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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MAXXIM MEDICAL, INC.
--------------------
(Name of Registrant as Specified in Its Charter)
--------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No filing fee required
[X] Fee computed on table below per Exchange Act Rule
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies: Common Stock, par value $.001 per share (the "Common Stock"),
of Maxxim Medical, Inc.
(2) Aggregate number of securities to which transaction applies:
15,223,896 shares of Common Stock (includes 1,491,070 shares
underlying options to purchase shares of Common Stock).
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: $26.00 per share in
cash-out merger plus the difference between $26.00 and the exercise
price of each share underlying an option to purchase shares of Common
Stock.
(4) Proposed maximum aggregate value of transaction:
$373,802,475.00
(5) Total fee paid:
$74,760
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------
(3) Filing party:
--------------------------------
(4) Date filed:
--------------------------------
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PRELIMINARY PROXY MATERIALS -- SUBJECT TO COMPLETION
MAXXIM MEDICAL, INC.
10300 49TH STREET NORTH
CLEARWATER, FLORIDA 33762
___________________, 1999
Dear Shareholders:
You are cordially invited to attend a special meeting of shareholders
of Maxxim Medical, Inc., a Texas corporation, to be held on _________________,
1999, at ___ a.m., local time, at ______________________.
At the special meeting, you will be asked to consider and vote upon a
merger agreement which provides for the merger of Fox Paine Medic Acquisition
Corporation with and into Maxxim. If the merger is completed, Maxxim will become
a privately owned corporation and you will receive $26.00 in cash for each of
your shares of Maxxim common stock.
Your board of directors has determined that the terms of the merger are
advisable, fair to and in the best interests of Maxxim and its shareholders.
ACCORDINGLY, YOUR BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS THAT
MAXXIM SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
Certain officers and directors of Maxxim have interests in the merger
that are different from, or in addition to, their interests as Maxxim
shareholders. These interests are summarized in the section entitled "Special
Factors - Interests of Certain Persons in the Merger" in the accompanying proxy
statement. These officers and directors, who in the aggregate have the power to
vote approximately 8% of the outstanding Maxxim shares, have agreed to vote
their Maxxim shares in favor of the merger agreement and the transactions
contemplated thereby and against any competing or alternative proposals.
We cannot complete the merger unless holders of a majority of the
outstanding shares of Maxxim common stock vote to approve the merger agreement.
Whether or not you plan to be present at the special meeting, please sign and
return your proxy as soon as possible in the enclosed self-addressed envelope so
that your vote will be recorded. Even if you return your proxy card, you may
still attend the special meeting and vote your Maxxim shares in person. Your
vote is very important. If you fail to return the proxy card or vote in person
at the special meeting, it will have the same effect as a vote against the
merger agreement.
The accompanying notice of meeting and proxy statement explain the
proposed merger and provide specific information concerning the special meeting.
Please read these materials carefully.
Sincerely,
Kenneth W. Davidson,
Chairman of the Board, President
and Chief Executive Officer
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This proxy statement is dated _________, 1999 and is first being mailed
to shareholders on or about ______________, 1999.
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PRELIMINARY PROXY MATERIALS -- SUBJECT TO COMPLETION
MAXXIM MEDICAL, INC.
10300 49TH STREET NORTH
CLEARWATER, FLORIDA 33762
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ___________________, 1999
Notice is hereby given that a special meeting of shareholders
of Maxxim Medical, Inc., a Texas corporation, will be held on
__________________, 1999, at ____ a.m., local time, at ____________________, for
the following purposes:
- - To consider and vote upon a proposal to approve an Agreement and Plan
of Merger, dated as of June 13, 1999, between Fox Paine Medic
Acquisition Corporation and Maxxim, pursuant to which Fox Paine Medic
Acquisition Corporation will be merged with and into Maxxim and each
share of Maxxim common stock, other than a portion of the shares held
by certain officers, directors and significant shareholders, and shares
held by dissenting shareholders, will be converted into the right to
receive $26.00 in cash, without interest.
- - To consider and act upon such other matters as may properly come before
the special meeting or any adjournment or postponement of the special
meeting.
Only those persons who were holders of record of Maxxim common
stock at the close of business on __________________, 1999, will be entitled to
notice of, and to vote at, the special meeting.
Approval of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Maxxim common stock
entitled to vote at the special meeting. THE BOARD OF DIRECTORS OF MAXXIM, AND
THE SPECIAL COMMITTEE OF FOUR INDEPENDENT DIRECTORS FORMED TO CONSIDER THE
MERGER, HAVE UNANIMOUSLY APPROVED THE MERGER AND RECOMMEND THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
Under Texas law, appraisal rights will be available to Maxxim
shareholders who do not vote in favor of the merger agreement. In order to
exercise such appraisal rights, Maxxim shareholders must follow the procedures
required by Texas law, which are summarized under "Appraisal Rights" in the
accompanying proxy statement.
The merger agreement and the merger are explained in the
accompanying proxy statement, which you are urged to read carefully. A copy of
the merger agreement is attached as Appendix A to the proxy statement.
By order of the Board of Directors,
Peter M. Graham, Secretary
Clearwater, Florida
_____________________, 1999
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PRELIMINARY PROXY MATERIALS -- SUBJECT TO COMPLETION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER .............................................................................1
WHO CAN HELP ANSWER YOUR QUESTIONS .................................................................................2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION.........................................................3
SUMMARY ............................................................................................................4
The Participants...........................................................................................4
Structure of the Transactions..............................................................................5
The Special Meeting .......................................................................................5
The Voting Agreements......................................................................................6
Recommendations to Shareholders............................................................................6
Fairness Opinion...........................................................................................6
Terms of the Merger Agreement .............................................................................6
Accounting Treatment ......................................................................................7
Merger Financing...........................................................................................8
Interests of Certain Persons in the Merger.................................................................8
Regulatory Approvals ......................................................................................8
Appraisal Rights ..........................................................................................9
HISTORICAL MARKET INFORMATION ......................................................................................9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA ...................................................................10
SPECIAL FACTORS ...................................................................................................12
Structure of the Transactions; Transaction Participants...................................................12
Background of the Merger..................................................................................13
Certain Projections.......................................................................................13
Recommendations of the Special Committee and of the Full Maxxim Board; Fairness of the Merger ............13
Opinion of Lazard Freres & Co. LLC........................................................................16
The Continuing Shareholders' Reasons for the Merger ......................................................20
Position of the Continuing Shareholders as to Fairness of the Merger .....................................20
Interests of Certain Persons in the Merger ...............................................................21
Certain Effects of the Merger; Conduct of Business After the Merger.......................................27
MERGER FINANCING...................................................................................................27
General...................................................................................................27
Senior Bank Loans.........................................................................................28
Senior Subordinated Notes / Senior Subordinated Credit Facility...........................................30
Holding Company Notes.....................................................................................30
Equity Commitment.........................................................................................31
Financing of the Circon Sale..............................................................................31
THE SPECIAL MEETING ...............................................................................................33
General ..................................................................................................33
Record Date and Voting ...................................................................................33
Required Vote ............................................................................................33
Proxies; Revocation ......................................................................................34
Adjournments or Postponements ............................................................................34
Voting Agreements.........................................................................................34
Other Matters to Be Considered ...........................................................................35
THE MERGER ........................................................................................................36
Structure and Effective Time .............................................................................36
Merger Consideration .....................................................................................36
Payment Procedures .......................................................................................36
Treatment of Maxxim Stock Options ........................................................................36
</TABLE>
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<TABLE>
<S> <C>
Retirement/Amendment of Maxxim Senior Notes ..............................................................37
Directors and Officers ...................................................................................37
Representations and Warranties ...........................................................................37
Covenants; Conduct of the Business of Maxxim Prior to the Merger .........................................38
Prohibition Against Solicitation of Competing Transactions ...............................................39
Access to Information ....................................................................................41
Cooperation and Reasonable Efforts to Complete the Merger ................................................41
Indemnification and Insurance ............................................................................41
Conditions to the Merger .................................................................................42
Termination ..............................................................................................43
Termination Fees .........................................................................................44
Expenses .................................................................................................44
Amendment and Waiver .....................................................................................44
Estimated Fees and Expenses of the Merger ................................................................45
APPRAISAL RIGHTS ..................................................................................................45
REGULATORY APPROVALS ..............................................................................................47
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND OTHERS ...............................................47
INFORMATION ABOUT THE TRANSACTION PARTICIPANTS.....................................................................49
Maxxim Medical, Inc.......................................................................................49
Fox Paine Medic Acquisition Corporation and the Other Fox Paine Entities..................................49
The Continuing Shareholders...............................................................................49
FEDERAL INCOME TAX CONSEQUENCES ...................................................................................50
INDEPENDENT AUDITORS ..............................................................................................52
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ...................................................................52
LEGAL PROCEEDINGS .................................................................................................52
OTHER MATTERS .....................................................................................................53
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE 2000 ANNUAL MEETING..................................................53
WHERE YOU CAN FIND MORE INFORMATION................................................................................54
APPENDICES
APPENDIX A - AGREEMENT AND PLAN OF MERGER .........................................................................
APPENDIX B - OPINION OF LAZARD FRERES & CO. LLC ...................................................................
APPENDIX C - ARTICLES 5.11, 5.12 AND 5.13 OF THE TEXAS BUSINESS CORPORATION ACT....................................
APPENDIX D - FORM OF VOTING AGREEMENT..............................................................................
</TABLE>
ii
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PRELIMINARY PROXY MATERIALS -- SUBJECT TO COMPLETION
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to briefly address
some commonly asked questions regarding the merger. It should be read together
with the Summary that follows. These questions and answers may not address all
questions that may be important to you as a Maxxim shareholder. Please refer to
the more detailed information contained elsewhere in this proxy statement, the
appendices to this proxy statement, and the documents referred to or
incorporated by reference in this proxy statement.
Q: WHAT IS THE PROPOSED TRANSACTION?
A: Fox Paine Capital Fund, L.P. and other related private investment funds
will acquire a majority of the shares of Maxxim common stock, a group
of 10 current Maxxim shareholders will retain their equity in Maxxim,
and all of Maxxim's other shareholders will receive $26 per share in
cash for their shares of Maxxim common stock. Separately, Fox Paine and
the other funds, along with the 10 continuing shareholders, will
acquire Maxxim's Circon subsidiary. The group of 10 continuing
shareholders includes eight members of Maxxim's senior management team
and one non-employee director. This group is referred to throughout
this proxy statement as the "Continuing Shareholders" and their names
are listed on page __.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will receive $26.00 in cash, without interest, for each share of
Maxxim common stock that you own.
Q: WHEN WILL THE MERGER BE COMPLETED? WHEN CAN I EXPECT TO RECEIVE CASH IN
EXCHANGE FOR MY SHARES?
A: We expect to complete the merger in September or October of 1999,
although we cannot assure you that the actual date will not be later.
As soon as the merger is completed, Maxxim will send you detailed
instructions regarding surrendering your Maxxim shares and receiving
your cash payment. PLEASE DO NOT SEND YOUR SHARE CERTIFICATES NOW.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The receipt of the cash by you in exchange for your Maxxim shares will
be a taxable transaction for U.S. federal income tax purposes and may
be taxable under applicable state, local, and other tax laws. To review
the tax consequences to you in greater detail, see pages _____ through
_____. Your tax consequences will depend on your personal situation.
You should consult your tax advisors for a full understanding of the
tax consequences of the merger to you.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve the merger agreement, which is the legal
document governing the merger and the related transactions we describe
in this proxy statement.
Q: WHAT DOES THE BOARD OF DIRECTORS OF MAXXIM RECOMMEND?
A: The full Maxxim board believes that the terms of the merger are
advisable, fair to and in the best interests of Maxxim and its
shareholders and unanimously recommends that Maxxim shareholders vote
"FOR" approval of the merger agreement. In addition, because some of
the Continuing Shareholders are directors and executive officers of
Maxxim, the Maxxim board established a special committee consisting of
four independent directors to review and evaluate the proposed merger.
None of the members of the special committee are Continuing
Shareholders. The special committee, like the full board, believes that
the terms of the merger are advisable, fair to and in the best
interests of Maxxim and its shareholders and unanimously recommends
that Maxxim shareholders vote "FOR" approval of the merger agreement.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER AGREEMENT?
A: The merger agreement must be approved by a majority of the outstanding
shares of Maxxim common stock. If you fail to vote, it will have the
same effect as a vote against the merger agreement. Therefore, it is
important that you return your signed proxy card.
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Q: HOW DO I VOTE?
A: Just indicate on the enclosed proxy card how you want to vote, and then
date, sign and mail it in the enclosed envelope. Please vote as soon as
possible to ensure that your shares are represented at the special
shareholders meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your Maxxim shares only if you provide
instructions to your broker on how to vote. You should instruct your
broker how to vote your shares, following the directions your broker
provides. If you do not provide instructions to your broker, your
shares will not be voted, which will have the same effect as a vote
against the merger agreement.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at
the special meeting. You may revoke your proxy by notifying the
Secretary of Maxxim in writing or by submitting a new proxy, in each
case, dated after the date of the proxy being revoked. In addition,
your proxy may be revoked by attending the special meeting and voting
in person. However, simply attending the special meeting will not
revoke your proxy. If you have instructed a broker to vote your shares,
you must follow the instructions received from your broker to change
your vote.
WHO CAN HELP ANSWER YOUR QUESTIONS:
If you would like additional copies of this document, or if you would
like to ask any questions about the merger, you should contact:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Collect) or Call Toll Free: (800) 322-2885
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement includes and incorporates by reference statements
that are not historical facts. These statements are "forward-looking statements"
(as defined in the Private Securities Litigation Reform Act of 1995) based on
our current plans and expectations relating to analyses of value, expectations
for anticipated growth in the future and future success under various efforts,
and, as such, these forward-looking statements involve uncertainty and risk. The
forward-looking statements are not guarantees of future performance, and actual
results may differ materially from those contemplated by such forward-looking
statements. You are cautioned to consider these statements in light of the
following assumptions: that products in development will be introduced
successfully and on schedule; that we will make acquisitions which contribute to
profitability; that key distributors will make purchases at the same level as
their sales; that demand for our products will follow recent growth trends; that
competitors will not introduce new products which will substantially reduce our
market share in its most significant product lines; that we will continue to
manufacture high-quality products at competitive costs and maintain or increase
product pricing; and that we will become year 2000 compliant without material
expenditures and our key suppliers and customers also will become year 2000
compliant so that our business is not disrupted. In addition, actual results
could differ materially from the forward-looking statements contained in this
proxy statement as a result of the timing of the completion of the merger or the
impact of the merger on operating results, capital resources, profitability, and
cash requirements and liquidity.
In the event any of the above factors do not occur as anticipated,
actual results could differ materially from the expectations expressed in the
forward-looking statements. We do not undertake any obligation to update or
revise forward-looking statements, whether as a result of new information,
future events or otherwise.
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SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. It should be read
together with the questions and answers provided on the previous pages. For a
more complete understanding of the merger and the related transactions, and for
a more complete description of the legal terms of the merger, you should read
this proxy statement in its entirety carefully, as well as the additional
documents to which we refer you. See "Where You Can Find More Information"
(page __).
THE PARTICIPANTS
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, Florida 33762
(727) 561-2100
Maxxim Medical, Inc. is a major, diversified developer, manufacturer
and marketer of specialty medical products for use in acute and alternate care
settings. Our products include custom procedure trays, medical gloves,
endoscopic and laproscopic systems, as well as electrosurgical and video systems
for general surgery, urology, gynecology, interventional radiology and critical
care. We refer to Maxxim Medical, Inc. as "Maxxim" throughout this proxy
statement. You should also know that references to Maxxim in this proxy
statement include its subsidiaries, unless the context clearly indicates
otherwise.
Fox Paine Medic Acquisition Corporation
c/o Fox Paine & Company, LLC
950 Tower Lane, Suite 1950
Foster City, California 94404
(650) 525-1300
Fox Paine Medic Acquisition Corporation is the entity that will be
merged with Maxxim in the merger. It was formed by Fox Paine Capital Fund, L.P.,
a private investment fund, for the purpose of participating in the merger
transactions. We refer to Fox Paine Medic Acquisition Corporation as "Fox Paine
Maxxim" throughout this proxy statement. Fox Paine Maxxim is not expected to
have any significant assets or liabilities, or engage in any business activities
other than those related to completing the merger, and it will cease to exist
after the merger.
Fox Paine Capital Fund, L.P. is a private investment fund managed by
Fox Paine & Company, LLC. Fox Paine & Company, LLC manages investment funds in
excess of $500 million focused on investing equity capital in management-led
acquisitions and company expansion programs and restructurings. Fox Paine was
founded in 1997 by Saul Fox and Dexter Paine. Mr. Fox is a former general
partner of Kohlberg Kravis Roberts & Co., and Mr. Paine is a former general
partner of Kohlberg & Company. Over their combined 29 years of investment
experience, Fox Paine's principals have arranged 21 transactions totaling in
excess of $4.3 billion in which they invested over $900 million of equity
capital. These transactions have ranged in size from $12 million to $1.5
billion. Throughout this proxy statement, we sometimes refer to Fox Paine
Capital Fund, L.P., Fox Paine & Company, LLC and Fox Paine Maxxim together as
"Fox Paine."
Fox Paine Capital Fund, L.P. owns all of the equity of Fox Paine Maxxim
and all of the equity of Fox Paine Citron Acquisition Corporation, which is the
company that will buy Maxxim's Circon subsidiary from Maxxim as part of the
merger transactions. We refer to Fox Paine Citron Acquisition Corporation as
"Fox Paine Circon" in this proxy statement.
The Continuing Shareholders
Eight members of Maxxim's senior management and two other shareholders
(one is a non-employee director and the other is a vice president and
significant shareholder) are participating in the merger transactions and will
be treated differently from all other Maxxim shareholders. These ten
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individuals are referred to throughout this proxy statement as the "Continuing
Shareholders," and the eight Continuing Shareholders who are members of Maxxim's
senior management are referred to throughout this proxy statement as the
"Management Investors." Kenneth W. Davidson, who is the Chairman of Maxxim's
board of directors and is Maxxim's President and Chief Executive Officer, is
both a Continuing Shareholder and a Management Investor. The other Continuing
Shareholders, including the Management Investors, are listed on page __ under
"Special Factors - Structure of the Transactions; Transaction Participants."
STRUCTURE OF THE TRANSACTIONS (PAGE __)
We propose a two-part transaction involving the sale by Maxxim of its
Circon subsidiary to Fox Paine Circon and the merger of Fox Paine Maxxim into
Maxxim, with Maxxim surviving the merger and continuing its businesses
(excluding the Circon business). These transactions will have several important
effects, including:
- The current shareholders of Maxxim, other than the Continuing
Shareholders (and other than shareholders who perfect their
appraisal rights) will receive $26.00 per share in cash for
their Maxxim shares (including the preferred stock purchase
rights associated with those shares), and will no longer have
any interest in and will not be shareholders of Maxxim or
Circon.
- After the merger, Maxxim and Circon will be separate
companies, will be separately capitalized and will separately
pursue their respective business strategies.
- Immediately after the merger, Maxxim will be owned
approximately 85% by Fox Paine and approximately 15% by the
Continuing Shareholders, and Circon will be owned
approximately 89% by Fox Paine and approximately 11% by the
Continuing Shareholders (in both cases, before giving effect
to the exercise of any stock options or warrants). Fox Paine
may permit certain affiliated investment funds or certain
other minority investors to purchase a portion of Fox Paine's
equity in Maxxim or Circon.
- The Maxxim shares will no longer be listed on the New York
Stock Exchange and price quotations with respect to sales of
shares in the public market will no longer be available. The
registration of the Maxxim shares under the Securities
Exchange Act of 1934 will be terminated, and Maxxim will cease
filing reports with the SEC.
THE SPECIAL MEETING (PAGE __)
The special meeting of Maxxim shareholders will be held on ____________
_____, 1999, at ___ a.m., local time, at ______________________________. At the
special meeting, you will be asked to consider and vote upon a proposal to
approve the merger agreement.
Record Date; Voting Power. Only holders of shares of Maxxim common
stock who are holders at the close of business on the record date, ______ __,
1999, are entitled to notice of and to vote at the special meeting. As of that
date, there were _______________ shares of Maxxim common stock issued and
outstanding. Each Maxxim share is entitled to one vote on any matter that may
properly come before the special meeting.
Vote Required. The merger agreement must be approved by a majority of
the outstanding shares of Maxxim common stock. If you fail to vote, it will have
the same effect as a vote against the merger agreement.
Changing Your Vote. You can change your vote at any time before we vote
your proxy at the special meeting in any of three ways. First, you can send a
written notice to the Secretary of Maxxim at the address below stating that you
would like to revoke your proxy. Second, you can complete a new proxy card and
send it to the Secretary of Maxxim, and the new proxy card will automatically
replace any earlier proxy card you returned. Third, you can attend the special
meeting and vote in person. You should send
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<PAGE> 11
any written notice or new proxy card to the Secretary of Maxxim at the following
address: Maxxim Medical, Inc., 10300 49th Street North, Clearwater, Florida
33762, Attention: Corporate Secretary. If you have instructed a broker to vote
your shares, you must follow the instructions received from your broker to
change your vote.
THE VOTING AGREEMENTS (PAGE __)
Fox Paine Maxxim has entered into individual voting agreements with
each of the Continuing Shareholders in which the Continuing Shareholders agreed
to vote their shares of Maxxim common stock in favor of the merger agreement and
the merger transactions and against any competing or alternative proposals. The
voting agreements will remain in effect as long as the merger agreement is in
effect. The Continuing Shareholders have the power to vote, in the aggregate,
approximately 8% of the outstanding shares of Maxxim common stock. See "Special
Meeting - The Voting Agreements."
RECOMMENDATION TO SHAREHOLDERS (PAGE __)
The full Maxxim board believes that the terms of the merger are
advisable, fair to and in the best interests of Maxxim and its shareholders, and
unanimously recommends that Maxxim shareholders vote "FOR" approval of the
merger agreement. In addition, because some of the directors and executive
officers of Maxxim are Continuing Shareholders and therefore may have interests
in the merger that differ from those of shareholders generally, the Maxxim board
established a special committee consisting of four independent directors to
review and evaluate the proposed merger. None of the members of the special
committee are Continuing Shareholders. The special committee, like the full
board, believes that the terms of the merger are advisable, fair to and in the
best interests of Maxxim and its shareholders and unanimously recommends that
Maxxim shareholders vote "FOR" approval of the merger agreement. You also should
refer to the factors that the special committee and Maxxim board considered in
determining whether to approve the merger agreement on pages __ through __ under
"Special Factors - Recommendation of the Special Committee and of the Full
Maxxim Board; Fairness of the Merger."
FAIRNESS OPINION (PAGE __)
Lazard Freres & Co. LLC, which served as financial advisor to the
special committee, has delivered a written opinion to the Maxxim board that, as
of June 13, 1999, the $26 per share cash merger consideration was fair from a
financial point of view to Maxxim's shareholders (other than the Continuing
Shareholders). A copy of Lazard Freres' opinion, which includes a discussion of
the information reviewed, assumptions made and matters considered by Lazard
Freres, is attached to this proxy statement as Appendix B. You should read this
opinion in its entirety.
TERMS OF THE MERGER AGREEMENT (PAGE __)
The merger agreement is the legal document that governs the merger
transactions. We have attached the merger agreement as Appendix A to this proxy
statement, and we encourage you to read it carefully.
Conditions to the Merger. The completion of the merger depends on a
number of conditions being met. In addition to customary conditions relating to
our compliance with the merger agreement, these conditions include the
following:
- approval of the merger agreement by the holders of a majority
of the outstanding shares of Maxxim common stock;
- absence of any statute, rule, regulation, order or injunction
of any governmental entity or court prohibiting or restricting
completion of the merger;
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<PAGE> 12
- closing of the debt tender offer and amendment of Maxxim's
outstanding 10 1/2% senior subordinated notes described on
page ___ under "The Merger - Retirement/Amendment of Maxxim
Senior Notes" occurring concurrently with the completion of
the merger;
- closing of the Circon sale described on page ___ under "The
Merger - Structure and Effective Time" occurring concurrently
with the completion of the merger, unless otherwise requested
by Fox Paine Maxxim;
- Maxxim having received an independent solvency opinion;
- Maxxim having received a written opinion from its independent
auditor to the effect that the transactions contemplated in
the merger agreement will receive recapitalization accounting
treatment; and
- financing for the merger having been obtained on terms and
conditions satisfactory to Fox Paine Maxxim.
Termination of the Merger Agreement. Maxxim and Fox Paine Maxxim can
agree at any time to terminate the merger agreement without completing the
merger, even if Maxxim shareholders have approved it. Also, either Maxxim or Fox
Paine Maxxim can terminate the merger agreement, without the consent of the
other, in various circumstances, including the following:
- if the shareholders of Maxxim fail to approve the merger
agreement at the special meeting;
- if any court or governmental entity issues any final order,
decree or ruling or takes any other final action restraining,
enjoining or otherwise prohibiting the completion of the
merger, and such judgment, injunction, order or decree has
become final and nonappealable;
- if the merger has not been completed by December 31, 1999,
unless the party seeking to terminate has caused the failure
of completion by failing to fulfill any of its obligations
under the merger agreement; or
- if there has been a material breach of any representation,
warranty or covenant made by the other party, which would
cause one of the conditions to the merger not to be satisfied
and which cannot be or has not been cured within 30 days from
the time the breaching party receives notice of the breach.
In addition, Fox Paine Maxxim may, without the consent of Maxxim,
terminate the merger agreement in various circumstances including the following:
- the Maxxim board withdraws or modifies its recommendation that
Maxxim shareholders vote to approve the merger agreement (or
publicly announces its intention to do so);
- the Maxxim board recommends any proposal for a competing
acquisition transaction;
- any person other than Fox Paine Maxxim and its affiliates
becomes the beneficial owner of 15% or more of Maxxim's common
stock; or
- Maxxim breaches the provisions described on page __ under "The
Merger - Prohibition Against Solicitation of Competing
Transactions."
Maxxim, may, without the consent of Fox Paine Maxxim, terminate the
merger agreement in order to enter into a superior transaction in compliance
with the provisions of the merger agreement described on page __ under "The
Merger - Prohibition Against Solicitation of Competing Transactions," but only
in
7
<PAGE> 13
strict compliance with those provisions, including providing Fox Paine Maxxim
with at least five full business days' written notice of termination and paying
to Fox Paine Maxxim a termination fee of $19 million.
ACCOUNTING TREATMENT (PAGE __)
We expect that the merger will be treated as a "recapitalization" for
accounting purposes.
MERGER FINANCING (PAGE __)
It is expected that completion of the merger transactions will require
total funding of approximately $809.7 million, which will be obtained from the
following sources:
- $310.0 million in senior secured credit facilities committed
by The Chase Manhattan Bank, of which $267.0 million is
expected to be funded at closing;
- $150.0 million in new senior subordinated notes to be issued
by a subsidiary of Maxxim (or, if the subsidiary is unable to
sell these senior subordinated notes, $150.0 million in senior
subordinated bridge loans committed by The Chase Manhattan
Bank);
- $50.0 million in senior unsecured notes to be issued by Maxxim
to Fox Paine or other investors;
- $208.0 million in cash from the sale of Circon Corporation to
Fox Paine Circon immediately before the merger (the financing
for this $208 million is described on page ___ under "Merger
Financing - Financing for the Circon Sale");
- $106.4 million of cash equity provided by Fox Paine and other
affiliated investment funds or certain other minority
investors;
- $18.6 million of existing equity contributed by the Continuing
Shareholders (consisting of $14.1 million of shares of Maxxim
common stock retained in the merger and $4.5 million of new
shares of Maxxim common stock purchased from the proceeds of
the cash-out of Maxxim options in the merger); and
- $9.7 million of existing capital leases that will remain
outstanding.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE _)
The Continuing Shareholders have interests in the merger transactions
as employees and/or directors of Maxxim, or as shareholders with a continuing
equity interest in Maxxim and Circon, that are different from, or in addition
to, yours as a Maxxim shareholder. Among other things, the Continuing
Shareholders will not receive $26 per share, in cash, for all of their Maxxim
shares, and will remain shareholders of Maxxim and will become shareholders of
Circon.
In addition, the Continuing Shareholders have entered into an investor
participation agreement with Fox Paine Maxxim that would provide the Continuing
Shareholders with a number of benefits after the merger, including employment
agreements and cash and equity incentive compensation for those Continuing
Shareholders who are members of Maxxim's senior management team. These
benefits, and others contained in the investor participation agreement, are
described on pages __ to __ under "Special Factors - Interests of Certain
Persons in the Merger."
When making the determination to approve and recommend approval of the
merger transactions to Maxxim's public shareholders, both the Maxxim board and
the special committee of independent directors appointed to review the proposed
merger were aware of the interests of the Continuing Shareholders and considered
these interests together with the other factors described under "Special Factors
- - Recommendations of the Special Committee and the Full Maxxim Board."
8
<PAGE> 14
REGULATORY APPROVALS (PAGE __)
In order to complete the merger, Maxxim and Fox Paine Maxxim were
required to make certain filings with and receive authorizations from various
U.S. federal governmental agencies under federal antitrust laws. These filings
were made and the authorization has been received.
APPRAISAL RIGHTS (PAGE __)
You have the right to dissent from approval of the merger agreement
and, subject to strict compliance with certain requirements and procedures of
Texas law, to receive payment of the "fair value" of your shares of Maxxim
common stock. These rights, as well as the requirements and procedures for
dissenting under Texas law are described on pages __ through __ under "Appraisal
Rights." In addition, the full text of the relevant articles of the Texas
Business Corporation Act are reprinted in Appendix C to this proxy statement.
HISTORICAL MARKET INFORMATION
Maxxim's common stock is traded on the New York Stock Exchange under
the symbol "MAM." The following table sets forth the high and low sale prices on
the New York Stock Exchange for the Maxxim shares for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED NOVEMBER 2, 1997:
First Quarter 15 1/8 12 1/4
Second Quarter 16 12 5/8
Third Quarter 19 5/16 13 1/4
Fourth Quarter 26 19 1/2
FISCAL YEAR ENDED NOVEMBER 1, 1998:
First Quarter 24 15/16 19 1/2
Second Quarter 28 15/16 22 1/8
Third Quarter 29 3/8 22 7/8
Fourth Quarter 26 15/16 16 1/8
FISCAL YEAR ENDING OCTOBER 31, 1999:
First Quarter 30 5/8 24 7/16
Second Quarter 27 15/16 15 1/2
Third Quarter ======== =======
Fourth Quarter (through ____________, 1999) -------- -------
</TABLE>
As of __________, 1999, there were ____ holders of record of Maxxim's
common stock. Maxxim estimates that there are approximately ______ beneficial
holders of Maxxim's common stock.
Maxxim has never paid cash dividends on its common stock. Maxxim's
present credit facility prohibits payments of dividends. In addition, under the
terms of the merger agreement, Maxxim is not permitted to declare or pay
dividends on the common stock during the term of the agreement.
On June 11, 1999, the last full trading day prior to the announcement
of the execution of the merger agreement, the last reported sales price of
Maxxim shares on the NYSE was $19.875 per share. On ____________________ , 1999,
the last reported sales price of the shares was $ ___________ per share.
Shareholders are urged to obtain a current market quotation for the shares.
In March 1998, Maxxim completed a public offering of 4,025,000 shares
of its common stock at a price to the public of $24.00 per share, including
525,000 shares pursuant to the underwriters' exercise of the overallotment
option. After deducting offering costs and commissions, Maxxim received net
proceeds of approximately $91,418,000.
9
<PAGE> 15
In May 1997, pursuant to Maxxim's Senior Management Stock Purchase
Plan, the Management Investors purchased at $13.00 per share (the closing sale
price of the common stock on the New York Stock Exchange on April 30, 1997) the
shares set forth opposite their names in the table below:
<TABLE>
<CAPTION>
NAME SHARES PURCHASED
- ---- ----------------
<S> <C>
Kenneth W. Davidson.................................... 100,000 shares
Peter M. Graham........................................ 50,000 shares
Jack F. Cahill......................................... 44,000 shares
David L. Lamont........................................ 39,000 shares
Alan S. Blazei......................................... 39,000 shares
Henry T. DeHart........................................ 39,000 shares
Joseph D. Dailey....................................... 28,000 shares
Suzanne R. Garon....................................... 7,000 shares
</TABLE>
Since the beginning of fiscal 1997, certain of the Continuing
Investors have made the following additional purchases of Maxxim shares,
all of which were pursuant to stock option exercises, except for those market
with an "*":
<TABLE>
<CAPTION>
NAME DATE SHARES PURCHASED PRICE
---- ---- ---------------- -----
<S> <C> <C> <C>
Kenneth W. Davidson 8/31/98 5,000 $ 13.39
Kenneth W. Davidson 10/27/97 3,000 $ 12.96
Peter M. Graham 10/23/98 4,000 $ 13.39
Peter M. Graham 10/31/97 3,000 $ 12.96
Alan S. Blazei 7/20/98 3,000 $ 13.39
Alan S. Blazei 9/19/97 3,000 $ 12.96
David L. Lamont 8/31/98 3,000 $ 13.39
David L. Lamont 10/27/97 3,000 $ 12.96
Jack F. Cahill 7/28/98 800 $ 15.40
Jack F. Cahill 7/28/98 1,800 $ 10.73
Joseph D. Dailey 10/8/98 1,000 $ 13.39
Ernest J. Henley 6/12/98 8,000 $ 11.48
Ernest J. Henley 6/12/98 3,000 $ 10.73
Ernest J. Henley 10/30/97 3,000 $ 12.96
Ernest J. Henley 10/30/97 3,000 $ 15.40
Ernest J. Henley* 7/7/97 2,000 $ 19.25
Davis C. Henley* 3/4/99 5,000 $ 17.25
</TABLE>
10
<PAGE> 16
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Our selected historical consolidated financial information for the five
fiscal years 1998, 1997, 1996, 1995 and 1994 set forth below has been derived
from our audited consolidated financial statements. The financial information
for the six-month periods ended May 2, 1999 and May 3, 1998, has been derived
from unaudited consolidated financial statements. The unaudited financial
statements reflect all adjustments (consisting of normal recurring adjustments)
which are necessary for a fair presentation of such information. Results for the
six-month periods are not necessarily indicative of results for the full year.
The financial data should be read in conjunction with the financial statements
and related notes that have been filed with the Securities and Exchange
Commission. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MAY 2, MAY 3,
------------------------------------------------------------- --------- ---------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 522,516 $ 529,552 $ 399,836 $ 265,726 $ 191,382 $ 312,089 $ 260,961
Cost of sales 381,638 397,691 294,164 186,495 129,569 209,881 193,158
--------- --------- --------- --------- --------- --------- ---------
Gross profit 140,878 131,861 105,672 79,231 61,813 102,208 67,803
Operating expenses 94,410 90,101 77,980 60,329 48,390 69,367 45,617
Nonrecurring charges (1) -- -- -- 10,845 -- 3,371 --
--------- --------- --------- --------- --------- --------- ---------
Income from operations 46,468 41,760 27,692 8,057 13,423 29,470 22,186
Interest expense (13,998) (22,145) (13,143) (4,088) (2,059) (12,231) (7,838)
Other income, net 1,620 2,751 583 1,014 859 351 389
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes (2) 34,090 22,366 15,132 4,983 12,223 17,590 14,737
Income taxes 14,454 9,485 6,422 2,054 4,538 7,647 6,267
Changes in accounting for
income taxes -- -- -- -- 380 -- --
--------- --------- --------- --------- --------- --------- ---------
Net income $ 19,636 $ 12,881 $ 8,710 $ 2,929 $ 8,065 $ 9,943 $ 8,470
========= ========= ========= ========= ========= ========= =========
Basic earnings per share (3), (4) $ 1.55 $ 1.55 $ 1.08 $ 0.36 $ 1.10 $ 0.70 $ 0.76
========= ========= ========= ========= ========= ========= =========
Diluted earnings per share (3), (4) $ 1.50 $ 1.42 $ 1.02 $ 0.36 $ 1.05 $ 0.68 $ 0.74
========= ========= ========= ========= ========= ========= =========
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MAY 2, MAY 3,
------------------------------------------------------------ -------- --------
1998 1997 1996 1995 1994 1999 1998
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $108,918 $ 99,815 $122,086 $ 73,286 $ 82,886 $146,124 $122,957
Total assets 468,051 424,046 465,347 264,490 165,416 760,622 427,039
Long-term liabilities (includes
current portion):
Capital leases and other 7,883 6,433 5,269 2,421 1,684 9,327 4,500
Bank debt 13,800 91,300 128,590 76,987 -- 267,300 --
Convertible debentures -- 23,352 28,750 28,750 28,750 -- --
Senior notes 100,000 100,000 100,000 -- -- 100,000 100,000
Shareholders' equity 272,909 137,928 123,556 116,351 111,470 279,477 258,751
Book value per share $ 20.79 $ 14.03 $ 12.53 $ 11.81 $ 12.43 $ 19.11 $ 22.18
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MAY 2, MAY 3,
------------------------------------------------------- ------ ------
1998 1997 1996 1995 1994 1999 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE MEASUREMENT:
Revenue growth (1.3)% 32.4% 50.5% 38.8% 47.5% 19.6% (3.1)%
Pre-tax income as a % of
total revenue 6.5% 4.2% 3.8% 1.9% 6.4% 5.6% 5.6%
Effective income tax rate 42.4% 42.4% 42.4% 41.2% 37.1% 43.5% 42.5%
Net income as a % of
total revenue 3.8% 2.4% 2.2% 1.1% 4.2% 3.2% 3.2%
Return on average
Shareholders' equity 9.6% 9.8% 7.3% 2.6% 9.0% 7.2% 8.5%
Total debt as a % of debt, 30.8% 61.6% 68.0% 48.2% 21.4% 57.4% 28.8%
plus equity
Working capital ratio 2.7 x 2.3 x 2.4 x 2.4 x 4.5 x 2.3 x 3.1 x
</TABLE>
(1) Nonrecurring charges includes the following:
a. May 2, 1999 expenses related to Maxxim's sales force
restructuring and the acquisition and integration of
Circon.
b. Fiscal 1995 expenses related to the formation of Maxxim's
Case Management division.
(2) Income before income taxes includes the following nonrecurring
charges and benefits:
a. A pre-tax gain in fiscal 1997 of $1.5 million from the sale
of equity securities.
b. Pre-tax charges in fiscal 1996 of $3.5 million relating to
the acquisition of Sterile Concepts.
c. Pre-tax charges in fiscal 1995 of $10.8 million related to
the formation of Maxxim's Case Management division.
(3) For information concerning calculation of earnings per share,
see Note 1 of the Notes to Consolidated Financial Statements.
Maxxim has restated all previous earnings per share data to
comply with Statement of Financial Accounting Standards No.
128, "Earnings per Share."
(4) Fiscal 1994 basic and diluted earnings per share exclude $.05
and $.04 adjustments respectively, to reflect the change in
accounting for income taxes.
12
<PAGE> 18
SPECIAL FACTORS
STRUCTURE OF THE TRANSACTIONS; TRANSACTION PARTICIPANTS
We propose a two-part transaction involving the sale by Maxxim of its
Circon Corporation subsidiary to Fox Paine Circon, an affiliate of Fox Paine,
and the merger of Fox Paine Maxxim into Maxxim, with Maxxim surviving this
merger and continuing its businesses (other than Circon's businesses). These
transactions will have several important effects, including:
- The current shareholders of Maxxim, other than the Continuing
Shareholders (and other than shareholders who perfect
appraisal rights) will receive $26 per share in cash for their
Maxxim shares (and the associated preferred stock purchase
rights) and will no longer have any interest in, and will not
be shareholders of Maxxim or Circon.
- After the merger, Maxxim and Circon will be separate
companies, will be capitalized separately, and will pursue
separately their respective business strategies.
- Immediately after the merger, Maxxim will be owned
approximately 85% by Fox Paine and approximately 15% by the
Continuing Shareholders described below, and Circon will be
owned approximately 89% by Fox Paine and approximately 11% by
the Continuing Shareholders (in both cases, before giving
effect to the exercise of any stock options or warrants). Fox
Paine may permit certain affiliated investment funds or
certain other minority investors to purchase a portion of Fox
Paine's equity in Maxxim or Circon.
- The Maxxim shares will no longer be listed on the New York
Stock Exchange and price quotations with respect to sales of
Maxxim shares in the public market will no longer be
available. The registration of the Maxxim shares under the
Securities Exchange Act of 1934 will be terminated, and Maxxim
will cease filing reports with the SEC.
Eight members of Maxxim's senior management and two other shareholders
(one is a non-employee director of Maxxim and the other is a vice president and
significant shareholder) are participating in the merger transactions together
with Fox Paine and will be treated differently than the rest of Maxxim's
shareholders. These 10 individuals are referred to throughout this proxy
statement as the "Continuing Shareholders," and the eight Continuing
Shareholders who are members of Maxxim's senior management are referred to
throughout this proxy statement as the "Management Investors." The following
table lists the Continuing Shareholders and their current occupations. Those
noted with an "*" are also "Management Investors."
<TABLE>
<CAPTION>
NAME CURRENT OCCUPATION
---- ------------------
<S> <C>
Kenneth W. Davidson * Chairman of the Board, President and
Chief Executive Officer of Maxxim
Peter M. Graham * Senior Executive Vice President,
Chief Operating Officer and Secretary
of Maxxim
David L. Lamont * Executive Vice President, Research
and Development of Maxxim
Alan S. Blazei * Executive Vice President, Controller
and Treasurer of Maxxim
</TABLE>
13
<PAGE> 19
<TABLE>
<S> <C>
Henry T. DeHart * Executive Vice President,
Manufacturing Operations of Maxxim
Joseph D. Dailey * Executive Vice President, Information
Services of Maxxim
Jack F. Cahill * Executive Vice President, Sales and
Marketing of Maxxim
Suzanne R. Garon * Executive Vice President, Human
Resources of Maxxim
Ernest J. Henley Director of Maxxim; Professor of
Chemical Engineering at the
University of Houston
Davis C. Henley + Vice President of Maxxim
</TABLE>
- ----------------------------------------
+ Davis C. Henley is the son of Ernest J. Henley.
For additional details on the terms and structure of the merger and the
merger transactions, please see pages __ through __ under "The Merger - Terms of
the Merger," and for additional detail on the Continuing Shareholders and their
participation in the merger transactions, please see pages __ through __ under
"Special Factors - Interests of Certain Persons in the Merger."
BACKGROUND OF THE MERGER
From time to time beginning in June 1997, Fox Paine has been in contact
with members of Maxxim's senior management to discuss Fox Paine's interest in
pursuing some form of acquisition of or significant investment in Maxxim, and to
engage in preliminary due diligence. In the course of these discussions, Fox
Paine made proposals to Maxxim to engage in such transactions. None of these
discussions resulted in formal negotiations or contemplated a price per share in
excess of the $26 per share price of the merger.
In August 1998, Fox Paine renewed its interest in some form of business
combination with Maxxim and forwarded a letter to Mr. Kenneth W. Davidson,
Chairman, President and Chief Executive Officer of Maxxim, indicating its
interest in acquiring the stock of Maxxim at a price of $24.25, with Maxxim's
senior management retaining an equity interest in Maxxim, and requesting an
exclusive period to perform due diligence. Mr. Davidson presented the proposal
to Maxxim's board on September 8, 1998, and after careful consideration the
board instructed Mr. Davidson to continue discussions with Fox Paine and to
determine if a higher price was available. On September 11, 1998, the board met
again to receive an update on the status of the discussions with Fox Paine. Mr.
Davidson advised the board that Fox Paine had increased its proposal to $25.00
per share and renewed its request for a short exclusivity period. The board
determined not to execute any agreement at that time, but directed Mr. Davidson
to continue his discussions with Fox Paine. Thereafter, Maxxim's senior
management met with Fox Paine and certain of its potential financing sources,
the parties exchanged financial information and senior executives of the
respective companies met to discuss the general terms of the proposal. In late
September, the negotiations ceased without the execution of any agreement.
From October 1998 through February 1999, executives of Fox Paine
periodically contacted members of Maxxim's senior management to discuss Fox
Paine's continuing interest in pursuing some form of acquisition transaction or
significant investment in Maxxim. None of these discussions resulted in formal
negotiations or contemplated a price per share in excess of the $26 per share
price of the merger.
14
<PAGE> 20
In early March, Mr. W. Dexter Paine, III, President of Fox Paine,
advised Mr. Davidson of Fox Paine's continuing interest in an acquisition of or
a significant investment in Maxxim. Mr. Paine indicated that Fox Paine would be
interested in retaining senior management and having them retain an equity
interest in Maxxim and was prepared to commence a due diligence investigation of
Maxxim and to engage in substantive discussions with Maxxim regarding such a
potential transaction immediately. On March 5, 1999, at a Maxxim board meeting,
Mr. Davidson advised the Maxxim board of the interest expressed by Mr. Paine. At
the meeting, the board discussed various possible alternatives for increasing
shareholder value, including a potential transaction with Fox Paine. The board
elected to defer any action for one week. In a letter dated March 10, 1999, Fox
Paine proposed the acquisition of Maxxim for $25.00 per share in a
recapitalization transaction, provided that Fox Paine be given a 30 day
exclusive negotiating period. The Maxxim board met on March 12, 1999 to discuss
the proposal. After careful consideration, and with Mr. Davidson abstaining, the
board unanimously directed Mr. Davidson to execute the letter, provided that the
exclusivity period be shortened to 14 days, to permit Fox Paine to conduct due
diligence in support of a proposal to acquire the stock of Maxxim at $25.00 per
share. Shortly thereafter, Fox Paine began its due diligence investigation.
In late March 1999, upon completion of Fox Paine's initial due
diligence, Mr. Paine advised Mr. Davidson that Fox Paine was prepared to
negotiate a transaction in which Maxxim's public shareholders would receive $24
per share in cash. After consultation with the Maxxim board, Mr. Davidson told
Mr. Paine that Maxxim would not consider any offer of less than $25 per share.
On April 8, 1999, Fox Paine revised its proposal, and proposed to acquire Maxxim
in a recapitalization transaction in which Maxxim's public shareholders would
receive $25 per share, in cash, and members of Maxxim's senior management team
and certain directors would participate with a continuing interest in Maxxim.
Fox Paine requested that Maxxim agree to negotiate with Fox Paine on an
exclusive basis and agree not to solicit, negotiate, encourage or otherwise
discuss a change in control transaction with any other person prior to April 30,
1999. Fox Paine's proposal also required that Maxxim agree to reimburse Fox
Paine for up to $800,000 in expenses and, in the event that on or before April
30, 1999, Fox Paine were to reaffirm its willingness to engage in the $25 per
share transaction, but Maxxim would not agree to such a transaction and later
were to agree to a change in control transaction with a third party at any time
before April 30, 2000, to pay Fox Paine a fee of $2 million.
On April 9, 1999, the Maxxim board formed a special committee composed
of four non-interested directors to review and consider Fox Paine's proposal.
The four members of the special committee were: Donald R. DePriest, Martin
Grabois, Richard O. Martin and Henk R. Wafelman. The members of the special
committee, along with all other directors (other than Mr. Davidson, who
abstained) authorized Maxxim to agree to the exclusivity, fee and expense
arrangements requested by Fox Paine. The parties then executed a letter
reflecting these arrangements. Thereafter, and through the end of April, Fox
Paine continued its due diligence of Maxxim.
The special committee then engaged Lazard Freres & Co. LLC as its
financial advisor and also engaged outside legal counsel. During the week of
April 19, 1999, immediately following this engagement, Lazard Freres and outside
legal counsel conducted due diligence.
Following the formation of the special committee, Fox Paine delivered a
proposed merger agreement to the special committee's advisors. The terms of the
merger agreement proposed by Fox Paine included a "no solicitation" covenant
which would prohibit Maxxim from, among other things, engaging in discussions
with any person with respect to any competing transaction unless the Maxxim
board determined that failure to take such action would constitute a breach of
fiduciary duty. The terms of the proposed merger agreement further provided that
if the merger agreement were terminated for certain reasons, including by Maxxim
to accept a superior offer, Maxxim would pay to Fox Paine a termination fee of
$25 million and reimburse its expenses. Fox Paine advised the special committee
that it would not participate in any auction process.
On April 26, 1999, executives of Fox Paine, together with its legal
counsel, met with Lazard Freres and the special committee's legal counsel to
discuss the price, structure and proposed financing of
15
<PAGE> 21
the proposed transaction and to discuss financial information relating to Maxxim
and to the proposed financing.
On the evening of April 27, 1999, the special committee met with its
financial and legal advisors to receive a preliminary report from Lazard Freres
regarding its analysis of Maxxim and the proposed purchase price of $25 per
share and the terms of the proposed merger. On the following morning, the
special committee again met with its financial and legal advisors and determined
that it would be in the best interests of the shareholders of Maxxim to explore
whether unaffiliated third parties had an interest in the possible acquisition
of Maxxim. The special committee also determined that it was not advisable to
negotiate the proposed merger agreement with Fox Paine until such time as more
information was available regarding the price which unaffiliated third parties
might be willing to pay to acquire Maxxim.
The recommendations of the special committee were communicated to the
Maxxim board on April 28, 1999, and on the basis of that recommendation, the
Maxxim board decided to allow the Fox Paine proposal to expire and determined to
further explore with its financial advisor Maxxim's options for maximizing
shareholder value. Fox Paine indicated that while it remained interested in
negotiating the purchase of Maxxim, it was not willing to participate in an
auction process.
At a meeting held on May 3, 1999, the Maxxim board reviewed various
alternatives for increasing shareholder value. It then authorized Lazard Freres
to initiate a confidential limited auction process to determine the interest of
unaffiliated third parties in an acquisition of Maxxim.
Beginning on May 7, 1999, Lazard Freres contacted ten unaffiliated
third parties regarding their interest, if any, in considering a possible
acquisition of Maxxim. Eight of the parties contacted were potential strategic
buyers and the other two were potential financial buyers other than Fox Paine.
The eight strategic buyers were chosen based on Lazard Freres' and management's
review of the potentially interested parties including (i) potential strategic
fit with Maxxim, (ii) prior expressions of interest in Maxxim (if any) and (iii)
competitive issues such as whether discussions with any potentially interested
party might result in a competitor receiving competitively sensitive information
or otherwise present other potential significant issues. The two financial
buyers were chosen based on Lazard Freres' knowledge of, discussions with and
recent transaction experience of these two firms in the healthcare sector.
Of the ten parties contacted by Lazard Freres, five expressed an
interest in receiving information concerning Maxxim and engaging in further
discussions. Four of the parties executed confidentiality agreements and were
sent information concerning Maxxim, including certain financial projections
described on page __ under "Certain Projections" that were based upon
projections that had been developed by Maxxim and its advisors in connection
with its acquisition of Circon and subsequently updated, and which were provided
to Fox Paine and Lazard Freres. Only two initial responses, both from potential
financial buyers, were received by the May 26, 1999 deadline set for indications
of interest. The ranges of these indications of interest were $23.00 to $26.00
and $25.00 to $27.50 per share, and each indication of interest was subject to
various conditions including due diligence, financing, the establishment of
appropriate management incentive programs and necessary approvals. Three
strategic buyers indicated that they would have been interested in acquiring
parts of Maxxim, but none of these strategic buyers were interested in
purchasing Maxxim as a whole due to a lack of strategic fit across business
lines.
On May 28, 1999, Lazard Freres reviewed the results of the process with
the Maxxim board. Following the discussion, the Maxxim board decided to
re-establish the special committee (composed of the same individuals as
previously) with the authority to negotiate a possible sale of Maxxim with Fox
Paine or any other potential buyer. On June 2, 1999, the special committee
engaged legal counsel and Lazard Freres' retention was continued.
On June 3, 1999, at a telephonic meeting of the special committee, the
members of the special committee reviewed the results of the process which had
been conducted by Lazard Freres and the history of the prior discussions with
Fox Paine. The special committee believed that, in comparison with the
indications of interest received, the Fox Paine proposal could be negotiated and
consummated in a rapid time frame, thus exposing Maxxim to minimal market and
business risk. Based on the facts that no strategic buyer had submitted an
indication of interest for all of Maxxim, that there was no assurance that
16
<PAGE> 22
either of the financial buyers who had expressed an interest in Maxxim would
make a definitive offer, that any such offer would be superior to Fox Paine's,
or that any such offer could be consummated, as compared to the facts that Fox
Paine and its debt financing sources had completed their due diligence review
(which was not the case with the other potential financial buyers) and were in a
position to proceed to negotiate a definitive agreement rapidly, the special
committee determined that it would be advisable to contact Fox Paine to inform
them that the special committee was prepared, for a short period of time, to
negotiate the terms of a recapitalization transaction with Fox Paine without
further engaging in a formal auction process provided that the purchase price
must be improved beyond the $25.00 which previously had been offered, the
termination fee must be significantly reduced, and the merger agreement must
include an acceptable "fiduciary out" provision regarding competing
transactions. On June 4, Lazard Freres contacted Fox Paine and advised them of
the special committee's decision and discussed the parameters of a potential
transaction. Subsequently, a proposed merger agreement was delivered to Fox
Paine and its legal advisors by the special committee's advisors.
Negotiations between Fox Paine and its advisors and the advisors to the
special committee concerning the price, structure and other terms of the merger
agreement continued from June 6 through June 12. Also during this period, Fox
Paine negotiated the terms of the investor participation agreement and related
term sheet with the Continuing Shareholders.
On June 6, 1999, Fox Paine stated that it was not prepared to increase
the purchase price beyond $25.00 per share with the proposed two-step tender
offer and merger structure, but that Fox Paine would increase the price to
$25.50 per share if the transaction did not entail a bridge financing and the
related expense, for example through the use of a one-step merger structure.
On June 7, 1999, Fox Paine's legal advisors provided a draft merger
agreement which incorporated the one-step merger proposal, included the same "no
solicitation" covenant that had been included in Fox Paine's April draft merger
agreement and provided for a $22.5 million termination fee, plus expenses.
On June 8, 1999, the special committee held a meeting with its
financial and legal advisors to discuss the terms of the Fox Paine counter
proposal. The special committee concluded that it was not prepared to approve an
offer at that point in time of less than $26.00 per share. The special committee
instructed its legal advisors and Lazard Freres to meet with Fox Paine and its
advisors to determine whether it would be possible to agree upon the terms of a
fully financed transaction which (i) provided shareholders with at least $26.00
per share in cash, (ii) provided firm financing commitments, with bridge
financing if necessary, (iii) provided for a lower termination fee and (iv)
would not preclude third parties from making a bid for Maxxim.
On June 9, 1999, Lazard Freres and the special committee's legal
advisors met with Fox Paine and its legal advisor to negotiate the terms of the
merger agreement. Following the meeting, Lazard Freres and the special
committee's legal advisors advised the members of the special committee that
several issues were not resolved, but that there had been significant progress
on the issues that were of the greatest concern to the special committee. Lazard
Freres and the special committee's legal advisors also advised the special
committee that Fox Paine had stated that it would be prepared to pay $26 per
share subject to resolution of any remaining issues, but that it would not be
willing to enter into a transaction that provided Fox Paine with a break-up fee
(and expense reimbursement) of less than $1.25 per share. The members of the
special committee directed its legal advisors and Lazard Freres to continue to
negotiate the terms of the merger agreement, including the terms of Fox Paine's
financing commitments. The special committee emphasized to its advisors the
importance of a fully financed proposal which, in the committee's view, should
include bridge financing and have as few contingencies as reasonably
practicable.
From June 10, 1999 through June 13, 1999, Lazard Freres and the special
committee's legal advisors continued to negotiate a merger agreement with Fox
Paine and its representatives, including price, financing terms, termination
fees and terms of the non-solicitation provisions.
On June 13, 1999, the special committee held a meeting with its
financial and legal advisors to consider the form of merger agreement and
related terms which had been negotiated with Fox Paine. At
17
<PAGE> 23
this meeting, the special committee's legal advisors reviewed with the special
committee the terms and conditions of the proposed merger agreement and Fox
Paine's financing commitments, as well as other legal issues relating to the
proposed merger. Lazard Freres made a detailed financial presentation and
delivered to the special committee its opinion that, as of June 13, 1999, the
$26 per share cash merger consideration was fair, from a financial point of
view, to Maxxim's public shareholders (other than the Continuing Shareholders).
The members of the special committee discussed the terms of the proposed merger
agreement in detail and concluded that the $26 per share price was the highest
price that Fox Paine would be willing to pay, the terms of the "no-solicitation"
covenant permitted Maxxim to negotiate with a party who made an unsolicited
proposal for a competing acquisition transaction under acceptable circumstances,
and Fox Paine's financing commitments were sufficiently firm. The special
committee also reviewed the terms and effects of the voting agreements and the
investor participation agreement and considered the participation of the
Continuing Shareholders in the proposed merger generally. After considerable
discussion, the special committee unanimously determined that the terms of the
merger are advisable, fair to and in the best interests of Maxxim's public
shareholders (other than the Continuing Shareholders), recommended that the
Maxxim board approve the merger agreement and the transactions contemplated
thereby and determined that the Maxxim board should recommend that the
shareholders of Maxxim approve the merger agreement.
The special committee meeting was followed immediately by a meeting of
the full Maxxim board to consider the merger agreement. The special committee,
with its legal and financial advisors participating, reported to the Maxxim
board on its review of the merger agreement and the related financing
commitments and the special committee's recommendation of the proposed
transaction as advisable, fair to and in the best interests of Maxxim's public
shareholders (other than the Continuing Shareholders). The special committee's
legal advisors and Lazard Freres repeated their presentations, and Lazard Freres
delivered its opinion to the Maxxim board that, as of June 13, 1999, the $26 per
share cash merger consideration was fair, from a financial point of view, to
Maxxim's public shareholders (other than the Continuing Shareholders). After
receiving the recommendation of the special committee, the Maxxim board
unanimously determined that the terms of the merger agreement are advisable,
fair to and in the best interests of the shareholders of Maxxim, approved the
merger agreement and the transactions contemplated thereby and recommended that
Maxxim's shareholders approve the merger agreement. Following the meeting of the
Maxxim board, Fox Paine Maxxim and Maxxim executed the merger agreement, and Fox
Paine Maxxim and the Continuing Shareholders executed the investor participation
agreement and the voting agreements.
CERTAIN PROJECTIONS
Maxxim does not as a matter of course make public projections as to its
future performance or earnings. However, in connection with the discussions
concerning the proposed merger, Maxxim furnished to Fox Paine, and in connection
with the Maxxim board's solicitations of interest in May of 1999, Maxxim
furnished to certain interested parties, projections as to Maxxim's future
financial performance.
The distributed projections included projections of revenues, earnings
before interest, taxes, depreciation and amortization (EBITDA) and net income
for Maxxim on a consolidated basis of $740.4 million, $118.2 million and $30.9
million, respectively, in 2000; $775.0 million, $123.5 million and $36.5
million, respectively, in 2001; $811.3 million, $128.9 million and $41.3
million, respectively, in 2002; and $849.3 million, $134.6 million and $46.5
million, respectively, in 2003. Maxxim had also provided pro forma forecasts of
revenues, EBITDA and net income for 1999, which it revised since signing the
merger agreement to $660.3 million, $102.1 million, and $22.1 million,
respectively. In late 1998, in connection with Maxxim's acquisition of Circon,
Maxxim and its financial advisors had prepared certain other projections of
Maxxim's future financial performance, which were shared with Fox Paine. These
projections, which were later updated to the distributed projections described
above, indicated revenues, EBITDA and net income that were 4.4% to 5.4%, 0.6%
to 1.6% and 0.3% to 2.6% higher, respectively, than indicated in the
distributed projections for the 2000-2003 period.
When results for the second quarter of fiscal 1999 became available
during the first week of June, before the execution of the merger agreement,
based on those results Maxxim lowered its revenue projections for the 2000 -
2003 period by approximately .9% for each year, its EBITDA projections for the
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<PAGE> 24
2000 - 2003 period by between 3.4% and 3.6% per year and its net earnings
projections for the 2000 - 2003 period by between 3.6% and 8.5% per year, in
each case from the distributed projections.
Important Information About the Projections
The projections referred to above were not prepared with a view to
public disclosure, and are included in this proxy statement only because such
information was made available to Fox Paine and to certain interested parties.
The projections were not prepared with a view to compliance with published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. Neither the
Company's independent auditors, nor any other independent accountants, have
compiled, examined, or performed any procedures with respect to the projections.
While presented with numeric specificity, the projections reflect numerous
assumptions made by Maxxim's management with respect to industry performance,
general business, economic, market and financial conditions and other matters,
including assumed interest expense and effective tax rates consistent with
historical levels for Maxxim, all of which are difficult to predict, many of
which are beyond Maxxim's control and none of which were subject to approval by
Fox Paine or any of the interested parties who received them. Accordingly, there
can be no assurance that the assumptions made in preparing the projections will
prove accurate, and actual results may be materially greater or less than those
contained in the projections. The inclusion of the projections herein should not
be regarded as an indication that Maxxim, any recipient of the projections, or
their respective affiliates or representatives considered or consider the
projections to be a reliable prediction of future events, and the projections
should not be relied upon as such. Maxxim does not intend to further update or
otherwise revise the projections to reflect circumstances existing after the
date when made or to reflect the occurrence of future events even in the event
that any or all of the assumptions underlying the projections are shown to be in
error.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND OF THE FULL MAXXIM BOARD; FAIRNESS
OF THE MERGER
Recommendation of the Special Committee and the Full Maxxim Board
The special committee has unanimously recommended that the Maxxim board
approve the merger agreement and the transactions contemplated thereby. Both the
special committee and the full Maxxim board have unanimously determined that the
terms of the merger are advisable, fair to and in the best interests of Maxxim's
public shareholders (other than the Continuing Shareholders) and determined that
the Maxxim board should recommend that the Maxxim shareholders approve the
merger agreement.
In recommending approval of the merger agreement, the special committee
considered a number of factors, including:
- The results of operations, financial condition,
assets, liabilities, business strategy and prospects of Maxxim
and the nature of the industry in which Maxxim competes. The
members of the special committee also held discussions with
members of Maxxim's management regarding its business,
conditions and prospects.
- The opinion of Lazard Freres, dated June 13, 1999,
that, as of that date, the $26 per share cash consideration to
be paid in the merger is fair from a financial point of view
to Maxxim's public shareholders (other than the Continuing
Shareholders).
- The relationship of the $26 per share cash
consideration to the current market price and the historical
market prices for Maxxim common stock and the fact that the
$26 per share cash consideration represents a premium of
approximately 30.8% over the per share closing price of Maxxim
shares on June 11, 1999, the last trading day prior to the
public announcement of the merger agreement, and a premium of
approximately 53.8% over the volume weighted average trading
price of the Maxxim shares over the ninety days prior to the
public announcement of the merger agreement.
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<PAGE> 25
- The fact that Lazard Freres, in its solicitation of
indications of interest, did not identify any strategic buyer
that had an interest in acquiring all of Maxxim.
- The special committee's belief that the risk and
disruption to Maxxim and its operations due to the process
involved with a sale of its parts was greater than the
potential benefit, if any, to its shareholders.
- The special committee's belief that it was in the
best interests of Maxxim and its shareholders to enter into a
transaction that could be consummated rapidly, thus exposing
Maxxim to minimal market and business risk, and that, in
comparison with the parties from whom indications of interest
were received, Fox Paine and its financing sources were in a
position to complete a transaction in a rapid time frame.
- The statements of representatives of Fox Paine that
Fox Paine would not participate in an auction of Maxxim.
- The fact that approval of the merger agreement
requires the affirmative vote of a majority of the outstanding
Maxxim shares entitled to vote thereon.
- The fact that the consideration to be received in the
merger is payable in cash, thereby eliminating any
uncertainties in valuing the consideration to be received by
Maxxim's public shareholders.
- The likelihood of the completion of the merger in
light of the fact that commitments have been received by Fox
Paine Maxxim and Fox Paine Circon for the funds necessary to
complete the merger transactions.
- The arm's-length negotiations between the special
committee and Fox Paine and their respective representatives,
including that the negotiations resulted in:
- an increase in the per share cash price to
be received by Maxxim's public shareholders;
- a reduction in the termination fee payable
by Maxxim in the event the merger agreement is
terminated as a result of a competing transaction;
- a limitation in the number of events
resulting in the payment of the termination fee or
reimbursement of Fox Paine Maxxim's expenses;
- Maxxim having the right to engage in
negotiations with, and supply information to, a
person who makes an unsolicited proposal for a
competing acquisition transaction that could
reasonably be expected to lead to a superior
transaction (see page __ under "The Merger --
Prohibition Against Solicitation of Competing
Transactions"); and
- significant changes in the financing
commitments to limit the nature of the conditions to
such financing and to eliminate the liability of
Maxxim with respect to such financing if the merger
is not completed.
- The nature of the financing commitments received by
Fox Paine with respect to the merger, including the identity
of the institutions providing such commitments, their
knowledge of Maxxim and their proven experience in
consummating transactions such as the merger and the
conditions to the obligations of such institutions to fund
such commitment, as well as the fact that completion of the
merger will not be dependent on
20
<PAGE> 26
the ability of Fox Paine, Fox Paine Maxxim or Fox Paine Circon
to raise funds through the high yield debt or other securities
markets and the special committee's belief as to the strength
of the financing commitments.
- The terms and effects of the voting agreements and
the investor participation agreement described on pages __
through __ under "Interests of Certain Persons in the Merger,"
and the participation of the Continuing Shareholders in the
proposed merger generally.
The foregoing discussion of the information and factors considered by
the special committee includes all of the material factors considered by the
special committee in reaching its conclusions and recommendations but is not
meant to be exhaustive. In view of the variety of factors considered in its
reaching its determination, the special committee did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its conclusions and recommendations. In addition,
individual members of the special committee may have given different weights to
different factors.
In reaching its determinations referred to above, the Maxxim board
considered the following factors, each of which, in the view of the Maxxim
board, supported such determinations:
- The factors referred to above as having been taken
into account by the special committee.
- The conclusions and recommendations of the special
committee.
- The fact that the $26 per share cash consideration
and the terms and conditions of the merger agreement were the
result of arm's-length negotiations among the special
committee and Fox Paine and their respective advisors.
Fairness of the Merger
The Maxxim board, including the members of the special committee, also
believes that the merger is procedurally fair because, among other things:
- The special committee consisted of four non-employee,
independent directors appointed to represent the interests of
Maxxim's public shareholders.
- The members of the special committee are not
Continuing Shareholders.
- The special committee retained and received advice
from independent financial advisors and legal counsel.
- The $26 per share cash consideration and the other
terms and conditions of the merger agreement resulted from
active arm's-length bargaining between the special committee
and its representatives, on the one hand, and Fox Paine and
its representatives, on the other hand.
- The special committee, through its advisors,
solicited indications of interest from potential interested
parties unaffiliated with Maxxim and none of the indications
of interest received from the unaffiliated parties approached
provided the combination of price and degree of certainty
that Maxxim believed could be achieved with Fox Paine.
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<PAGE> 27
- Under Texas law and Maxxim's articles of
incorporation, a plan of merger requires the affirmative vote
of the holders of a majority of all outstanding shares
entitled to vote thereon in order to be adopted.
The members of the Maxxim board, including the members of the special
committee, evaluated Fox Paine's proposal and the merger in light of their
knowledge of the business, financial condition and prospects of Maxxim, and
based upon the advice of financial and legal advisors. In light of the number
and variety of factors that the Maxxim board considered in connection with their
evaluation of the merger, the Maxxim board did not find it practicable to assign
relative weight to any of the foregoing factors.
OPINION OF LAZARD FRERES & CO. LLC
Under a letter agreement, dated April 19, 1999, and amended June 11,
1999, the special committee appointed by the Maxxim board retained Lazard Freres
& Co. LLC to act as its financial advisor for the merger. As part of this
engagement, the special committee requested that Lazard Freres evaluate the
fairness, from a financial point of view, of the price to be paid in the merger
to the public shareholders of Maxxim, which was determined on the basis of
arm's-length negotiations between the special committee and Fox Paine. On June
13, 1999, Lazard Freres delivered to the board of directors its oral opinion
that, as of that date, $26.00 was fair from a financial point of view to the
public shareholders. Lazard Freres later confirmed its oral opinion by
delivering a written opinion dated June 13, 1999, which stated the
considerations and assumptions upon which its opinion was based.
THE FULL TEXT OF THE OPINION DATED JUNE 13, 1999, WHICH EXPLAINS THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
SCOPE OF THE REVIEW UNDERTAKEN BY LAZARD FRERES IN RENDERING ITS OPINION, IS
ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT. LAZARD FRERES' WRITTEN OPINION
IS DIRECTED TO THE MAXXIM BOARD AND ONLY ADDRESSES THE FAIRNESS OF THE $26.00
PER SHARE AMOUNT FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION.
LAZARD FRERES' WRITTEN OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MAXXIM SHAREHOLDER AS TO HOW TO
VOTE AT THE SPECIAL MEETING. THE FOLLOWING IS ONLY A SUMMARY OF THE LAZARD
FRERES OPINION. SHAREHOLDERS ARE URGED TO READ THE ENTIRE OPINION.
In arriving at its opinion, Lazard Freres, among other things:
- reviewed the financial terms and conditions of the draft
merger agreement, dated June 10, 1999;
- analyzed historical business and financial information
relating to Maxxim;
- reviewed financial forecasts referred to on page ___ under
"Special Factors - Certain Projections" and other data
provided to Lazard Freres relating to Maxxim;
- held discussions with members of Maxxim's senior management
regarding the businesses, prospects and strategic objectives
of Maxxim;
- reviewed public information of other companies in lines of
businesses that Lazard Freres believed were generally
comparable to the business of Maxxim;
- reviewed the financial terms of business combinations
involving companies in lines of businesses that Lazard Freres
believed were generally comparable to the business of Maxxim;
- - reviewed the historical stock prices and trading volumes of Maxxim
common stock; and
- - conducted other financial studies, analyses and investigations that
Lazard Freres believed were appropriate.
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<PAGE> 28
Lazard Freres assumed and relied upon, without independent
verification, the accuracy and completeness of all information publicly
available or reviewed by or discussed with Lazard Freres. Lazard Freres did not
independently value or appraise the assets or liabilities of Maxxim and did not
assume any responsibility for matters concerning the solvency of or issues
relating to solvency concerning Maxxim. Lazard Freres also relied upon the
advice of management of Maxxim that the financial forecasts and other
information that were provided to or discussed with Lazard Freres were
reasonably prepared based on the best currently available estimates and
judgments of Maxxim management as to the future financial performance of Maxxim.
Lazard Freres also assumed, with Maxxim's consent, that the merger
would be completed according to the terms of the merger agreement, without
waiver of any condition contained in that agreement, and that the merger will be
accounted for as a recapitalization. In addition, Lazard Freres assumed (1)
obtaining the necessary regulatory approvals for the merger will not have an
adverse effect on Maxxim and (2) there were no material changes to the merger
agreement as executed from the draft reviewed by Lazard Freres.
The following is a brief summary of the material financial analyses
performed by Lazard Freres in preparing its opinion:
Comparable Publicly Traded Companies Analysis
Lazard Freres reviewed and compared the actual and estimated financial,
operating and stock market information of certain companies in lines of business
believed to be generally comparable to those of Maxxim in the health care
industry. These companies included Arrow International, Inc., CONMED Corp.,
Dexter Corp., Mentor Corp., Owens & Minor, Inc. and Safeskin Corp.
Specifically, Lazard Freres analyzed the respective multiples of the
enterprise value of these companies to their earnings before interest, taxes,
depreciation and amortization and earnings before interest and taxes for the
last twelve months and for projected fiscal year 1999 and 2000, and multiples of
the equity value of these companies to their net income for the last twelve
months and for projected fiscal year 1999 and 2000. Their analysis indicated the
following:
<TABLE>
<CAPTION>
Multiples of EBITDA
-------------------
- --------------------------------------------------------------------------------------------------------
High Low Median
---- --- ------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000E 8.3x 5.2x 6.6x
- --------------------------------------------------------------------------------------------------------
1999E 8.8x 6.2x 7.4x
- --------------------------------------------------------------------------------------------------------
Last Twelve Months 10.0x 6.0x 9.0x
- --------------------------------------------------------------------------------------------------------
<CAPTION>
Multiples of EBIT
-----------------
- --------------------------------------------------------------------------------------------------------
High Low Median
---- --- ------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000E 10.7x 6.3x 8.0x
- --------------------------------------------------------------------------------------------------------
1999E 11.6x 7.6x 9.0x
- --------------------------------------------------------------------------------------------------------
Last Twelve Months 14.8x 8.5x 11.9x
- --------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 29
<TABLE>
<CAPTION>
Multiples of Net Income
-----------------------
- --------------------------------------------------------------------------------------------------------
High Low Median
---- --- ------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000E 15.0x 10.8x 11.7x
- --------------------------------------------------------------------------------------------------------
1999E 18.0x 12.8x 15.3x
- --------------------------------------------------------------------------------------------------------
Last Twelve Months 19.8x 14.0x 15.7x
- --------------------------------------------------------------------------------------------------------
</TABLE>
Lazard Freres then derived a range of implied per share equity values for Maxxim
by applying the multiples of the comparable companies listed above to
corresponding data for Maxxim prepared by Maxxim's management. Lazard Freres
then narrowed those ranges by focusing on the medians of the high and low
implied per share equity value ranges, which Lazard Freres determined was an
appropriate measure for this analysis. The resulting implied per share equity
value range was $17.45 to $33.16. As the per share merger consideration of
$26.00 fell within this range, Lazard Freres concluded that this analysis
supported its fairness determination.
Selected Precedent Transaction Analysis.
Lazard Freres reviewed selected publicly available financial and stock
market information of 15 transactions in the health care industry since 1994
including: The Carlyle Group/EMPI Inc., Chase Capital/Donjoy, Kimberly-Clark
Corp./Ballard Medical Products, Maxxim Medical, Inc./Circon Corp., Cardinal
Health Inc./Allegiance Corp., Maxxim Medical, Inc./Winfield Medical, Inc.,
Freeman Spogli & Co./Hudson Respiratory Care, Inc., Tyco
International/Sherwood-Davis & Geck, Conmed Corp./Linvatec Corp., Kimberly-Clark
Corp./Tecnol Medical Products, Inc., Fremont Partners/Kinetic Concepts, Inc.,
McKesson Corp./General Medical, Inc., Maxxim Medical, Inc./Sterile Concepts
Holdings, Inc., Maxxim Medical, Inc./Medical Glove Division of Becton Pickinson,
and Tyco International Ltd./Kendall International, Inc.
Specifically, Lazard Freres analyzed the respective multiples of the
transaction values for these transactions to the last twelve months' earnings
before interest, taxes, depreciation and amortization and earnings before
interest and taxes for the seller in these transactions, and multiples of the
equity value for these transactions to the last twelve months' net income for
the seller in these transactions. Lazard Freres' analysis indicated the
following:
<TABLE>
<CAPTION>
Precedent Transaction Multiples
-------------------------------
- --------------------------------------------------------------------------------------------------------
High Low Median
---- --- ------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Last Twelve Months' 10.7x 7.2x 9.2x
EBITDA
- --------------------------------------------------------------------------------------------------------
Last Twelve Months' 14.6x 8.6x 11.0x
EBIT
- --------------------------------------------------------------------------------------------------------
Last Twelve Months' 25.3x 14.4x 18.2x
Net Income
- --------------------------------------------------------------------------------------------------------
</TABLE>
Lazard Freres then derived a range of implied per share equity values for Maxxim
by applying the multiples from the precedent transactions listed above to
corresponding data for Maxxim prepared by Maxxim's management. Lazard Freres
then narrowed those ranges by focusing on the medians of the high and low
implied per share equity value ranges, which Lazard Freres determined was an
appropriate measure for this analysis. The resulting implied per share equity
value range was $18.02 to $42.03. As the per share merger consideration of $26
fell within this range, Lazard Freres concluded that this analysis supported its
fairness determination.
Premiums Paid Analysis.
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<PAGE> 30
Lazard Freres reviewed the publicly available information concerning
premiums paid in eight of the selected transactions listed above, in seven
selected healthcare leveraged buyout transactions and in 12 selected leveraged
buyout transactions since 1998. Lazard Freres analyzed the information on these
transactions using two criteria. The first criteria was the purchase price as a
percentage of the 52-week high trading price and the second was the purchase
price as a percentage premium to the one-month-prior trading price. Based on
Maxxim's 52-week high trading price of $30.63, the implied equity value per
share ranged from $24.02 to $34.76. Based on Maxxim's one-month-prior trading
price of $16.00, the implied equity value per share ranged from $17.38 to
$26.79. As the per share merger consideration of $26 fell within these ranges,
Lazard Freres concluded that this analysis supported its fairness determination.
Discounted Cash Flow Analysis.
Lazard Freres performed a discounted cash flow analysis of the
projected free cash flow of Maxxim for the years ended November 1, 1999, through
November 1, 2003, based on projections provided to Lazard Freres by management
of Maxxim. A discounted cash flow analysis is generally used to ascribe a
present value to an anticipated future stream of cash flow, based upon
assumptions relating to, among other things, prevailing market conditions,
including costs of capital. As part of its analysis, Lazard Freres assumed,
among other things, discount rates of 10%-12%, based on a comparable company
weighted average cost of capital of 11%, and terminal multiples of earnings
before interest, taxes, depreciation or amortization of 6.5x to 8.5x. Using the
same discount rate range, Lazard Freres also analyzed the effects of perpetual
growth of Maxxim's unlevered free cash flow, based on perpetual growth rates of
3%-5%. The following sets forth the results of Lazard Freres' analysis:
<TABLE>
<CAPTION>
Discounted Cash Flow Analysis
-----------------------------
- --------------------------------------------------------------------------------------------------------
Range Discount Rate Equity Value
----- ------------- ------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Terminal Value 6.5x-8.5x 10%-12% $24.07-$35.15
- --------------------------------------------------------------------------------------------------------
Perpetual Growth 3%-5% 10%-12% $22.73-$35.17
- --------------------------------------------------------------------------------------------------------
</TABLE>
As the per share merger consideration of $26 fell within both ranges, Lazard
Freres concluded that this analysis supported its fairness determination.
Leveraged Buyout Analysis.
Lazard Freres prepared an analysis as to the consideration a leveraged
buyout purchaser might be willing to pay to acquire Maxxim. This analysis was
based upon the then-current economic market conditions and projections provided
by management of Maxxim. Lazard Freres assumed a capital structure and a
financing rate scenario consistent with the financing commitments under the
proposed capital structure. Assuming internal rates of return to equity
investors of approximately 24% to 30%, the per share consideration a leveraged
buyout purchaser might be willing to pay for Maxxim ranged from approximately
$23 to $26. As the per share merger consideration of $26 is at the top of this
range, Lazard Freres concluded that this analysis supported its fairness
determination.
Leveraged Buyout Transactions Comparables.
Lazard Freres reviewed selected publicly available financial and stock
market information of 11 selected leveraged buyout transactions since 1994,
including: The Carlyle Group/EMPI Inc., Chase Capital/Donjoy, Welsh, Carson,
Anderson, Stowe et. al./Concentra Managed Care, Madison Dearborn Partners et.
al./Team Health Group, Freeman Spogli & Co./Management Hudson Respiratory Corp.
Inc., Bruckmann Rosser Sherrill & Co./MEDIQ Incorporated, Thomas H. Lee
Co./Fisher Scientific International, Inc., Fremont Partners et. al./Kinetic
Concepts, Inc., Apollo Management L.P./SMT Health Services Inc., and River
Medical Acquisition Corp. (DLJ)/Ivac Corporation (Eli Lilly).
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<PAGE> 31
Specifically, Lazard Freres analyzed the respective multiples of the
transaction values for these transactions to the last twelve months' earnings
before interest, taxes, depreciation and amortization and earnings before
interest and taxes for the seller in these transactions, and multiples of the
equity value for these transactions to the last twelve months' net income for
the seller in these transactions. Lazard Freres' analysis indicated the
following:
<TABLE>
<CAPTION>
Leveraged Buyout Transaction Multiples
--------------------------------------
- --------------------------------------------------------------------------------------------------------
High Low Median
---- --- ------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Last Twelve Months' 9.5x 7.2x 8.6x
EBITDA
- --------------------------------------------------------------------------------------------------------
Last Twelve Months' 13.5x 8.6x 11.8x
EBIT
- --------------------------------------------------------------------------------------------------------
Last Twelve Months' 23.4x 14.4x 18.7x
Net Income
- --------------------------------------------------------------------------------------------------------
</TABLE>
Lazard Freres then derived a range of implied per share equity values
for Maxxim by applying the multiples from the leveraged buyout transactions
listed above to corresponding data for Maxxim prepared by management. Lazard
Freres then narrowed those ranges by focusing on the medians of the high and low
implied per share equity value ranges, which Lazard Freres determined was an
appropriate measure for this analysis. The resulting implied per share equity
value range was $18.02 to $36.81. As the per share merger consideration of $26
fell within this range, Lazard Freres concluded that this analysis supported its
fairness determination.
Lazard Freres performed a variety of financial and comparative analyses
solely for the purpose of providing its opinion to the Maxxim board that the $26
per share amount is fair from a financial point of view. The summary of these
analyses is not a complete description of the analyses performed by Lazard
Freres. Preparing a fairness opinion is a complex analytic process and is not
readily susceptible to partial analysis or summary description. Lazard Freres
believes that its analyses must be considered as a whole. Selecting portions of
its analyses and factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying the analyses
and its opinion.
In its analyses, Lazard Freres made numerous assumptions with respect
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Maxxim.
The estimates contained in these analyses and the valuation ranges resulting
from any particular analysis do not necessarily indicate actual values or
predict future results or values, which may be significantly more or less
favorable than those suggested by these analyses. In addition, analyses relating
to the value of the businesses are not appraisals and do not reflect the prices
at which the businesses may actually be sold or the prices at which their
securities may trade. As a result, these analyses and estimates are inherently
subject to substantial uncertainty.
Lazard Freres' opinion and financial analyses were not the only factors
considered by the Maxxim board in its evaluation of the merger and should not be
viewed as determinative of the views of the Maxxim board or Maxxim's management.
Under the terms of Lazard Freres' engagement, Maxxim has agreed to pay
Lazard Freres an advisory fee of $4.5 million, which the special committee
believes is reasonable for the services provided in connection with the merger.
A substantial portion of this fee will not be paid unless and until the merger
is completed. Maxxim has agreed to reimburse Lazard Freres for travel and other
out-of-pocket expenses incurred in performing its services, including the fees
and expenses of its legal counsel, and to indemnify Lazard Freres and related
persons against liabilities, including liabilities under the federal securities
laws, arising out of Lazard Freres' engagement.
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<PAGE> 32
Lazard Freres is an internationally recognized investment banking firm
and is continually engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts, and valuations for real estate, corporate and other purposes. Lazard
Freres was selected to act as investment banker to the special committee because
of its expertise and its reputation in investment banking and mergers and
acquisitions.
THE CONTINUING SHAREHOLDERS' REASONS FOR THE MERGER
The Continuing Shareholders' purpose in engaging in the merger is to
retain an investment in each of Maxxim and Circon as private companies. The
Continuing Shareholders believe that as private companies Maxxim and Circon will
have greater operating flexibility to focus on enhancing value by emphasizing
growth (both internally and through acquisitions) and operating cash flow
without the constraint of the public market's emphasis on quarterly earnings.
While the Continuing Shareholders believe that there will be significant
opportunities associated with their continued participation in Maxxim and
Circon, there are also substantial risks that such opportunities may not be
fully realized. In addition, the Continuing Shareholders regard the merger as an
attractive investment opportunity because they believe that the substantial
increase in the debt to equity ratio of each of Maxxim and Circon after the
merger, although importing greater investment risks, will create the potential
for increased investment returns.
POSITION OF THE CONTINUING SHAREHOLDERS AS TO FAIRNESS OF THE MERGER
None of the Continuing Shareholders participated in the deliberations
of the special committee regarding, or received advice from the special
committee's financial advisor as to, the merger. Each of the Continuing
Shareholders has, however, considered the analyses and findings of the special
committee and the Maxxim board (described in detail under "Recommendation of
the Special Committee and of the Full Maxxim Board; Fairness of the Merger"),
as well as the opinion of Lazard Freres (described in detail under "Opinion
of Lazard Freres & Co. LLC"), with respect to the fairness of the merger to the
public shareholders of Maxxim. As of the date of this proxy statement, each of
the Continuing Shareholders, based on the reasoning set forth in
"Recommendation of the Special Committee and of the Full Maxxim Board; Fairness
of the Merger" and "Opinion of Lazard Freres & Co. LLC," believes that the
merger, the merger agreement and the merger transactions are fair to and in the
best interests of Maxxim's public shareholders. This belief does not constitute
a recommendation to the public shareholders of Maxxim by the Continuing
Shareholders to vote to approve the merger agreement. The Continuing
Shareholders (except in the case of Messrs. Davidson and Henley for their
recommendation in their capacity as members of the board of directors of
Maxxim) make no recommendation as to how the Maxxim public shareholders should
vote their shares. Each of the Continuing Shareholders has entered into a
voting agreement with Fox Paine Maxxim, pursuant to which, among other things,
he or she has agreed to vote all of his or her Maxxim shares in favor of the
merger and against any competing transaction. See "The Special Meeting - Voting
Agreements." No opinion is expressed by any of the Continuing Shareholders to
each other as to the fairness of the transactions contemplated by the merger
agreement to any shareholder making or maintaining an investment in Maxxim or
Circon after the merger.
The disadvantage of the transaction to public shareholders of Maxxim
is that such public shareholders will cease to have an interest in Maxxim and
will, therefore, not participate in any future growth or financial success of
Maxxim.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
- -- CONTINUING SHAREHOLDERS
The Continuing Shareholders have interests in the merger transactions
as employees and/or directors of Maxxim, or as shareholders with a continuing
equity interest in Maxxim and Circon, that are different from, or in addition
to, yours as a Maxxim shareholder. Among other things, the Continuing
Shareholders will not receive $26 per share, in cash, for all of their Maxxim
shares, and will remain shareholders of Maxxim and will become shareholders of
Circon. In addition, the Continuing Shareholders have entered into an investor
participation
27
<PAGE> 33
agreement with Fox Paine Maxxim that would have the effects and would provide
the Continuing Shareholders with the benefits described below. When making the
determination to approve and recommend approval of the merger transactions to
Maxxim's public shareholders, both the Maxxim board and the special committee of
independent directors appointed to review the merger were aware of the interests
of the Continuing Shareholders and the terms and effects of the investor
participation agreement and considered these interests, effects and terms
together with the other factors described under "Special Factors --
Recommendations of the Special Committee and of the Full Maxxim Board; Fairness
of the Merger."
The Investor Participation Agreement -- General
At the time it entered into the merger agreement, Fox Paine Maxxim
entered into an investor participation agreement with the Continuing
Shareholders pursuant to which each Continuing Shareholder agreed to be bound by
all of the terms and conditions set forth in a term sheet relating to the
retention by the Continuing Shareholders of their equity interest in Maxxim, the
purchase by the Continuing Shareholders of equity interests in Circon at the
time of the Circon sale, and the terms for employment, compensation and equity
incentive compensation for the Management Investors. It is expected that the
term sheet will be replaced by one or more full agreements before the completion
of the merger. Until then, the term sheet is binding. The key provisions of the
term sheet are described in the next few sections.
Treatment of Continuing Shares and Options
Stock Rollover. The Continuing Shareholders currently
collectively own 1,125,402 shares of Maxxim common stock. In the merger, these
shares will be treated as follows:
- 198,084 shares (all but 4,500 of which are owned by Ernest J.
Henley or Davis C. Henley) will be converted into $26 per
share in cash;
- 543,856 shares will be retained by the Continuing Shareholders
in the merger (and not converted into cash), and will continue
to represent an ownership interest in Maxxim; and
- 383,462 shares will be converted into $26 per share in cash,
with the gross proceeds (approximately $10 million)
immediately being reinvested in shares of Fox Paine Circon,
which is the company that will purchase Circon in the Circon
sale described on page ___.
The Continuing Shareholders will receive loans in an amount sufficient
to cover the taxes due on the cash received from the conversion of the 383,462
shares used to purchase Circon shares. There will be no cash interest payments
on tax loans. Instead, interest will be imputed and the Management Investors
will receive gross-up payments in respect of the taxes due on that imputed
interest. These tax loans will be mandatorily repayable from the after-tax
proceeds of future sales of Circon shares.
In May 1997, Maxxim issued 400,000 shares of its common stock at a
price of $13 per share to members of Maxxim's senior management, including the
Management Investors, under a senior management stock purchase plan (see
"Historical Market Information"). These shares were issued in exchange for
non-interest bearing, full recourse promissory notes due May 23, 2000. The
aggregate outstanding principal amount owed by the Management Investors under
these notes is approximately $4,498,000. The promissory notes will remain
outstanding after the merger, and will be extended until the tenth anniversary
of the completion of the merger. However, promissory notes from any employee
who is not a Management Investor will be mandatorily repaid by the employee
with the proceeds of any cash received by the employee from the cash out of his
or her Maxxim stock options in the merger, and the Management Investors will be
required to prepay the promissory notes with the after-tax proceeds of any
sales of Maxxim or Circon stock or options made after the completion of the
merger. The management promissory notes will not accelerate upon the
termination of employment of each Continuing Shareholder. The notes will be
appropriately divided (or new notes created) to reflect the fact that some of
each Management Investor's Maxxim shares that were subject to the notes will
have been exchanged for Circon shares in the merger. In addition, the senior
management stock purchase plan will be amended to remove the existing provision
that requires the holder to forfeit to Maxxim 50% of the profit from the sale
of Maxxim shares that are subject to the notes.
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<PAGE> 34
The following table indicates the number of shares in Maxxim that will
be held by each of the Continuing Shareholders and Fox Paine Maxxim immediately
after the merger and the percentage ownership in Maxxim represented by those
shares:
<TABLE>
<CAPTION>
NAME PERCENTAGE
PERCENTAGE NUMBER OF FOX OWNERSHIP OF
NUMBER OF OWNERSHIP OF PAINE CIRCON FOX PAINE
MAXXIM SHARES MAXXIM AFTER SHARES CIRCON AFTER
AFTER THE MERGER THE MERGER AFTER THE MERGER THE MERGER
<S> <C> <C> <C> <C>
Kenneth W. Davidson 188,678 3.9% 99,810 2.9%
Peter M. Graham 77,065 1.6% 29,153 0.8%
David L. Lamont 61,269 1.3% 23,674 0.7%
Henry T. DeHart 37,566 0.8% 16,499 0.5%
Jack F. Cahill 40,555 0.9% 18,195 0.5%
Alan S. Blazei 47,570 1.0% 16,127 0.5%
Joseph D. Dailey 24,870 0.5% 11,702 0.3%
Suzanne R. Garon 5,137 0.1% 2,895 0.1%
Ernest J. Henley, Ph.D. 146,621 3.0% 103,379 3.0%
Davis C. Henley 87,972 1.8% 62,028 1.8%
Fox Paine Maxxim 4,091,180 85.1% 3,096,154 88.9%
</TABLE>
Option Rollover. The Management Investors collectively own
options to acquire 1,084,200 shares of Maxxim common stock at a weighted average
exercise price of $13.97 per share. Upon the completion of the merger, vested or
unvested options on 635,864 shares will be canceled in exchange for a cash
payment equal to the difference between $26.00 and the exercise price per share
under the relevant option. The Management Investors will use the after-tax
proceeds of this cash-out to purchase 173,436 new Maxxim shares at $26.00 per
share, and will be granted 462,428 new options to acquire Maxxim common stock,
which equals the number of shares subject to the cashed-out options (635,864)
minus the number of newly issued shares (173,436). The new options will have an
exercise price of $26.00 per share. The remaining 448,336 options held by the
Management Investors will be canceled, and the Management Investors will receive
new options to acquire 448,336 shares of Circon common stock at a price of
$26.00 per share. These options will be fully vested, permit cashless exercise
with previously owned shares, and have no built-in gain.
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<PAGE> 35
The following table indicates, for each Management Investor, the number
of options currently held, the number of Maxxim options (which will have a
$26.00 exercise price) to be held after the merger, and the number of Circon
options (which will have a $26.00 exercise price) to be held after the merger.
<TABLE>
<CAPTION>
NUMBER OF MAXXIM OPTIONS NUMBER OF MAXXIM NUMBER OF CIRCON
NAME CURRENTLY HELD OPTIONS AFTER THE MERGER OPTIONS AFTER THE MERGER
<S> <C> <C> <C>
Kenneth W. Davidson 290,000 123,688 119,920
Peter M. Graham 213,000 90,848 88,079
David L. Lamont 166,000 70,801 68,644
Henry T. DeHart 98,000 41,798 40,525
Jack F. Cahill 101,400 43,249 41,931
Alan S. Blazei 151,000 64,404 62,441
Joseph D. Dailey 55,000 23,458 22,743
Suzanne R. Garon 9,800 4,180 4,052
</TABLE>
New Management Equity Incentive Plan.
As of the completion of the merger, Maxxim and Circon each will provide
a new management equity incentive plan that will grant the Management Investors
options to purchase up to a total of 10% of the common equity of Maxxim and of
Circon at an exercise price of $26.00. The new incentive plans will generally
provide for a ten-year option term, and will allow cashless exercise of the
options. The options will be split evenly into two pools:
- a pool of performance-based options that will vest in 20%
increments after each fiscal year from 1999 through 2003 if
previously agreed upon annual targets for EBITDA (earnings
before interest, taxes, depreciation and amortization) for
Maxxim and Circon for such fiscal year are met; and
- a pool of time-based options that vest in 20% increments on
each of the first through fifth anniversaries of the merger.
Maxxim and Circon performance-based options that do not vest as
scheduled because an EBIDTA target is not achieved will vest either in the next
fiscal year in which the EBITDA target is achieved or upon Fox Paine's
realization of an internal rate of return of at least 30% on its investment in
Maxxim or Circon, as applicable, or else on the ninth anniversary of the merger.
Any stock options granted under the new incentive plans that remain
unvested as of the date of a Management Investor's termination of employment
with Maxxim or Circon for any reason will be forfeited on the date of
termination. However, any stock options that are vested at the time of
termination may be exercised for one year following the termination of
employment, after which they will be forfeited.
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<PAGE> 36
Options granted under the new equity incentive plans will be granted to
individual Management Investors based upon the recommendation of Mr. Davidson to
the compensation committee of the Maxxim board.
Special Bonus Program.
In connection with the merger, Maxxim will establish a key executive
special bonus program, valued at approximately $3,663,000, for the benefit of
the Management Investors. The bonus payments for all of the participants, other
than Mr. Graham and Mr. Blazei, will be payable on the completion of the merger.
A portion of Mr. Graham's and Mr. Blazei's bonus will be payable on the
completion of the merger with the remaining portion paid based on the
achievement of performance goals following the merger.
In addition, the bonus program provides that the unpaid portion of Mr.
Graham's and Mr. Blazei's bonus will be forfeited if their employment is
terminated either by Maxxim for cause or by Messrs. Graham or Blazei without
good reason. If, however, Mr. Graham's or Mr. Blazei's employment is terminated
by Maxxim without cause or by Messrs. Graham or Blazei for good reason, or upon
their disability or death, the unpaid portion of their respective bonuses will
become payable in accordance with the agreed upon schedule and conditions.
In addition, it is expected that Circon will establish a bonus pool of
up to $5.4 million in the aggregate for the benefit of the Management Investors.
Bonuses will be paid over a number of years to be determined and will be related
to the value of the Circon equity.
Employment and Severance Agreements.
Although currently employed by Maxxim, the Management Investors (other
that Mr. Davidson) do not have written employment agreements with Maxxim,
although each is a party to an Executive Continuity Agreement with Maxxim which
provides them with certain benefits in the event of their termination upon a
change of control of Maxxim. Effective upon the completion of the merger, each
Management Investor (including Mr. Davidson, whose current agreement will be
terminated) will enter into employment agreements with Maxxim and each of the
Executive Continuity Agreements will be terminated. The following is a summary
of the material terms of such employment agreements.
The employment period under the new employment agreements will commence
upon the completion of the merger and will terminate on the fifth anniversary of
the merger, with additional one year renewal options. Pursuant to the new
employment agreements, each executive will continue in the position and with the
duties and responsibilities as in effect prior to the completion of the merger,
subject to reassignment from time to time by Mr. Davidson, in the case of all
executives other than Mr. Davidson. The new employment agreements will provide
that each executive will receive an annual base salary equal to his or her
current annual base salary and an annual performance bonus opportunity equal to
a percentage of his or her annual base salary. The annual base salary and bonus
opportunity percentage for Mr. Davidson is $350,000 and 90%, respectively, and
will be less for the other executives. In addition, during the employment
period, each executive will be entitled to participate in compensation and
benefit plans on terms and conditions no less favorable in the aggregate than
those in effect prior to the merger.
Pursuant to the new employment agreements, upon the termination of an
executive's employment by Maxxim, other than for cause, or by the executive for
good reason, the executive will be entitled to a cash payment equal to a
multiple of the sum of the executive's annual base salary and the most recent
annual bonus earned by the executive, as well as continued participation in
Maxxim's benefit plans for a number of years equal to that executive's multiple.
Mr. Davidson's multiple will be three, so that he will be entitled to receive a
payment of three times the sum of his annual base salary and most recent annual
bonus, as well as continued participation in Maxxim's benefit plans for a period
of three years. The compensation, multiple and length of continuing
participation will be less for the other executives.
Under the new employment agreements, Maxxim is required to provide term
life insurance with death benefits equal to two times the sum of the executive's
then current base salary and annual bonus opportunity.
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<PAGE> 37
Should the executive become disabled, Maxxim is required to pay the executive's
then current base salary and bonus opportunity for a period of 24 months.
The new employment agreements will provide that if any amounts payable
to the executive in connection with a change in control (other than the merger
transactions) would be subject to the excise tax under section 4999 of the U.S.
tax code, an additional payment will be made so that after the payment of all
income and excise taxes the executive will be in the same after-tax position as
if no excise tax under section 4999 had been imposed. In addition, the
employment agreements with Messrs. Davidson, Graham and Blazei will provide for
a similar additional payment in the event any amounts payable to these
individuals in connection with the merger transactions would be subject to
excise tax under Section 4999 of the U.S. tax code.
Pursuant to the new employment agreements, each executive will also
agree to non-competition and non-solicitation restrictions during the employment
period and thereafter for the number of years equal to each executive's
multiple.
Shareholder Rights Relative to Fox Paine and to Each Other
After the merger, the Continuing Shareholders, together with Fox Paine,
will own all of the equity of Maxxim and Circon. Accordingly, the Continuing
Shareholders and Fox Paine have entered into an Investor Participation Agreement
creating various rights and obligations between them. These provisions are
described below. While these provisions are currently enforceable, it is
anticipated that, at the time of the merger, the Continuing Shareholders and Fox
Paine will enter into shareholders agreements (one for Maxxim and another for
Circon) that will also include these provisions. It is further anticipated that
the shareholder agreements will permit Fox Paine and the Continuing Shareholders
to transfer or sell their shares in some circumstances and that anyone who
becomes a shareholder of Maxxim or Circon as a result of a permitted transfer or
sale will be required to sign the shareholders agreements and be bound in the
same way as the person who transferred or sold the shares to the new
shareholder. Unless otherwise indicated, the following items apply equally to
Fox Paine's and the Continuing Shareholders' participation in Maxxim and Circon.
Tag-Along Rights. If, at any time before an initial public
offering of stock, Fox Paine or a Continuing Shareholder accepts an offer from a
third party to sell any or all of its shares, each of the other shareholders
will be able to participate in the offer on a proportionate basis, at the same
price and on the same terms.
Drag-Along Rights. If, at any time before an initial public
offering of stock, Fox Paine sells at least 50% of its shares in a bona fide
arm's length transaction or series of related transactions, Fox Paine may
require the Continuing Shareholders to sell a proportionate number of their
shares in the same transaction at the same price and on the same terms (with
appropriate adjustments for warrants or options).
Registration Rights. After an initial public offering, the
Continuing Shareholders will collectively have the right, which can only be used
once with respect to Circon and twice with respect to Maxxim, to demand that
Circon or Maxxim, as the case may be, register their shares for sale under the
Securities Act of 1933, as amended. Fox Paine will have the same right, which it
will be permitted to use up to five times for each of Maxxim or Circon, as the
case may be. In addition, the Continuing Shareholders and Fox Paine will all
have customary and full "piggyback" registration rights on registrations
initiated by Fox Paine or another Continuing Shareholder. If the underwriters
request a reduction in the number of shares to be sold in any registered
offering, the number of shares offered by Fox Paine and any participating
Continuing Shareholders will be cut back proportionally based on the number of
shares owned by each person, regardless of who initiated the registration.
Expenses related to all demand registrations and piggyback registrations will be
borne by the issuer. Other customary registration rights provisions will apply,
including holdbacks, indemnification, and contribution provisions. If Fox Paine
is permitted to include any of its shares in an initial public offering, the
Continuing Shareholders will be entitled to participate proportionately as well.
Right of First Offer. Before an initial public offering, if
Fox Paine proposes to sell or transfer any of its shares, Fox Paine will first
be required to offer to sell the shares to the Continuing Shareholders at a
minimum
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<PAGE> 38
price suggested by Fox Paine. If the Continuing Shareholders elect not to
purchase all of the offered shares, Fox Paine will have the right to sell the
shares to any other party as long as the sale price is equal to or above the
minimum price offered to the Continuing Shareholders. Before an initial public
offering, Fox Paine will have a reciprocal right to receive a first offer on any
sales or transfers by the Continuing Shareholders. These right of first offer
provisions do not apply to transfers to customary permitted transferees (such as
affiliates of Fox Paine or family members of the Continuing Shareholders).
Liquidity upon Death or Disability and Some Terminations. The
Management Investors will have the right to sell all of their Circon shares back
to Circon, at fair market value, upon their death or disability or the voluntary
termination of their employment by the Management Investors for good reason, or
their involuntary termination without cause. In addition, the Management
Investors will have the right to sell any Maxxim shares that are acquired upon
the exercise of stock options (provided that the shares have been held for at
least six months) back to Maxxim at fair market value, upon death or disability
or termination of employment by the Management Investors for good reason or by
Maxxim without cause.
The Management Investors' liquidity rights will end upon completion of
an initial public offering of Maxxim or Circon shares, as applicable, and, in
any event, are subject to Maxxim's and Circon's available cash flow, debt
restrictions, and any legal restrictions on distributions of cash, particularly
under debt and loan agreements (including those described on pages __ to __
under "Merger Financing"). If payments related to these rights are not made
immediately, the payments will remain a continuing obligation of the relevant
company and will be made, with interest, before the payment of any dividends or
distributions to other shareholders.
Call Rights. Before an initial public offering of Circon
shares, Circon will have the right to purchase its shares back from any
Management Investor at fair market value if the investor's employment is
terminated by Maxxim or Circon for cause or by the Management Investor
voluntarily and without good reason.
Board of Directors.
Maxxim and Circon will have separate boards of directors after the
merger. Each board of directors initially will consist of (1) Kenneth W.
Davidson, as Chairman, (2) Ernest J. Henley, (3) one other member to be
appointed by the Continuing Shareholders, and (4) four members designated by Fox
Paine. The shareholder agreement will not limit Fox Paine's right to add
additional directors. So long as Mr. Davidson is the chief executive officer or
chairman of the board of directors, Mr. Davidson will have the right to
designate all three representatives of the Continuing Shareholders. Thereafter,
the representatives of the Continuing Shareholders will be elected by plurality
vote of shares held by the Continuing Shareholders. Fox Paine's and the
Continuing Shareholders' right to designate directors will terminate upon an
initial public offering or a significant reduction in ownership percentage by
either group.
Indemnification of Directors and Officers.
Under the merger agreement, the indemnification and exculpation
provisions of Maxxim's articles of incorporation and bylaws as in effect at the
time of the completion of the merger will, to the extent they relate to matters
arising before the completion of the merger, remain in force after the merger.
In addition, Fox Paine Maxxim has agreed that, for a period of six years after
the completion of the merger, it will cause Maxxim to maintain in effect the
current policies of directors' and officers' liability insurance maintained by
Maxxim with respect to matters arising on or before the completion of the
merger. Fox Paine Maxxim is only required to cause Maxxim to obtain as much
comparable insurance as is available at an annual premium of 150% of Maxxim's
current annual premium. In addition, the investor participation agreement
provides that Maxxim and Circon will each adopt customary mandatory
indemnification and expense advancement policies for its respective officers.
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<PAGE> 39
- -- SPECIAL COMMITTEE
Because some of the directors are Continuing Shareholders in the merger
transactions, the Maxxim board appointed a special committee of four independent
directors to evaluate the proposed transactions. None of the members of the
special committee are Continuing Shareholders or employees of Maxxim, nor do any
of them have interests in the merger different from the interests of Maxxim
shareholders generally. Their Maxxim shares and options will be cashed out like
those of other public Maxxim shareholders.
The members of the special committee have not received any special
compensation for their services on the committee. Members of the special
committee, however, will be entitled to certain indemnification rights and to
directors' and officers' liability insurance that will be continued by Maxxim
following the merger as described above for the current and former officers and
directors of Maxxim. The Maxxim board and the special committee believe that the
foregoing arrangements do not affect the special committee's independence or
impartiality.
CERTAIN EFFECTS OF THE MERGER; CONDUCT OF BUSINESS AFTER THE MERGER
After the merger, Maxxim and Circon will be separate companies, will be
capitalized separately and will pursue separately their respective business
strategies. Immediately after the merger, Maxxim will be owned approximately 85%
by Fox Paine and approximately 15% by the Continuing Shareholders, and Circon
will be owned approximately 89% by Fox Paine and approximately 11% by the
Continuing Shareholders (in both cases, before giving effect to the exercise of
any stock options or warrants). The current Maxxim shareholders, other than the
Continuing Shareholders, will no longer have any interest in, and will not be
shareholders of either Maxxim or Circon. Maxxim and Circon will have separate
boards of directors after the merger. Each board of directors initially will
consist of (1) Kenneth W. Davidson, as Chairman, (2) Ernest J. Henley, (3) one
other member to be appointed by the Continuing Shareholders, and (4) four
members designated by Fox Paine. See page __ under "Special Factors - Interests
of Certain Persons in the Merger" for additional details.
It is currently expected that the Management Investors, who are the
current executive officers of Maxxim, will continue to be the executive officers
of both Maxxim and Circon after the merger. These persons will receive the
employment, compensation, and cash and equity incentives described under
"Special Factors Interests of Certain Persons in the Merger."
Following the merger, Maxxim intends to delist the Maxxim shares from
the New York Stock Exchange, and the registration of the Maxxim shares under the
Securities Exchange Act of 1934 will be terminated. It is anticipated that there
will be no active trading market for Maxxim or Circon shares unless and until
Maxxim or Circon determines at a future date to conduct an initial public
offering of its shares.
Fox Paine is continuing to evaluate Maxxim's business, assets,
practices, operations, properties, corporate structure, capitalization,
management and personnel and discuss what changes, if any, will be desirable.
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MERGER FINANCING
GENERAL
It is expected that completion of the merger transactions will require
total funding of approximately $809.7 million for the following uses:
1) to make payments to Maxxim shareholders and holders of Maxxim
stock options of approximately $368.7 million in cash
consideration for the merger;
2) to retire certain existing indebtedness of Maxxim of
approximately $265.0 million;
3) to purchase approximately $100.0 million principal amount of
Maxxim's 10 1/2% senior subordinated notes dUE August 1, 2006
in a debt tender offer to be consummated concurrently with the
merger;
4) to leave outstanding existing capital lease obligations of
approximately $9.7 million;
5) to retain $14.1 million of existing equity of the Continuing
Shareholders in Maxxim; and
6) to pay the fees and expenses incurred in connection with the
merger transactions (other than the Circon sale) of
approximately $52.2 million, including any debt tender premium
and consent fee paid in connection with the debt tender offer.
It is expected that such financing needs will be funded from the
following sources:
1) $310.0 million in senior secured credit facilities committed
by The Chase Manhattan Bank, of which $267.0 million is
expected to be funded at closing;
2) $150.0 million in new senior subordinated notes to be issued
by a subsidiary of Maxxim (or, if the subsidiary is unable to
sell these senior subordinated notes, $150.0 million in senior
subordinated bridge loans committed by The Chase Manhattan
Bank);
3) $50.0 million in senior unsecured notes to be issued by Maxxim
to Fox Paine or other investors;
4) $208.0 million in cash from the sale of Circon to Fox Paine
Circon immediately before the merger (the financing for this
$208.0 million is described on page __ under "-- Financing of
the Circon Sale");
5) $106.4 million of cash equity provided by Fox Paine and other
affiliated investment funds or other investors;
6) $18.6 million of existing equity from the Continuing
Shareholders (consisting of $14.1 million of shares of Maxxim
common stock retained in the merger and $4.5 million of new
shares of Maxxim common stock purchased from the proceeds of
the cash-out of Maxxim options in the merger) (see "Interests
of Certain Persons in the Merger - Option Rollover" on page
____); and
7) $9.7 million of existing capital leases that will remain
outstanding.
Under the merger agreement, Fox Paine Maxxim may change the terms or
components of the financing for the merger described above and may enter into
new, replacement or additional financing arrangements as long as in doing so Fox
Paine Maxxim does not materially delay completion of the merger or materially
affect Fox Paine Maxxim's ability to complete the merger. In addition, Fox Paine
may, with the approval of the lenders, reallocate its
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aggregate equity contributions to Maxxim and Circon in order to facilitate
completion of the merger transactions. In such case, the Continuing
Shareholders' equity in Maxxim and Circon will be adjusted accordingly.
SENIOR BANK LOANS
Commitment; Structure; Amortization; Interest; Maturity.
In connection with the merger, Fox Paine Maxxim received a commitment
from The Chase Manhattan Bank to provide up to $310.0 million in senior secured
credit facilities to a newly formed wholly-owned subsidiary of Maxxim that will
be the borrower (the "Borrowing Subsidiary"). Immediately prior to or concurrent
with the merger, Maxxim will contribute all of its assets (which consist
primarily of the stock of Maxxim's other subsidiaries) to the Borrowing
Subsidiary.
It is expected that the senior secured credit facilities will consist
of three term loans and a revolving credit facility, as follows:
- an $80.0 million Tranche A term loan, which will mature six
years after the effective date of the merger and will be
amortized on a schedule to be agreed upon by Maxxim and the
lenders. The loan will bear interest, at the Borrowing
Subsidiary's option, at the adjusted LIBOR rate plus 2.75% per
annum or at the alternate base rate described below plus 1.75%
per annum, in each case subject to adjustments to be agreed
upon by Maxxim and the lenders;
- a $90.0 million Tranche B term loan, which will mature
seven-and-one-half years after the effective date of the
merger and will be amortized on a schedule to be agreed upon
by Maxxim and the lenders (but providing for only nominal
installments until the final six months of the loan). The loan
will bear interest, at the Borrowing Subsidiary's option, at
the adjusted LIBOR rate plus 3.25% per annum or at the
alternate base rate plus 2.25% per annum;
- a $90.0 million Tranche C term loan, which will mature
eight-and-one-half years after the effective date of the
merger and will be amortized on a schedule to be agreed upon
by Maxxim and the lenders (but providing for only nominal
installments until the final six months of the loan). The loan
will bear interest, at the Borrowing Subsidiary's option, at
the adjusted LIBOR rate plus 3.50% per annum or at the
alternate base rate plus 2.50% per annum; and
- a $50.0 million revolving credit facility, which will mature
six years after the effective date of the merger. The
revolving facility will bear interest, at the Borrowing
Subsidiary's option, at the adjusted LIBOR rate plus 2.75% per
annum or at the alternate base rate plus 1.75% per annum, in
each case subject to adjustments to be agreed upon by Maxxim
and the lenders.
The alternate base rate is the highest of The Chase Manhattan Bank's
prime rate, the federal funds effective rate plus 1/2%, and the base CD rate
plus 1%. Under some circumstances, the maturity of each facilitY can be moved to
an earlier date. If any of Maxxim's currently outstanding 10 1/2% senior
subordinated notes remaIN outstanding after the debt tender offer or more than
$150 million of senior subordinated notes are issued by the Borrowing Subsidiary
in connection with the merger, then the amount of the term loans will be reduced
by the amount of the outstanding notes or the amount of new senior subordinated
notes in excess of $150 million.
It is expected that approximately $7.0 million of the $50.0 million
available under the revolving credit facility will be drawn to fund completion
of the merger transactions. The remainder of the revolving credit facility will
be available to be drawn upon for general corporate purposes.
Guarantees; Security.
The Borrowing Subsidiary's obligations under the term loans and the
revolving credit facility will be unconditionally guaranteed by Maxxim and by
each of Maxxim's subsidiaries other than the Borrowing Subsidiary,
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Circon and its subsidiaries and any foreign subsidiary of Maxxim whose guaranty
would result in adverse tax consequences to Maxxim. The Borrowing Subsidiary's
obligations under the term loans and the revolving credit facility and the
guarantee obligations referred to above will be secured by (1) a perfected first
priority pledge of all capital stock of the Borrowing Subsidiary and, subject to
certain exceptions, all capital stock held by Maxxim or any of Maxxim's
subsidiaries of each of Maxxim's subsidiaries, other than Circon and its
subsidiaries, and (2) subject to certain exceptions, a perfected first priority
security interest in all or substantially all of the tangible and intangible
assets of Maxxim, the Borrowing Subsidiary and each of their subsidiaries, other
than Circon and its subsidiaries.
Availability.
The availability of the term loans and the revolving credit facility
will be subject to various conditions precedent including:
- There not having occurred since December 31, 1998, any
material adverse change in the business, results of
operations, conditions (financial or otherwise), assets,
liabilities or prospects of Maxxim and its subsidiaries.
- There not having occurred and being continuing a material
disruption of or material adverse change in financial, banking
or capital market conditions that, in Chase's reasonable
judgment, could materially impair the syndication of the
senior secured facilities or the senior subordinated notes
described below.
- The pro forma adjusted consolidated EBITDA of the Borrowing
Subsidiary and its subsidiaries (other than Circon and its
subsidiaries) being not materially less than $73.2 million for
the 12 months ending July 30, 1999.
- Completion by Maxxim of the debt tender offer and consent
solicitation for its 10 1/2% senior subordinatED notes
described on page __ under "The Merger - Retirement/Amendment
of Maxxim Senior Notes."
- Availability of the other debt and equity funding for the
merger transactions.
- The merger transactions being completed, in accordance with
the terms of the merger agreement (without any waiver or
amendment that is adverse to the lenders and not reasonably
satisfactory to the loan agents), concurrently with, or
immediately after, the first drawing of funds under the term
loans and revolving credit facility.
The term loans are subject to mandatory prepayments upon the occurrence
of certain events, and the Borrowing Subsidiary may prepay any of the borrowings
in whole or in part at any time. Amounts repaid or prepaid under the term loans
cannot be reborrowed. Amounts repaid under the revolving credit facility will be
available for reborrowing on a revolving basis, subject to customary terms and
conditions.
Representations and Warranties; Covenants; Events of Default.
The term loans and the revolving credit facility will contain customary
representations and warranties and customary affirmative and negative covenants,
including covenants related to delivery of financial information, corporate
obligations and financial audits, as well as financial covenants, including
covenants related to maximum leverage and minimum interest coverage. The term
loans and the revolving credit facility will contain customary default
provisions, including the nonpayment of principal or interest when due,
cross-defaults, non-compliance with covenants, breach of representations and
warranties, bankruptcy, and changes of control.
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SENIOR SUBORDINATED NOTES/SENIOR SUBORDINATED CREDIT FACILITY
It is expected that the Borrowing Subsidiary will issue $150.0 million
in unsecured senior subordinated notes in a Rule 144A offering before or at the
same time as the completion of the merger. The senior subordinated notes will
have a 10-year term and will be subordinated to all of the Borrowing
Subsidiary's existing and senior indebtedness, including indebtedness under the
senior secured credit facilities described above. It is expected that the
senior subordinated notes will be guaranteed, on a senior subordinated basis,
by each of the Borrowing Subsidiary's subsidiaries. The senior subordinated
notes will not have been registered for sale under the Securities Act and will
not be eligible for offer or sale in the U.S. absent registration or an
exemption from the registration process.
If Maxxim is unable to issue the senior subordinated notes at or before
the completion of the merger, the Chase Manhattan Bank has committed to bridge
the issuance of the senior subordinated notes with a senior subordinated loan
facility of approximately $150.0 million. The bridge loan, if made, would mature
on the first anniversary of the merger and would accrue interest at an annual
rate that would be based initially on a spread over the three-month adjusted
LIBOR rate in effect at the time of issuance. If the bridge loan is not paid in
full on or before the first anniversary of the merger, the loan must either be
extended by the lenders or exchanged by the lender for exchange notes that the
Borrowing Subsidiary would be required to register for public sale in compliance
with applicable securities laws.
The bridge loan, if made, may be prepaid by the Borrowing Subsidiary at
any time, in whole or in part, upon ten days' prior notice to The Chase
Manhattan Bank.
The Borrowing Subsidiary's obligations under the bridge loan would be
unconditionally guaranteed, on a senior subordinated basis, by Maxxim and by
each of Maxxim's subsidiaries other than the Borrowing Subsidiary, Circon and
its subsidiaries, and any foreign subsidiary of Maxxim whose guaranty would
result in adverse tax consequences to Maxxim.
The availability of the bridge loan would be subject to various
conditions precedent including those applicable to the senior secured facilities
described above.
At the time of the merger, the indenture relating to Maxxim's currently
outstanding 10 1/2% senior subordinated notes due August 1, 2006 (as amended as
described on page __ under "The Merger - Retirement/Amendment of Maxxim Senior
Notes") will be assigned to the Borrowing Subsidiary and any of Maxxim's 10 1/2%
senior subordinated notes that are not tendered and purchased in the tender
offer described on page __ under "The Merger - Retirement/Amendment of Maxxim
Senior Notes" will become obligations of the Borrowing Subsidiary. Maxxim also
will continue to be liable for the repayment of the Notes.
HOLDING COMPANY NOTES
It is expected that at the time the merger is completed, Maxxim will
issue $50.0 million of senior unsecured notes to Fox Paine (which has committed
to purchase such notes) or other investors, the proceeds of which will be used
for completion of the merger transactions. These notes will be senior unsecured
obligations and will not be guaranteed by any of Maxxim's direct or indirect
subsidiaries.
Maxxim's senior unsecured notes will mature eleven years after the
effective date of the merger and will be payable in full at maturity. The
interest rate for the senior unsecured notes will be agreed upon between Fox
Paine and the Chase Manhattan Bank, and has not yet been determined, but will
be permitted to be paid in additional notes rather than cash at Maxxim's
election.
The issuance of the senior unsecured notes is subject to certain
customary conditions, including those applicable to the senior secured
facilities and the senior subordinated loan described above. The senior
unsecured notes will not have been registered for sale under the Securities Act
and will not be eligible for offer or sale in the U.S. absent registration or an
exemption from the registration process.
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EQUITY COMMITMENT
In connection with the merger agreement, Fox Paine Capital Fund, L.P.
has committed to contribute the sum of approximately $106.4 million to Fox
Paine Maxxim in return for 4,091,180 shares of Fox Paine Maxxim's common stock.
In addition, the Continuing Shareholders, who will retain 543,856 shares of
Maxxim common stock (valued at $14.1 million), have agreed to purchase an
additional 173,436 shares of Maxxim common stock (valued at $4.5 million) using
the net proceeds from the cash-out of their Maxxim stock options in the merger
(see "Special Factors - Interests of Certain Persons in the Merger"). The
equity commitments are conditioned upon the bank and debt financing being
completed on terms acceptable in form and substance to Fox Paine Maxxim and
upon all of the conditions to Fox Paine Maxxim's obligation to consummate the
merger having been satisfied without waiver. Fox Paine may permit certain
affiliated investment funds or certain other minority investors to purchase a
portion of the committed equity.
FINANCING OF THE CIRCON SALE
In exchange for all of the capital stock of Circon, Fox Paine Circon
will pay to Maxxim $208.0 million in cash and $2.0 million of redeemable common
stock of Fox Paine Circon. Fox Paine expects to obtain the $208.0 million of
cash, plus an additional $20.1 million for transaction costs, from the following
sources:
- $127.5 million in senior secured credit facilities committed
by The Chase Manhattan Bank, of which 102.5 million is
expected to be funded at closing;
- $35.0 million in senior unsecured notes to be issued by Fox
Paine Circon;
- $80.5 million of cash equity provided by Fox Paine and other
affiliated investment funds or certain other minority
investors; and
- $10.1 million of cash equity contributed by the Continuing
Shareholders from the proceeds of the sale of Maxxim shares in
the merger.
Senior Bank Loans.
The Chase Manhattan Bank has committed to provide up to $127.5 million
in senior secured credit facilities to Circon, consisting of:
- a $35.0 million Tranche A term loan, which will mature five
years after the effective date of the merger and will be
amortized on a schedule to be agreed upon by Maxxim and the
lenders. The loan will bear interest, at Circon's option, at
the adjusted LIBOR rate plus 3.00% per annum or at the
alternate base rate described below plus 2.00% per annum, in
each case subject to adjustments to be agreed upon by Circon
and the lenders;
- a $67.5 million Tranche B term loan, which will mature seven
years after the effective date of the merger and will be
amortized on a schedule to be agreed upon by Maxxim and the
lenders (but providing for only nominal installments until the
final six months of the loan). The loan will bear interest, at
Circon's option, at the adjusted LIBOR rate plus 3.75% per
annum or at the alternate base rate described below plus 2.75%
per annum; and
- a $25.0 million revolving credit facility, which will mature
five years after the effective date of the merger. The loan
will bear interest, at Circon's option, at the adjusted LIBOR
rate plus 3.00% per annum or at the alternate base rate
described below plus 2.00% per annum, in each case subject to
adjustments to be agreed upon by Circon and the lenders.
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The alternate base rate is the highest of The Chase Manhattan Bank's
prime rate, the federal funds effective rate plus 1/2%, and the base CD rate
plus 1%.
The Circon senior secured facilities would be subject to guarantees by
its parent and subsidiaries, to security interests and arrangements, and to
various covenants and events of default, in each case similar in form to those
applicable to the Maxxim senior secured facilities described above. The
availability of the Circon senior secured facilities and the revolving credit
facility will be subject to various conditions precedent including conditions
similar in form to those applicable to the Maxxim senior secured facilities
described above.
Under the merger agreement, Fox Paine may change the terms or
components of the financing for the Circon sale described above and may enter
into new, replacement or additional financing arrangements as long as in doing
so Fox Paine does not materially delay completion of the merger or materially
affect Fox Paine Maxxim's ability to complete the merger. In addition, Fox Paine
may, with the approval of the lenders, reallocate its aggregate equity
contributions to Maxxim and Circon in order to facilitate completion of the
merger transactions. In such case, the Continuing Shareholders' equity in Maxxim
and Circon will be adjusted accordingly.
Equity Commitments.
Fox Paine Capital Fund, L.P. has committed to contribute the sum of
approximately $80.5 million to Fox Paine Circon in return for 3,096,154 shares
of Fox Paine Circon common stock. In addition, the Continuing Shareholders will
purchase $10.1 million of Fox Paine Circon common stock from the proceeds of
the conversion of $10.1 million of Maxxim common stock in the merger and a
related loan to cover taxes (see "Special Factors Interests of Certain Persons
in the Merger"). The equity commitments are conditioned upon the debt financing
for the merger being completed on terms acceptable in form and substance to Fox
Paine Maxxim and upon all of the conditions to Fox Paine Maxxim's obligation to
consummate the merger having been satisfied without waiver. Fox Paine may
permit certain affiliated investment funds or certain other minority investors
to purchase a portion of the committed equity.
Holding Company Notes.
It is expected that at the time the merger is completed, Fox Paine
Circon will issue up to $35.0 million of senior unsecured notes to Fox Paine
(which has committed to purchase such notes) or other investors, the proceeds of
which will be used toward the completion of the Circon purchase. These notes are
likely to have similar terms and conditions as the Maxxim senior unsecured notes
described on page ____ under "-- Holding Company Notes." These senior unsecured
notes will not have been registered for sale under the Securities Act and will
not be eligible for offer or sale in the U.S. absent registration or an
exemption from the registration process.
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THE SPECIAL MEETING
GENERAL
This proxy statement is being furnished to Maxxim shareholders as part
of the solicitation of proxies by the Maxxim board for use at a special meeting
to be held on __________, 1999, starting at __:___ a.m., local time, in
______________________________________. The purpose of the special meeting is
for Maxxim shareholders to consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of June 13, 1999, between Maxxim and Fox
Paine Maxxim. A copy of the merger agreement is attached to this proxy statement
as Appendix A. This proxy statement and the enclosed form of proxy are first
being mailed to Maxxim shareholders on _____________, 1999.
RECORD DATE AND VOTING
The holders of record of Maxxim shares as of the close of business on
___________, 1999, are entitled to receive notice of, and to vote at, the
special meeting. On the record date, there were ____________ shares of Maxxim
common stock outstanding. The holders of a majority of the outstanding shares of
Maxxim common stock on __________, 1999, represented in person or by proxy, will
constitute a quorum for purposes of the special meeting. A quorum is necessary
to hold the special meeting. Any shares of Maxxim common stock held in treasury
by Maxxim or by any of its subsidiaries are not considered to be outstanding for
purposes of determining a quorum. Once a share is represented at the special
meeting, it will be counted for the purpose of determining a quorum at the
special meeting and any adjournment or postponement of the special meeting,
unless the holder is present solely to object to the special meeting.
Any shareholder of Maxxim has the right to dissent from approval of the
merger agreement, and, subject to strict compliance with certain requirements
and procedures set forth in Articles 5.11, 5.12 and 5.13 of the Texas Business
Corporation Act, to receive payment of the "fair value" of that shareholder's
shares of Maxxim common stock. See "Appraisal Rights." The Continuing
Shareholders have waived their rights to seek appraisal for their shares.
REQUIRED VOTE
Each share of Maxxim common stock outstanding on ___________, 1999,
entitles the holder to one vote at the special meeting. Completion of the merger
requires the approval of the merger agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Maxxim common stock. You must
vote your shares (1) by returning the enclosed proxy or (2) by appearing at the
special meeting and voting.
As of ____________, 1999, the Continuing Shareholders owned, in the
aggregate, 1,125,402 shares of Maxxim common stock, or approximately 8% of the
outstanding shares of Maxxim common stock on that date. The Continuing
Shareholders have agreed to vote their shares for the approval of the merger
agreement. See "--Voting Agreement" below. In addition, the other directors and
executive officers of Maxxim who, as of the record date, own in the aggregate
_______ shares of Maxxim common stock, or approximately ____% of the outstanding
shares of Maxxim common stock, have informed Maxxim that they intend to vote all
of their shares of Maxxim common stock "FOR" the approval of the merger
agreement.
The merger was not structured so that approval of at least a majority
of Maxxim shareholders not affiliated with Maxxim or Fox Paine Maxxim is
required to consummate the merger.
Under the rules of the New York Stock Exchange, brokers who hold shares
in street name for customers have the authority to vote on "routine" proposals
when they have not received instructions from beneficial owners. Under the rules
of the New York Stock Exchange, brokers are precluded from exercising their
voting discretion with respect to the approval of non-routine matters such as
the merger proposal and thus, absent specific instructions from the beneficial
owner of such shares, brokers may not vote such shares with respect to the
approval of such
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proposals (i.e., "broker non-votes"). Abstentions and properly executed broker
non-votes will be treated as shares that are present and entitled to vote at the
special meeting for purposes of determining whether a quorum exists and will
have the same effect as votes against approval of the merger agreement.
PROXIES; REVOCATION
If you vote your shares of Maxxim common stock by signing a proxy, your
shares will be voted at the special meeting as you indicate on your proxy card.
If no instructions are indicated on your signed proxy card, your shares of
Maxxim common stock will be voted "FOR" the approval of the merger agreement.
You may revoke your proxy at any time before the proxy is voted at the special
meeting. A proxy may be revoked prior to the vote at the special meeting by
submitting a written revocation to the Secretary of Maxxim at 10300 49th Street
North, Clearwater, Florida 33762, or by submitting a new proxy, in either case,
dated after the date of the proxy that is being revoked. In addition, a proxy
may also be revoked by voting in person at the special meeting. However, simply
attending the special meeting will not revoke a proxy.
All expenses incurred in connection with solicitation of the enclosed
proxy will be paid by Maxxim. Officers and employees of Maxxim may solicit
proxies by telephone or in person. However, they will not be paid for soliciting
proxies. Maxxim also will request that persons and entities holding shares in
their names or in the names of their nominees that are beneficially owned by
others send proxy materials to and obtain proxies from those beneficial owners,
and will reimburse those holders for their reasonable expenses in performing
those services. Maxxim has retained MacKenzie Partners, Inc. to assist it in the
solicitation of proxies, using the means referred to above, at an anticipated
cost of $________, plus reimbursement of out-of-pocket expenses.
ADJOURNMENTS OR POSTPONEMENTS
Although it is not expected, the special meeting may be adjourned or
postponed for the purpose of soliciting additional proxies. Any adjournment or
postponement of the special meeting may be made without notice, other than by an
announcement made at the special meeting, by approval of the holders of a
majority of the outstanding shares of Maxxim common stock present in person or
represented by proxy at the special meeting, whether or not a quorum exists. Any
signed proxies received by Maxxim will be voted in favor of an adjournment or
postponement of the special meeting in these circumstances, unless either a
written note on the proxy delivered by the shareholder directs otherwise or the
shareholder has voted against the merger agreement. Any adjournment or
postponement of the special meeting for the purpose of soliciting additional
proxies will allow Maxxim shareholders who have already sent in their proxies to
revoke them at any time prior to their use.
VOTING AGREEMENTS
The following is a brief summary of the material provisions of the
voting agreements between Fox Paine Maxxim and each of the Continuing
Shareholders. The summary may not contain all of the information that you would
consider to be important. The summary is qualified in its entirety by reference
to the voting agreements, a form of which is attached as Appendix D to this
proxy statement.
General.
Concurrent with the execution and delivery of the merger agreement, Fox
Paine Maxxim entered into separate voting agreements with each of the Continuing
Shareholders pursuant to which, among other things, each Continuing Shareholder
agreed to vote all of his or her Maxxim shares in favor of the merger agreement
and the merger transactions.
Voting.
Each Continuing Shareholder has agreed, during the period beginning on
June 13, 1999, and ending on the completion of the merger or the termination of
the merger agreement, to vote his or her Maxxim shares at any
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meeting of Maxxim shareholders or in any other circumstances upon which such
Continuing Shareholder's vote, consent or other approval is sought:
(1) in favor of the merger agreement and the merger transactions;
and
(2) against any action or agreement that would interfere with the
merger or any other transaction contemplated by the merger
agreement including,
- the adoption by Maxxim of a proposal regarding (a)
the acquisition of Maxxim by any person or group
(including by merger or other business combination);
(b) the acquisition by a third party of 5% or more of
the assets of Maxxim and its subsidiaries; (c) the
acquisition by a third party of 5% or more of the
outstanding voting stock of Maxxim; (d) the
repurchase by Maxxim or any of its subsidiaries of 5%
or more of the outstanding Maxxim shares; or (e) any
other competing acquisition transaction;
- any amendment of Maxxim's articles of incorporation
or by-laws or other proposal or transaction involving
Maxxim or any of its subsidiaries, which would in any
manner impede, frustrate, prevent or nullify the
merger, the merger agreement or any of the
transactions contemplated by the merger agreement or
change the voting rights of any class of Maxxim's
capital stock;
- any change in the control of Maxxim or Maxxim's
board;
- any material change in the present capitalization or
dividend policy of Maxxim; or
- any other material change in Maxxim's corporate
structure or business.
Other Agreements.
Each Continuing Shareholder has agreed that during the term of the
voting agreements, he or she will not sell, transfer, assign or otherwise
dispose of any of his or her Maxxim shares, enter into any voting arrangement
with respect to his or her Maxxim shares, or take any action that would prevent
or disable such shareholder from fulfilling his or her obligations under the
voting agreement.
Each Continuing Shareholder has also agreed that, during the term of
the voting agreements, he or she will not and will not permit his or her
representatives to solicit, initiate, encourage or facilitate, furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any competing acquisition transaction involving
Maxxim or enter into any agreement requiring or causing Maxxim to abandon or
fail to complete any of the transactions contemplated by the merger agreement.
However, the foregoing restrictions will not prevent any Continuing Shareholder
who is a director or officer of Maxxim from taking any action consistent with
his or her fiduciary duties to Maxxim and its shareholders or as may be provided
in the merger agreement, or if the Continuing Shareholder is an officer of
Maxxim, prohibit that person from participating in discussions with any third
party permitted by the merger agreement provisions described on pages __ through
__ under "The Merger - Prohibition Against Solicitation of Competing
Transactions" at any time during which Maxxim is permitted to engage (and is so
engaging) in such discussions with such third party pursuant to those provisions
of the merger agreement.
Termination.
The voting agreements may be terminated following the earlier to occur
of (1) the completion of the merger or (2) the termination of the merger
agreement in accordance with its terms.
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OTHER MATTERS TO BE CONSIDERED
Maxxim's board is not currently aware of any other business to be
brought before the special meeting. If, however, other matters are properly
brought before the special meeting or any adjournment or postponement of the
special meeting, the persons appointed as proxies will have discretionary
authority to vote the shares represented by duly executed proxies in accordance
with their discretion and judgment.
THE MERGER
The following is a brief summary of the material provisions of the
merger agreement, which may not contain all of the information that you would
consider to be important. The summary is qualified in its entirety by reference
to the merger agreement, a copy of which is attached as Appendix A to this proxy
statement.
STRUCTURE AND EFFECTIVE TIME
The merger agreement provides for the merger of Fox Paine Maxxim with
and into Maxxim. Maxxim will continue as the surviving corporation following the
merger.
The merger agreement also provides that, concurrent with the merger,
Maxxim will sell all of the outstanding Circon shares to Fox Paine Circon, an
affiliate of Fox Paine Maxxim, for $208 million in cash plus $2 million of
redeemable common stock of the buyer, or on other terms as the buyer may request
that do not reduce the consideration to be paid to Maxxim shareholders in the
merger.
The closing of the merger will occur on the second business day
immediately following the date upon which all conditions to the merger have been
satisfied or waived, or at such other time as the parties to the merger
agreement agree. The parties will file the articles of merger promptly after the
satisfaction or waiver of all conditions in the merger agreement. The merger
will become effective at the time a certificate of merger is issued by the
Secretary of State of the State of Texas in response to our filing of the
articles of merger, which is expected to occur on the closing date. We cannot
assure you when, or if, all the conditions of the merger will be satisfied or
waived. See "-- Conditions to the Merger." We expect, however, to complete the
merger in September or October 1999.
MERGER CONSIDERATION
The merger agreement provides that each share of Maxxim common stock
outstanding immediately prior to the completion of the merger (together with the
associated preferred stock purchase rights under the Maxxim preferred stock
purchase rights agreement), other than those held and retained by the Continuing
Shareholders and shareholders who exercise their right to dissent with respect
to the merger, will be converted upon the completion of the merger into the
right to receive $26.00 in cash from Maxxim, without interest. All Maxxim shares
owned by or held in the treasury of Maxxim and all Maxxim shares owned by
Maxxim's subsidiaries will be canceled upon the completion of the merger and no
payment will be made for those Maxxim shares.
PAYMENT PROCEDURES
Fox Paine Maxxim will appoint a paying agent that will pay the merger
consideration in exchange for certificates representing Maxxim shares. Maxxim
will deposit sufficient cash with the paying agent in order to permit the
payment of the merger consideration. Promptly after the completion of the
merger, the paying agent will send Maxxim shareholders a letter of transmittal
and instructions explaining how to send their stock certificates to the paying
agent. The paying agent will mail checks for the appropriate merger
consideration, minus any withholding taxes required by law, to Maxxim
shareholders promptly following the paying agent's receipt and processing of
Maxxim stock certificates and properly completed transmittal documents.
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TREATMENT OF MAXXIM STOCK OPTIONS
The merger agreement provides that Maxxim will terminate Maxxim's
employee and director stock option plans immediately prior to the completion of
the merger and, following that termination, grant no additional Maxxim stock
options under those option plans.
Maxxim has agreed to take all actions necessary prior to the completion
of the merger so that, immediately prior to the completion of the merger:
- 448,336 of the 1,084,200 Maxxim options held by Continuing
Shareholders will be canceled without any consideration. These
canceled options will be replaced with Circon options
following the merger; and
- all other outstanding Maxxim options, including 635,864
options held by the Continuing Shareholders, will
automatically be canceled and each holder of a Maxxim option
will receive a cash payment for each Maxxim share subject to
an option equal to the excess of $26.00 over the exercise
price of the option, less applicable withholding taxes.
RETIREMENT/AMENDMENT OF MAXXIM SENIOR NOTES
The merger agreement provides that, within five business days of a
request from Fox Paine Maxxim, Maxxim will commence a tender offer to purchase
all of its 10 1/2% senior subordinated notes issued under a July 30, 1996
Indenture. The aggregate principal amount of these notes outstanding is
currently $100 million. As part of this tender offer, Maxxim will solicit
consents from holders of the notes to amendments to the terms of the notes and
the indenture in order to eliminate restrictions applicable to all of the
transactions and financing contemplated in the merger agreement and a number of
other restrictive provisions. The consent of holders of more than 50% of the
outstanding principal amount of the notes is needed to effect the amendments
necessary to allow the merger to occur. The tender offer is subject to several
customary conditions.
DIRECTORS AND OFFICERS
The merger agreement provides that the directors of Fox Paine Maxxim
immediately before the completion of the merger will be the directors of the
surviving corporation. The officers of Maxxim immediately before the completion
of the merger will continue as the initial officers of the surviving
corporation.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties made by
Maxxim to Fox Paine Maxxim, including representations and warranties relating
to:
<TABLE>
<S> <C>
- - due organization, power and standing, and - non-applicability of takeover laws and the Maxxim
other corporate matters; preferred stock purchase rights agreement;
- - subsidiaries; - conduct of business since November 1, 1998;
- - capital structure;
- - authorization, execution, delivery and - brokers' and finders' fees with respect to the
enforceability of the merger agreement; merger;
- - required consents, approvals, licenses, - tax matters;
permits, orders and authorizations of
governmental entities relating to the merger - intellectual property rights;
agreement;
</TABLE>
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<PAGE> 51
<TABLE>
<S> <C>
- - proper filing of all required SEC reports - labor matters;
and financial statements and the accuracy of
information used in their preparation; - receipt of a fairness opinion from Maxxim's
financial advisor;
- - absence of undisclosed liabilities;
- title to assets;
- - litigation;
- material contracts;
- - compliance with applicable law;
- product liability;
- - retirement and employee benefit matters;
- suppliers and customers; and
- - environmental compliance and liability;
- Year 2000 compliance.
</TABLE>
The merger agreement also contains representations and warranties made
by Fox Paine Maxxim to Maxxim, including representations and warranties relating
to:
<TABLE>
<S> <C>
- - due organization, power and standing and - required consents, approvals, licenses, permits,
other corporate matters; orders and authorizations of governmental
entities relating to the merger agreement; and
- - authorization, execution, delivery and
enforceability of the merger agreement; - availability of financing.
</TABLE>
The representations and warranties of each of the parties to the merger
agreement will expire upon completion of the merger.
COVENANTS; CONDUCT OF THE BUSINESS OF MAXXIM PRIOR TO THE MERGER
From June 13, 1999, through the completion of the merger, Maxxim and
its subsidiaries are subject to certain restrictions on their conduct and
operations. Maxxim has agreed, and has agreed to cause its subsidiaries, to
conduct their business in the ordinary course of business, consistent with past
practice. In addition, Maxxim has agreed that, except as provided under the
merger agreement or with the prior written consent of Fox Paine Maxxim, Maxxim
will not and will cause its subsidiaries not to:
- amend or propose to amend their respective articles of
incorporation or bylaws;
- authorize, issue, deliver, sell, pledge or dispose of any
shares of its capital stock, except as required by any
existing employee stock incentive or benefit plans;
- split, combine or reclassify any of its capital stock; or
declare, set aside or pay any dividends or other distribution
related to its capital stock; or redeem or otherwise acquire
any of its securities or any securities of its subsidiaries;
- incur any material indebtedness or issue any debt securities
except for borrowings under its existing credit agreement in
the ordinary course of business; or assume, guarantee, endorse
or otherwise become liable or responsible for the obligations
of any other person; make any loans, advances, capital
contributions to, or investments in any other person, except
wholly owned subsidiaries or
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<PAGE> 52
customary loans or advances to employees in the ordinary
course of business and consistent with past practice and in
amounts not material to Maxxim, or make any change in its
existing borrowing or lending arrangements for or on behalf of
any such person;
- adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation,
dissolution, consolidation, merger, restructuring or
recapitalization of Maxxim or any of its subsidiaries;
- enter into, adopt or pay, agree to pay, grant, issue,
accelerate or accrue salary or other payments or benefit
pursuant to, or amend or terminate any bonus, profit sharing,
compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement,
deferred compensation, employment, welfare, issuance or other
employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director,
officer or employee;
- increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not
required by any plan and arrangement (including the granting
of stock appreciation rights or performance units), except for
normal increases in the ordinary course of business consistent
with past practices for employees (other than officers and
directors) that, in the aggregate, do not result in a material
increase in benefits or compensation expense to Maxxim;
- acquire, sell, transfer, lease, encumber or dispose of any
assets outside the ordinary course of business or any assets
that are in the aggregate material to Maxxim and its
subsidiaries; or enter into any commitment or transaction
outside the ordinary course of business consistent with past
practice that would be material to Maxxim and its
subsidiaries;
- make any change in accounting principles or practices, except
insofar as may have been required by a change in law or in
generally accepted accounting principles;
- revalue in any material respect its assets, including writing
down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business;
- acquire (by merger, consolidation, purchase of assets or
otherwise) or acquire any equity interest in any corporation,
business organization or division;
- enter into any material contract or agreement other than in
the ordinary course of business, consistent with past
practice;
- authorize any new capital expenditures that, individually, is
in excess of $500,000, or, in total, are in excess of
$5,000,000;
- make any tax election or settle or compromise any tax
liability, except in the ordinary course of business
consistent with past practice;
- satisfy or discharge any claims, liabilities or obligations,
other than in the ordinary course of business consistent with
past practice;
- cancel or terminate its insurance policy, other than in the
ordinary course of business and consistent with past practice
and only if it has obtained a comparable replacement insurance
policy;
- terminate, amend, or modify any material contracts, other than
in the ordinary course of business and consistent with past
practice;
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<PAGE> 53
- settle any pending or threatened material lawsuit or claim; or
- enter into any binding commitment or contract limiting
Maxxim's ability to competitively sell its products or
services or engage in any line of business.
PROHIBITION AGAINST SOLICITATION OF COMPETING TRANSACTIONS
The merger agreement provides that Maxxim will not, nor will it
authorize or permit any of its subsidiaries, directors, employees, officers,
agents or representatives, directly or indirectly, to:
- solicit, initiate, encourage, facilitate or provide non-public
information to facilitate any inquiries or proposals for any
merger or business combination involving Maxxim or to acquire
all or any capital stock of Maxxim or any material portion of
its assets; or
- negotiate, explore or otherwise engage in discussions or
negotiations regarding any alternative or competing
transaction or enter into any agreement, arrangement or
understanding that requires or would cause Maxxim to abandon,
terminate or fail to complete the transactions provided for in
the merger agreement, including the merger.
However, if prior to the completion of the merger, Maxxim receives an
unsolicited written proposal with respect to a competing transaction that Maxxim
did not initiate, solicit or encourage and that does not otherwise breach any
confidentiality, exclusivity, or standstill agreements entered into by Maxxim
before the merger agreement and that the Maxxim board or a special committee of
the board determines in good faith by majority vote could reasonably be expected
to result in a third party making a proposal for a superior transaction, then
Maxxim may participate in discussions or negotiations with that person regarding
that specific proposal. Under those circumstances, Maxxim may also furnish
confidential information to the person making the competing acquisition
proposal, but only pursuant to a customary confidentiality agreement, the terms
of which are no less favorable to Maxxim than the most favorable confidentiality
agreement entered into by Maxxim on or after January 1, 1999. However, Maxxim is
not permitted to furnish to any competitor or potential competitor information
about Maxxim or its subsidiaries, including sensitive information on pricing,
volume, sales and marketing, unless: (1) Maxxim's board or a special committee
of the board determines in its reasonable judgment, after consultation with
Maxxim's management, that disclosure of such information would not be materially
competitively disadvantageous to Maxxim and its subsidiaries, or (2)
confirmatory review of such sensitive information is the only remaining
condition to Maxxim and the competitor entering into an acquisition agreement
relating to an acquisition transaction that is superior to the transactions
contemplated by the merger agreement.
In any event, Maxxim is required to keep Fox Paine Maxxim apprised of
the status of any proposal relating to a competing transaction, including
promptly providing to Fox Paine Maxxim any sensitive information provided to any
competitor or potential competitor. In addition, Maxxim is permitted to amend
the terms of any existing standstill agreement solely to permit the other party
to make written proposals to Maxxim's board.
If Maxxim receives a bona fide written proposal for a superior
transaction, Maxxim may terminate the merger agreement and engage in that
superior transaction, but only if (1) Maxxim first provides written notice to
Fox Paine Maxxim advising it that Maxxim intends to terminate the merger
agreement and identifying the superior transaction (and attaching a copy of the
related acquisition agreement), and (2) not less than five full business days
later, Maxxim delivers to Fox Paine Maxxim a written notice of termination and
pays to Fox Paine Maxxim a termination fee of $19 million.
A proposal for a transaction will only be deemed to be "superior" under
the merger agreement if:
- the transaction was not initiated, solicited or encouraged by
Maxxim or its representatives in violation of the merger
agreement and does not violate any confidentiality,
exclusivity, or standstill
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<PAGE> 54
agreements entered into by Maxxim before the merger agreement
(as such agreements may be amended to permit the other party
to make a written proposal to Maxxim's board);
- Maxxim's board has determined in good faith, after
consultation with its financial and legal advisors, that the
transaction is more favorable to Maxxim's shareholders from a
financial point of view than the merger agreement transactions
(after taking into account any adjustment to the merger
agreement transactions proposed by Fox Paine Maxxim in
response to the competing transaction), is likely to and
capable of being consummated, and is in the best interest of
Maxxim's shareholders; and
- Maxxim has received (1) advice of its outside legal counsel
that failure to enter into such proposed transaction will
constitute a breach of the directors' fiduciary duties under
applicable law, and (2) a written opinion from Maxxim's
financial advisor that the competing transaction is more
favorable from a financial point of view to Maxxim's
shareholders (other than Fox Paine Maxxim and the Continuing
Shareholders) than the merger agreement transactions (after
taking into account any adjustment to the transactions
contemplated by the merger agreement proposed by Fox Paine
Maxxim in response to the competing transaction).
The Maxxim board has agreed to recommend that Maxxim shareholders vote
to approve the merger agreement and the transactions contemplated by the merger
agreement, and to use its best efforts to obtain shareholder approval of the
merger agreement and the transactions contemplated by the merger agreement.
Maxxim has agreed that neither Maxxim's board nor any committee of its
board may withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Fox Paine Maxxim, the Maxxim board's recommendation, or
approve or recommend any competing transaction. However, the Maxxim board may
withdraw or modify its recommendation if it receives the advice of its outside
legal counsel that failure to do so will result in breach of the directors'
fiduciary duties under applicable law. In such event, Maxxim's board must
provide Fox Paine Maxxim with five days' prior written notice of its intention
to withdraw or modify its recommendation regarding approval of the merger
agreement and the transactions contemplated by the merger agreement.
ACCESS TO INFORMATION
Until the completion of the merger, Maxxim will provide Fox Paine
Maxxim and its authorized representatives and its financing sources with
reasonable access to all of Maxxim's employees, plants, offices, warehouses and
other facilities and properties, and to all books and records. In addition,
Maxxim will permit Fox Paine Maxxim and its representatives to make any
inspections (at Fox Paine Maxxim's expense) that Fox Paine Maxxim may reasonably
request, and provide Fox Paine Maxxim access to all financial and operating data
and other information with respect to the business and properties of Maxxim and
its subsidiaries as Fox Paine Maxxim may from time to time reasonably request.
COOPERATION AND REASONABLE EFFORTS TO COMPLETE THE MERGER
In connection with the merger agreement, Maxxim and Fox Paine Maxxim
have agreed to use their reasonable efforts to take all actions necessary or
advisable so that the transactions contemplated by the merger agreement may be
completed, including cooperation in the arrangement of financing and the
satisfaction of conditions to the merger.
INDEMNIFICATION AND INSURANCE
Fox Paine Maxxim has agreed that the indemnification and exculpation
provisions of Maxxim's articles of incorporation and bylaws as in effect upon
the completion of the merger will, to the extent they relate to matters arising
before the completion of the merger, remain in force after the merger.
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<PAGE> 55
Fox Paine Maxxim has agreed that, for a period of six years after the
completion of the merger, it will cause Maxxim to maintain in effect the current
policies of directors' and officers' liability insurance maintained by Maxxim
with respect to matters arising on or before the completion of the merger. If
the cost of maintaining such insurance would exceed 150% of the current annual
premiums paid by Maxxim for such insurance, Fox Paine Maxxim is only required to
cause Maxxim to obtain as much comparable insurance as is available at an annual
premium of 150% of the current annual premium.
CONDITIONS TO THE MERGER
The obligations of Maxxim and Fox Paine Maxxim to complete the merger
are subject to the satisfaction or waiver of the following conditions on or
before the completion of the merger:
(1) approval of the merger agreement by the holders of a majority
of the outstanding Maxxim shares;
(2) absence of any statute, rule, regulation, order or injunction
of any governmental entity or court prohibiting or restricting
completion of the merger; and
(3) termination or expiration of the applicable antitrust waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
In addition, the obligation of Maxxim to complete the merger is subject
to the satisfaction or waiver of the following additional conditions:
(1) the representations and warranties of Fox Paine Maxxim
contained in the merger agreement being true and correct in
all material respects on and as of the effective date of the
merger (except to the extent that such representations and
warranties speak as of an earlier date);
(2) Fox Paine Maxxim having performed all of its obligations under
the merger agreement in all material respects; and
(3) Maxxim having received an independent solvency opinion (which
may be the same solvency opinion delivered to the lenders who
are financing the merger).
In addition, the obligations of Fox Paine Maxxim to complete the merger
are subject to the satisfaction or waiver of the following additional
conditions:
(1) the representations and warranties of Maxxim contained in the
merger agreement being true and correct in all material
respects on and as of the effective date of the merger (except
to the extent that such representations and warranties speak
as of an earlier date);
(2) Maxxim having performed all of its obligations under the
merger agreement in all material respects;
(3) the closing of the debt tender offer and the amendment of
Maxxim's 10 1/2% senior subordinated notes described on page
__ under "--Retirement/Amendment of Maxxim Senior Notes"
occurring concurrently with the closing of the merger;
(4) the closing of the Circon sale described on page ___ under
"--Structure and Effective Time" occurring concurrently with
the closing of the merger, unless otherwise requested by Fox
Paine Maxxim;
(5) Maxxim receiving a written opinion from its independent
auditor to the effect that the transactions contemplated in
the merger agreement will receive recapitalization accounting
treatment;
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<PAGE> 56
(6) there not being pending any suit, action or proceeding that
has a reasonable likelihood of success, that
- seeks to prohibit or materially limit Fox Paine
Maxxim's ownership or operation of any material
portion of Maxxim's businesses or assets, or to
compel Fox Paine Maxxim or Maxxim to dispose of or
hold separate any material portion of Maxxim's
business or assets;
- would prohibit, restrict or significantly delay
completion of the merger;
- seeks damages from Fox Paine Maxxim or Maxxim that
are material in amount;
- would impose material limitations on the ability of
Fox Paine Maxxim to acquire or hold, or exercise full
rights of ownership of, any shares of Maxxim common
stock, or prohibit Fox Paine Maxxim from effectively
controlling the business or operations of Maxxim and
its subsidiaries; or
- is reasonably likely to have a material adverse
effect on Maxxim or Fox Paine Maxxim.
(7) there not having occurred since June 13, 1999, any change,
development or event that has a material adverse effect on the
business, condition, results of operations, assets or
liabilities of Maxxim and its subsidiaries;
(8) all material consents, approvals or authorizations having been
obtained; and
(9) the financing for the merger having been obtained on terms and
conditions satisfactory to Fox Paine Maxxim.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned
at any time prior to the completion of the merger (regardless of any approval by
the shareholders of Maxxim):
(1) by mutual written consent of Maxxim and Fox Paine Maxxim;
(2) by either Maxxim or Fox Paine Maxxim, if any court or
governmental entity issues any judgment, injunction, order or
decree that restrains or prohibits the completion of the
merger, and such judgment, injunction, order or decree has
become final and nonappealable;
(3) by either Maxxim or Fox Paine Maxxim, if the merger has not
been completed by December 31, 1999, unless the party seeking
to terminate has caused the failure of completion by failing
to fulfill any of its obligations under the merger agreement;
(4) by Maxxim, in order to enter into a superior transaction in
compliance with the provisions described on page __ under
"Prohibition Against Solicitation of Competing Transactions,"
but only in strict compliance with such provisions, including
providing Fox Paine Maxxim with notice of Maxxim's intention
to terminate at least five full business days prior to such
termination, and payment to Fox Paine Maxxim of a termination
fee of $19 million;
(5) by either Maxxim or Fox Paine Maxxim, if there has been a
material breach of any representation, warranty or covenant
made by the other party, which would cause one of the
conditions to the merger not to be satisfied and which cannot
be or has not been cured within 30 days from the time the
breaching party receives notice of the breach;
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(6) by Fox Paine Maxxim, if
- Maxxim's board withdraws or modifies its
recommendation that Maxxim shareholders vote to
approve the merger (or publicly announces its
intention to do so);
- Maxxim's board recommends any proposal for a
competing acquisition transaction;
- any person other than Fox Paine Maxxim and its
affiliates becomes the beneficial owner of 15% or
more of Maxxim's common stock; or
- Maxxim breaches the provisions described on page __
under "-- Prohibition Against Solicitation of
Competing Transactions"; or
(7) by either Maxxim or Fox Paine Maxxim, if Maxxim's shareholders
fail to approve the merger at the special meeting.
TERMINATION FEES
The merger agreement obligates Maxxim to pay a fee to Fox Paine Maxxim
equal to $19 million if:
- Fox Paine Maxxim terminates the merger agreement
because the merger has not been completed by December
31, 1999, because of a failure by Maxxim to fulfill
any of its obligations under the merger agreement
and, on or before the termination of the merger
agreement, any entity or group publicly proposed, and
did not withdraw, or publicly discloses its intention
to make a proposal for a competing acquisition
transaction involving Maxxim;
- Fox Paine Maxxim terminates the merger agreement for
the reasons described in paragraph 6 on page __ under
"--Termination;"
- either party terminates the merger agreement for the
reasons described in paragraph 7 on page __ under "--
Termination" and before the special meeting at which
the shareholders of Maxxim voted on the merger, any
entity or group had publicly proposed and not
withdrawn or publicly disclosed its intention to make
a proposal for a competing acquisition transaction
involving Maxxim; or
- Maxxim terminates the merger agreement for the
reasons described in paragraph 4 on page __ under "--
Termination."
EXPENSES
The merger agreement provides that all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated by the
merger agreement will be paid by Maxxim upon consummation of the merger. In
addition, if the merger agreement is terminated by Maxxim for the reasons
described in paragraph 4 or paragraph 7 on page ___ under "-- Termination" or by
Fox Paine Maxxim for the reasons described in any of paragraphs 5, 6 or 7 on
page __ under "-- Termination," and the $19 million termination fee does not
become payable to Fox Paine Maxxim, then Maxxim will reimburse Fox Paine Maxxim
for the out-of-pocket fees and expenses incurred by, or on behalf of, Fox Paine
Maxxim in connection with the merger agreement, including fees and expenses
payable to financing sources and to counsel for Fox Paine Maxxim or its
financing sources.
AMENDMENT AND WAIVER
The merger agreement may be amended by the parties in writing at any
time before receipt of Maxxim shareholder approval. The merger agreement also
may be amended after receipt of Maxxim shareholder approval
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without the further approval of Maxxim shareholders if no amendments are made
which by law require further approval by Maxxim shareholders. Prior to the
completion of the merger, either of the parties may, by written instrument, (1)
extend the time for the performance of any of the obligations or other acts of
the other parties to the merger agreement; (2) waive inaccuracies in the
representations and warranties contained in the merger agreement or in any
document delivered pursuant to the merger agreement; or (3) waive compliance
with any of the agreements or conditions in the merger agreement.
ESTIMATED FEES AND EXPENSES OF THE MERGER
Estimated fees and expenses incurred or to be incurred by Maxxim in
connection with the Merger are approximately as follows:
<TABLE>
<S> <C>
Financial advisory fees...........................................................................................$
Lender fees and expenses .........................................................................................
Legal, accounting and printing fees and expenses .................................................................
Investment banking fees and expenses .............................................................................
Paying Agent fees and expenses ...................................................................................
Proxy solicitation fees and expenses .............................................................................
SEC filing fee ...................................................................................................
Miscellaneous expenses ...........................................................................................
Total.............................................................................................................$
</TABLE>
APPRAISAL RIGHTS
In the event that the merger is approved, holders of Maxxim common
stock on ________, 1999, who did not vote in favor of the merger agreement
will have the right to dissent from the merger and to demand an appraisal of the
"fair value" of their Maxxim shares in accordance with Articles 5.11 through
5.13 of the Texas Business Corporation Act. The Texas Business Corporation Act
provides that fair value is to be determined by the courts. The judicial
determination of fair value, which will be determined as of the day immediately
preceding the special meeting, may be greater than or less than $26.00 and will
be determined without regard to any appreciation or depreciation that occurred
in anticipation of the merger.
ANY MAXXIM SHAREHOLDER CONTEMPLATING THE EXERCISE OF APPRAISAL RIGHTS
IS URGED TO REVIEW CAREFULLY THE PROVISIONS OF ARTICLES 5.11 THROUGH 5.13 OF THE
TEXAS BUSINESS CORPORATION ACT, PARTICULARLY WITH RESPECT TO THE PROCEDURAL
STEPS REQUIRED TO PERFECT THE RIGHT OF APPRAISAL. FAILURE TO COMPLY WITH THE
STATUTORY REQUIREMENTS WILL RESULT IN THE LOSS OF THE SHAREHOLDER'S APPRAISAL
RIGHTS. THE FOLLOWING SUMMARY OF THE APPRAISAL RIGHTS STATUTE IS NOT A COMPLETE
STATEMENT OF THE RELEVANT PROVISIONS OF TEXAS LAW AND SHOULD BE READ IN
CONJUNCTION WITH THE FULL TEXT OF ARTICLES 5.11, 5.12 AND 5.13, WHICH IS
ATTACHED TO THIS PROXY STATEMENT AS APPENDIX C, AND ANY AMENDMENTS TO SUCH
SECTIONS AS MAY BE ADOPTED AFTER THE DATE OF THIS PROXY STATEMENT.
Filing written objection
Dissenting shareholders wishing to exercise their rights to appraisal
with respect to the merger must file with Maxxim, prior to the special meeting,
a written objection to the merger. The written objection must state that the
shareholder intends to dissent from the merger and demand a judicial
determination of the fair value of the dissenting Maxxim shares. The written
objection should include the dissenting shareholder's address and should be
addressed to Maxxim Medical, Inc., 10300 49th Street North, Clearwater, Florida
33762, Attention: Corporate Secretary. Neither an abstention from voting on the
merger agreement nor a vote against approval of the merger agreement will
satisfy the requirement that a written objection be filed with Maxxim before the
vote on the merger agreement.
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No Voting in Favor of the Merger Agreement
Dissenting shareholders must not vote their shares of Maxxim common
stock in favor of the merger agreement or their appraisal rights will be waived.
A dissenting shareholder will not be deemed to have waived such dissenting
shareholder's appraisal rights by voting against the merger agreement or
otherwise not voting.
Notice by Maxxim.
Within 10 days after the completion of the merger, Maxxim will notify
each holder of record who has complied with the provisions of Article 5.12, and
whose shares were not voted in favor of the merger agreement, that the merger
has been completed.
Written Demand.
Within 10 days from the delivery or mailing of Maxxim's notice, any
dissenting shareholder that wishes to exercise appraisal rights must make a
written demand on Maxxim demanding it pay the shareholder the fair value of his
or her Maxxim shares. Such demand should be addressed to Maxxim Medical, Inc.,
10300 49th Street North, Clearwater, Florida 33762, Attention: Corporate
Secretary. The demand must state the number of shares owned by such dissenting
shareholder and the dissenting shareholder's estimate of the fair value of such
Maxxim shares. Any dissenting shareholder failing to make a demand within the
10-day period will lose his or her appraisal rights.
Notation of Certificates.
Within 20 days after making a demand, the dissenting shareholder must
submit his or her stock certificates to Maxxim so that Maxxim can make an
appropriate notation on those certificates. If a dissenting shareholder fails to
submit the certificates within this 20-day period, the dissenting shareholder's
appraisal rights will be waived, unless a court, for good and sufficient cause,
determines otherwise.
Acceptance or Settlement of Demand.
Within 20 days after receipt of a demand from a dissenting shareholder,
Maxxim will deliver or mail to each dissenting shareholder a written notice
either (i) stating that Maxxim accepts the amount claimed in the demand and
agrees to pay such amount within 90 days after completion of the merger, or (ii)
containing an estimate by Maxxim of the fair value of the shares together with
an offer to pay such amount within 90 days after completion of the merger. If
Maxxim responds to the demand with an estimate of the fair value of the shares
and the dissenting shareholder wishes to accept Maxxim's estimate, the
dissenting shareholder must deliver to Maxxim, within 60 days, his or her
endorsed certificates along a written notice accepting Maxxim's estimate. If,
within 60 days after the completion of the merger, the dissenting shareholder
and Maxxim agree on the value of the shares, and the dissenting shareholder
delivers his or her endorsed certificates to Maxxim, Maxxim must pay the agreed
value to the shareholder within 90 days after the completion of the merger. Upon
payment of the agreed value, the dissenting shareholder will cease to have any
interest in Maxxim.
Appraisal.
If, within the 60 days after the completion of the merger, any one or
more of the dissenting shareholders and Maxxim do not agree on the fair value of
the shares, then any of such dissenting shareholders or Maxxim may, within 60
days following the expiration of such 60-day period, file a petition in any
court of competent jurisdiction in Pinellas County, Florida, to obtain a
judicial finding and determination of the fair value of the dissenting
shareholders' shares of Maxxim common stock. Upon filing such a petition, a
dissenting shareholder must serve Maxxim with a copy. Within 10 days after being
served with a copy of the petition, Maxxim must file with the court a list of
dissenting shareholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached. The clerk of
the court will then notify all dissenting shareholders as to
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the time and place of the hearing of the petition. Maxxim and all notified
dissenting shareholders will be bound by the final judgment of the court.
After the hearing of the petition, if the court determines that any one
or more of the dissenting shareholders have complied with the requirements of
Articles 5.11 through 5.13, the court will appoint one or more qualified
appraisers who will determine the fair value of the dissenting shareholders'
shares and will file a report of that value with the clerk of the court. Each
party will have reasonable opportunity to submit to the appraisers pertinent
evidence as to the value of the shares. Any party may take exceptions to the
appraiser's report. The court will then determine the fair value of the shares
and will direct Maxxim, upon receipt from the dissenting shareholders of the
endorsed certificates relating to those shares, to pay the value so determined,
with interest. The interest will run from the 91st day after the completion of
the merger to the date of the judgment. Upon payment of the judgment, the
dissenting shareholders will cease to have any interest in Maxxim. The court
will allow the appraiser(s) a reasonable fee as court costs, which will be
allotted between the parties in the manner that the court determines to be fair
and equitable.
Rights as Shareholder
A dissenting shareholder who makes a demand for payment will not be
entitled to vote or to exercise any other rights as a Maxxim shareholder except
the right to receive payment pursuant to Article 5.12 and the right to maintain
an appropriate action to obtain relief on the ground that the merger would be or
was fraudulent.
Withdrawal of Rights
A dissenting shareholder may withdraw a demand at any time before
Maxxim has made the requested payment or before a petition has been filed
requesting a determination of the fair value of such dissenting shareholder's
shares.
Exclusive Remedy.
The Texas Business Corporation Act provides that, in the absence of
fraud, the foregoing procedures represent the exclusive remedy under Texas law
for a dissenting shareholder to object to the merger. If Maxxim complies with
the requirements of Articles 5.11 through 5.13, but the dissenting shareholder
fails to do so, such dissenting shareholder is not entitled to bring an action
for the recovery of the value of such dissenting shareholder's shares or for
money damages.
ANY MAXXIM SHAREHOLDER WHO DESIRES TO EXERCISE APPRAISAL RIGHTS SHOULD
CAREFULLY REVIEW THE TEXAS BUSINESS CORPORATION ACT AND IS ADVISED TO CONSULT
SUCH SHAREHOLDER'S LEGAL ADVISOR BEFORE EXERCISING OR ATTEMPTING TO EXERCISE
SUCH RIGHTS.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the
premerger notification rules issued by the Federal Trade Commission, Maxxim and
Fox Paine were required to file notifications with the U.S. Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice in
connection with the merger and the acquisition of Circon, and the proposed
transactions could not be completed until after the applicable waiting period
expired or was earlier terminated by the U.S. federal antitrust regulatory
authorities. Maxxim and Fox Paine filed the required notifications with these
federal antitrust regulatory authorities on July 6, 1999, and the waiting period
was terminated by the regulatory authorities on July 16, 1999.
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of June 9, 1999, information as to
the beneficial ownership of Maxxim's common stock by (1) each person known to
have beneficial ownership of more than 5% of Maxxim's common
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stock, (2) each person serving as a director or executive officer of Maxxim, (3)
all of the directors and executive officers as a group; and (4) each of the
other Continuing Shareholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
BENEFICIAL OWNER (1) NUMBER PERCENT
- -------------------- ------ -------
<S> <C> <C>
Peter G. Dorflinger 419,936 (2) 2.9
Kenneth W. Davidson 388,468 (3) 2.7
Ernest J. Henley Ph.D. 326,949 (4) 2.3
Davis C. Henley 303,385 (5) 2.1
Peter M. Graham 188,900 (6) 1.3
David L. Lamont 144,650 (7) 1.0
Alan S. Blazei 121,083 (8) *
Henry T. DeHart III 81,100 (9) *
Jack F. Cahill 79,160 (10) *
Joseph D. Dailey 51,700 (11) *
Richard O. Martin, Ph.D. 20, 000 (12) *
Martin Grabois, M.D. 19,000 (13) *
Henk R. Wafelman, Ing 11,000 (14) *
Suzanne R. Garon 9,080 (15) *
Donald R. DePriest 5,000 (16) *
All executive officers and Directors as a group (14 persons) 1,881,526 12.7
</TABLE>
- -----------------
* Less than 1%
(1) The address for all executive officers and directors and Davis C.
Henley is 10300 49th Street North, Clearwater, Florida 33762.
(2) Includes 9,100 shares held of record and 410,836 shares purchasable
under currently exercisable options. Mr. Dorflinger is the former Vice
President and General Counsel of Sulzer Intermedics, Inc., a subsidiary
of Sulzer Medica USA, Inc., and holds a fully exercisable option to
purchase all of the 397,836 shares held of record by Sulzer Medica USA,
Inc.
(3) Includes 241,368 shares owned of record by a family limited partnership
controlled by Mr. Davidson and 147,000 shares purchasable under
currently exercisable options.
(4) Includes 321,949 shares owned of record by Dr. Henley and 5,000 shares
purchasable under currently exercisable options.
(5) Includes 273,985 shares owned of record by Mr. Henley, 29,400 shares of
which Mr. Henley exercises voting and investment control as custodian.
(6) Includes 70,500 shares owned of record by Mr. Graham, 4,200 shares of
which Mr. Graham exercises voting and investment control as trustee and
114,200 shares purchasable under currently exercisable options.
(7) Includes 57,250 shares owned of record by Mr. Lamont and 87,400 shares
purchasable under currently exercisable options.
(8) Includes 41,150 shares owned of record by Mr. Blazei, 3,533 shares over
which Mr. Blazei's spouse exercises voting and investment control as
custodian and 76,400 shares purchasable under currently exercisable
options.
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(9) Includes 39,900 shares owned of record by Mr. DeHart and 41,200 shares
purchasable under currently exercisable options.
(10) Includes 44,000 shares owned of record by Mr. Cahill and 35,160 shares
purchasable under currently exercisable options.
(11) Includes 28,300 shares owned of record by Mr. Dailey and 23,400 shares
purchasable under currently exercisable options.
(12) Includes 7,000 shares owned of record by Dr. Martin and 13,000 shares
purchasable under currently exercisable options.
(13) Includes 6,000 shares owned of record by Dr. Grabois and 13,000 shares
purchasable under currently exercisable options
(14) Includes 6,000 shares owned of record by Mr. Wafelman and 5,000 shares
purchasable under currently exercisable options.
(15) Includes 7,000 shares owned of record by Ms. Garon and 2,080 shares
purchasable under currently exercisable options.
(16) Includes 5,000 shares purchasable by Mr. DePriest under currently
exercisable options.
There have been no transactions in Maxxim common stock effected during the
past 60 days by Maxxim or any of the Continuing Shareholders.
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INFORMATION ABOUT THE TRANSACTION PARTICIPANTS
FOX PAINE MEDIC ACQUISITION CORPORATION AND THE OTHER FOX PAINE ENTITIES
Fox Paine Medic Acquisition Corporation (which we have referred to as
"Fox Paine Maxxim" in this proxy statement) is the entity that will be merged
with Maxxim in the merger. It was formed by Fox Paine Capital Fund, L.P., a
private investment fund, for the purpose of participating in the merger
transactions. Fox Paine Maxxim is engaging in the merger and the Circon sale for
the purpose of furthering Fox Paine's business and investment strategy described
below. Fox Paine Maxxim is not expected to have any significant assets or
liabilities, or engage in any business activities other than those related to
completing the merger, and it will cease to exist after the merger.
Fox Paine Capital Fund, L.P. is a private investment fund managed by
Fox Paine & Company, LLC. Fox Paine & Company, LLC manages investment funds in
excess of $500 million focused on investing equity capital in management-led
acquisitions and company expansion programs and restructurings. Fox Paine was
founded in 1997 by Saul Fox and Dexter Paine. Mr. Fox is a former general
partner of Kohlberg Kravis Roberts & Co., and Mr. Paine is a former general
partner of Kohlberg & Company. Over their combined 29 years of investment
experience, Fox Paine's principals have arranged 21 transactions totaling in
excess of $4.3 billion in which they invested over $900 million of equity
capital. These transactions have ranged in size from $12 million to $1.5
billion. Throughout this proxy statement, we have referred to Fox Paine Capital
Fund, L.P., Fox Paine & Company, LLC and Fox Paine Maxxim together as "Fox
Paine."
Fox Paine Capital Fund, L.P. owns all of the equity of Fox Paine Maxxim
and all of the equity of Fox Paine Citron Acquisition Corporation, which is the
company that will buy Circon from Maxxim as part of the merger transactions. We
have referred to Fox Paine Citron Acquisition Corporation as "Fox Paine Circon"
in this proxy statement.
THE CONTINUING SHAREHOLDERS
The following Management Investors are executive officers of Maxxim and
are expected to be executive officers of the surviving corporation:
Kenneth W. Davidson has served as a Director of Maxxim since
1982, and as Chairman of the Board of Directors, Chief Executive
Officer and President of Maxxim since November 1, 1986. Mr. Davidson is
also a director of Henley Healthcare, Inc., a manufacturer of products
used in physical therapy, Encore Orthopedics, Inc., a designer and
manufacturer of implantable orthopedic devices, and of Bovie Medical
Corporation, a manufacturer and marketer of electrosurgical medical
devices.
Peter M. Graham has served as Senior Executive Vice President
since January 1999, and as Executive Vice President and Chief Operating
Officer since January 1986, and was elected Secretary in July 1997. Mr.
Graham also served as Treasurer from April 1986 through June 1997.
David L. Lamont has served as Executive Vice President,
Research and Development since January 1999, and as Vice President
since March 1988. Mr. Lamont was Group Vice President from July 1993
through December 1998, and President of the Argon Medical division from
January 1992 through July 1993.
Alan S. Blazei has served as Executive Vice President since
January 1999 and Vice President and Controller since December 1990. In
July 1997, Mr. Blazei was elected Treasurer of Maxxim.
Henry T. DeHart has served as Executive Vice President,
Manufacturing Operations since January 1999 and as Vice President since
November 1993. Mr. DeHart was Executive Vice President,
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Manufacturing Operations, Case Management from June 1995 through
December 1998, and President of Boundary Healthcare division from
December 1992 through July 1995.
Joseph D. Dailey has served as Executive Vice President,
Information Services since January 1999 and Vice President, Information
Services since August 1994. Previously, he had served as Director of
Information Services since January 1991.
Jack F. Cahill has served as Executive Vice President, Sales
and Marketing since January 1999 and as Vice President since May 1995.
Mr. Cahill was Executive Vice President Sales and Marketing, Case
Management from June 1995 through December 1998, President of the
Sterile Design division from May 1994 through June 1995, and Executive
Vice President, Sterile Design from July 1993 through May 1994.
Suzanne R. Garon has served as Executive Vice President, Human
Resources since January 1999 and as Vice President since January 1997.
Previously, she had served as Vice President Human Resources, Case
Management since August 1995. Ms. Garon was Manager of Human Resources,
Sterile Design from July 1993 through August 1995.
Ernest J. Henley, Ph.D. has served as a Director of Maxxim since 1976,
and served as a consultant to Maxxim from that date until May 1996. Dr.
Henley's principal employment for more than the past five years has been as a
Professor of Chemical Engineering at the University of Houston. Dr. Henley is
also a consultant and director of Henley Healthcare, Inc. Dr. Henley will
continue to serve as a director of Maxxim and Circon after the Merger.
Each of the Management Investors, except for Messrs. Davidson, Graham
and Lamont, as well as Ernest J. Henley, is a citizen of the United States of
America. Messrs. Davidson, Graham and Lamont are citizens of Canada. During the
last five years, none of the Management Investors nor Ernest J. Henley has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction in which as a result of such
proceeding any such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws. The business address for each of the Management Investors
and Ernest J. Henley is c/o Maxxim Medical, Inc., 10300 49th Street North,
Clearwater, Florida 33762.
Davis C. Henley, who is not an executive officer of Maxxim, has served
as a Vice President of Maxxim since May 1996. During this time he has focused on
special projects and business development. Previously, since at least 1994, Mr.
Henley served as President of Henley Healthcare, a division of Maxxim.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material U.S. federal income
tax considerations relevant to the merger that are generally applicable to
holders of Maxxim common stock. This discussion is based on currently existing
provisions of the Internal Revenue Code of 1986, existing and proposed U.S.
Treasury Regulations, and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences. Special tax consequences not
described below may be applicable to particular classes of taxpayers, including
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States or who are foreign corporations, foreign
partnerships, or foreign estates or trusts as to the United States, persons who
will own, actually or constructively, stock of Maxxim after the merger, and
holders who acquired their stock through the exercise of an employee stock
option or otherwise as compensation.
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Your receipt of the merger consideration in the merger will be a
taxable transaction for U.S. federal income tax purposes. Your gain or loss per
share will be equal to the difference between $26 and your adjusted basis in
that particular share of Maxxim common stock. Such gain or loss generally will
be a capital gain or loss. In the case of individuals, trusts, and estates, such
capital gain will be subject to a maximum U.S. federal income tax rate of 20%
for shares of Maxxim common stock held for more than 12 months prior to the date
of the merger.
You may be subject to backup withholding at the rate of 31% with
respect to the merger consideration received by you, unless you (1) are a
corporation or come within certain other exempt categories and, when required,
demonstrate this fact or (2) provide a correct taxpayer identification number
("TIN"), certify as to no loss of exemption from backup withholding, and
otherwise comply with applicable requirements of the backup withholding rules.
To prevent the possibility of backup U.S. federal income tax withholding on
payments made pursuant to the merger, you must provide the Paying Agent with
your correct TIN by completing a Form W-9 or substitute Form W-9. If you do not
provide Maxxim with your correct TIN, you may be subject to penalties imposed by
the Internal Revenue Service as well as backup withholding. Any amount withheld
under these rules will be creditable against your U.S. federal income tax
liability. Maxxim (or its agent) will report to you and the IRS the amount of
any "reportable payments," as defined in Section 3406 of the Internal Revenue
Code, and the amount of tax, if any, withheld with respect thereto.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON PRESENT LAW. THE FOREGOING DISCUSSION DOES NOT DISCUSS TAX
CONSEQUENCES UNDER THE LAWS OF STATES OR LOCAL GOVERNMENTS OR OF ANY OTHER
JURISDICTION OR TAX CONSEQUENCES TO CATEGORIES OF SHAREHOLDERS THAT MAY BE
SUBJECT TO SPECIAL RULES, SUCH AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES,
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, AND DEALERS IN STOCKS AND
SECURITIES. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO A SHAREHOLDER WHO
CONTINUES TO OWN, ACTUALLY OR CONSTRUCTIVELY, STOCK OF MAXXIM AFTER THE MERGER
OR WHO ACQUIRED HIS OR HER SHARES OF MAXXIM COMMON STOCK PURSUANT TO THE
EXERCISE OF STOCK OPTIONS OR OTHERWISE AS COMPENSATION. YOU SHOULD CONSULT YOUR
OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU,
INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, AND OTHER
TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES IN SUCH TAX LAWS.
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INDEPENDENT AUDITORS
The consolidated balance sheets as of November 1, 1998, and November 2,
1997, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three fiscal years in the period ended November
1, 1998, incorporated by reference in this Proxy Statement, have been audited by
KPMG LLP, independent auditors. A representative of KPMG LLP will be at the
special meeting to answer appropriate questions from shareholders and will have
the opportunity to make a statement, if so desired.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Maxxim hereby incorporates the following documents previously filed
with the SEC (SEC File No. 0-18208) into this proxy statement:
(1) Maxxim's Annual Report on Form 10-K for the fiscal year ended
November 1, 1998, as amended June 16, 1999;
(2) Maxxim's Quarterly Reports on Form 10-Q for the fiscal quarters
ended January 31, 1999 and May 2, 1999; and
(3) Maxxim's Current Reports on Form 8-K dated January 19, 1999 (as
amended on March 19, 1999 and June 16, 1999) and June 13, 1999.
Maxxim incorporates by reference in this proxy statement additional
documents that it may file with the SEC between the date of this proxy statement
and the date of the special meeting. These documents include periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as its proxy statements. Any statements contained
in a document incorporated by reference in this proxy statement will be deemed
to be modified or superseded for purposes of this proxy statement to the extent
that a statement contained in this proxy statement (or in any other subsequently
filed document which also is incorporated by reference in this proxy statement)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to be a part of this proxy statement except as so modified
or superseded.
LEGAL PROCEEDINGS
A complaint has been filed in state court in Harris County, Texas, and
another has been filed in state court in Pinellas County, Florida, each naming
Maxxim, its directors and Fox Paine & Company as defendants. Each complaint is
brought on behalf of a purported class of public shareholders of Maxxim and
alleges that the consideration being offered in the merger is unfair and
inadequate, and that the directors of Maxxim breached their fiduciary duties by
failing to obtain the best price for Maxxim. As relief, each complaint seeks,
among other things, an injunction against completion of the merger, and damages
in an unspecified amount. The defendants believe the allegations of each
complaint are without merit. The cases are titled Steiner v. Maxxim Medical,
Inc., et al. No. l999-30682 (28lst Judl. Dist., Harris Cty., Tex). and Burnetti
v. Maxxim Medical, Inc., et. al. No. 99-4347-CI-15 (6th Judl. Circ., Pinellas
Cty., Fla).
Maxxim has been named as a defendant in various other lawsuits arising
in the ordinary course of business. We believe that the ultimate resolution of
such litigation will not have a material adverse impact on our results of
operations or financial position (see Note 5 of Notes to Consolidated Financial
Statements incorporated by reference from Maxxim's Annual Report on Form 10-K
for the fiscal year ended November 1, 1998).
Circon is involved in the following legal proceedings:
On May 28, 1996, two purported stockholders of Circon, Bart Milano and
Elizabeth Heaven, commenced an action in the Superior Court of the State of
California for the County of Santa Barbara, Case No. 213476, purportedly on
behalf of themselves and all others who purchased Circon's common stock between
May 2, 1995 and
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February 1, 1996, against Circon, Richard A. Auhll, Rudolf R. Schulte, Harold R.
Frank, John F. Blokker, Paul W. Hartloff, Jr., R. Bruce Thompson, Jon D. St.
Clair, Frederick A. Miller, David P. Zielinski, Winton L. Berci, Jurgen Zobel,
Trevor Murdoch and Warren G. Wood. That complaint alleged that defendants
violated Sections 11 and 15 of the Securities Act of 1933 Sections 25400-02 and
25500-02 of the California Corporations Code, and Sections 1709-10 of the
California Civil Code, by disseminating allegedly false and misleading
statements relating to Circon's acquisition of Cabot Medical Corp. by merger and
to the combined companies' future financial performance. In general the
complaint alleged that defendants knew that synergies from the merger would not
be achieved, but misrepresented to the public that they would be achieved, in
order to obtain approval for the merger so they would be executives of a much
larger corporation. This alleged conduct allegedly had the effect of inflating
the price of Circon's common stock. On July 29, 1996, defendants filed demurrers
to the complaint on the ground that plaintiffs' allegations fail to state facts
sufficient to constitute a cause of action. On or about August 6, 1996,
plaintiffs served their response to defendants' demurrers, stating their
intention to file an amended complaint prior to the hearing on defendants'
demurrers. On September 20, 1996, plaintiffs voluntarily dismissed Rudolf R.
Schulte, Harold R. Frank, John F. Blokker and Paul W. Hartloff, Jr. from the
action, without prejudice. On September 30, 1996, plaintiffs, joined by a third
purported stockholder of Circon, Adam Zetter, filed a first amended complaint
against the remaining defendants. Plaintiffs' amended complaint is substantially
similar to the original complaint, but adds a new purported cause of action
under the unfair business practices provisions of the California Business &
Professions Code, Sections 17200, et seq. and 17500, et seq. Like the original
complaint, the amended complaint seeks compensatory and/or punitive damages,
attorneys' fees and costs, and any other relief (including injunctive relief)
deemed proper. On December 2, 1996, defendants filed demurrers to the amended
complaint again on the grounds that plaintiffs' allegations fail to state facts
sufficient to constitute a cause of action. On April 17, 1997, a hearing was
held regarding the defendants' demurrers to the first amended complaint. By
order dated May 28, 1997, the Superior Court overruled the defendants' demurrers
to the amended complaint. The parties are now engaged in discovery proceedings.
Circon believes plaintiffs' allegations to be without merit and intends to
vigorously defend the lawsuit.
On August 15, 1996, an action captioned Steiner v. Auhll, et al., No.
15165 was filed in the Court of Chancery of the State of Delaware. Shortly
thereafter, three substantially similar actions were filed by three other
individuals claiming to be stockholders of Circon. All four actions allege that
Circon and certain of its officers and directors breached their fiduciary duties
to Circon's stockholders by taking steps to resist the hostile tender offer by
U.S. Surgical Corporation announced on August 2, 1996. All four of these actions
purport to be brought as class actions on behalf of all Circon stockholders. On
August 16, 1996, a separate action captioned Krim v. Circon Corp., et al., No.
153767, was filed in the Superior Court of California in Santa Barbara. The
plaintiff in that action also claims to be a Circon stockholder and purports to
bring his claim as a class action. On September 27, 1996, that action was stayed
by the Court in favor of the actions pending in Delaware; the Court also
encouraged the plaintiff to refile his action in Delaware. On or about August
30, 1996, the Chancery Court consolidated the four Delaware complaints into a
single action, and plaintiffs filed an amended complaint. Circon and its
officers and directors filed an answer to the amended complaint on November 12,
1996. Circon believes plaintiffs' allegations to be without merit and intends to
vigorously defend the lawsuits.
OTHER MATTERS
Management knows of no other business to be presented at the Special
Meeting. If other matters do properly come before the meeting, or any
adjournment or postponement thereof, it is the intention of the persons named in
the proxy to vote on such matters according to their best judgment unless the
authority to do so is withheld in such proxy.
SHAREHOLDER PROPOSALS FOR PRESENTATION
AT THE 2000 ANNUAL MEETING
Your board of directors requests that any shareholder proposals
intended for presentation at the 2000 Annual Meeting be submitted to Peter M.
Graham, Secretary, in writing no later than October 31, 1999, for consideration
for inclusion in Maxxim's proxy materials for such meeting. Members of the
Maxxim's proxy committee will have discretionary voting authority with respect
to all shares represented by proxies held by them at
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the 2000 Annual Meeting for any matters raised at that meeting about which
Maxxim does not receive proper notice prior to January 16, 2000. If the merger
is completed, there will be no 2000 Annual Meeting.
WHERE YOU CAN FIND MORE INFORMATION
Maxxim files annual, quarterly, and current reports, proxy statements,
and other information with the SEC. You may read and copy any reports,
statements, or other information that Maxxim files at the SEC's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Maxxim public filings are also available to the public from commercial
document retrieval services and at the Internet World Wide Website maintained by
the SEC at http://www.sec.gov. Reports, proxy statements, and other information
concerning Maxxim also may be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, NY 10005.
The SEC allows Maxxim to "incorporate by reference" information into
this document, which means that Maxxim can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be a part of this document,
except for any information superseded by information contained directly in this
document. This document incorporates by reference certain documents that Maxxim
has previously filed with the SEC. These documents contain important business
information about Maxxim and its financial condition.
Maxxim may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through Maxxim or the SEC or the SEC's
Internet World Wide Web site described above. Documents incorporated by
reference are available from Maxxim without charge, excluding all exhibits
unless specifically incorporated by reference as an exhibit to this document.
Shareholders may obtain documents incorporated by reference in this document
upon written or oral request to the following address or telephone number:
MAXXIM MEDICAL, INC.
10300 49th Street North
Clearwater, Florida 33762
(727) 561-2100
Attention: Mary Lugris
Maxxim will send any document so requested to the requesting
shareholder by first class mail or other equally prompt means within one day of
receiving such request.
Maxxim has filed a Schedule 13E-3 with the SEC with respect to the
merger. As permitted by the SEC, this proxy statement omits certain information
contained in the Schedule 13E-3. The Schedule 13E-3, including any amendments
and exhibits filed or incorporated by reference as a part thereof, is available
for inspection or copying as set forth above. Statements contained in this proxy
statement or in any document incorporated herein by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete and in each instance reference is made to such contract or
other document filed as an exhibit to the Schedule 13E-3 or such other document,
and each such statement shall be deemed qualified in its entirety by such
reference.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM MAXXIM, PLEASE DO SO AT
LEAST FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO
RECEIVE TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE YOUR MAXXIM SHARES AT THE SPECIAL MEETING.
MAXXIM HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED
_______________, 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING
OF THIS DOCUMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
By Order of the Board of Directors
Peter M. Graham, Secretary
Clearwater, Florida
Dated: ________________, 1999
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APPENDIX A
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AGREEMENT AND PLAN OF MERGER
Dated as of June 13, 1999,
Between
FOX PAINE MEDIC ACQUISITION CORPORATION
And
MAXXIM MEDICAL, INC.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER, ITS EFFECTS ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS,
AND THE DEBT OFFER.................................................................. 2
Section 1.1. The Merger.......................................................................... 2
Section 1.2. Effective Time...................................................................... 2
Section 1.3. Effects of the Merger............................................................... 2
Section 1.4. Articles of Incorporation and Bylaws................................................ 3
Section 1.5. Directors........................................................................... 3
Section 1.6. Officers............................................................................ 3
Section 1.7. Subsequent Actions.................................................................. 3
Section 1.8. Effect of the Capital Stock......................................................... 3
Section 1.9. Dissenting Shares................................................................... 4
Section 1.10. List of Stock Options; Cancellation of Stock Options................................ 5
Section 1.11. Payment for Shares.................................................................. 6
Section 1.12. The Senior Notes Offer and Solicitation............................................. 8
Section 1.13. Company Action...................................................................... 9
ARTICLE II ASSET DROPDOWN...................................................................... 10
Section 2.1. Asset Dropdown...................................................................... 10
Section 2.2. Non-Assignment Under Certain Circumstances.......................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 11
Section 3.1. Organization and Qualification; Subsidiaries........................................ 11
Section 3.2. Capitalization of the Company and its Subsidiaries.................................. 12
Section 3.3. Authority Relative to this Agreement; Consents and Approvals........................ 13
Section 3.4. SEC Reports; Financial Statements................................................... 14
Section 3.5. Debt Offer Documents; Proxy Statement; Form S-4..................................... 15
Section 3.6. Consents and Approvals, No Violations............................................... 15
Section 3.7. No Default.......................................................................... 16
Section 3.8. No Undisclosed Liabilities; Absence of Changes...................................... 16
Section 3.9. Litigation.......................................................................... 17
Section 3.10. Compliance with Applicable Law...................................................... 17
Section 3.11. Employee Benefit Matters............................................................ 17
Section 3.12. Environmental Laws and Regulations.................................................. 20
Section 3.13. Rights Agreement; State Takeover Statute Inapplicable............................... 21
Section 3.14. Brokers............................................................................. 21
Section 3.15. Absence of Certain Changes.......................................................... 21
Section 3.16. Taxes............................................................................... 21
Section 3.17. Intellectual Property............................................................... 23
Section 3.18 Labor Matters....................................................................... 23
Section 3.19. Opinions of Financial Advisors...................................................... 24
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Section 3.20. Titles to Properties; Encumbrances.................................................. 24
Section 3.21 Material Contracts.................................................................. 25
Section 3.22. Product Liability................................................................... 27
Section 3.23. Suppliers and Customers............................................................. 28
Section 3.24. Title and Condition of Properties................................................... 28
Section 3.25. Information in Financing Documents.................................................. 29
Section 3.26. Year 2000 Compliance................................................................ 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................... 29
Section 4.1. Organization........................................................................ 29
Section 4.2. Authority Relative to this Agreement................................................ 29
Section 4.3. Consents and Approvals; No Violations............................................... 30
Section 4.4. Proxy Statement; Offer Documents.................................................... 30
Section 4.5. Financing........................................................................... 30
Section 4.6. Brokers............................................................................. 31
ARTICLE V COVENANTS........................................................................... 31
Section 5.1. Shareholders Meeting................................................................ 31
Section 5.2. Proxy Statement..................................................................... 31
Section 5.3. Conduct of Business of the Company.................................................. 32
Section 5.4. No Solicitation..................................................................... 34
Section 5.5. Access to Information............................................................... 37
Section 5.6. Additional Agreements, Reasonable Efforts........................................... 38
Section 5.7. Public Announcements................................................................ 39
Section 5.8. Indemnification..................................................................... 40
Section 5.9. Recapitalization.................................................................... 40
Section 5.10. Financial Statements................................................................ 40
Section 5.11. Certain Agreements with Management.................................................. 41
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER............................................ 41
Section 6.1. Conditions to the Merger............................................................ 41
Section 6.2. Conditions to Each Party's Obligations to Effect the Merger......................... 43
ARTICLE VII TERMINATION; AMENDMENT; WAIVER...................................................... 44
Section 7.1. Termination......................................................................... 44
Section 7.2. Effect of Termination............................................................... 45
Section 7.3. Fees and Expenses................................................................... 45
Section 7.4. Amendment........................................................................... 46
Section 7.5. Waiver.............................................................................. 46
ARTICLE VIII MISCELLANEOUS....................................................................... 46
Section 8.1. Nonsurvival of Representations and Warranties....................................... 46
Section 8.2. Entire Agreement; Assignment........................................................ 46
Section 8.3. Validity............................................................................ 47
Section 8.4. Notices............................................................................. 47
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Section 8.5. Governing Law....................................................................... 48
Section 8.6. Descriptive Headings................................................................ 48
Section 8.7. Parties in Interest................................................................. 48
Section 8.8. Counterparts........................................................................ 48
ANNEX A Terms and Conditions to the Debt Offer
EXHIBIT A-1 Equity Commitment Letter to Purchaser
EXHIBIT A-2 Equity Commitment Letter to Circon Buyer
EXHIBIT B Holdco Commitment Letter
EXHIBIT C OpCo Financing Commitment Letters
SCHEDULES Schedules 1.8(b) and 1.10(c)
Company Disclosure Letter
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 13, 1999
(this "Agreement"), is made by and between Fox Paine Medic Acquisition
Corporation, a Texas corporation ("Purchaser"), and Maxxim Medical, Inc., a
Texas corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company and
Purchaser have determined that the merger of Purchaser with and into the Company
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair to and in the best interests of their respective
shareholders, and such Boards of Directors have approved such Merger, pursuant
to which each share of common stock, par value $.001 per share (together with
the associated Preferred Share Purchase Rights (the "Rights") issued pursuant to
the Rights Agreement, dated as of July 10, 1997 (the "Rights Agreement"), by and
between the Company and Harris Trust and Savings Bank as rights agent, the
"Company Common Stock"), issued and outstanding immediately prior to the
Effective Time (as defined in Section 1.2) will (except for shares of Company
Common Stock owned, directly or indirectly by the Company or Purchaser, except
for those shares owned by the Specified Shareholders (as defined herein) which
are to be retained pursuant to Section 1.8(b) hereof, and except for any shares
of Common Stock as to which dissenters rights are exercised and perfected
pursuant to applicable law) be converted into the right to receive $26.00 in
cash (the "Per Share Amount");
WHEREAS, the Merger and this Agreement require the vote of a
majority of the shares of the Company Common Stock for the approval thereof (the
"Company Shareholder Approval");
WHEREAS, Purchaser is a newly formed corporation formed by Fox
Paine Capital Fund, L.P. and certain related parties;
WHEREAS, as a condition and inducement to Purchaser's
willingness to enter into this Agreement and consummate the transactions
contemplated hereby, Purchaser has required each of Kenneth W. Davidson, Peter
M. Graham, David L. Lamont, Henry T. DeHart, Jack F. Cahill, Alan S. Blazei,
Joseph D. Dailey, Suzanne R. Garon, Ernest J. Henley, and Davis C. Henley
(collectively, the "Specified Shareholders"), all but one of which is a member
of the Company's senior management or a member of Company's Board of Directors,
to enter into a voting agreement, dated even herewith (the "Voting Agreement"),
pursuant to which, among other things, each Specified Shareholder agrees to vote
all shares of Company Common Stock beneficially owned by him or her (including
without limitation shares of Company Common Stock issued upon conversion of
options of the Company beneficially owned by the Specified Shareholder) in favor
of the Merger;
WHEREAS, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, the parties hereto intend that the Merger be treated
as a recapitalization for financial reporting purposes.
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NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
THE MERGER, ITS EFFECTS ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS, AND THE DEBT OFFER
Section 1.1. The Merger. Subject to the conditions of this Agreement
and in accordance with the Business Corporation Act of the State of Texas (the
"TBCA"), the Company and Purchaser shall consummate a merger (the "Merger")
pursuant to which (i) Purchaser shall merge with and into the Company and the
separate corporate existence of Purchaser shall thereupon cease, (ii) the
Company shall be the successor or the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Texas, and (iii) the
corporate existence of the Company, with all of its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the Merger.
Purchaser may, upon notice to the Company, modify the structure of the Merger if
Purchaser determines it advisable to do so because of tax or other
considerations, and the Company shall promptly enter into any amendment to this
Agreement necessary or desirable to accomplish such structure modification,
provided that no such amendment shall reduce the Per Share Amount or materially
delay the Closing (as defined below) and, provided, further, that in the event
of any such modification of structure, for purposes of determining whether the
condition set forth in Section 6.1(b)(i) has been satisfied, the accuracy of the
Company's representations and warranties shall be determined (unless the Company
otherwise reasonably agrees) as if such modification had not been made.
Section 1.2. Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause (i) articles of merger (the "Articles of Merger") to be
executed and filed on the Closing Date (or on such other date as Purchaser and
the Company may agree) with the Secretary of State of the State of Texas in such
form as required by, and executed in accordance with the relevant provisions of
the TBCA, and (ii) all other filings or recordings required by the TBCA in
connection with the Merger. A closing for the Merger (the "Closing") will be
held at the offices of Wachtell, Lipton, Rosen & Katz, counsel to Purchaser, at
10:00 a.m. New York City time (or such other place as the parties may agree) on
second business day after satisfaction or waiver of the conditions set forth in
Article VI (other than those that are to be satisfied on the Closing Date) (the
"Closing Date"). The Merger shall become effective at such time as a Certificate
of Merger is duly issued by the Secretary of State of the State of Texas (the
time the Merger becomes effective being referred to herein as the "Effective
Time").
Section 1.3. Effects of the Merger. At the Effective Time, the Merger
shall have the effects as set forth in the applicable provisions of the TBCA.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation,
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and all debts, liabilities and duties of the Company and Purchaser shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Articles of Incorporation and Bylaws.
(a) The articles of incorporation of the Company in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation until amended in accordance with its terms and
applicable law.
(b) The bylaws of Purchaser in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with its terms and applicable law.
Section 1.5. Directors. The directors of Purchaser immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation until such director's
successor is duly elected or appointed and qualified.
Section 1.6. Officers. The officers of the Company immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation until such officer's
successor is duly elected or appointed and qualified.
Section 1.7. Subsequent Actions. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Purchaser, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.8. Effect of the Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Company,
Purchaser or any holder of any shares of Company Common Stock ("Shares") or any
shares of capital stock of Purchaser:
(a) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into one
share of the common stock, par value $.001 per share, of the Company following
the Merger.
(b) Each issued and outstanding share of Company Common Stock
held by the Specified Shareholders immediately prior to the Effective Time,
other than as set forth in
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Schedule 1.8(b) hereto, shall not be canceled as provided below but be retained
by such holder and remain outstanding and unaffected by the Merger.
(c) Each share of Company Common Stock that is owned by or
held in the treasury of the Company or owned by any subsidiary of the Company
immediately prior to the Effective Time, shall automatically be canceled and
retired and shall cease to exist, and no cash, Company Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
(d) Shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than (i) any shares to be issued
pursuant to Section 1.8(a), (ii) any shares to remain outstanding pursuant to
Section 1.8(b), (iii) any shares to be canceled pursuant to Section 1.8(c) and
(iv) any Dissenting Shares (as defined below)), together with the Associated
Rights, held by each shareholder of the Company shall be converted into the
right to receive (i) an amount in cash (the "Merger Consideration") equal to the
product of (A) the number of such shares of Company Common Stock owned by such
shareholder prior to the Effective Time, and (B) the Per Share Amount. The
Merger Consideration shall be payable to the holder of shares of Company Common
Stock, without interest thereon, upon the surrender of the certificate or
certificates formerly representing such Shares in the manner provided in Section
5.2 and less any required withholding of taxes. From and after the Effective
Time, all such Shares so converted into the Merger Consideration shall no longer
be outstanding and shall be deemed to be canceled and retired and shall cease to
exist, and each holder of a certificate or certificates formerly representing
any such Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor upon the surrender of such
certificate or certificates in accordance with Section 1.11, or the right, if
any, to receive payment from the Surviving Corporation in accordance with
Articles 5.11, 5.12 and 5.13 of the TBCA. Anything contained herein to the
contrary notwithstanding, with respect to any Person (as defined in Section 2.2)
(other than any Specified Shareholder) who has purchased shares of Company
Common Stock pursuant to the terms of the Company's Senior Management Stock
Purchase Plan and who as of the Effective Time has an amount outstanding and
unpaid under a promissory note(s) entered into between such Person and the
Company under such plan, the Company shall withhold from the aggregate Merger
Consideration payable to any such Person in respect of shares of Company Common
Stock canceled in the Merger (subject to obtaining any required consent of any
such Person) the amount necessary to satisfy the outstanding obligation under
the promissory note(s) in full (including the amount equal to any imputed
interest if such Person authorized the Company to do so).
Section 1.9. Dissenting Shares. Anything in this Agreement to the
contrary notwithstanding, shares of Company Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who have the right to dissent with respect to the Merger pursuant
to Article 5.11 of the TBCA ("Dissenting Shares") shall not be converted into or
be exchangeable for the right to receive the Merger Consideration, but the
holders of such Dissenting Shares shall be entitled to receive payment of the
fair value of such Dissenting Shares in accordance with the provisions of the
TBCA, unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost such right under the
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TBCA. If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right, such holder's shares of Company Common Stock shall
thereupon be converted into and become exchangeable only for the right to
receive, as of the Effective Time, the Merger Consideration without any interest
thereon. The Company shall give Purchaser (i) prompt notice of any written
demands received by the Company for payment of fair value in respect of any
shares of Company Common Stock, attempted written withdrawals of such demands,
and any other instruments served pursuant to the TBCA and received by the
Company relating to shareholders' rights to dissent with respect to the Merger
and (ii) the opportunity to direct all negotiations and proceedings with respect
to any exercise of such rights under the TBCA. The Company shall not, except
with the prior written consent of Purchaser, voluntarily make any payment with
respect to any demands for payment of fair value for capital stock of the
Company, offer to settle or settle any such demands or approve any withdrawal of
any such demands.
Section 1.10. List of Stock Options; Cancellation of Stock Options.
(a) The Company has heretofore provided Purchaser a true and
complete list (the "Stock Option List") of each option to purchase shares of
Company Common Stock (the "Stock Options") granted under each employee and
director stock option plan or arrangement (the "Company Stock Plans")
outstanding as of the date hereof (along with the exercise prices thereof). The
Company represents and warrants that as of the date hereof, other than as
previously disclosed in the Stock Option List, no outstanding Stock Options are
held by any Specified Shareholder. Stock Options held by any Specified
Shareholder and any other person permitted by Purchaser in writing after the
date hereof to participate in the option rollover (collectively, the "Rollover
Participants") are referred to as "Rollover Options".
(b) The term "Option Cancellation Time" shall mean the time
that is immediately prior to the Effective Time.
(c) At the Option Cancellation Time, 448,336 Rollover Options
(as specified in Schedule 1.10(c) (the "Canceled Rollover Options")) shall be
canceled, and shall be of no further force or effect.
(d) At the Option Cancellation Time, each then outstanding
Stock Option (whether vested or unvested), other than any Canceled Rollover
Option, shall be canceled and, in consideration of such cancellation, the
Company shall pay to the holder in full satisfaction of such Stock Option,
subject to any applicable withholding tax, an amount in cash equal to the
product of (i) the excess, if any, of the Per Share Amount over the exercise
price per share of Company Common Stock of such Stock Option and (ii) the number
of shares of Company Common Stock subject to such Stock Option.
(e) The Company (i) shall take all actions necessary,
including seeking written consents from each holder (other than the Rollover
Participants), to cause the actions and effects specified in Section 1.10 to
occur, and (ii) shall take all actions necessary to provide that, effective as
of the Option Cancellation Time, (A) except as necessary in connection with the
treatment of Rollover Options, each of the Company Stock Plans shall be
terminated and no new options shall be granted thereunder, (B) the provisions in
any other plan, program or arrangement
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providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its subsidiaries shall be amended to
provide that no new issuances or grants may be made thereunder, and (C) no
holder of Stock Options will have any right to receive any shares of capital
stock of the Company or, if applicable, the Surviving Corporation, upon exercise
of any Stock Option.
Section 1.11. Payment for Shares.
(a) Prior to the Effective Time, Purchaser shall designate a
bank or trust company reasonably acceptable to the Company to act as paying
agent in connection with the Merger (the "Paying Agent") pursuant to a paying
agent agreement providing for the matters set forth in this Section 1.11 and
otherwise reasonably satisfactory to the Company. At the Effective Time, the
Company shall deposit, or cause to be deposited, in trust with the Paying Agent
for the benefit of holders of shares of Company Common Stock, the aggregate
consideration to which such holders shall be entitled at the Effective Time
pursuant to Section 1.8(d). Such funds shall be invested as directed by the
Company or the Surviving Corporation pending payment thereof by the Paying Agent
to holders of the shares of Company Common Stock. Earnings from such investments
shall be the sole and exclusive property of the Company and the Surviving
Corporation and no part thereof shall accrue to the benefit of the holders of
the shares of Company Common Stock.
(b) Promptly after the Effective Time, the Paying Agent shall
mail to each record holder, as of the Effective Time, of an outstanding
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares were converted pursuant to Section 1.8(d) into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent and
shall be in such form and have such other provisions not inconsistent with this
Agreement as Purchaser may specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for payment of the Merger
Consideration (together, the "Transmittal Documents"). Upon surrender of a
Certificate or Certificates for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Purchaser, together with such
letter of transmittal, duly executed, the holder of such Certificate or
Certificates shall be entitled to receive in exchange therefor (as promptly as
practicable) the Merger Consideration in respect of all shares of Company Common
Stock formerly represented by such Certificate or Certificates, without any
interest thereon, pursuant to Section 1.8(d) The Certificate(s) so surrendered
shall forthwith be canceled. If payment of the Merger Consideration is to be
made to a Person other than the Person in whose name the surrendered Certificate
or Certificates are registered, it shall be a condition of payment that the
Certificate(s) so surrendered shall be properly endorsed or shall otherwise be
in proper form for transfer, that the signatures on the Certificate(s) or any
related stock power shall be properly guaranteed and that the Person requesting
such payment shall have paid any transfer and other taxes required by reason of
the payment of the Merger Consideration to a Person other than the registered
holder of the Certificate(s) surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been paid or
is not applicable. Until surrendered in accordance with the pro-
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visions of and as contemplated by this Section 1.11, any Certificate (other than
Certificates representing shares of Company Common Stock subject to Sections
1.8(a), (b) and (c) and other than Dissenting Shares) shall be deemed at any
time after the Effective Time to represent only the right to receive the Merger
Consideration in cash without interest as contemplated by this Section 1.11.
Upon the surrender of Certificates in accordance with the terms and instructions
contained in the Transmittal Documents, the Company shall cause the Paying Agent
to pay the holder of such Certificates in exchange therefor cash in an amount
equal to the Merger Consideration (other than Certificates representing
Dissenting Shares and Certificates representing shares of Company Common Stock
subject to Sections 1.8(a), (b) and (c)).
(c) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further registration of
transfers of any shares of capital stock thereafter on the records of the
Company. If, after the Effective Time, Certificates (other than Dissenting
Shares or those subject to Sections 1.8(a), (b) and (c)) are presented to the
Surviving Corporation, they shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Section 1.11. No interest shall accrue or be paid on any cash payable upon
the surrender of a Certificate or Certificates which immediately before the
Effective Time represented outstanding shares of Company Common Stock.
(d) From and after the Effective Time, the holders of
Certificates evidencing ownership of shares of Company Common Stock outstanding
immediately prior to the Effective Time (other than those subject to Section
1.8(b)) shall cease to have any rights with respect to such shares of Company
Common Stock except as otherwise provided herein or by applicable law.
(e) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Surviving Corporation
shall pay or cause to be paid in exchange for such lost, stolen or destroyed
Certificate the relevant portion of the Merger Consideration in accordance with
Section 1.8(d) for shares of Company Common Stock represented thereby. When
authorizing such payment of any portion of the Merger Consideration in exchange
therefor, the board of directors of the Surviving Corporation may, in its
discretion and as a condition precedent to the payment thereof, require the
owner of such lost, stolen or destroyed Certificate to give the Surviving
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(f) Promptly following the date which is one year after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the Merger, which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or similar laws) only as general creditors thereof with respect to any
portion of the Merger Consideration payable upon due surrender of their
Certificates, without any interest thereon.
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(g) The Merger Consideration paid in the Merger shall be net
to the holder of shares of Company Common Stock in cash, subject to reduction
only for any applicable Federal withholding taxes or, as set forth in Section
1.11(b), stock transfer taxes payable by such holder.
(h) Anything to the contrary in this Section 1.11
notwithstanding, none of the Paying Agent, Purchaser or the Surviving
Corporation shall be liable to any holder of a Certificate formerly representing
Shares for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If Certificates are not
surrendered prior to two years after the Effective Time, unclaimed funds payable
with respect to such Certificates shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any Person previously entitled thereto.
Section 1.12. The Senior Notes Offer and Solicitation.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 7.1 and none of the events set forth in
Annex A shall have occurred or be existing, the Company shall promptly after the
date of this Agreement, but in no event later than five business days from the
date a request is made by the Purchaser (which request shall not be made prior
to the sixth business day following the date of this Agreement), commence an
offer to purchase all of the outstanding aggregate principal amount of the
Company's 10-1/2% Senior Subordinated Senior Notes (the "Senior Notes") issued
pursuant to that certain Indenture, dated as of July 30, 1996, among the
Company, certain of its subsidiaries, and First Union National Bank of North
Carolina, as Trustee (the "Senior Notes Indenture"), on the terms and conditions
set forth in and attached as Annex A hereto, and such other customary terms and
conditions as are reasonably acceptable to Purchaser (the "Debt Offer"). Without
limiting the foregoing, the Debt Offer (and the provisions of Annex A hereto),
shall include the solicitation of consents to amendments to the terms of the
Senior Notes and the Senior Notes Indenture that shall be reasonably
satisfactory to Purchaser and shall include, without limitation, the elimination
of the negative covenants contained therein and the elimination of any
restrictions applicable to the transactions contemplated by this Agreement or
any of the financing contemplated thereby (the "Senior Notes Amendments"). The
Company shall waive any of the conditions to the Debt Offer and make any other
changes in the terms and conditions of the Debt Offer as reasonably requested by
Purchaser, and the Company shall not, without Purchaser's prior written consent,
waive any condition to the Debt Offer, make any changes to the terms and
conditions of the Debt Offer set forth in Annex A or make any other changes in
the terms and conditions of the Debt Offer. The Company covenants and agrees
that, subject to the terms and conditions of this Agreement, including, but not
limited to, Annex A, it will accept for payment and thereafter pay for, as
promptly as practicable after expiration of the Debt Offer, Senior Notes and
consents concurrently with the consummation of the Merger.
(b) Subject to Section 7.1, the Company shall, from time to
time at the direction of Purchaser, extend the Debt Offer.
(c) Promptly following the date of this Agreement, the Company
shall prepare an offer to purchase the Senior Notes and forms of the related
letter of transmittal (collectively,
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the "Debt Offer to Purchase") and summary advertisement, as well as all other
information and exhibits (collectively, the "Debt Offer Documents"). Purchaser
and the Company will cooperate with each other in the preparation of the Debt
Offer Documents. All mailings to the holders of Senior Notes in connection with
the Debt Offer shall be subject to the prior review, comment and approval of
Purchaser. The Company will use its reasonable efforts to cause the Debt Offer
Documents to be mailed to the holders of the Senior Notes within five business
days from the date a request is made by Purchaser (which request shall not be
made prior to the sixth business day following the date of this Agreement). The
Debt Offer Documents will comply in all material respects with the provisions of
applicable state and federal laws. Each of Purchaser and the Company agrees
promptly to correct any information provided by it for use in the Debt Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect, and the Company further agrees to take all steps necessary
to cause the Debt Offer Documents as so corrected to be disseminated to holders
of Senior Notes as and to the extent required by applicable state and federal
laws.
Section 1.13. Company Action.
(a) The Company hereby approves of and agrees to undertake the
Debt Offer and represents and warrants that the Board of Directors of the
Company (the "Company Board"), at a meeting duly called and held, has, subject
to the terms and conditions set forth herein, (i) determined that this
Agreement, which provides, among other things, for the Debt Offer, the Circon
Sale (as defined in Section 5.6(d)) and the Merger, is advisable, fair to, and
in the best interests of, the shareholders of the Company, (ii) resolved to
recommend approval and adoption of the plan of merger (within the meaning of
Article 5.03 of the TBCA) contained in this Agreement by such shareholders of
the Company, (iii) approved the Merger and all of the other Transactions, for
purposes of Article 13.03 of the TBCA and taken all necessary steps to render
Article 13.03 of the TBCA inapplicable to the Transactions contemplated hereby,
(iv) resolved to elect, to the extent permitted by law, not to be subject to any
state takeover law other than Article 13.03 of the TBCA that may purport to be
applicable to the Transactions contemplated hereby, (v) has taken all action
under the Rights Agreement to make the representations and warranties contained
in Section 3.13 true and correct in all respects, and (vi) resolved to
recommend, and recommended, that the shareholders of the Company approve and
adopt this Agreement and the Merger. The determinations, resolutions and
recommendations referred to in the immediately preceding sentence are
collectively referred to herein as the "Company Board Recommendation". The
Company shall include a statement of such recommendation and approval in the
Proxy Statement (as defined in Section 3.5). The Company further represents that
Lazard Freres & Co. LLC (the "Financial Advisor") has delivered to the Board its
written opinion that, as of the date of such opinion, the Per Share Amount to be
received in the Merger by the holders of Shares (other than Purchaser and the
Specified Shareholders) is fair from a financial point of view to such holders.
The Company agrees to, and has been authorized by the Financial Advisor to,
permit the inclusion of the fairness opinion (or a reference thereto) in the
Proxy Statement.
(b) The Company shall take all action as may be necessary to
effect the Debt Offer as contemplated by this Agreement, including, without
limitation, promptly mailing the Debt Offer Documents to the record holders and
beneficial owners of the Senior Notes.
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ARTICLE II
ASSET DROPDOWN
Section 2.1. Asset Dropdown. If requested by Purchaser in order to facilitate
the financing contemplated hereby, the Company shall organize, or cause to be
organized under the laws of the State of Delaware a corporation ("Company Sub")
and thereafter maintain its good standing under the laws of the State of
Delaware and qualify it to do business in such jurisdictions as may be necessary
to comply with the terms of Section 3.1. Purchaser shall be afforded the
opportunity to review and approve all documents prepared in connection with the
formation of Company Sub. In accordance with the first sentence of this Section
2.1, as so requested, immediately before or concurrent with the Effective Time,
subject to satisfaction or waiver of all conditions to the Merger, the Company
shall sell, convey, assign, transfer and deliver to Company Sub, and the Company
shall cause Company Sub to acquire from the Company, all of the rights, title
and interests of the Company in and to all of the assets, properties, operations
and businesses and all other rights and privileges of every nature, kind and
description, whether tangible or intangible (including goodwill), whether
accrued, contingent or otherwise, of the Company as such assets, properties,
operations, businesses, rights and privileges may exist on the date and time of
the transfer (collectively, the "Company Assets"); provided, however, that the
Company shall retain sufficient cash or cash equivalents in order to finance the
consummation of the Merger. The transfer of the Company Assets contemplated by
this Section 2.1 shall be effected by appropriate bills of sale and other
evidences of transfer or assignment, all in forms reasonably satisfactory to the
Company and Purchaser. Simultaneously therewith, the Company shall assign to
Company Sub, and shall cause Company Sub to assume and agree to pay, perform and
be liable and responsible for, any and all of its liabilities, obligations,
debts whatsoever of the business of the Company, whether mature or unmatured,
liquidated or unliquidated, fixed or contingent, including as the "Company"
under Section 5.2 of the Senior Notes Indenture ("Liabilities"). The assumption
of Liabilities by Company Sub pursuant to this Section 2.1 shall be evidenced by
an assumption agreement or other comparable document in form and substance
reasonably satisfactory to the Company and Purchaser.
Section 2.2. Non-Assignment Under Certain Circumstances. Anything
contained in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to sell, convey, assign, transfer or deliver
("Transfer") any interest in any instruments, commitments, contracts, leases,
permits or other agreements or arrangements or any claim, right or benefit, or
any Liability arising thereunder or resulting therefrom ("Instruments"), if such
a Transfer or an attempt to make such a Transfer without authorization,
approval, consent or waiver of a third person ("Authorizations") would
constitute a breach or violation thereof or affect adversely the rights of
Company Sub or the Company thereunder; and any transfer hereunder of such
Instruments that requires Authorizations shall be made subject to such
Authorizations being obtained. In the event that any such Authorizations are not
obtained on or prior to the Effective Time, the Company shall use commercially
reasonable efforts to obtain any such Authorization after the Effective Time,
and the Company shall, to the fullest extent permitted by law and any
instruments (including by acting as an agent of Company Sub), hold such
instruments in trust for the exclusive use and benefit of Company Sub such that
Company Sub receives the interest of
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the Company in the benefits therefrom until such time as such Authorizations are
obtained. "Person" or "person" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and all Governmental Entities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
Section 3.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate or other power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its businesses as now being conducted, except
where the failure to be in good standing or to have such power, authority and
governmental approvals, would not, individually or in the aggregate, have a
Company Material Adverse Effect. The Company has heretofore delivered to
Purchaser accurate and complete copies of the articles of incorporation and
bylaws, as currently in effect, of the Company and accurate and complete copies
of the certificate or articles of incorporation and bylaws (or other governing
document), as currently in effect, of each of its Subsidiaries. As used in this
Agreement, the term "Subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated or
domestic or foreign to the United States of which (i) such Person or any other
Subsidiary of such Person is a general partner (excluding such partnerships
where such Person or any Subsidiary of such Person do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries. The term
"Company Material Adverse Effect" means any event, change, circumstance or
effect that is or could reasonably be expected to be materially adverse to (a)
the business, results of operations, condition (financial or otherwise), assets
or liabilities of the Company and its Subsidiaries, taken as a whole, or (b) the
ability of the Company to consummate any of the transactions contemplated by
this Agreement, including the Debt Offer, the Circon Sale and the Merger
(collectively, the "Transactions"). The schedule of disclosures delivered by the
Company to Purchaser together with the execution of this Agreement (the "Company
Disclosure Schedule") sets forth in Section 3.1(a) a complete list of the
Company's Subsidiaries.
(b) Each of the Company and its Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing nec-
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essary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not, individually or in
aggregate, have a Company Material Adverse Effect.
(c) Except as set forth in Section 3.1(c) of the Company
Disclosure Schedule, the Company does not own any equity or similar interest in
any Person.
Section 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of:
40,000,000 shares of Company Common Stock and 20,000,000 shares of preferred
stock, par value $1.00 per share (the "Preferred Stock"). As of June 9, 1999,
14,276,682 shares of Company Common Stock are issued and outstanding, no shares
of the Preferred Stock are outstanding. All of the Shares have been validly
issued, and are fully paid, nonassessable and free of preemptive rights. As of
June 9, 1999, a total of 1,498,920 Shares are reserved for issuance pursuant to
outstanding Stock Options under the Company Stock Plans, and no other Shares are
subject to issuance pursuant to Stock Options. Set forth in Section 3.2(a) of
the Company Disclosure Schedules is a complete and accurate list of the Company
Stock Plans and the number of Shares reserved for issuance pursuant to Stock
Options outstanding as of June 9, 1999 under each such Company Stock Plan, and
no other Shares are subject to issuance pursuant to such Company Stock Plans.
Since June 9, 1999, no shares of the Company's capital stock have been issued
other than pursuant to Stock Options set forth on the Stock Option List and,
since June 9, 1999, no stock options have been granted. Except as set forth
above and except for the Rights to, among other things, purchase Series A
Participating Preferred Stock issued pursuant to the Rights Agreement, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company or any of its Subsidiaries, and no obligations of the Company or any of
its Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, interests in the ownership or earnings
of the Company or any of its Subsidiaries or other similar rights (collectively,
"Company Securities"). There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding, capital stock of, or other
ownership interests in, each Subsidiary of the Company, is owned by the Company,
directly or indirectly, free and clear of any Lien or any other limitation or
restriction (including any restriction on the right to vote or sell the same,
except as may be provided as a matter of law). All such shares have been validly
issued, fully paid and non-assessable, and have been issued free of preemptive
rights. There are no securities of the Company or any of its Subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or any of its Subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any capital stock or other ownership
interests in, or any other securities of, any Subsidiary of the Company. There
are no contractual obligations of the Company
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or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in any
Subsidiary of the Company. For purposes of this Agreement, "Lien" means, with
respect to any asset (including, without limitation, any security) any option,
claim, mortgage, lien, pledge, charge, security interest or encumbrance or
restrictions of any kind in respect of such asset.
(c) The Shares and the Rights constitute the only class of equity
securities of the Company or any of its Subsidiaries registered or required to
be registered under the Exchange Act.
(d) Other than the Voting Agreements, there are no voting trusts
or other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of the Subsidiaries.
(e) Other than the Outstanding Indebtedness, there is no
outstanding Indebtedness of the Company or any of its Subsidiaries. Except as
identified in Section 3.2(e) of the Company Disclosure Schedule, no such
Indebtedness of the Company or its Subsidiaries contains any restriction upon
(i) the prepayment of such Indebtedness, (ii) the incurrence of Indebtedness by
the Company or its Subsidiaries, respectively, or (iii) the ability of the
Company or its Subsidiaries to grant any Liens on its properties or assets.
(f) For purposes of this Agreement, "Indebtedness" shall include
(i) all indebtedness for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices,
and excluding ordinary operating leases), (ii) any other indebtedness which is
evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under conditional sale or other title retention agreements relating
to property purchased, (iv) capital lease or sale-leaseback obligations, (v) all
liabilities secured by any Lien on any property (other than ordinary operating
leases), and (vi) any guarantee or assumption of any of the foregoing in clauses
(i) through (v) or guaranty of minimum equity or capital or any make-whole or
similar obligation. The term "Outstanding Indebtedness" means (a) the Senior
Notes, (b) Indebtedness not in excess of $265,000,000 as of the date hereof
under that certain Third Amended and Restated Credit Agreement, dated as of
January 4, 1999 (the "Credit Agreement"), by and among the Company, NationsBank,
N.A., as Agent, The Bank of Nova Scotia and First Union Bank, as managing
agents, and certain other banks named therein, and (c) capitalized leases
outstanding on the date hereof not in excess of $10,500,000 in the aggregate.
The aggregate principal amount of the outstanding Senior Notes does not exceed
$100,000,000, and there is no accrued but unpaid interest thereon other than
interest accruing since the last regular interest payment date.
Section 3.3. Authority Relative to this Agreement; Consents and
Approvals.
(a) The Company has all the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
Transactions in accordance with the terms hereof (subject to obtaining the
necessary approval and adoption of this Agreement and the Merger by the
shareholders of the Company). The execution, delivery and performance of this
Agreement by the Company and the consummation by it of the Transactions have
been duly and
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validly authorized by the Board and, except for obtaining the approval of the
Company's shareholders in connection with the Merger as contemplated by Section
5.1 hereof, no other corporate action or corporate proceedings on the part of
the Company is necessary to authorize the execution and delivery by the Company
of this Agreement and the consummation by it of the Transactions. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
due and valid authorization, execution and delivery by Purchaser, constitutes a
valid, legal and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
(b) The Board has duly and validly approved, and taken all
corporate actions required to be taken by the Board for the consummation of, the
Transactions, including, without limitation, all actions required to ensure that
the representations and warranties set forth in Section 3.13 are, and shall
remain, true and correct in all respects.
(c) No approval of the shareholders of the Company is required
(by the Company's articles of incorporation or bylaws, or by applicable law)
with respect to the entering into of this Agreement or the consummation of any
of the Transactions other than the approval of the Merger by holders of a
majority of the outstanding shares of Company Common Stock.
Section 3.4. SEC Reports; Financial Statements.
(a) Since January 1, 1996, the Company has filed with the SEC all
forms, reports, schedules, statements and other documents required to be filed
by it with the SEC pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the SEC's rules and regulations promulgated thereunder,
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the SEC's rules and regulations promulgated thereunder (any such documents filed
since January 1, 1996 and prior to the date hereof being collectively, the
"Company SEC Documents"). The Company SEC Documents, including without
limitation, any financial statements or schedules included therein, at the time
filed, or in the case of registration statements on their respective effective
dates, (i) complied in all material respects with the applicable requirements of
the Exchange Act and the Securities Act, as the case may be, and the rules and
regulations promulgated thereunder and (ii) did not at the time filed (or, in
the case of registration statements, at the time of effectiveness), contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. No
Subsidiary of the Company is required to file any form, report or other document
with the SEC. The financial statements included in the Company SEC Documents
(the "Financial Statements") (i) have been prepared from, and are in accordance
with, the books and records of the Company and its Subsidiaries, (ii) complied
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, (iii) have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) ("GAAP") and (iv) fairly present in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its Subsidiaries as of the times and for the periods referred
to therein, except
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that any such Financial Statements that are unaudited, interim financial
statements were or are subject to normal and recurring year end adjustments.
(b) The Company has heretofore made available to Purchaser, in
the form filed with the SEC (including any amendments thereto), (i) its Annual
Reports on Form 10-K for each of its three most recently completed fiscal years,
(ii) all definitive proxy statements relating to the Company's meetings of
shareholders (whether annual or special) held since January 1, 1996 and (iii)
all other reports (other than Quarterly Reports on Form 10-Q) or registration
statements filed by the Company with the SEC since January 1, 1996.
Section 3.5. Debt Offer Documents; Proxy Statement; Form S-4. None of the
information included in (i) the Debt Offer Documents, shall, at the time the
Debt Offer Documents or any amendments or supplements thereto are first
published, sent or given to holders of the Senior Notes contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, (ii) the
registration statement on Form S-4 to be filed, if necessary, with the
Securities and Exchange Commission (the "SEC") by the Company in connection with
any issuance of Company Common Stock in connection with the Merger (such Form
S-4, as amended or supplemented, is herein referred to as the "Form S-4") will,
at the time the Form S-4 is filed with the SEC, and at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (iii) the proxy statement to be sent to the shareholders of
the Company in connection with the Shareholders Meeting (as defined in Section
5.1) (such proxy statement, as amended or supplemented, is herein referred to as
the "Proxy Statement") will, at the date it is first mailed to the Company's
shareholders or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. If the
filing of the Form S-4 is required, the Form S-4 will, as of its effective date,
and the prospectus contained therein will, as of its date, comply as to form in
all material respects with the requirements of the Securities Act and the rules
and regulations promulgated thereunder. The Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation is
made by the Company with respect to statements made therein based on information
supplied in writing by Purchaser specifically for inclusion in the Proxy
Statement. For purposes of this Agreement, the parties agree that statements
made and information in the Debt Offer Documents, the Form S-4 (if one is filed)
and the Proxy Statement relating to the federal income tax consequences of the
transactions herein contemplated to holders of Company Common Stock shall be
deemed to be supplied by the Company and not by Purchaser.
Section 3.6. Consents and Approvals, No Violations. Except as set forth
in Section 3.6 of the Company Disclosure Schedule, no filing with or notice to,
and no permit, authorization, consent or approval of, any federal, state, local
or foreign court or tribunal or administrative, governmental or regulatory body,
agency or authority (a "Governmental Entity"), is required on
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the part of the Company or any of its Subsidiaries for the execution, delivery
and performance by the Company of this Agreement or the consummation by the
Company of the Transactions, except (i) in connection with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) pursuant to the applicable requirements of the
Securities Act and the Exchange Act and the SEC's rules and regulations
promulgated thereunder, (iii) the filing and if applicable, recordation of the
Articles of Merger pursuant to the TBCA, (iv) such filings as are or may become
necessary or desirable in connection with the organization and capitalization of
Company Sub, or (v) where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not have
a Company Material Adverse Effect. Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation by the Company
of the Transactions will (A) conflict with or result in any breach of any
provision of the respective articles of incorporation or bylaws (or similar
governing documents) of the Company or of any its Subsidiaries, (B) except as
set forth in Section 3.6 of the Company Disclosure Schedule, result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound, other than breaches or defaults under the Credit Agreement
upon consummation of the Debt Offer without repayment thereof, or (C) violate
any order, writ, injunction, decree, law, statute, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets, except in the case of (B) or (C) for violations, breaches or defaults
which would not, individually or in the aggregate, have a Company Material
Adverse Effect.
Section 3.7. No Default. None of the Company or any of its Subsidiaries
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its articles of incorporation or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company,
any of its Subsidiaries or any of their respective properties or assets, except
in the case of (ii) or (iii) for violations, breaches or defaults that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except (i)
for liabilities incurred pursuant to the terms of the Agreement, or (ii) as set
forth in the Company SEC Documents filed since November 1, 1998, neither the
Company nor any of its Subsidiaries has, or has incurred since November 1, 1998,
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, that have a Company Material Adverse Effect or, other than in the
ordinary course of business and consistent with past practices, that would be
required in accordance with GAAP to be reflected or reserved against on a
consolidated balance sheet, or in the notes thereto, of the Company and its
Subsidiaries prepared in accordance with GAAP.
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Section 3.9. Litigation. Except as disclosed in the Company SEC Documents
or in Section 3.9 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against, affecting or involving the Company or any of its
Subsidiaries or any of their respective properties or assets before any
Governmental Entity with respect to which there is a reasonable likelihood of an
adverse determination which would have a Company Material Adverse Effect. Except
as disclosed in the Company SEC Documents or in Section 3.9 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject
to any outstanding order, writ, injunction or decree which has a Company
Material Adverse Effect.
Section 3.10. Compliance with Applicable Law. Except as set forth in
Section 3.10 of the Company Disclosure Schedule, the Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities (including under applicable regulations
adopted by the U.S. Food and Drug Administration and the U.S. Food, Drug and
Cosmetic Act) necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted ("Company Permits") except
where the failure to hold such permits, licenses, variances, exemptions, orders
and approvals would not, individually or in the aggregate, have a Company
Material Adverse Effect. There has not occurred any material default under, or
violation of, or failure of compliance under, any such Company Permit. Except as
set forth in Section 3.10 of the Company Disclosure Schedule, the businesses of
the Company and its Subsidiaries are not being, and have not been, conducted in
violation of any law, ordinance or regulation of any Governmental Entity
(including under applicable regulations adopted by the U.S. Food and Drug
Administration and the U.S. Food, Drug and Cosmetic Act) except for violations
or possible violations which individually or in the aggregate will not have a
Company Material Adverse Effect. Except as set forth in Section 3.10 of the
Company Disclosure Schedule, no investigation or review by any Governmental
Entity (including under applicable regulations adopted by the U.S. Food and Drug
Administration and the U.S. Food, Drug and Cosmetic Act) with respect to the
Company or any of its Subsidiaries or any of their respective products is, or
during the past three years has been, pending or, to the knowledge of the
Company, threatened nor, to the knowledge of the Company, has any Governmental
Entity indicated an intention to conduct the same. This Section 3.10 shall not
be applicable to compliance with Environmental Laws (on permits required
thereunder), which is the subject of Section 3.12.
Section 3.11. Employee Benefit Matters.
(a) All employee or director benefit plans, arrangements or
agreements, whether or not written, including without limitation any employee
welfare benefit plan within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), any employee
pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not
such plan is subject to ERISA) and any bonus, incentive, deferred compensation,
vacation, stock purchase, stock option, severance, employment, change of control
or fringe benefit plan, program or agreement that is or has since January 1,
1994 (or prior to such date if such plan, program or arrangement could result in
any liability of the Company or any Subsidiary after the date of this Agreement)
been sponsored, maintained or contributed to for the benefit of any current or
former employee or director of the Company or any Subsidiary are listed in
Section
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3.11(a) of the Company Disclosure Schedule (the "Company Benefit Plans"). True
and complete copies of (i) the Company Benefit Plans (or, in the case of any
unwritten Company Benefit Plan, a description thereof) and any amendment
thereto, (ii) the most recent summary plan description (or similar document) for
each Company Benefit Plan, (iii) the three most recent Annual Reports (Form 5500
Series) and accompanying schedules, if any, and (iv) the most recent
determination letter from the IRS (if applicable) for such Company Benefit Plan
have been made available to the Purchaser.
(b) Except as set forth in Section 3.11(b) of the Company
Disclosure Schedule, (i) each Company Benefit Plan has been maintained and
administered in all material respects in compliance with its terms and with all
applicable laws including, but not limited to, ERISA, and the Internal Revenue
Code of 1986, as amended (the "Code"); (ii) each Company Benefit Plan intended
to be qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service (the "IRS") to be so qualified (or such qualification
is pending, or such plan is maintained under a prototype plan approved by the
IRS), and, to the knowledge of the Company, no event has occurred that could
reasonably be expected to adversely affect the qualified status of such Company
Benefit Plan; (iii) neither the Company nor any of its Subsidiaries has incurred
or is reasonably likely to incur any liability or penalty under Sections 4975 or
4976 of the Code or Sections 409 or 502(i) of ERISA; (iv) there are no pending,
nor has the Company or any of its Subsidiaries received notice of any
threatened, claims against or otherwise involving any of the Company Benefit
Plans (other than routine claims for benefits); (v) no Company Benefit Plan is
under audit or investigation by the IRS, the Department of Labor or the Pension
Benefit Guaranty Corporation, and to the knowledge of the Company, no such audit
or investigation is pending or threatened; (vi) all contributions or other
payments required to be made as of the date of this Agreement to or pursuant to
the Company Benefit Plans have been made or accrued for in the Company's
Financial Statements; (vii) neither the Company nor any entity under "common
control" with the Company within the meaning of Sections 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA ("ERISA Affiliate") has at any time
contributed to, or been required to contribute to, any "pension plan" (as
defined in Section 3(2) of ERISA) that is subject to Title IV of ERISA or
Section 412 of the Code, including without limitation, any "multi-employer plan"
(as defined in Sections 3(37) and 4001(a)(3) of ERISA) (a "Multiemployer Plan");
(viii) no Company Benefit Plan is subject to the laws of any jurisdiction other
than the United States; (ix) neither the Company nor any of its Subsidiaries has
any obligation for retiree health or life benefits; (x) the Company or its
Subsidiaries may amend or terminate any of the Company Benefit Plans without
incurring any liability thereunder; (xi) all amounts of deferred compensation
benefits under any Company Benefit Plan have been properly accrued on the
Financial Statements of the Company and its Subsidiaries to the extent required
under GAAP; and (xii) each Company Benefit Plan which is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA is either insured
pursuant to a contract of insurance whereby the insurance company bears any risk
of loss with respect to such claims or covered under a contract with a health
maintenance organization (an "HMO") pursuant to which the HMO bears the
liability for such claims.
(c) Except as set forth in Section 3.11(c) of the Company
Disclosure Schedule, the consummation of the Transactions will not (either alone
or upon the occurrence of any
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additional or subsequent events) (i) constitute an event under any Company
Benefit Plan, trust, or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any current or former employee, officer or director of the Company or any
Subsidiary, or (ii) result in the triggering or imposition of any restrictions
or limitations on the right of the Company or the Purchaser to amend or
terminate any Company Benefit Plan and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
applicable taxes. Except as set forth in Section 3.11(c) of the Company
Disclosure Schedule, no payment or benefit which will or may be made by the
Company, any of its Subsidiaries, the Purchaser or any of their respective
affiliates with respect to any employee, officer or director of the Company or
its Subsidiaries will be characterized as an "excess parachute payment," within
the meaning of Section 280G(b)(1) of the Code, and no amount of any such payment
or benefit will fail to be deductible by the Company by reason of Section 162(m)
of the Code.
(d) Except as set forth in Section 3.11(d) of the Company
Disclosure Schedule, with respect to each Company Benefit Plan that is subject
to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (i)
there does not exist any accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA, whether or not waived; (ii) the
fair market value of the assets of each such Company Benefit Plan equals or
exceeds the actuarial present value of all accrued benefits under such Plan
(whether or not vested), based upon the actuarial assumptions used to prepare
the most recent actuarial report for such Plan; (iii) no reportable event within
the meaning of Section 4043(c) of ERISA for which the 30-day notice requirement
has not been waived has occurred, and the consummation of the transactions
contemplated by this agreement will not result in the occurrence of any such
reportable event; (iv) all premiums to the Pension Benefit Guaranty Corporation
(the "PBGC") have been timely paid in full; (v) no liability (other than for
premiums to the PBGC) under Title IV of ERISA has been or is expected to be
incurred by the Company or its Subsidiaries; and (vi) the PBGC has not
instituted proceedings to terminate any such Company Benefit Plan and, to the
Company's and each of its Subsidiary's knowledge, no condition exists that
presents a risk that such proceedings will be instituted or which would
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Company Benefit Plan.
(e) None of the Company and its Subsidiaries nor any ERISA
Affiliate has incurred any "withdrawal liability" (as defined in Part I of
Subtitle E of Title IV of ERISA) ("Withdrawal Liability"), as a result of a
complete or partial withdrawal from a Multiemployer Plan, that has not been
satisfied in full. With respect to each Company Benefit Plan that is a
Multiemployer Plan: (i) if the Company or any of its Subsidiaries or any of
their respective ERISA Affiliates were to experience a withdrawal or partial
withdrawal from such plan, no Withdrawal Liability would be incurred that would
have a Company Material Adverse Effect; and (ii) none of the Company and its
Subsidiaries, nor any of their respective ERISA Affiliates has received any
notification, nor has any reason to believe, that any such Company Benefit Plan
is in reorganization, has been terminated, is insolvent, or may reasonably be
expected to be in reorganization, to be insolvent, or to be terminated.
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Section 3.12. Environmental Laws and Regulations.
(a) Except as set forth in the Company SEC Documents or Section
3.12 of the Company Disclosure Schedule, (i) the Company and each of its
Subsidiaries is in compliance with all applicable federal, state, local and
foreign laws and regulations relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or emissions, discharges,
releases, disposal, or handling of any pollutants or toxic or hazardous
substances, wastes or materials (including, without limitation, petroleum, and
petroleum products, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon or lead or lead-based paints or materials (collectively,
"Environmental Laws"), except for non-compliance that individually or in the
aggregate would not have a Company Material Adverse Effect, which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof; (ii) neither the Company nor any of its Subsidiaries has received
written (or, to the Company's knowledge, oral) notice of, or, is the subject of,
any material action, cause of action, claim, investigation, demand or notice by
any such Person alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim") including, without limitation,
relating to any contractor, subcontractor or agent of the Company or for the
business, or relating in any way to any prior facilities, locations, or business
of the Company or any of its Subsidiaries; and (iii) there are no conditions or
circumstances that are reasonably likely to result in any liability of the
Company or any of its Subsidiaries under any Environmental Law, prevent or
interfere with any such compliance thereunder in the future including, without
limitation, relating to any contractor, subcontractor or agent of the Company or
for the business, or relating in any way to any prior facilities, locations, or
business of the Company or any of its Subsidiaries, except for any such
conditions or circumstances that individually or in the aggregate would not have
a Company Material Adverse Effect. There are no permits or other governmental
authorizations held by the Company or required for the Company's business that
are required to be transferred or reissued, or that are otherwise prohibited
from being transferred or reissued, pursuant to any Environmental Laws as a
result of the transactions contemplated by this Agreement. The Company has
provided to Purchaser all environmental assessments, reports, data, results of
investigations, or compliance or other environmental audits conducted by or for
the Company, or otherwise relating to the Company's or any Subsidiary's business
or properties (owned, leased or operated).
(b) There are no Environmental Claims which individually or in
the aggregate would have a Company Material Adverse Effect that are pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries or, to the knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
or is reasonably likely to have been retained or assumed either contractually or
by operation of law.
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Section 3.13. Rights Agreement; State Takeover Statute Inapplicable.
(a) The Company has taken all necessary action so that none of
the execution of this Agreement or the Voting Agreements, the making of the Debt
Offer, the acquisition of Senior Notes or consents pursuant to the Debt Offer,
or the consummation of the Merger or the Circon Sale or the other Transactions
will (i) cause the Rights issued pursuant to the Rights Agreement to become
exercisable, (ii) cause Purchaser or any of its affiliates to become an
Acquiring Person (as such term is defined in the Rights Agreement) or (iii) give
rise to a Distribution Date or a Triggering Event (as each such term is defined
in the Rights Agreement). The Company has delivered to Purchaser true and
complete copies of all amendments to the Rights Agreement that fulfill the
requirements of this Section 3.13 and such amendments are in full force and
effect.
(b) As of the date hereof and at all times through and including
the Effective Time, Article 13.03 of the TBCA shall be inapplicable to the
Transactions contemplated by this Agreement and all future transactions between
the Company and any of Purchaser and, to the extent the Specified Shareholders,
or any of them, could be deemed to be or become (by virtue of the Transactions)
an "affiliated shareholder" or an "affiliate or associate of the affiliated
shareholder" (as such terms are used in Article 13.03 of the TBCA), the
Specified Shareholders.
Section 3.14. Brokers. No broker, finder or investment banker (other than
the Financial Advisor, a true and correct copy of whose engagement agreement has
been delivered to Purchaser) is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company. The fees to which the Financial Advisor shall be
entitled to in connection with the transactions contemplated by this Agreement
and the portion thereof heretofore paid are set forth in Section 3.14 of the
Company Disclosure Schedule.
Section 3.15. Absence of Certain Changes. Except as set forth in Section
3.15 of the Company Disclosure Schedule or disclosed in the Company SEC
Documents filed prior to the date hereof, since November 1, 1998, the Company
and each of its Subsidiaries have conducted its businesses only in the ordinary
course of business and consistent with past practice and (a) there has not been
any Company Material Adverse Effect and (b) the Company has not taken any of the
actions set forth in paragraphs (a) through (q) of Section 5.3.
Section 3.16. Taxes.
(a) The Company and each of its Subsidiaries on or prior to the
date of this Agreement has filed or has had filed on its behalf, and will file
or will have filed on its behalf prior to the Effective Time, in a timely manner
(within any applicable extension periods) with the appropriate governmental
entity all income and other material Tax Returns (as defined herein) required to
be filed with respect to Taxes (as defined herein) of the Company and each of
its Subsidiaries, and such Tax Returns are correct and complete in all material
respects. The most recent financial statements contained in the Company SEC
Documents provide an adequate accrual for the payment of Taxes for all periods
covered by such financial statements.
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(b) All material Taxes with respect to the Company and its
Subsidiaries have been paid in full to the extent required to be so paid or have
been provided for in accordance with GAAP on the Company's most recent balance
sheet (as of the date of such balance sheet) which is part of the Company SEC
Documents.
(c) There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state, local or
foreign income or other material Tax Returns required to be filed by or with
respect to the Company and its Subsidiaries.
(d) No deficiency, delinquency or default for any Tax has been
claimed, proposed or assessed against the Company or any of its Subsidiaries
which has not been abated or paid in full, and neither the Company nor any
Subsidiary has received written notice of any such deficiency, delinquency or
default nor does the Company otherwise have knowledge of any threat of any
governmental entity to assert such deficiency, delinquency or default or any
facts or circumstances that would form a basis of such threat. No audit by any
tax authority is pending or, to the Company's knowledge, threatened with respect
to any Tax Returns filed by, or Taxes due from, the Company or any of its
Subsidiaries.
(e) There are no liens for Taxes upon the assets of the Company
or any of its Subsidiaries except statutory liens for current Taxes not yet due.
(f) No power of attorney has been executed by, or on behalf of,
the Company or any of its Subsidiaries with respect to any matter relating to
Taxes which is currently in force.
(g) Neither the Company nor any of its Subsidiaries is a party to
or bound by or has any obligation under any written or unwritten Tax sharing,
Tax indemnity or similar agreement or arrangement.
(h) There are no outstanding requests for any extension of time
within which to file any Tax Return or within which to pay any Taxes.
(i) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(j) Except as set forth in Section 3.16(j) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has been a
member of an affiliated group filing a consolidated federal income tax return
(other than the affiliated group of which the Company is the common parent) or
has any liability for the Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law).
(k) The Company is not, and during the preceding 5-year period
has not been, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
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(l) For purposes of this Agreement, (i) "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority and (ii) "Tax Return"
shall mean any report, return, document, declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction with
respect to Taxes.
Section 3.17. Intellectual Property.
(a) Except as set forth on Section 3.17(a) of the Company
Disclosure Schedule, and except for such failures to own or have the right to
use as would not have a Company Material Adverse Effect, the Company owns or has
the right to use all intellectual property rights used in the conduct of its
business, including without limitation all patents and patent applications,
trademarks, trademark registrations and applications, copyrights and copyright
registrations and applications, computer programs, technology, know-how, trade
secrets, proprietary processes and formulae (collectively, the "Intellectual
Property"). Other than as would not have a Company Material Adverse Effect, the
Company owns or has the right to use all such Intellectual Property free and
clear of all Liens.
(b) Section 3.17(b) of the Company Disclosure Schedule sets forth
a list of all material license agreements under which the Company or any of its
Subsidiaries has granted or received the right to use any Intellectual Property,
and the Company is not in material default under any such license.
(c) Except as set forth in Section 3.17(c) of the Company
Disclosure Schedule, no Person has a right to receive a royalty or similar
payment in respect of any item of Intellectual Property pursuant to any
contractual arrangements entered into by the Company or otherwise. No former or
present employees, officers or directors of the Company hold any right, title or
interest, directly or indirectly, in whole or in part, in or to any Intellectual
Property.
(d) There are no claims or suits pending or, to the knowledge of
the Company, threatened, and the Company has received no notice of any claim or
suit (i) alleging that the conduct of the Company's business infringes upon or
constitutes the unauthorized use of the proprietary rights of any third party or
(ii) challenging the ownership, use, validity or enforceability of the
Intellectual Property. To the knowledge of the Company, no Intellectual Property
of the Company is being violated or infringed upon by any third party. Except as
set forth in Section 3.17(d) of the Company Disclosure Schedule, there are no
settlements, consents, judgments, orders or other agreements which restrict the
Company's rights to use any Intellectual Property.
Section 3.18. Labor Matters.
(a) (i) There is no labor strike, dispute, slowdown, stoppage or
lockout pending, or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries and during the past five years
from the date of this Agreement there has not been
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any such action, (ii) except as set forth in Section 3.18(a) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company or any of its
Subsidiaries, (iii) except as set forth in Section 3.18(a) of the Company
Disclosure Schedule, none of the employees of the Company or any of its
Subsidiaries is represented by any labor organization and the Company does not
have any knowledge of any union organizing activities among the employees of the
Company or any of its Subsidiaries within the past five years, and (iv) there
are no complaints, lawsuits or other proceedings pending or, to the knowledge of
the Company, threatened in writing in any forum by or on behalf of any present
or former employee of the Company or any of its Subsidiaries, any applicant for
employment or classes of the foregoing alleging breach by the Company or its
Subsidiaries of any express or implied contract or employment, any laws
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship,
which, individually or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect.
(b) The Company and its Subsidiaries and each member of their
respective business enterprises has complied with the Worker Adjustment and
Retraining Notification Act (the "WARN Act") and any similar state, local or
foreign law or regulation. There has not occurred a "mass layoff" (as defined in
the WARN Act) affecting any site of employment or facility of the Company or its
Subsidiaries, and none of the Company's or its Subsidiaries' employees has
suffered an "employment loss" (as defined in the WARN Act) during the six month
period prior to the date of this Agreement.
(c) With respect to any collectively bargained agreement to which
the Company or any of its Subsidiaries is a party and that has been renewed or
renegotiated after November 1, 1998, the terms, including the costs to the
Company or its Subsidiaries, of such new or renogiatated agreement are not less
favorable in any material respect to the Company or its Subsidiaries than the
terms of the agreement as in effect prior to any such renewal or renegotiation.
Section 3.19. Opinions of Financial Advisors. The Financial Advisor has
delivered its written opinion, to the Board to the effect that, as of the date
of such opinion, the Per Share Amount to be received in the Merger by the
holders of Shares (other than Purchaser and the Specified Shareholders) is fair
from a financial point of view to such holders, a copy of which opinion has been
delivered to Purchaser.
Section 3.20. Titles to Properties; Encumbrances. Except for matters or
conditions which, individually or in the aggregate, could not be reasonably
expected to have a Company Material Adverse Effect,
(a) Section 3.20(a) of the Company Disclosure Schedule sets forth
a complete list of all real property (including land, buildings and other
improvements) owned by the Company or its Subsidiaries (the "Owned Real
Property"), such description including, for each parcel of Owned Real Property,
the address thereof, the approximate acreage thereof, and the use
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thereof. The Company or its Subsidiaries has good and marketable title to the
Owned Real Property, free and clear of all Liens, other than Permitted Liens (as
defined below). For purposes of this Agreement, "Permitted Liens" means (i)
mechanics', carriers', workers', repairers', material-men's, warehousemen's,
landlords' and other similar Liens arising in the ordinary course of the
Company's business, (ii) Liens arising or resulting from any action taken by or
on behalf of Purchaser, (iii) Liens for current Taxes not yet due or payable or
for supplemental Taxes for which the Company has not received a written notice
of assessment, and (iv) any other covenants, conditions, restrictions,
reservations, rights, non-monetary Liens, easements, encumbrances, encroachments
and other matters affecting title which could not, individually or in the
aggregate, be reasonably expected to result in a Company Material Adverse
Effect.
(b) The Real Property constitutes, in the aggregate, all of the
real property used to conduct the Business in the manner conducted subsequent to
October 31, 1998. The term "Real Property" means the Owned Real Property, any
property subject to a Real Property Lease (as defined in Section 3.21(a)(viii)),
and any property subject to a lease or agreement of that would have been
included within the meaning of the term Real Property Lease if not for the
minimum dollar amounts set forth in Section 3.21(a)(viii).
(c) Except as set forth in Section 3.20(c) of the Company
Disclosure Schedule, each of the Real Properties (i) is in satisfactory
operating condition and repair and is structurally sound, with no material
alterations or repairs being required thereto under applicable law or insurance
company requirements; (ii) consists of sufficient land, parking areas, driveways
and other improvements and lawful means of access and utility service to permit
the use thereof in the manner and for the material purposes to which it is
presently devoted; and (iii) is otherwise suitable and adequate in all material
respects for its current use, operation and occupancy.
(d) There are no pending or, to the Company's knowledge,
threatened proceedings regarding the amount of the Taxes on, or the assessed
valuation of, any Real Property, or relating to eminent domain or the
condemnation of any portion of the Real Property, or impact fees, special
assessments or similar matters with respect thereto.
Section 3.21. Material Contracts.
(a) Except for contracts filed as exhibits to the Company's
Annual Report on Form 10-K for the year ended November 1, 1998 (the "Company
1998 10-K"), Section 3.21(a) of the Company Disclosure Schedule lists each of
the following contracts and agreements (including, without limitation, oral
agreements) of the Company and each of its Subsidiaries (such contracts and
agreements, together with all contracts and agreements disclosed in Section
3.17(b) of the Company Disclosure Schedule or filed as exhibits to the Company
1998 10-K, being "Material Contracts"):
(i) each contract, agreement and other arrangement for the
purchase of inventory, spare parts, other materials or personal property
with any supplier or for the furnishing of services to the Company and
each of its Subsidiaries or otherwise related to the businesses of the
Company and each of its Subsidiaries under the terms of which the Company
or any of its Subsidiaries: (A) are likely to pay or otherwise give
consideration
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of more than $1,000,000 in the aggregate during the calendar year ended
December 31, 1999 or (B) are likely to pay or otherwise give
consideration of more than $2,000,000 in the aggregate over the
remaining term of such contract;
(ii) each contract, agreement and other arrangement for
the sale of inventory or other property or for the furnishing of services
by the Company or any of its Subsidiaries which: (A) is likely to involve
consideration of more than $1,000,000 in the aggregate during the
calendar year ended December 31, 1999 or (B) is likely to involve
consideration of more than $2,000,000 in the aggregate over the remaining
term of the contract;
(iii) all material broker, distributor, dealer,
manufacturer's representative, franchise, agency, sales promotion, market
research, marketing, consulting and advertising contracts and agreements
to which the Company or any of its Subsidiaries is a party;
(iv) all management contracts and contracts with
independent contractors or consultants (or similar arrangements) to which
the Company or any of its Subsidiaries is a party and which are not
cancelable without penalty or further payment in excess of $200,000 and
without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness
of the Company or any of its Subsidiaries or to any direct or indirect
guaranty by the Company or any of its Subsidiaries of Indebtedness of
any other Person, other than any such contracts or agreements as do not
involve more than $50,000 individually or $250,000 in the aggregate;
(vi) all contracts, agreements, commitments, written
understandings or other arrangements with any Governmental Entity, to
which the Company or any of its Subsidiaries is a party (other than
arrangements entered into in the ordinary course of business with
hospitals or other medical facilities owned or operated by any such
Governmental Entity);
(vii) all contracts and agreements containing any
provision or covenant limiting or purporting to limit the ability of the
Company or any of its Subsidiaries to (i) sell any products or services
of or to any other Person, (ii) engage in any line of business or (iii)
compete with or to obtain products or services from any Person or
limiting the ability of any Person to provide products or services to the
Company or any of its Subsidiaries, in each case in any geographic area
or during any period of time;
(viii) all contracts and agreements (each, a "Real
Property Lease") relating to the lease of real property used by the
Company or its Subsidiaries requiring annual payments in excess of
$200,000 or aggregate payments over the remaining term of the contract or
agreement in excess of $1,000,000; and
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(ix) all other contracts and agreements, whether or not
made in the ordinary course of business, which are material to the
Company and its Subsidiaries, taken as a whole, or the conduct of the
business of the Company and its Subsidiaries, taken as a whole, or the
absence of which would, in the aggregate, have a Company Material Adverse
Effect.
(b) Except as would not have a Company Material Adverse Effect,
each Material Contract: (i) is legal, valid and binding on the Company or its
respective Subsidiary party thereto and, to the knowledge of the Company, the
other parties thereto, and is in full force and effect and (ii) upon
consummation of the Transactions, except to the extent that any consents set
forth in Section 3.6 of the Company Disclosure Schedule are not obtained, shall
continue in full force and effect without penalty or other adverse consequence.
Except as would not have a Company Material Adverse Effect, neither the Company
nor any of its Subsidiaries is in breach of, or default under, any Material
Contract. As of the date hereof, neither the Company nor any Subsidiary has
received any written or, to the Company's knowledge, oral notice of a material
default (which has not been cured), offset or counterclaim under any Material
Contract, or any other written or, to the Company's knowledge, oral
communication calling upon it to comply with any provision of any Contract or
asserting noncompliance therewith or asserting the Company or any subsidiary has
waived or altered its rights thereunder, nor has the Company or any Subsidiary
received any written or, to the Company's knowledge, oral notice that any party
to any Material Contract intends or is threatening to terminate or fail to
exercise any renewal or extension of any Material Contract.
(c) No other party to any Material Contract is, to the knowledge
of the Company, in material breach thereof or default thereunder.
(d) There is no contract, agreement or other arrangement granting
any Person any preferential right to purchase any of the properties or assets of
the Company or any of its Subsidiaries, other than inventory in the ordinary
course of business consistent with past practice.
Section 3.22. Product Liability.
(a) Except as set forth in Section 3.22 of the Company Disclosure
Schedule, (i) there is no notice, demand, claim, action, suit inquiry, hearing,
proceeding, notice of violation or investigation of a civil, criminal or
administrative nature by or before any Governmental Entity pending against or
involving the Company or any of its Subsidiaries or concerning any product
relating to the businesses of the Company and its Subsidiaries which is pending
or, to the Company's knowledge, threatened, relating to or resulting from an
alleged defect in design, manufacture, materials or workmanship of any product
designed, manufactured, distributed, or sold by or on behalf of the Company or
any of its Subsidiaries (past or present), or any alleged failure to warn, or
from any alleged breach of express or implied warranties or representations,
(ii) to the Company's knowledge, during the past five years, there has not been
any Occurrence and (iii) other than any product not designed or manufactured by
the Company or any of its Subsidiaries the Recall of or subsequent corrective
action for which would not have a Company Material Adverse Effect, during the
past five years, there has not been any product recall or post-
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sale warning (collectively, "Recalls") by the Company or any of its Subsidiaries
concerning any products relating to the businesses of the Company and its
Subsidiaries which were designed, manufactured, marketed, distributed, or sold
by the businesses of the Company and its Subsidiaries (past or present), or to
the of the Company's knowledge, any investigation or any action that would
require the consideration by the Company's corrective action committee, made by
any Person or entity concerning whether to undertake or not to undertake any
Recalls. The term "Occurrence" shall mean any accident, happening or event which
is caused or allegedly caused by any alleged hazard or alleged defect in
manufacture, design, materials or workmanship including, without limitation, any
alleged failure to warn or any breach of express or implied warranties or
representations with respect to, or any accident, happening or event otherwise
involving, a product (including any parts or components) relating to the
businesses of the Company and its Subsidiaries designed, manufactured,
distributed, or sold by or on behalf of the Company and its Subsidiaries which
results or is alleged to have resulted in injury or death to any Person or
damage to or destruction of property, or other consequential damages, at any
time.
(b) Section 3.22(b) of the Company Disclosure Schedule contains a
true and complete list of (i) all products designed, manufactured, marketed,
distributed or sold by the Company or any of its Subsidiaries that have been
recalled or withdrawn (whether voluntarily or otherwise) at any time during the
past four years, other than any product not designed or manufactured by the
Company or any of its Subsidiaries the Recall or withdrawal of or subsequent
corrective action for which would not have a Company Material Adverse Effect,
and (ii) all proceedings known to the Company (whether completed or pending) at
any time during the past three years seeking the recall, withdrawal, suspension
or seizure of any product sold by the Company or any of its Subsidiaries.
Section 3.23. Suppliers and Customers. Since November 1, 1998, except as
set forth in Section 3.23 of the Company Disclosure Schedule, no material
licensor, vendor, supplier, licensee or customer of the Company or any of its
Subsidiaries has canceled or otherwise modified (in a manner materially adverse
to the Company) its relationship with the Company or its Subsidiaries and, to
the Company's knowledge, (i) no such Person has notified the Company of its
intention to do so, and (ii) the Company does not expect that the consummation
of the Transactions will adversely affect any of such relationships.
Section 3.24. Title and Condition of Properties. The Company and its
subsidiaries own good and sufficient title, free and clear of all Liens, to all
of the personal property and assets shown on the Company Balance Sheet or
acquired after November 1, 1998, except for (A) assets which have been disposed
of to nonaffiliated third parties since November 1, 1998 in the ordinary course
of business, (B) Liens reflected in the Company Balance Sheet, (C) Liens or
imperfections of title which are not, individually or in the aggregate, material
in character, amount or extent and which do not materially detract from the
value or materially interfere with the present or presently contemplated use of
the assets subject thereto or affected thereby, and (D) Permitted Liens. All of
the machinery, equipment and other tangible personal property and assets owned
or used by the Company or its Subsidiaries are in good condition and repair,
except for ordinary wear and tear not caused by neglect, and are usable in the
ordinary course of business, except for
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any matter otherwise covered by this sentence which does not have, individually
or in the aggregate, a Company Material Adverse Effect.
Section 3.25. Information in Financing Documents. None of the information
supplied or to be supplied by the Company for the purpose of inclusion or
incorporation by reference in any syndication and other materials to be
delivered to potential financing sources in connection with the transactions
contemplated by this Agreement (the "Financing Documents") will, at the date
delivered, contain any untrue statement of material fact contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 3.26. Year 2000 Compliance. The Company has adopted and
implemented a commercially reasonable plan to provide (x) that the change of the
year from 1999 to the year 2000 will not materially and adversely affect the
information and business systems of the Company or its Subsidiaries and (y) that
the impacts of such change on the vendors and customers of the Company and its
Subsidiaries will not have a the Company Material Adverse Effect. In the
Company's reasonable best estimate, no expenditures materially in excess of
currently budgeted items previously disclosed to Purchaser will be required in
order to cause the information and business systems of the Company and its
Subsidiaries to operate properly following the change of the year 1999 to the
year 2000. The Company reasonably expects that it will resolve any issues
related to such change of the year in accordance with the timetable set forth in
such plan (and in any event on a timely basis in order to be resolved before the
September 30, 1999). Between the date of this Agreement and the Effective Time,
the Company shall continue to use reasonable best efforts to implement such
plan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
Section 4.1. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has all requisite corporate or similar power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be in good standing or to have such corporate or
similar power and authority would not in the aggregate have a Purchaser Material
Adverse Effect. Purchaser was formed on June 9, 1999 solely for the purpose of
engaging in the Transactions contemplated hereby. The term "Purchaser Material
Adverse Effect" means any event, change, circumstance or effect that is or could
reasonably be expected to be materially adverse to the ability of Purchaser to
consummate the Transactions.
Section 4.2. Authority Relative to this Agreement. Purchaser has all
necessary power and authority to execute and deliver this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement and
the consummation of the Transactions have been
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duly and validly authorized by the board of directors and stockholders of
Purchaser, and no other corporate or similar proceedings on the part of
Purchaser are necessary to authorize this Agreement or to consummate the
Transactions. This Agreement has been duly and validly executed and delivered by
Purchaser and, assuming due and valid authorization, execution and delivery by
the Company, constitutes a valid, legal and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms.
Section 4.3. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, and the filing and recordation of an
articles of merger as required by the TBCA, no filing with or notice to, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Purchaser of this Agreement or the
consummation by Purchaser of the Transactions, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Purchaser Material Adverse Effect.
Neither the execution, delivery and performance of this Agreement by Purchaser
nor the consummation by Purchaser of the Transactions will (i) conflict with or
result in any breach of any provision of the Articles of Incorporation or bylaws
of Purchaser or any of Purchaser's Subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Purchaser or any of Purchaser's Subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to Purchaser or any of Purchaser's
Subsidiaries or any of their respective properties or assets, except in the case
of (ii) or (iii) for violations, breaches or defaults which would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
Section 4.4. Proxy Statement; Offer Documents. None of the information
supplied by Purchaser in writing specifically for inclusion in the Proxy
Statement or Form S-4 (if one is filed) or any of the Debt Offer Documents will,
at the respective times filed with the SEC and/or are first published or sent or
given to holders of Shares and/or Senior Notes, and in the case of the Proxy
Statement, at the time that it or any amendment or supplement thereto is mailed
to the Company's shareholders and, in the case of the Form S-4 (if one is
filed), at the time it becomes effective, at the time of the Shareholders'
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 4.5. Financing.
(a) At the Effective Time and subject to satisfaction of the
conditions in Article VI, (i) Purchaser will have cash funds from the issuance
of equity of not less than $107,000,000, and (ii) the Circon Buyer will have
cash funds from the issuance of equity of not
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less than $75,000,000 (in each case pursuant to the equity commitment letters
attached hereto as Exhibits A-1 and A-2, respectively).
(b) Attached hereto as Exhibits B and C, respectively, are (i) a
commitment letter (the "Holdco Commitment Letter") from Fox Paine Capital Fund,
L.P. with respect to its obligation to purchase $50,000,000 of the Company's
Senior Notes and (ii) commitment letters and related documentation (the "OpCo
Financing Commitment Letters" and together with the Holdco Commitment Letter,
the "Commitment Letter") from lenders relating to such debt financings as is
necessary, together with the funds referred to in paragraph (a) and subparagraph
(b)(i) above, to consummate the Debt Offer, the Merger and the other
Transactions (the "Debt Funding").
(c) Purchaser represents that the terms and conditions of the
Commitment Letters are acceptable in form and substance to Purchaser.
Section 4.6. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission payable by the Company in
connection with the Transactions based upon arrangements made by and on behalf
of Purchaser other than any payable upon consummation of the Debt Offer and the
Merger.
ARTICLE V
COVENANTS
Section 5.1. Shareholders Meeting. The Company, acting through the Board,
will, as promptly as practicable following the date of this Agreement and in
consultation with Purchaser, (i) duly call, give notice of, convene and hold a
meeting of its shareholders for the purpose of considering and approving this
Agreement and the transactions contemplated hereby (the "Shareholders Meeting")
and (ii) (A) include in the Proxy Statement the unanimous recommendation of the
Board that the shareholders of the Company vote in favor of the approval of this
Agreement and the other Transactions contemplated hereby and the written opinion
of the Financial Advisor that the consideration to be received by the
shareholders of the Company (other than Purchaser, its stockholders and the
Specified Shareholders) pursuant to the Merger is fair to such shareholders and
(B) use its best efforts to obtain the necessary approval of this Agreement and
the transactions contemplated hereby by its shareholders.
Section 5.2. Proxy Statement. Promptly following the date of this
Agreement, the Company shall prepare the Proxy Statement, and, if necessary, the
Company shall prepare and file with the SEC the Form S-4, in which the Proxy
Statement would be included. If the Form S-4 is filed, the Company shall use its
best efforts as promptly as practicable to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. The
Company shall use its best efforts to cause the Proxy Statement to be mailed to
the Company's shareholders as promptly as practicable or, if the Form S-4 is
filed, as promptly as practicable after the Form S-4 is declared effective under
the Securities Act. If the S-4 is filed, the information provided by the Company
for use in the Form S-4, and to be supplied by Purchaser in writ-
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ing specifically for use in the Form S-4, shall, at the time the Form S-4
becomes effective and on the date of the Shareholders Meeting referred to above,
be true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information not misleading, and the Company and Purchaser each agree to correct
any information provided by it for use in the Proxy Statement or the Form S-4
which shall have become false or misleading. Purchaser and the Company will
cooperate with each other in the preparation of the Proxy Statement and the Form
S-4 (if one is filed); without limiting the generality of the foregoing, the
Company will immediately notify Purchaser of the receipt of any comments from
the SEC and any request by the SEC for any amendment to the Proxy Statement or
the Form S-4 or for additional information. All filings with the SEC, including
the Proxy Statement and the Form S-4 (if filed) and any amendment thereto, and
all mailings to the Company's shareholders in connection with the Merger,
including the Proxy Statement, shall be subject to the prior review, comment and
approval of Purchaser (which approval by Purchaser shall not be unreasonably
withheld). Purchaser will furnish to the Company the information relating to it
required by the Exchange Act and the rules and regulations promulgated
thereunder to be set forth in the Proxy Statement. The Company agrees to use its
best efforts, after consultation with the other parties hereto, to respond
promptly to any comments made by the SEC with respect to the Form S-4 (if filed)
or Proxy Statement and any preliminary version thereof filed by it and cause
such Proxy Statement to be mailed to the Company's shareholders at the earliest
practicable time.
Section 5.3. Conduct of Business of the Company. Except as expressly
contemplated by this Agreement, the Board will not permit the Company or any of
its Subsidiaries to conduct its operations otherwise than in the ordinary course
of business consistent with past practice. Without limiting the generality of
the foregoing, and except as otherwise expressly contemplated by this Agreement,
the Board will not, without the prior written consent of Purchaser, permit the
Company or any of its Subsidiaries to:
(a) amend or propose to amend its articles of incorporation or
bylaws;
(b) authorize for issuance, issue, sell, deliver, or agree or
commit to issue, sell or deliver, dispose of, encumber or pledge (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
securities, except as required by agreements with the Company's employees under
the Company Stock Plans as in effect as of the date hereof or pursuant to the
Rights Agreement, or amend any of the terms of any such securities or agreements
outstanding as of the date hereof, except as specifically contemplated by this
Agreement;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeem or otherwise acquire any of its securities or any securities of its
Subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or issue
any debt securities except for borrowings under the Credit Agreement in the
ordinary course of business and
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in amounts not material to the Company and its Subsidiaries taken as a whole;
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person; (iii) make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned Subsidiaries of the
Company or customary loans or advances to employees in the ordinary course of
business consistent with past practice and in amounts not material to the maker
of such loan or advance) or make any change in its existing borrowing or lending
arrangements for or on behalf of any such Person, whether pursuant to an
employee benefit plan or otherwise; (iv) pledge or otherwise encumber shares of
capital stock of the Company or any of its Subsidiaries; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or create or suffer
to exist any material Lien thereupon;
(e) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or any
of its Subsidiaries;
(f) (i) except as may be required by law or as contemplated by
this Agreement, enter into, adopt or pay, agree to pay, grant, issue, accelerate
or accrue salary or other payments or benefits pursuant to, or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance, welfare, insurance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any director, officer or employee in any manner, or (ii) (except for
normal increases in the ordinary course of business consistent with past
practice for employees (other than officers and directors) that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, and as required under existing agreements or in the
ordinary course of business consistent with past practice) increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan and arrangement as in effect as of
the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units);
(g) except as contemplated by Section 5.6(d), acquire, sell,
transfer, lease, encumber or dispose of any assets outside the ordinary course
of business or any assets which in the aggregate are material to the Company and
its Subsidiaries taken as a whole, or enter into any commitment or transaction
outside the ordinary course of business consistent with past practice which
would be material to the Company and its Subsidiaries taken as a whole;
(h) except as may be required as a result of a change in law or
in GAAP, change any of the accounting principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business;
(j) (A) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity in-
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terest therein; (B) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice which would be
material to the Company and its Subsidiaries taken as a whole; (C) authorize any
new capital expenditure or expenditures which, individually, is in excess of
$500,000 or, in the aggregate, are in excess of $5,000,000; or (D) enter into or
amend any contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited hereunder;
(k) make any Tax election or settle or compromise any Tax
liability of the Company or any of its Subsidiaries, except if such action is
taken in the ordinary course of business consistent with past practice, and, in
any event, the Company shall consult with Purchaser before filing or causing to
be filed any Tax Return of the Company or any of its Subsidiaries and before
executing or causing to be executed any agreement or waiver extending the period
for assessment or collection of any Taxes of the Company or any of its
Subsidiaries;
(l) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice;
(m) permit any insurance policy naming it as a beneficiary or a
loss payable payee to be canceled or terminated without notice to Purchaser
except in the ordinary course of business and consistent with past practice
unless the Company shall have obtained a comparable replacement policy;
(n) except in the ordinary course of business consistent with
past practice, terminate, amend or modify, or waive any material provision of,
any of the Material Contracts;
(o) settle or compromise any pending or threatened material suit,
action or claim;
(p) enter into any agreement containing any provision or covenant
limiting the ability of the Company or any of its Subsidiaries to (i) sell any
products or services of or to any other Person, (ii) engage in any line of
business or (iii) compete with or to obtain products or services from any Person
or limiting the ability of any Person to provide products or services to the
Company or any of its Subsidiaries, in each case in any geographic area or
during any period of time; or
(q) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.3(a) through 5.3(p) or any action which would
make any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made or would result in any of
the conditions set forth in Article VI not being satisfied.
Section 5.4. No Solicitation.
(a) The Company agrees that, during the term of this Agreement,
it shall not, and shall not authorize or permit any of its Subsidiaries or any
of its or its Subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate, encourage
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or facilitate, or furnish or disclose non-public information in furtherance of,
any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
the Company, or acquisition of any capital stock (other than upon exercise of
Stock Options which are outstanding as of the date hereof) or any material
portion of the assets (except for acquisitions of assets in the ordinary course
of business consistent with past practice) of the Company and its Subsidiaries,
or any combination of the foregoing (a "Competing Transaction"), or negotiate,
explore or otherwise engage in discussions with any Person (other than
Purchaser, persons controlling Purchaser, or their respective directors,
officers, employees, agents and representatives) with respect to any Competing
Transaction or enter into any agreement, arrangement or understanding requiring
or causing it to abandon, terminate or fail to consummate the Debt Offer, the
Merger or any of the other Transactions contemplated by this Agreement; provided
that, prior to the Effective Time, if the Company receives a written proposal
for a Competing Transaction (x) that was not initiated, solicited or encouraged
after the date of this Agreement by the Company, its Subsidiaries or any of its
or their directors, officers, employees, agents or representatives and does not
violate or breach any confidentiality, exclusivity or standstill agreement
executed by the Company prior to the date of this Agreement (provided that the
Company may amend any standstill or similar provision of any such agreement
solely to provide or make clear that such third party may deliver to the Board a
written proposal for a Competing Transaction) and (y) that the Board or a
special committee thereof determines in good faith by majority vote could
reasonably be expected to result in a third party making a proposal for a
Superior Transaction (as defined in Section 5.4(b)), and subject to compliance
with the last two sentences of this Section 5.4(a), the Company may (A) furnish
information with respect to the Company to the Person making such proposal
pursuant to a customary confidentiality agreement the terms of which shall be no
less favorable to the Company than the confidentiality agreement entered into by
the Company on or after January 1, 1999 that is most favorable to the Company,
and (B) participate in discussions or negotiations with such Person regarding
such proposal. The activities referred to in clauses (A) and (B) of the previous
sentence, if undertaken in strict compliance with all of the terms and
conditions of the previous sentence, are referred to herein as "Permitted
Discussions". In no event shall the Company furnish (or authorize any of its
Subsidiaries, or any of its or its Subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to furnish) to any competitor
or potential competitor of the Company or its Subsidiaries information about the
Company or any of its Subsidiaries unless the Board or a special committee
thereof determines in its reasonable judgment, after consultation with
management, that disclosure of such information would not be materially
competitively disadvantageous to the Company and its Subsidiaries, including,
without limitation, pricing, volume, sales and marketing information ("Sensitive
Information"); provided that the Company may provide Sensitive Information to a
competitor or potential competitor of the Company if confirmatory review of
Sensitive Information is the only remaining condition to the Company and such
competitor or potential competitor entering into an Acquisition Agreement (as
defined in Section 5.4(b)) with respect to a Superior Transaction that has been
approved by the Board and approved (subject only to such confirmatory review) by
the board of directors (or similar governing body) of such competitor or
potential competitor. The Company shall, and shall cause its Subsidiaries and
their respective directors, officers, employees, agents and representatives
immediately to cease all existing activities, discussions and negotiations with
any parties conducted heretofore with respect to any of the foregoing. Neither
the Board nor any
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committee thereof shall (A) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Purchaser, the Company Board Recommendation,
or (B) approve or recommend, or propose publicly to approve or recommend, any
Competing Transaction. Notwithstanding the foregoing, in the event that prior to
the Effective Time the Board receives the advice of its outside legal counsel
that failure to do so will result in breach of its fiduciary duties to the
shareholders of the Company under applicable law, the Board may (subject to this
and the following sentences of this Section 5.4(a)) withdraw or modify the
Company Board Recommendation, provided that it gives Purchaser five days' prior
written notice of its intention to do so. Any such withdrawal or modification of
the Company Board Recommendation shall not change the approval of the Board for
purposes of causing any state takeover statute or other state law to be
inapplicable to the transactions contemplated hereby, or change the obligation
of the Company to present the Merger for approval and adoption by shareholders
of the Company or to hold the Debt Offer open. From and after the execution of
this Agreement, the Company shall immediately advise Purchaser in writing of the
receipt, directly or indirectly, of any inquiries, discussions, negotiations, or
proposals relating to a Competing Transaction (including the specific terms
thereof and the identity of the other party or parties involved) and promptly
furnish to Purchaser a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto. The Company
shall keep Purchaser fully apprised of the status of any proposal relating to a
Competing Transaction on a current basis, including, without limitation,
promptly providing to Purchaser any Sensitive Information provided to any
competitor or potential competitor pursuant to this paragraph (a).
(b) If prior to the Effective Time the Board shall determine in
good faith, after consultation with its financial and legal advisors, that any
bona fide written proposal from a third party for a Competing Transaction
received after the date hereof that was not initiated, solicited or encouraged
by the Company or any of its Subsidiaries or their respective directors,
officers, employees, agents or representatives in violation of this Agreement
and that does not violate or breach any confidentiality, exclusivity or
standstill agreement executed by the Company prior to the date of this Agreement
(as any such agreement may be amended in accordance with Section 5.4(a)) is more
favorable to the shareholders of the Company from a financial point of view than
the transactions contemplated by this Agreement (including any adjustment to the
terms and conditions of such transaction proposed in writing by Purchaser in
response to such Competing Transaction), is likely to and capable of being
consummated, and is in the best interest of the shareholders of the Company, and
the Company has received (x) advice of its outside legal counsel that failure to
enter into such a Competing Transaction will constitute a breach of the Board of
Directors' fiduciary duties under applicable law and (y) a written opinion (a
copy of which has been delivered to Purchaser) from the Financial Advisor (or
any other nationally recognized investment banking firm), that the Competing
Transaction is more favorable from a financial point of view to the shareholders
of the Company (other than Purchaser and the Specified Shareholders) than the
transactions contemplated by this Agreement (including any adjustment to the
terms and conditions of such transaction proposed in writing by Purchaser) (a
"Superior Transaction"), the Company may terminate this Agreement and enter into
a letter of intent, agreement-in-principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") with respect to such
Superior Transaction provided, that, prior to any such termination, (i) the
Company has provided Purchaser written notice that it intends to terminate this
Agreement pur-
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suant to this Section 5.4(b), identifying the Superior Transaction then
determined to be more favorable and the parties thereto and delivering a copy of
the Acquisition Agreement for such Competing Transaction in the form to be
entered into, and (ii) at least five full business days after the Company has
provided the notice referred to in clause (i) above (provided that the opinions
referred to in clauses (x) and (y) above shall continue in effect without
revision or modification), the Company delivers to Purchaser (A) a written
notice of termination of this Agreement pursuant to this Section 5.4(b), and (B)
a check or wire transfer of same day funds in an amount equal to the Purchaser
Expenses (as the same may have been estimated by Purchaser in good faith prior
to the date of such delivery (subject to an adjustment payment between the
parties upon Purchaser's definitive determination of such expenses)) plus the
amount of the Termination Fee as provided in Section 7.2, and (C) Purchaser
receives a written acknowledgment from the Company and from the other party to a
Superior Transaction that the Company and such other party have irrevocably
waived any right to contest such payments.
Section 5.5. Access to Information.
(a) Between the date hereof and the Effective Time, the Company
will give Purchaser and its authorized representatives and Persons providing or
committed or proposing to provide Purchaser or the Company with financing for
the Transactions and their representatives, reasonable access to all employees,
plants, offices, warehouses and other facilities and properties and to all books
and records of the Company and its Subsidiaries, will permit Purchaser and its
authorized representatives to make such inspections (including any physical
inspections or soil or groundwater investigations), at Purchaser's expense, as
they may reasonably request and will cause the Company's officers and employees
and those of its Subsidiaries to furnish Purchaser with such financial and
operating data and other information with respect to the business and properties
of the Company and any of its Subsidiaries as Purchaser may from time to time
reasonably request.
(b) Prior to the Effective Time, the Company and its accountants,
counsel, agents and other representatives shall cooperate with Purchaser by
providing information about the Company which is necessary for Purchaser and its
accountants, agents, counsel and other representatives to participate in and to
assist the Company in preparing the Financing Documents and such other documents
and other reasonable requests with respect to such documents. Notwithstanding
anything in this Agreement to the contrary, to the extent reasonably appropriate
to assist the success of the financing for the Transactions, Purchaser may
disclose, or cause its representatives to disclose, and at the request of
Purchaser, the Company shall disclose information concerning the Company and its
Subsidiaries and their respective businesses, assets and properties, and the
Transactions in the Financing Documents and to prospective financing sources in
connection with the Transactions.
(c) Except as otherwise agreed to by the Company, until the
earlier of the Effective Time and the second anniversary of the date hereof, and
notwithstanding termination of this Agreement, Purchaser will keep, and will
instruct its officers, employees, independent accountants, counsel, financial
advisers and other representatives and affiliates (x) to keep, all Confidential
Information (as defined below) confidential, (y) not to disclose any
Confidential
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Information to any Person other than the directors, officers, employees,
affiliates or agents of Purchaser and of Persons controlling Purchaser, and then
only on a confidential basis, and (z) to use Confidential Information solely in
connection with (A) the evaluation of, preparation for, and consummation of the
Transactions and (B) seeking or obtaining financing for the Transactions;
provided, however, that Purchaser may disclose Confidential Information (i) as
required by law, rule, regulation or judicial process, including as required to
be disclosed in connection with the Merger, the Debt Funding or any other
Transaction, (ii) to its financing sources and to Purchaser's and such
financing sources' attorneys, accountants, and financial advisors or (iii) as
requested or required by any Governmental Entity. For purposes of this
Agreement, "Confidential Information" shall include all confidential information
about the Company which has been furnished by the Company to Purchaser or the
directors, officers, employees, affiliates or agents of Purchaser or Persons
controlling Purchaser pursuant to or in connection with the negotiation,
execution and consummation of this Agreement; provided, however, that
Confidential Information does not include information which (x) is or becomes
generally available to the public other than as a result of a disclosure by
Purchaser not permitted by this Agreement, (y) was available to Purchaser on a
non-confidential basis prior to its disclosure to Purchaser by the Company or
(z) becomes available to Purchaser on a non-confidential basis from a Person
(other than the Company) who, to the knowledge of Purchaser, is not otherwise
bound by a confidentiality agreement with the Company or is not otherwise
prohibited from transmitting the relevant information to Purchaser. The
provisions of this paragraph (c) are referred to herein as the "Confidentiality
Provisions".
Section 5.6. Additional Agreements, Reasonable Efforts.
(a) Prior to the Effective Time, upon the terms and subject to
the conditions of this Agreement, each of Purchaser and the Company, agrees to
use its reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under any
applicable laws, rules or regulations to consummate and make effective the
Transactions as promptly as practicable including, but not limited to, (i) the
preparation and filing of all forms, registrations and notices required to be
filed to consummate the Transactions and the taking of such actions as are
necessary to obtain any requisite approvals, consents, orders, exemptions or
waivers by any third party or Governmental Entity, (ii) the preparation of any
Financing Documents reasonably requested by Purchaser and (iii) the satisfaction
of the other parties' conditions to the consummation of the Debt Offer or the
Closing. In addition, no party hereto shall take any action after the date
hereof that would reasonably be expected to materially delay the obtaining of,
or result in not obtaining, any permission, approval or consent from any
Governmental Entity necessary to be obtained prior to the consummation of the
Closing. The Company agrees to use its reasonable efforts to assist Purchaser in
connection with structuring or obtaining any financing for Purchaser and/or the
Company and its Subsidiaries in connection with consummation of the
Transactions, and Purchaser shall use its reasonable efforts to obtain such
financing for Purchaser and/or the Company and its Subsidiaries. At the request
of Purchaser from time to time, the Company agrees to use its reasonable efforts
to cause members of its senior management to participate in any "roadshow" or
other presentations to potential investors in connection with the obtaining of
any financing for Purchaser and/or the Company and its Subsidiaries in
connection with the Transactions.
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(b) Prior to the Effective Time, each party shall promptly
consult with the other parties hereto with respect to, provide any necessary
information with respect to and provide the other (or its counsel) copies of,
all filings made by such party with any Governmental Entity or any other
information supplied by such party to a Governmental Entity in connection with
this Agreement and the Transactions. Each party hereto shall promptly inform the
other of any communication from any Governmental Entity regarding any of the
Transactions. If any party hereto or affiliate thereof receives a request for
additional information or documentary material from any such Governmental Entity
with respect to the Transactions, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. To the extent that transfers of Company Permits are required as a
result of execution of this Agreement or consummation of the Transactions, the
Company and Purchaser shall use all reasonable efforts to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require Purchaser or any of its affiliates to (i) enter into
any agreement with any Governmental Entity or to consent to any order, decree or
judgment requiring Purchaser to hold separate or divest, or to restrict the
dominion or control of Purchaser or any of its affiliates over, any of the
assets, properties of businesses of Purchaser, its affiliates or the Company or
any of its Subsidiaries, in each case as in existence on the date hereof, or
(ii) defend against any litigation brought by any Governmental Entity seeking to
prevent the consummation of the Transactions.
(d) The parties hereto agree that substantially concurrent with
the Closing, unless otherwise requested by Purchaser, the Company shall, or
shall cause its appropriate Subsidiary to, sell and convey all of the
outstanding capital stock of Circon to an affiliate of Purchaser (the "Circon
Buyer") on the terms previously disclosed to the Company by Purchaser and as
contemplated by the Financing Documents and the Management Rollover Plan (as
defined in Section 6.1(b)) or on such other terms as Purchaser shall reasonably
request, and the parties hereto agree to execute any agreement, amendment or
other documentation necessary or desirable to accomplish such structure
modification (including modifications to any financing arrangements)
(collectively, the "Circon Sale"); provided that the Company shall not be
required to take any action or enter into any agreement or amendment that would
have the effect of reducing the Per Share Amount or otherwise reducing the
consideration to be received by holders of Company Common Stock (other than
Purchaser or the Specified Shareholders).
(e) Provided that any such action does not have a Purchaser
Material Adverse Effect or materially delay the Closing, then any other
provision of this Agreement to the contrary notwithstanding, Purchaser may amend
or revise the Commitment Letters, amend, increase, decrease or replace any
component of the Debt Funding or other financings referred to in Section 4.5, or
enter into new, replacement or additional financing arrangements, through itself
or any affiliate of itself or of persons controlling Purchaser, in connection
with the Debt Funding or other financings referred to in Section 4.5 or
otherwise to facilitate the transactions contemplated by this Agreement.
Section 5.7. Public Announcements. Purchaser and the Company, as the case
may be, will consult with each other before issuing any press release or
otherwise making any public
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statements with respect to the Transactions, including, without limitation, the
Debt Offer and the Merger, and shall not issue any such press release or make
any such public statement prior to such consultation (and shall give reasonable
consideration given to the comments of the other), in each case except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, as determined by Purchaser or the
Company, as the case may be.
Section 5.8. Indemnification.
(a) Purchaser agrees that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries as provided in their respective
charters or bylaws or otherwise in effect as of the date hereof with respect to
matters occurring prior to the consummation of the last to occur of any of the
Transactions shall survive such consummation and shall continue in full force
and effect.
(b) Purchaser shall cause the Company or the Surviving
Corporation, as the case may be, to maintain in effect for not less than six
years from the Effective Time, the policies of the directors' and officers'
liability and fiduciary insurance most recently maintained by the Company with
respect to matters occurring prior to the Effective Time to the extent
available; provided that (i) the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the beneficiaries thereof so long as such substitution
does not result in gaps or lapses in coverage, and (ii) such policies may in the
sole discretion of the Company after the Effective Time be one or more "tail"
policies for all or any portion of the full six year period; and, provided,
further, that in no event shall the Company or the Surviving Corporation, as the
case may be, be required to expend more than an amount per year equal to 150% of
the current annual premiums paid by the Company (the "Premium Amount") to
maintain or procure insurance coverage pursuant hereto and further provided that
if the Surviving Corporation is unable to obtain the insurance called for by
this Section 5.8(b), the Surviving Corporation will obtain as much comparable
insurance as is available for the Premium Amount per year.
Section 5.9. Recapitalization. The Company shall cooperate with any
reasonable requests of Purchaser or the SEC related to the reporting of the
Transactions as a recapitalization for financial reporting purposes including,
without limitation, to assist Purchaser and its affiliates with any presentation
to the SEC with regard to such reporting and to include appropriate disclo-
sure with regard to such reporting in all filings with the SEC and mailing to
the shareholders of the Company made in connection with the Debt Offer or the
Merger. In furtherance of the foregoing, the Company shall provide to Purchaser
for the prior review of Purchasers advisors any description of Transactions
which is meant to be disseminated.
Section 5.10. Financial Statements. The Company shall promptly prepare at
the end of each month and promptly deliver to Purchaser upon completion the
balance sheet, income statement and statement of cash flows prepared in
accordance with GAAP of the Company and Circon for each month ended between the
date of this Agreement and the Effective Time. The
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Company shall promptly prepare all reasonably requested financial statements
required to be included in the Financing Documents.
Section 5.11. Certain Agreements with Management. (a) Neither Purchaser
nor any of its affiliates shall enter into any agreement, arrangement or
understanding that would have the effect (i) of prohibiting any Specified
Shareholder who is an officer of the Company from participating in Permitted
Discussions with any third party at any time during which the Company is
permitted to engage (and is so engaging) in such discussions with such third
party pursuant to Section 5.4(a), or (ii) of prohibiting or preventing any
Specified Shareholder, at any time after any termination of this Agreement in
accordance with its terms, from participating in (as a shareholder, employee, or
both) a Superior Transaction.
(b) Neither Purchaser nor any of its affiliates shall enter into
any agreement, arrangement or understanding with any or all of the Specified
Shareholders if such agreement, arrangement or understanding would jeopardize
the ability of the condition set forth in Section 6.1(b)(vi) to be satisfied.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions to the Merger.
(a) The obligation of the Company to consummate the Merger is
subject to the satisfaction (or waiver) at or prior to the Effective Time of
each of the following conditions:
(i) Accuracy of Representations and Warranties. All
representations and warranties made by Purchaser herein shall be true and
correct in all material respects (except for representations qualified by
materiality or Purchaser Material Adverse Effect which shall be correct
in all respects) on the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date, except for representations and warranties that are made as
of a specified date or time, which shall be true and correct in all
material respects (except for representations qualified by materiality or
Purchaser Material Adverse Effect which shall be correct in all respects)
only as of such specific date or time.
(ii) Compliance with Covenants. Purchaser shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with covenants, contained in this
Agreement to be performed or complied with by it prior to or on the
Closing Date.
(iii) Officer's Certificates. The Company shall have
received certificates of Purchaser, dated as of the Closing Date, signed
by an executive officer of Purchaser to evidence satisfaction of the
conditions set forth in Section 6.1(a)(i) and (ii).
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(iv) Solvency Opinion. The Company shall have received an
independent solvency opinion substantially similar to (or, if addressed
to the Company, a copy of) the insolvency letter to be delivered to the
lenders pursuant to the terms of the Commitment Letters.
(b) The obligation of Purchaser to consummate the Merger is
subject to the satisfaction (or waiver) at or prior to the Effective Time of
each of the following conditions:
(i) Accuracy of Representations and Warranties. All
representations and warranties made by the Company herein shall be true
and correct in all material respects, (except for representations
qualified by materiality or Company Material Adverse Effect which shall
be correct in all respects) on the Closing Date, with the same force and
effect as though such representations and warranties had been made on and
as of the Closing Date, except for representations and warranties that
are made as of a specified date or time, which shall be true and correct
in all material respects (except for representations qualified by
materiality or Company Material Adverse Effect which shall be correct in
all respects) only as of such specific date or time.
(ii) Compliance with Covenants. The Company shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with covenants, contained in this
Agreement to be performed or complied with by it prior to or on the
Closing Date.
(iii) Officer's Certificate. Purchaser shall have received
a certificate of the Company, dated as of the Closing Date, signed by an
executive officer of the Company to evidence satisfaction of the
conditions set forth in Section 6.1(b)(i) and (ii).
(iv) Debt Offer. The conditions to the Debt Offer set
forth in Annex A shall have been satisfied, the terms of the Senior Notes
and the Senior Notes Indenture shall have been amended in accordance with
the Senior Notes Amendments, and the Company shall concurrently with the
Closing, purchase all Senior Notes validly tendered and not withdrawn
pursuant to the Debt Offer.
(v) Circon Closing. Unless otherwise requested by
Purchaser, the closing of the Circon Sale shall occur substantially
concurrently with the Closing.
(vi) Recapitalization Accounting. The Company shall have
received from the Company's regular independent auditing firm a letter in
form and substance reasonably satisfactory to Purchaser to the effect
that the transactions contemplated by this Agreement will receive
recapitalization accounting treatment and such letter has not been
modified in a manner adverse to Purchaser or withdrawn.
(vii) No Litigation. There shall not be pending any suit,
action or proceeding by any Governmental Entity or any other person that
has a reasonable likelihood of success, (i) seeking to prohibit or impose
any material limitations on Purchaser's ownership or operation of all or
a material portion of their or the Company's businesses or as-
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sets (or those of any of its Subsidiaries or affiliates), or to compel
Purchaser or the Company or their respective Subsidiaries and
affiliates, before or after the Effective Time, to dispose of or hold
separate any material portion of the business or assets of the Company
and its Subsidiaries, taken as a whole, (ii) prohibiting, restricting
or significantly delaying consummation of the Debt Offer or the Merger
or the performance of any of the other Transactions, or seeking to
obtain from Purchaser (or its affiliates) or the Company (or its
affiliates) any damages that are material, respectively, in relation to
Purchaser (assuming Purchaser has assets equal to the amount of cash it
is required to have at the Effective Time pursuant to Section 4.5(a))
or the Company and its Subsidiaries as taken as a whole, (iii) seeking
to impose material limitations on the ability of Purchaser or its
affiliates, or render Purchaser or its affiliates unable, to acquire or
hold or to exercise effectively all rights of ownership of shares of
Company Common Stock, or effectively to control in any material respect
the business, assets or operations of the Company, its Subsidiaries or
Purchaser or any of their respective affiliates, or (iv) which
otherwise is reasonably likely to have a Company Material Adverse
Effect or a Purchaser Material Adverse Effect.
(viii) Company Material Adverse Effect. From and after the
date of this Agreement, there shall not have occurred any change,
development or event that constitutes or has a Company Material Adverse
Effect.
(ix) Consents. There shall have been obtained any consent,
permit or approval the absence of which or the failure of which to be
obtained constitutes or has a Company Material Adverse Effect or
Purchaser Material Adverse Effect.
(x) Debt Funding. The Debt Funding shall have been
obtained on terms and conditions acceptable in form and substance to
Purchaser (giving effect to Purchaser's representations contained in
Section 4.5(c)).
Section 6.2. Conditions to Each Party's Obligations to Effect the
Merger.
(a) The respective obligations of each party hereto to effect
the Merger is further subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any and all of which may be waived in
whole or in part by the parties hereto to the extent permitted by applicable
law:
(i) Shareholder Approval. The Company Shareholder Approval
shall have been validly obtained under the TBCA and the Company's
articles of incorporation and bylaws.
(ii) Statutes; Court Orders. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which
prohibits, restrains, enjoins or restricts the consummation of the
Merger; and there shall be no order or injunction of a court of competent
jurisdiction in effect precluding consummation of the Merger.
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(iii) HSR Approval. Any waiting period applicable to the
Merger or the Circon Sale under the HSR Act shall have terminated or
expired.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the Transactions
may be abandoned at any time prior to the Effective Time notwithstanding any
requisite approval and adoption of this Agreement and the Transactions by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the Board of
Directors of each of the Company and the Purchaser;
(b) by Purchaser or the Company if (i) any Governmental Entity
shall have issued a final order, decree or ruling (which order, decree or ruling
the parties hereto shall use all reasonable efforts to lift) or taken any other
final action restraining, enjoining or otherwise prohibiting the Debt Offer, the
Circon Sale or the Merger and such order, decree, ruling or other action is or
shall have become final and nonappealable, or (ii) the Effective Time shall not
have occurred on or before December 31, 1999 (the "Outside Date"); provided,
however, that the right to terminate this Agreement under this Section
7.1(b)(ii) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by the Company, pursuant to and in strict compliance with
Section 5.4(b);
(d) by Purchaser, if (i) there shall have been a material breach
of any of the Company's representations, warranties or covenants which breach
(A) would give rise to the failure of a condition set forth in Section 6.1(b) or
Section 6.2 and (B) cannot be or has not been cured within 30 days following
written notice of such breach, (ii) the Board shall withdraw, modify, or change
(including by amendment of the Proxy Statement) the Company Board Recommendation
or shall have publicly indicated its intention to do so in a manner adverse to
Purchaser, (iii) the Board shall have recommended any proposal in respect of a
Competing Transaction, (iv) any Person or group (as defined in Section 13(d)(3)
of the Exchange Act) other than Purchaser or any of its respective subsidiaries
or affiliates shall have become the beneficial owner of more than 15% of the
outstanding shares of Company Common Stock (either on a primary or a fully
diluted basis), or (v) the Company shall otherwise have breached or taken any
action in violation of Section 5.4;
(e) by the Company if there shall have been a material breach of
any of Purchaser's representations, warranties or covenants which breach (A)
would give rise to the failure of a condition set forth in Section 6.1(a) or
Section 6.2 and (B) cannot be or has not been cured within thirty (30) days
following receipt of written notice of such breach; or
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(f) by either Purchaser or the Company if at the Shareholders
Meeting (including any postponement or adjournment thereof) the Company
Shareholder Approval shall have not been obtained.
Section 7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 7.2 and Section 7.3 hereof; provided,
however, that nothing contained in this Section 7.2 shall relieve any party from
liability for any breach of this Agreement.
Section 7.3. Fees and Expenses.
(a) In the event that (i) Purchaser shall have terminated this
Agreement pursuant to Section 7.1(b)(ii) and (A) the failure of the Company to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before the Outside Date and
(B) on or prior to such time any entity or group (other than Purchaser and its
affiliates) shall have made and not withdrawn a proposal that is or becomes
publicly disclosed for (or publicly disclosed its intention to make a proposal
for) a Competing Transaction, (ii) Purchaser shall have terminated this
Agreement pursuant to Section 7.1(d)(ii), (iii), (iv) or (v), (iii) either party
shall have terminated this Agreement pursuant to Section 7.1(f) and on or prior
to the Shareholders Meeting any entity or group (other than Purchaser and its
affiliates) shall have made and not withdrawn a proposal that is or becomes
publicly disclosed for (or publicly disclosed its intention to make a proposal
for) a Competing Transaction, or (iv) the Company shall have terminated this
Agreement pursuant to 7.1(c) hereof, then the Company shall pay to Purchaser, a
termination fee (the "Termination Fee"), in cash, of $19,000,000, provided,
however, that the Company in no event shall be obligated to pay more than one
such Termination Fee with respect to all such agreements and occurrences and
such termination. Any Termination Fee that becomes payable shall be paid (x) in
the case of clauses (i) and (ii) above, within one business day following the
occurrence of the event giving rise to such payment, (y) in the case of clause
(iii) above, at least one business day prior to termination in the case of a
termination by the Company, and within one day following termination in the case
of termination by Purchaser, and (z) in the case of clause (iv) above, in
accordance with Section 5.4(b).
(b) Provided that no Termination Fee has become payable to
Purchaser, upon the termination of this Agreement by the Company pursuant to
Section 7.1(c) or 7.1(f) or by Purchaser pursuant to Section 7.1(b)(ii) (in the
circumstance referred to in Section 7.3(a)(i)), 7.1(d) or 7.1(f), the Company
shall reimburse Purchaser and its affiliates (not later than one business day
after submission of statements therefor (or at such earlier time as may be
required pursuant to Section 5.4(b)) for all actual documented out-of-pocket
fees and expenses actually and reasonably incurred by any of them or on their
behalf in connection with the any of the transactions contemplated by this
Agreement (including, without limitation, fees and expenses payable to financing
sources, investment bankers, counsel to any of the foregoing, counsel to
Purchaser and its affiliates and accountants) (the "Purchaser Expenses"), less
any such expenses previously
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reimbursed. The Company shall in any event pay the amount requested within one
business day of such request, subject to the Company's right to demand a return
of any portion as to which invoices are not received in due course.
(c) Upon the consummation of the Merger, all costs and expenses
incurred by each party hereto in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, fees and
disbursements of counsel, financial advisors and accountants) shall be paid by
the Company or the Company shall promptly reimburse each such party, as the case
may be
(d) Except as specifically provided in this Section 7.3 each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated by this Agreement.
Section 7.4. Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time before or after approval of the Merger
by the shareholders of the Company (if required by applicable law), but after
any such approval, no amendment shall be made which requires the approval of
such shareholders under applicable law without such approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 7.5. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 8.2. Entire Agreement; Assignment. This Agreement (including the
schedules and exhibits hereto), (a) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof, including, without
limitation, that certain letter agreement dated April 8, 1999, between the
Company and Fox Paine & Company, LLC, and (b) shall not be assigned by operation
of law or otherwise; provided, however, that Purchaser may assign any or all of
its rights and obligations under this Agreement
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to any Subsidiary or affiliate of Purchaser, but no such assignment shall
relieve Purchaser of its obligations hereunder if such assignee does not perform
such obligations.
Section 8.3. Validity. If any provision of this Agreement, or the
application thereof to any Person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other Persons or circumstances shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 8.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (including by facsimile with
written confirmation thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business hours by hand, by FedEx or other
nationally recognized overnight commercial delivery service, or by facsimile
notice, confirmation of receipt received, addressed as follows, or to such other
address as may be hereafter notified by the respective parties hereto:
(a)If to Purchaser:
Fox Paine Medic Acquisition Corporation
c/o Fox Paine & Company, LLC
950 Tower Lane, Suite 1950
Foster City, California 94404
Attention: Saul A. Fox
Facsimile: 650-525-1396
With a copy, which will not constitute notice, to:
Wachtell, Lipton, Rosen & Katz
51 West 52(nd) Street
New York, New York 10019
Attention: Mitchell S. Presser
Facsimile: 212-403-2000
(b)If to the Company:
Maxxim Medical, Inc.
10300 49(th) Street North
Clearwater, Florida 33762
Attention: Kenneth W. Davidson
Facsimile: 727-561-2180
With a copy, which will not constitute notice, to:
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, NY 10177
Attention: Herbert Henryson II
Facsimile: 212-986-0604
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and
Shumaker, Loop & Kendrick, LLP
101 East Kennedy Boulevard
Barnett Plaza, Suite 2800
Tampa, FL 33602-5151
Attention: W. Thompson Thorn, III
Facsimile: 813-222-1705
Section 8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof, except that matters pertaining to
the effectuation and effects of the Merger and the transactions provided for in
Section 2.1 shall be governed by and construed in accordance with the laws of
the State of Texas, without regard to the principles of conflicts of law
thereof. The parties hereto hereby agree and consent to be subject to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York in any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the Transactions. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by law, (i) any objection that it may now or
hereafter have to laying venue of any suit, action or proceeding brought in such
courts, and (ii) any claim that any suit, action or proceeding brought in such
courts has been brought in an inconvenient forum.
Section 8.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 8.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 5.8 and 7.3 nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 8.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
-48-
<PAGE> 121
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the day and year first above written.
FOX PAINE MEDIC ACQUISITION CORPORATION
By: /s/ Saul A. Fox
---------------------------------------------
Name: Saul A. Fox
Title: Chief Executive Officer
MAXXIM MEDICAL, INC.
By: /s/ Kenneth W. Davidson
---------------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and Chief Executive
Officer
By: /s/ Donald R. DePriest
---------------------------------------------
Name: Donald R. DePriest
Title: Director
[Signature Page to Merger Agreement]
<PAGE> 122
ANNEX A
TERMS AND CONDITIONS TO THE DEBT OFFER
<TABLE>
<CAPTION>
<S> <C>
Transaction: Tender Offer and Consent Solicitation.
Issue: 10-1/2% Senior Subordinated Senior Notes due 2006 (the
"Senior Notes").
Outstanding: $100 million principal amount.
Trustee: First Union National Bank of North Carolina
Dealer Managers:
Type of Tender: Any and all; subject to receipt of
consents to the Proposed Amendments (see
below) from holders sufficient to effect
such Proposed Amendments.
Noteholders may consent without tendering, but may not
tender without consenting,
Consent Date: 10-20 business days after launch date.
Expiration Date: 20 business days after launch date.
Tender Consideration and To be determined by Purchaser
Consent Fee:
Consents to Indenture Amendments: Company shall solicit consents to the following Indenture
amendments (the "Proposed Amendments")
(1) to eliminate certain restrictive
covenants set forth in Articles 4 and
5 of the Indenture, including:
- Payment of Taxes and Other Claims (Sec. 4.06)
- Repurchase upon Change of Control (Sec. 4.07)
- Limitation on Asset Sales (Sec. 4.08)
- Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock (Sec. 4.09)
- Limitation on Restricted Payments (Sec. 4.10)
- Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries (Sec. 4.11)
- Limitation on Layering Debt (Sec. 4.12)
- Limitation on Liens (Sec. 4.13)
</TABLE>
<PAGE> 123
- Limitation on Ownership of and Liens on Capital
Stock (Sec. 4.14)
- Transactions with Affiliates (Sec. 4.15)
- Reports (Sec. 4.16)
- Unrestricted Subsidiaries (Sec. 4.17)
- Merger, Consolidation or Sale of Assets (5.01)
(2) to amend the Events of Default
provisions (Sec. 6.01) and, if
requested by Purchaser, the
provisions relating to defeasance
(Art. VIII).
(3) to effect any other amendments
requested by Purchaser that can be
effected other than by unanimous vote
of the holders of the Senior Notes.
Conditions:
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN
THE AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") TO WHICH THIS ANNEX A
IS ATTACHED
Notwithstanding any other provision of the Debt Offer, the
Company shall not be required to accept for payment or pay for any Senior Notes
tendered pursuant to the Debt Offer, if (i) consents to the Proposed Amendments
shall not have been received (and be unrevoked) from holders of not less than a
principal amount of Senior Notes necessary to validly effect the Proposed
Amendments, (ii) the Debt Funding shall not be obtained concurrently with such
acceptance for payment and on terms acceptable in form and substance to
Purchaser, (iii) the Closing of the Merger shall not occur in accordance with
the Merger Agreement concurrently with such acceptance for payment, (iv) at any
time on or after the date of the Merger Agreement to which this Annex A is
appended, and prior to the acceptance for payment of Senior Notes, any of the
conditions set forth below shall exist; provided, however, that none of the
conditions referred to in this paragraph shall be waived by the Company without
the consent of Purchaser (which may be granted or withheld in its sole
discretion); and provided, further, that the following conditions shall be
waived by the Company at the request of Purchaser: (x) the conditions set forth
in clauses (ii) and (iii) of this preamble to this Annex A shall be waived by
the Company at the request of Purchaser, but only if sufficient funds to
purchase all tendered Senior Notes and accept all consents to the Proposed
Amendments are available from debt or equity financing on terms that the Company
determines in its reasonable good faith judgment will not jeopardize the
likelihood of consummating any of the transactions contemplated by the Merger
Agreement, and (y) any or all of the conditions set forth below in this Annex A
(other than those set forth in clauses (a)(i) (except as applicable to Purchaser
only) and (d)):
(a) there shall be threatened or pending any action, suit or
proceeding or any statute, rule, regulation, judgment, order or injunction
proposed, sought, promulgated, enacted, en-
<PAGE> 124
tered, enforced or deemed applicable to the Debt Offer, or any other action
shall have been taken, proposed or threatened, by any state or federal
government or governmental authority or by any court of competent jurisdiction,
other than the routine application to the Merger of waiting periods under the
HSR Act, (i) seeking to make the acceptance for payment of, or the payment for,
some or all of the Senior Notes illegal or otherwise prohibiting, restricting or
significantly delaying consummation of the Merger or the performance of any of
the other transactions contemplated by the Merger Agreement, or seeking to
obtain from Purchaser (or its affiliates) or the Company (or its affiliates) any
damages that are material, respectively, in relation to Purchaser (assuming
Purchaser has assets equal to the amount of cash it is required to have at the
Effective Time pursuant to Section 4.5(a)) or to the Company and its
Subsidiaries, taken as a whole, or (ii) which otherwise is reasonably likely to
have a Company Material Adverse Effect or Purchaser Material Adverse Effect; or
(b) there shall have occurred any change or event that
constitutes a Company Material Adverse Effect; or
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange or the NASDAQ Stock Market for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States (whether or not mandatory), (iii) the commencement of
a war, armed hostilities or other international or national calamity directly or
indirectly involving the territory of the United States, (iv) any limitation
(whether or not mandatory), by any U.S. governmental authority or agency, likely
to materially adversely affect, the extension of credit by banks or other
financial institutions, (v) a change in general financial, bank or capital
market conditions which materially and adversely affects the ability of
financial institutions in the United States to extend credit or syndicate loans,
(vi) from the date of the Merger Agreement through the date of termination or
expiration of the Debt offer, a decline of 15% or more in the Dow Jones
Industrial Average or the Standard & Poor's 500 Index, or (vii) in the case of
any of the foregoing, existing at the date of the execution of the Merger
Agreement, a material acceleration or worsening thereof; or
(d) the Merger Agreement shall have been terminated in
accordance with its terms; or
the Trustee shall have objected in any respect to, or taken any action
that could, in the sole judgment of Purchaser, adversely affect the consummation
of any of the transactions contemplated by the Merger Agreement or the ability
of the Company to effect the Proposed Amendments, or shall have taken any action
that challenges the validity or effectiveness of the procedures used by the
Company in soliciting consents to the Proposed Amendments or in making the Debt
Offer.
<PAGE> 125
APPENDIX B
June 13, 1999
The Board of Directors
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, FL 33762
Dear Members of the Board:
We understand that Maxxim Medical, Inc., a Texas corporation (the
"Company"), and Fox Paine Medic Acquisition Corporation, a Texas corporation
(the "Purchaser"), entered into an Agreement and Plan of Merger dated as of
June 13, 1999 (the "Merger Agreement") pursuant to which the Purchaser will
merge with and into the Company with the Company being the surviving
corporation (the "Merger"). All capitalized terms used herein and not otherwise
defined shall have the same meanings ascribed to such terms in the Merger
Agreement. Pursuant to the Merger, each share of Company Common Stock (other
than shares of Company Common Stock owned directly or indirectly by the Company
or Purchaser, shares of Company Common Stock owned by the Specified
Shareholders and shares of Company Common Stock as to which dissenters rights
are exercised and perfected pursuant to applicable law) will be converted into
the right to receive $26.00 in cash (the "Per Share Amount").
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of the Company Common Stock (other than the
Purchaser and the Specified Shareholders) of the Per Share Amount. In
connection with this opinion, we have among other things:
(i) Reviewed the financial terms and conditions
of the draft Merger Agreement dated June 10, 1999;
(ii) Analyzed certain historical business and
financial information relating to the Company;
(iii) Reviewed various financial forecasts and
other data provided to us by the Company relating to its
business;
(iv) Held discussions with members of the senior
management of the Company with respect to the business,
prospects and the strategic objectives of the Company;
1
<PAGE> 126
(v) Reviewed public information with respect to
certain other companies in lines of business we believe to be
generally comparable to the business of the Company;
(vi) Reviewed the financial terms of certain
business combinations involving companies in lines of
business we believe to be generally comparable to those of
the Company;
(vii) Reviewed the historical stock prices and
trading volumes of the Company Common Stock; and
(viii) Conducted such other financial studies,
analyses and investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company or concerning the solvency of
or issues relating to solvency concerning the Company. With respect to
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of
management of the Company as to the future financial performance of the
Company. We assume no responsibility for and express no view as to such
forecasts or the assumptions on which they are based.
Further, our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof. In rendering our opinion, we did not address the
relative merits of the Merger, any alternative potential transaction or the
Company's underlying decision to effect the Merger.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement without any waiver
of any material term or condition by the Company and that the Merger will be
accounted for as a recapitalization. In addition, we have assumed that (i)
obtaining the necessary regulatory approvals for the Merger will not have an
adverse effect on the Company and (ii) there have been no material changes made
to the Merger Agreement from the draft Merger Agreement we reviewed for
purposes of rendering our opinion.
Lazard Freres & Co. LLC is acting as investment banker to the Special
Committee of the Board of Directors of the Company in connection with the
Merger and will receive a fee for our services, a substantial portion of which
is contingent upon the consummation of the Merger.
Our engagement and the opinion expressed herein are for the benefit of
the Company's Board of Directors and our opinion is rendered to the Company's
Board of Directors in connection with its consideration of the Merger. This
opinion is not intended
2
<PAGE> 127
to and does not constitute a recommendation to any holder of the Company Common
Stock as to whether such stockholder should vote for the Merger, if such vote
is required under the Company's articles of incorporation and/or applicable
law. It is understood that this letter may not be disclosed or otherwise
referred to without our prior written consent, except for its inclusion in
filings the Company may be required to make with the Securities and Exchange
Commission and except as may otherwise be required by law or by a court of
competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
Per Share Amount to be received pursuant to the Merger is fair to the holders
of the Company Common Stock (other than the Purchaser and the Specified
Shareholders), from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ Albert H. Garner
---------------------------------------
Albert H. Garner
Managing Director
3
<PAGE> 128
APPENDIX C
TEXT OF ARTICLES 5.11, 5.12 and 5.13 OF THE
TEXAS BUSINESS CORPORATION ACT
ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and the
shareholder holds shares of a class or series that was entitled to vote thereon
as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the articles of incorporation) of all, or substantially all, the property and
assets, with or without good will, of a corporation if special authorization of
the shareholders is required by this Act and the shareholders hold shares of a
class or series that was entitled to vote thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the shareholder
are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in
which there is a single surviving or new domestic or foreign corporation, or
from any plan of exchange, if:
(1) the shares held by the shareholder are part of a class or series,
shares of which are on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on the Nasdaq Stock Market (or successor quotation
system) or designated as a national market security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc., or successor entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of merger
or plan of exchange to accept for the shareholder's shares any consideration
that is different than the consideration (other than cash in lieu of fractional
shares that the shareholder would otherwise be entitled to receive) to be
provided to any other holder of shares of the same class or series of shares
held by such shareholder; and
<PAGE> 129
(3) the shareholder is not required by the terms of the plan of merger
or the plan of exchange to accept for the shareholder's shares any
consideration other than:
(a) shares of a domestic or foreign corporation that,
immediately after the effective time of the merger or exchange, will
be part of a class or series, shares of which are:
(i) listed, or authorized for listing upon official
notice of issuance, on a national securities exchange;
(ii) approved for quotation as a national market
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or successor entity;
or
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be
received; or
(c) any combination of the securities and cash describe in
Subdivisions (a) and (b) of this subsection.
ART 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1)(a) With respect to proposed corporate action that is submitted to a
vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall
be delivered or mailed in that event. If the action is effected and the
shareholder shall not have voted in favor of the action, the corporation, in
the case of action other than a merger, or the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten (10)
days after the action is effected, deliver or mail to the shareholder written
notice that the action has been effected, and the shareholder may, within ten
(10) days from the delivery or mailing of the notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the shareholder's
shares. The fair value of the shares shall be the value thereof as of the day
immediately preceding the meeting, excluding any appreciation or depreciation
in anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the shares
as estimated by the shareholder. Any shareholder failing to make demand within
the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved pursuant
to Section A of Article 9.10 of this Act, the corporation, in the case of
action other than a merger, and the surviving
<PAGE> 130
or new corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a merger, shall,
within ten (10) days after the date the action is effected, mail to each
shareholder of record as of the effective date of the action notice of the fact
and date of the action and that the shareholder may exercise the shareholder's
right to dissent from the action. The notice shall be accompanied by a copy of
this Article and any articles or documents filed by the corporation with the
Secretary of State to effect the action. If the shareholder shall not have
consented to the taking of the action, the shareholder may, within twenty (20)
days after the mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the
case may be, for payment of the fair value of the shareholder's shares. The
fair value of the shares shall be the value thereof as of the date the written
consent authorizing the action was delivered to the corporation pursuant to
Section A of Article 9.10 of this Act, excluding any appreciation or
depreciation in anticipation of the action. The demand shall state the number
and class of shares owned by the dissenting shareholder and the fair value of
the shares as estimated by the shareholder. Any shareholder failing to make
demand within the twenty (20) day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of a
demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the
county in which the principal office of the domestic corporation is located,
asking for a finding and determination of the fair value of the shareholder's
shares. Upon the filing of any such petition by the shareholder, service of a
copy thereof shall be made upon the corporation (foreign or domestic) or other
entity, which
<PAGE> 131
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the
judgment entered for the value of the shares, as in this Article provided,
shall, in the case of a merger, be treated as provided in the plan of merger
and, in all other cases, may be held and disposed of by the corporation as in
the case of other treasury shares.
<PAGE> 132
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action.
If the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ART 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled
to vote or exercise any other rights of a shareholder except the right to
receive payment for his shares pursuant to the provisions of those articles and
the right to maintain an appropriate action to obtain relief on the ground that
the corporate action would be or was fraudulent, and the respective shares for
which payment has been demanded shall not thereafter be considered outstanding
for the purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided
<PAGE> 133
in Article 5.12 or 5.16 of this Act, as the case may be, or if after the
hearing of a petition filed pursuant to Article 5.12 or 5.16, the court shall
determine that such shareholder is not entitled to the relief provided by those
articles, then, in any such case, such shareholder and all persons claiming
under him shall be conclusively presumed to have approved and ratified the
corporate action from which he dissented and shall be bound thereby, the right
of such shareholder to be paid the fair value of his shares shall cease, and
his status as a shareholder shall be restored without prejudice to any
corporate proceedings which may have been taken during the interim, and such
shareholder shall be entitled to receive any dividends or other distributions
made to shareholders in the interim.
<PAGE> 134
APPENDIX D
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement"), dated as of June 13,
1999, is made by and between Fox Paine Medic Acquisition Corporation, a Texas
corporation ("Purchaser"), and the undersigned shareholder (the "Shareholder")
of Maxxim Medical, Inc., a Texas corporation ("Maxxim" or the "Company").
WHEREAS, concurrently herewith, Purchaser and the Company are
entering into an Agreement and Plan of Merger, of even date herewith (the
"Merger Agreement"), which provides that, among other things, upon the terms
and subject to the conditions thereof, (a) Purchaser will be merged (the
"Merger") with and into the Company, with the Company as the surviving
corporation, and (b) each outstanding share of common stock, $0.001 par value,
of the Company (together with the associated Preferred Share Purchase Rights
issued pursuant to the Rights Agreement, dated as of July 10, 1997, by and
between the Company and Harris Trust and Savings Bank as rights agent, the
"Company Common Stock") shall (except for certain shares of Company Common
Stock referred to in Sections 1.8(a), 1.8(b) and 1.8(c) of the Merger
Agreement, and except for any Dissenting Shares (as defined in the Merger
Agreement)) be converted into the right to receive $26.00 in cash.
WHEREAS, the Shareholder beneficially owns a number of shares of
Company Common Stock and a number of options to purchase shares of Company
Common Stock, in each case as set forth on the signature page to this
Agreement; and
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, Purchaser has requested and required that the Shareholder
enter into this Agreement;
NOW, THEREFORE, to induce Purchaser to enter into, and in
consideration of its entering into, the Merger Agreement, and in consideration
of the promises and the representations, warranties and agreements contained
herein, the parties hereto agree as follows:
1. Representations and Warranties of the Shareholder. The
Shareholder hereby represents and warrants to Purchaser that, as of the date
hereof:
(a) Authority; No Conflicts. The Shareholder has the necessary
legal capacity, power and authority to execute and deliver this Agreement, to
perform the Shareholder's obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by and on behalf of the Shareholder, and, assuming due authorization,
execution and delivery by Purchaser,
<PAGE> 135
constitutes a legal, valid and binding obligation of the Shareholder,
enforceable in accordance with its terms, subject to bankruptcy, fraudulent
conveyance, insolvency, moratorium or other similar laws affecting the rights
of creditors generally.
(b) The Subject Shares. The Shareholder is the beneficial owner of
(i) a number of shares of Company Common Stock (such shares, together with any
other shares of Company Common Stock of the Company of which the Shareholder
has or acquires beneficial ownership after the date hereof and during the term
of this Agreement, whether upon the exercise of options, warrants or rights,
the conversion or exchange of convertible or exchangeable securities, or by
means of purchase, dividend, distribution or otherwise, being collectively
referred to herein as the "Subject Shares") and (ii) a number of options to
purchase shares of Company Common Stock (such options, together with any other
options, warrants or rights to purchase shares of Company Common Stock, or
other securities convertible into or exchangeable for shares of Company Common
Stock of which the Shareholder has or acquires beneficial ownership after the
date hereof and during the term of this Agreement, whether by means of grant,
purchase, dividend, distribution or otherwise, being collectively referred to
herein as the "Subject Options") in each case, as of the date of this
Agreement, as are set forth on the signature page to this Agreement. Except as
set forth on Schedule 1 hereto: (i) the Shareholder has, and throughout the
term of this Agreement will have, good and marketable title to such Subject
Shares and Subject Options free and clear of all encumbrances and liens; (ii)
other than the Subject Shares and Subject Options indicated on the signature
page to this Agreement, the Shareholder does not beneficially own any shares of
capital stock of the Company or securities convertible into or exchangeable for
shares of capital stock of the Company; and (iii) the Shareholder has the sole
right and power to vote and dispose of the Subject Shares and Subject Options,
and none of the Subject Shares or Subject Options is subject to any voting
trust or other agreement, arrangement or restriction with respect to the voting
or transfer (other than the provisions of the Securities Act of 1933, as
amended) of such Subject Shares or Subject Options, except as contemplated by
this Agreement.
2. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Shareholder that Purchaser is a Texas
corporation, and is duly organized, validly existing and in good standing under
the laws of the State of Texas. Purchaser has the necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by and on behalf of
Purchaser, and, assuming due execution and delivery by the Shareholder,
constitutes a legal, valid and binding obligation of Purchaser enforceable in
accordance with its terms, subject to bankruptcy, fraudulent conveyance,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally.
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<PAGE> 136
3. COVENANTS OF THE SHAREHOLDER. THE SHAREHOLDER AGREES AS
FOLLOWS:
(a) Voting in Favor of the Merger and/or the Circon Sale. At any
meeting of shareholders of the Company called to vote upon the Merger, the
Merger Agreement or any transaction contemplated thereby (including the Circon
Sale (as defined in the Merger Agreement)), or at any adjournment thereof or in
any other circumstances (including, without limitation, a solicitation of
written consents or proxies) upon which a vote or other approval with respect
to the Merger, the Merger Agreement or any of the other transactions
contemplated thereby (including the Circon Sale (as defined therein)) is
sought, the Shareholder shall vote the Subject Shares in favor of the Merger
Agreement, the approval of the terms thereof, the Merger and all other
transactions contemplated by the Merger Agreement (including the Circon Sale).
(b) Voting Against Competing Transactions. At any meeting of
shareholders of the Company or at any adjournment thereof or in any other
circumstances upon which the Shareholder's vote, consent or other approval as a
shareholder is sought (including, without limitation, a solicitation of written
consents or proxies), the Shareholder shall vote the Subject Shares against any
action or agreement that would interfere with the Debt Offer, the Merger or any
other transaction contemplated by the Merger Agreement (including the Circon
Sale), including, but not limited to, (A) the adoption by the Company of a
proposal regarding (1) the acquisition of the Company by merger, tender offer
or otherwise by any person or group, other than Purchaser or any designee
thereof (a "Third Party"), or any other merger, business combination or similar
transaction with any Third Party; (2) the acquisition by a Third Party of 5% or
more of the assets of the Company and its subsidiaries, taken as a whole; (3)
the acquisition by a Third Party of 5% or more of the outstanding shares of
Company Common Stock or any other class of equity or voting securities of the
Company; (4) the repurchase by the Company or any of its subsidiaries of 5% or
more of the outstanding shares of Company Common Stock or (5) any other
Competing Transaction (as defined in the Merger Agreement); (B) any amendment
of the Company's certificate of incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which amendment
or other proposal or transaction would in any manner impede, frustrate, prevent
or nullify the Debt Offer, the Merger, the Merger Agreement or any of the
transactions contemplated by the Merger Agreement (including the Circon Sale)
or change in any manner the voting rights of any class of the Company's capital
stock; (C) any change in the control of the Company or its board of directors,
other than as contemplated by the Merger Agreement; (D) any material change in
the present capitalization or dividend policy of the Company other than as
contemplated by the Merger Agreement; or (E) any other material change in the
Company's corporate structure or business other than as contemplated by the
Merger Agreement. The Shareholder further agrees not to commit or agree to take
any action in his or her capacity as a shareholder that is inconsistent with
the foregoing.
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<PAGE> 137
(c) Merger Agreement. The Shareholder acknowledges that such
Shareholder has read the Merger Agreement, including the exhibits thereto, and
has had an opportunity to consult with such Shareholder's counsel concerning
the same, and the Shareholder accepts and agrees to the terms and conditions of
the Merger Agreement that relate to the treatment of the Subject Shares
(including as provided in Section 1.8(b)) and the Subject Options, and the
Shareholder hereby irrevocably waives any claim that the Merger Agreement, the
Merger or any other transaction contemplated by the Merger Agreement (including
the Circon Sale) violates any right of the Shareholder under the Texas Business
Corporation Act, any fiduciary obligation owed by the Company or any of its
directors or officers to the Shareholder, or any obligation owed by the Company
to the Shareholder pursuant to any agreement between the Company and the
Shareholder or pursuant to any employee benefit plan or stock option or similar
plan of the Company in which the Shareholder participates.
(d) Transfer Restrictions. In addition to its obligations under
Section 3(a) of this Agreement, the Shareholder further agrees not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of such Shareholder (collectively,
"Transfer")), or enter into any contract, option or other arrangement or
understanding with respect to the Transfer of, any of the Subject Shares or
Subject Options for the term of this Agreement, (ii) other than with respect to
this Agreement, enter into any voting arrangement or understanding with respect
to the Subject Shares, whether by proxy, voting agreement or otherwise, or
(iii) take any action that would reasonably be expected to make any of its
representations or warranties contained herein untrue or incorrect or could
have the effect of preventing or disabling such Shareholder from performing any
of its obligations hereunder. Anything in this Section 3(d) to the contrary
notwithstanding, nothing in the foregoing shall prohibit or prevent the
Shareholder from complying with any of the Shareholder's obligations in respect
of the Circon Sale provided for in the Merger Agreement or any document
executed by the Shareholder and Purchaser in connection therewith.
(e) Appraisal Rights. Each Shareholder hereby irrevocably waives
any and all rights that he may have as to appraisal, dissent or any similar or
related matter with respect to the Merger, the Merger Agreement or any
transaction contemplated thereby, including, without limitation, any rights
otherwise available to such Shareholder pursuant to Section 5.11 of the Texas
Business Corporation Act.
(f) No Solicitation. The Shareholder agrees that, during the term
of this Agreement, he shall not, and shall not authorize or permit any of such
Shareholder's representatives, agents, affiliates or other persons, directly or
indirectly, to solicit, initiate, encourage or facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any recapitalization, merger, consolidation or
other business combination involving the Company, or acquisition of
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<PAGE> 138
any capital stock (other than upon exercise of Stock Options (as defined in the
Merger Agreement) which are outstanding as of the date hereof) or any material
portion of the assets (except for acquisition of assets in the ordinary course
of business consistent with past practice) of the Company and its Subsidiaries
(as defined in the Merger Agreement), or any combination of the foregoing (a
"Competing Transaction"), or negotiate, explore or otherwise engage in
discussions with any person (other than Purchaser, persons controlling
Purchaser, or their respective directors, officers, employees, agents and
representatives) with respect to any Competing Transaction or enter into any
agreement, arrangement or understanding requiring or causing the Company to
abandon, terminate or fail to consummate any of the transactions contemplated
by the Merger Agreement. Anything herein to the contrary notwithstanding,
nothing in this Agreement shall (i) prevent any director or officer of the
Company from taking any action consistent with his or her fiduciary duties to
the Company and its shareholders or as may be provided by the Merger Agreement,
or (ii) if Shareholder is an officer of the Company, prohibit such Shareholder
from participating in Permitted Discussions with any third party at any time
during which the Company is permitted to engage (and is so engaging) in such
discussions with such third party pursuant to Section 5.4(a) of the Merger
Agreement.
4. Stop Transfer Order. The Shareholder hereby authorizes and
requests the Company's counsel to notify the Company's transfer agent that
during the terms of this Agreement there is a stop transfer order with respect
to all of the Subject Shares and that this Agreement places limits on the
voting of the Subject Shares.
5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other party, except that Purchaser may
assign, in its sole discretion and without the consent of the Shareholder, any
or all of its rights, interests and obligations hereunder to any affiliate of
Purchaser. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
permitted assigns and their respective successors, heirs, agents,
representatives, trust beneficiaries, attorneys, affiliates and associates and
all of their respective predecessors, successors, permitted assigns, heirs,
executors and administrators.
6. Termination. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further legal effect immediately following the earlier to
occur of (x) the Effective Time (as defined in the Merger Agreement) or (y) the
termination of the Merger Agreement in accordance with its terms. Nothing in
this Section shall relieve any party of liability for breach of this Agreement.
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<PAGE> 139
7. General Provisions.
(a) Amendments. This Agreement may not be amended except by
an instrument in writing signed by each of the parties hereto.
(b) Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (if confirmed), sent by overnight courier (providing
proof of delivery) or mailed by registered or certified mail (return receipt
requested), (i) if to the Purchaser, in accordance with Section 8.4(a) of the
Merger Agreement, and (ii) if to the Shareholder, to the Shareholder's
attention c/o of the Company at the address or facsimile number set forth in
Section 8.4(b) of the Merger Agreement.
(c) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that each party need not sign the same counterpart.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware without
regard to the conflicts of law principles thereof.
8. Enforcement. The parties agree that if any of the
provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, the parties would suffer irreparable
harm that monetary compensation would be inadequate to remedy. It is
accordingly agreed that the parties shall be entitled to an injunction or other
forms of equitable relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which they are entitled at law or in equity.
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<PAGE> 140
IN WITNESS WHEREOF, Purchaser and the Shareholder have each
executed this Agreement as of the date first written above.
FOX PAINE MEDIC ACQUISITION
CORPORATION
By:
----------------------------------------
Name:
Title:
SHAREHOLDER:
-------------------------------------------
Print Name:
Number of shares of Company Common Stock
beneficially owned by the Shareholder as of the
date hereof:
----------------------
Number of shares of Company Common Stock subject to
options to purchase shares of Company Common Stock
held by the Shareholder as of the date hereof:
----------------------
[Signature Page to Voting Agreement]
<PAGE> 141
MAXXIM MEDICAL, INC.
10300 49TH STREET NORTH
CLEARWATER, FLORIDA 33762
Proxy for the Special Meeting of Shareholders to be held ______________, 1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby designates and appoints Peter M. Graham, David
L. Lamont and Alan S. Blazei, and each of them, with authority to act without
the others, as attorneys and proxies for the undersigned, with full power of
substitution, to vote all shares of Common Stock, $.001 par value per share, of
Maxxim Medical, Inc. that the undersigned is entitled to vote at the Special
Meeting of Shareholders of Maxxim Medical, Inc., to be held at ___________ a.m.
Eastern Time on ________, _____________, 1999, or at any adjournment thereof,
with all the powers the undersigned would possess if personally present, such
proxies being directed to vote as specified below and in their discretion on
any other business that may properly come before the Meeting.
PROPOSAL 1. To approve the Agreement and Plan of Merger, dated as of June 13,
1999, between Fox Paine Medic Acquisition Corporation and Maxxim Medical, Inc.,
pursuant to which Fox Paine Medic Acquisition Corporation will be merged with
and into Maxxim and each share of Maxxim common stock, other than a portion of
the shares held by certain officers, directors and significant shareholders,
and shares held by dissenting shareholders, will be converted into the right to
receive $26.00 in cash, without interest.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 2. In their discretion, on such other business as may properly come
before the Meeting.
THE BOARD OF DIRECTORS OF MAXXIM RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE
EVEN IF YOU PLAN TO ATTEND THE MEETING. THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED "FOR" THE APPROVAL OF THE AGREEMENT AND PLAN OF
MERGER.
Dated:
---------------------------- ---------------------------------
Signature of Shareholder
---------------------------------
Signature of Shareholder
Please sign this Proxy exactly as
your name appears on your stock
certificate(s). JOINT OWNERS
SHOULD EACH SIGN PERSONALLY. When
signing as attorney, executor,
administrator, trustee, guardian,
partner or corporate officer,
please give your full title as
such.
