-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Iw+peo0cVri5t7TnOfNnKGVhT5nNUud9G9vCYwz6Ea36fTlgsYkL3B/ybFf+A0ok Ajb7HcT7kkpJD21AiiRJ0A== 0000890566-97-001379.txt : 19970616 0000890566-97-001379.hdr.sgml : 19970616 ACCESSION NUMBER: 0000890566-97-001379 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970504 FILED AS OF DATE: 19970613 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXXIM MEDICAL INC CENTRAL INDEX KEY: 0000858660 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 760291634 STATE OF INCORPORATION: TX FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10600 FILM NUMBER: 97624048 BUSINESS ADDRESS: STREET 1: 104 INDUSTRIAL BLVD CITY: SUGAR LAND STATE: TX ZIP: 77478 BUSINESS PHONE: 7132405588 MAIL ADDRESS: STREET 1: 104 INDUSTRIAL BLVD CITY: SUGAR LAND STATE: TX ZIP: 77478 10-Q 1 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended MAY 4, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ____________ to _______________. Commision File Number 0-18208 MAXXIM MEDICAL, INC. (Exact name of registrant as specified in its charter) TEXAS 76-0291634 State or other jurisdiction of (I.R.S. Employee Identification No.) incorporation or organization) 104 INDUSTRIAL BOULEVARD, SUGAR LAND, TEXAS 77478 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code........ (281) 240-5588 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock: Class Outstanding at June 2, 1997 COMMON STOCK, $.001 PAR VALUE 8,530,827 MAXXIM MEDICAL, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Condensed Consolidated Balance Sheets as of May 4, 1997 and November 3, 1996 2 Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended May 4, 1997 and May 5, 1996 3 Condensed Consolidated Statements of Cash Flows for the Six Months Ended May 4, 1997 and May 5, 1996 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 9 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MAXXIM MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
May 4, November 3, 1997 1996 --------- --------- ASSETS (Unaudited) Current assets: Cash and cash equivalents ................................................ $ 9,543 $ 8,044 Accounts receivable, net of allowances of $5,122 and $4,092, respectively ...................................... 85,878 86,207 Inventory ................................................................ 84,548 95,087 Prepaid expenses, deferred taxes and other ............................... 12,098 15,386 --------- --------- Total current assets ............................................. 192,067 204,724 Property and equipment ................................................... 121,826 123,077 Less: accumulated depreciation ....................................... (27,979) (24,562) --------- --------- 93,847 98,515 Goodwill and other intangibles, net ...................................... 152,342 156,046 Deferred taxes and other assets, net ..................................... 8,271 8,156 --------- --------- Total assets ..................................................... $ 446,527 $ 467,441 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt ..................................... $ 10,500 $ 7,500 Accounts payable ......................................................... 24,213 30,084 Accrued liabilities ...................................................... 39,823 45,375 Other short-term obligations ............................................. 1,347 3,645 --------- --------- Total current liabilities ........................................ 75,883 86,604 Long-term debt, net of current maturities .................................. 110,400 121,090 10 1/2% Senior subordinated notes .......................................... 100,000 100,000 6 3/4% Convertible subordinated debentures ................................. 28,750 28,750 Other long-term obligations, net of current maturities ..................... 1,149 1,624 Deferred taxes ............................................................. 5,817 5,817 --------- --------- Total liabilities ................................................ 321,999 343,885 Commitments and contingencies Shareholders' equity Preferred Stock, $1.00 par, 20,000,000 shares authorized, none issued or outstanding ............................... -- -- Common Stock, $.001 par value, 40,000,000 shares authorized, 8,130,827 and 8,128,827 shares issued and outstanding, respectively ................ 8 8 Additional paid-in capital ............................................... 92,452 92,445 Unrealized gain on investments - net of tax .............................. -- 259 Retained earnings ........................................................ 38,545 32,369 Cumulative translation adjustment ........................................ (6,477) (1,525) --------- --------- Total shareholders' equity ....................................... 124,528 123,556 --------- --------- Total liabilities and shareholders' equity ....................... $ 446,527 $ 467,441 ========= =========
See accompanying notes to condensed consolidated financial statements 2 MAXXIM MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Three Months Ended Six Months Ended --------------------- ---------------------- May 4, May 5, May 4, May 5, 1997 1996 1997 1996 --------- -------- --------- --------- Net sales ......................... $ 136,042 $ 90,859 $ 269,443 $ 177,459 Cost of sales ..................... 102,801 65,348 204,204 126,714 --------- -------- --------- --------- Gross profit ...................... 33,241 25,511 65,239 50,745 Operating expenses ................ 22,270 18,809 44,017 37,553 --------- -------- --------- --------- Income from operations ............ 10,971 6,702 21,222 13,192 Interest expense .................. (5,641) (1,800) (11,182) (3,787) Other income (expense), net ....... (748) (229) 247 (399) --------- -------- --------- --------- Income before taxes ............... 4,582 4,673 10,287 9,006 Income taxes ...................... 1,865 1,722 4,111 3,329 --------- -------- --------- --------- Net income ........................ $ 2,717 $ 2,951 $ 6,176 $ 5,677 ========= ======== ========= ========= Primary earnings per share ........ $ 0.33 $ 0.35 $ 0.75 $ 0.68 ========= ======== ========= ========= Fully diluted earnings per share .. $ 0.31 $ 0.33 $ 0.69 $ 0.64 ========= ======== ========= ========= Weighted average shares outstanding 8,269 8,339 8,253 8,318 ========= ======== ========= =========
See accompanying notes to condensed consolidated financial statements. 3 MAXXIM MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, In thousands) Six Months Ended ------------------- May 4, May 5, 1997 1996 -------- ------- Cash flows from operating activities: Net income ............................................. $ 6,176 $ 5,677 Adjustment to reconcile net income to net cash provided by operations: Depreciation and amortization .................... 9,254 6,969 Gain on sale of investment in equity securities .. (1,510) -- Change in operating assets and liabilities ....... 4,922 (5,210) -------- ------- Net cash provided by operations .......................... 18,842 7,436 Cash flows from investing activities Purchase of property and equipment ..................... (4,198) (6,164) Proceeds from the sale of Henley Assets ................ -- 6,000 Payment of accrued fees and expenses related to the acquisition of Sterile Concepts ............... (2,523) -- Proceeds from sale of investment in equity securities .. 3,130 -- Proceeds from sale of building ......................... 450 -- -------- ------- Net cash provided by (used in) investing activities ...... (3,141) (164) Cash flows from financing activities Decrease in negative book cash balance ................. (3,367) (293) Payments on long-term debt--net ........................ (10,463) (8,330) Other financing activities ............................. -- 1,379 -------- ------- Net cash used in financing activities .................... (13,830) (7,244) Effect of foreign currency translation adjustment ........ (372) (43) -------- ------- Net increase (decrease) in cash and cash equivalents ..... 1,499 (15) Cash and cash equivalents at beginning of period ......... 8,044 5,074 -------- ------- Cash and cash equivalents at end of period ............... $ 9,543 $ 5,059 ======== ======= Supplemental disclosure on non-cash investing activities: Note received from the sale of building ................ $ 350 $ -- ======== ======= Convertible note received from the sale of Henley assets $ -- $ 7,000 ======== ======= See accompanying notes to condensed consolidated financial statements. 4 MAXXIM MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Maxxim Medical, Inc. and its wholly owned subsidiaries (collectively, the Company). The Company develops, manufactures and markets specialty hospital products. The accompanying unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the Company's annual audited financial statements for the year ended November 3, 1996, included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Certain reclassifications have been made to the fiscal 1996 condensed consolidated financial statements to conform with the fiscal 1997 presentation. Note 2 - Summary of Significant Accounting Policies Fiscal Year. Commencing in fiscal year 1994 the Company implemented a fiscal year which ends on the Sunday nearest to the end of the month of October. Normally each fiscal year will consist of 52 weeks, but every five or six years, the fiscal year will consist of 53 weeks. For fiscal 1997 the year end date will be November 2 compared to a 1996 year end date of November 3. Fiscal 1997 will consist of 52 weeks. The second quarter of fiscal 1997 ended on May 4 compared to the fiscal 1996 second quarter end date of May 5. Translation of Foreign Currency Financial Statements. Assets and liabilities of foreign subsidiaries have been translated into United States dollars at the applicable rates of exchange in effect at the end of the period reported. Revenues and expenses have been translated at the applicable weighted average rates of exchange in effect during the period reported. Translation adjustments are reflected as a separate component of stockholders' equity. Earnings Per Share. Earnings per share is based on the weighted average number of common shares and common stock equivalents outstanding for the period. For purposes of this calculation, outstanding stock options are considered common stock equivalents using the treasury stock method. On a fully diluted basis, both net income available to common shareholders and shares outstanding are adjusted to assume the conversion of the 6 3/4% Convertible Subordinated Debentures from the date of issue. 5 MAXXIM MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Estimates Involved in Preparing the Condensed Consolidated Financial Statements. The Company's interim financial statements are prepared in accordance with the same accounting policies as those followed at year end. Certain items in the financial statements can be determined on an interim basis only by making accounting estimates. The accuracy of such amounts is dependent upon facts that will exist and procedures that will be accomplished by the Company later in the year. Certain of the significant accounting estimates related to the accompanying statements are stated below. Inventories - The Company makes a physical count of portions of its inventory at or near year end. The amount reflected as inventory as of May 4, 1997 and the related amount for the cost of sales have been determined using the Company's normal accounting procedures. In management's opinion, no significant adjustment would have been required had an actual count of the inventory been made. Inventory as of May 4, 1997 and November 3, 1996 included the following: May4, November 3, 1997 1996 ------- ------- (In Thousands) Raw materials ............................ $33,333 $40,239 Work in progress ......................... 8,757 8,232 Finished goods ........................... 42,456 46,616 ------- ------- $84,548 $95,087 ------- ------- Income Taxes - The Company has calculated current and deferred income tax provisions for the quarters ended May 4, 1997 and May 5, 1996, based on its best estimate of the effective income tax rate expected to be applicable for the full fiscal year. Note 3 - Sale of Marketable Equity Securities In the first quarter of fiscal 1997, the Company recorded a one-time gain from the sale of an investment in marketable equity securities in the amount of $1,510,000, which is reflected in other income in the financial statements. Note 4 - Subsequent Event On May 23, 1997 the Company issued 400,000 shares of common stock pursuant to a Senior Management Stock Purchase Plan at $13.00 per share, the closing stock price on April 30, 1997. The stock was issued in exchange for an aggregate of $5.2 million in notes from the participating managers. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes appearing elsewhere in this report. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage which selected items in the Condensed Consolidated Statements of Operations bear to net sales: Percentage of Net Sales -------------------------------------------- Three Months Ended Six Months Ended -------------------- -------------------- May 4, May 5, May 4, May 5, 1997 1996 1997 1996 -------- -------- -------- -------- Net sales ...................... 100.0% 100.0% 100.0% 100.0% Cost of sales .................. 75.6% 71.9% 75.8% 71.4% -------- -------- -------- -------- Gross profit ................... 24.4% 28.1% 24.2% 28.6% Operating expenses ............. 16.4% 20.7% 16.3% 21.2% -------- -------- -------- -------- Income from operations ......... 8.1% 7.4% 7.9% 7.4% Interest expense ............... (4.1%) (2.0%) (4.2%) (2.1%) Other income (expense), net .... (0.5%) (0.3%) 0.1% (0.2%) -------- -------- -------- -------- Income before taxes ............ 3.4% 5.1% 3.8% 5.1% Income taxes ................... 1.4% 1.9% 1.5% 1.9% -------- -------- -------- -------- Net income ..................... 2.0% 3.2% 2.3% 3.2% ======== ======== ======== ======== NET SALES -- Net Sales for the second fiscal quarter of 1997 increased 49.7% to $136,042,000 from $90,859,000 reported for the second fiscal quarter of 1996. Net sales for the first six months of fiscal 1997 were $269,443,000, a 51.8% increase over the $177,459,000 reported for the comparable period in the prior fiscal year. This increase is primarily due to the Sterile Concepts acquisition which was consummated at the end of the third quarter of fiscal 1996. GROSS PROFIT -- In the second quarter of fiscal 1997 the Company's gross profit increased to $33,241,000, compared to $25,511,000 reported in the second quarter of last year. The Company's gross profit rate declined from 28.1% in the second quarter of fiscal 1996 to 24.4% in the second quarter of fiscal 1997. For the six months ended May 4, 1997 and the six months ended May 5, 1996 gross profit was $65,239,000 and $50,745,000 , or 24.2% and 28.6% of net sales respectively. The increase in dollars and the decline in rate are both attributable to the Sterile Concepts acquisition which added significant sales volume at lower gross margin rates compared to the Company's prior year fiscal periods. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) OPERATING EXPENSES -- Operating expenses for the second quarter were $22,270,000 or 16.4% of net sales for fiscal 1997 compared to $18,809,000 or 20.7% of net sales for fiscal 1996. For the first six months of fiscal 1997 and 1996 operating expenses were $44,017,000 and $37,553,000 , or 16.3% and 21.2% of net sales, respectively. The increase in operating expenditures was directly attributable to the Sterile Concepts acquisition and the decrease in the operating expense rate to sales was primarily attributable to cost savings that resulted from combining the sales, distribution and administrative functions of the Sterile Concepts operations with the existing operations of the Company. INCOME FROM OPERATIONS -- Income from operations increased to $10,971,000, or 8.1% of net sales, in the second quarter of fiscal 1997 from $6,702,000, or 7.4% of net sales, in the comparable period of the prior fiscal year. This is an increase of 63.7% over the prior fiscal period. For the first six months of fiscal 1997 and 1996 income from operations were $21,222,000 and $13,192,000, or 7.9% and 7.4 % of net sales, respectively. INTEREST EXPENSE -- The Company's interest expense increased to $5,641,000 in the second quarter of fiscal 1997 from $1,800,000 in the second quarter of fiscal 1996. For the six months ended May 4, 1997 and May 5, 1996 interest expense was $11,182,000 and $3,787,000, respectively. The increase in interest expense for the quarter is directly related to the debt incurred to finance the Sterile Concepts acquisition. OTHER INCOME -- A one-time gain of $1,510,000 from the sale of investment securities was included in other income for the first quarter of fiscal 1997. INCOME TAXES -- The Company's effective tax rate for the quarter and six months ended May 4, 1997 was 40.7% and 40.0%, respectively, and is higher than the statuatory rate primarily due to non-deductible goodwill from acquisitions. NET INCOME -- As a result of the foregoing, net income for the second quarter of fiscal 1997 was $2,717,000 or $0.31 a share, fully diluted, versus $2,951,000 or $0.33 a share, fully diluted for fiscal 1996. For the first six months of fiscal 1997 and 1996, net income was $6,176,000 or $0.69 a share, fully diluted, versus $5,677,000 or $0.64 a share, fully diluted, respectively. LIQUIDITY AND CAPITAL RESOURCES At May 4, 1997 the Company had cash and cash equivalents of $9,543,000, working capital of $116,184,000, long-term liabilities of $240,299,000 and shareholders' equity of $124,528,000. For the six months ended May 4, 1997 net cash provided by operations was $18,842,000 versus $7,436,000 provided by operations for the six months ended May 5, 1996. On May 4, 1997 the outstanding balance on the term loan and revolver was $85,500,000 and $35,400,000, respectively, resulting in $39,600,000 of availability on the revolver at the end of the second quarter. The Company believes that its present cash balances together with internally generated cash flows and borrowings under its existing credit facility will be sufficient to meet its future working capital requirements for the reasonably forseeable future. 8 PART II. OTHER INFORMATION Items 1, 2, 3 and 5 for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its 1997 Annual Meeting of Shareholders on April 3, 1997 for the purpose of voting on the following: (1) As set forth in the table below the following directors were elected to serve until the next annual meeting of shareholders or until their respective successors are elected and qualified: NAME FOR WITHHELD Kenneth W. Davidson 6,961,507 557,050 Donald R. DePriest 6,962,807 555,750 Peter G. Dorflinger 6,963,707 554,850 Martin Grabois, M.D. 6,961,832 556,725 Ernest J. Henley, Ph.D. 6,961,007 557,550 Richard O. Martin, Ph.D. 6,962,307 556,250 Henk R. Wafelman, Ing. 6,963,107 555,450 (2) The shareholders approved the 1997 Non-Employee Directors' Stock Option Plan ("Directors' Plan") providing for the reservation of up to 40,000 shares in connection with the grant of options to purchase such shares to non-employee directors, and approved the grant of options to purchase 30,000 shares to current non-employee directors, with 4,903,028 shares voting for the Directors' Plan and grant, 670,739 shares voting against the Directors' Plan and grant, 28,835 shares abstaining, and 1,915,955 shares not voting. (3) The shareholders approved the 1997 Employee Stock Option Plan ("Employee Plan") providing for the issuance of up to 500,000 shares to employees, with 4,682,609 shares voting for the Employee Plan, 846,287 shares voting against the Employee Plan, 25,103 shares abstaining, and 1,964,558 shares not voting. All of the foregoing are discussed in further detail in the Company's definitive Proxy Statement and related documents filed with the Securities and Exchange Commission in connection with the 1997 Annual Meeting of Shareholders. 9 ITEM 6(A) EXHIBITS An asterisk below indicates an exhibit previously filed with the Securities and Exchange Commission (the "Commission") as an exhibit to Registrant's Registration Statement on Form S-8 filed with the Commission on May 22, 1997, and incorporated herein as indicated (Reg. No. 333- 27609). The number in parenthesis following the description of each such exhibit is the number of such exhibit in such Registration Statement from which such document is incorporated by reference. EXHIBIT NO. EXHIBIT TITLE ----------- ------------- *4.1 -- 1997 Employee Stock Option Plan (4.2) *4.2 -- 1997 Non-Employee Director Stock Option Plan (4.5) *4.3 -- Senior Management Stock Purchase Plan (4.6) 4.4 -- Termination Agreement between Registrant and Kenneth W. Davidson 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAXXIM MEDICAL, INC. Date:6/13/97 By: /S/ KENNETH W. DAVIDSON Kenneth W. Davidson Chairman of the Board, President & Chief Executive Officer Date:6/13/97 By: /S/ PETER M. GRAHAM Peter M. Graham Treasurer and Chief Operating Officer (Principal Financial Officer) 11 EX-4.4 2 EXHIBIT 4.4 TERMINATION AGREEMENT THIS TERMINATION AGREEMENT ("AGREEMENT") is made between MAXXIM MEDICAL, INC. a Texas corporation (the "COMPANY") and Kenneth W. Davidson, an individual (the "EXECUTIVE"). As of the 31st day of January, 1997 with respect to the following facts: RECITALS: A. The Executive is a principal officer of the Company and an integral part of its management. B. The Company wishes to assure both itself and the Executive of continuity of management in the event of any actual or threatened change in control of the Company. C. This Agreement is not intended to alter materially the compensation and benefits that the Executive could reasonably expect in the absence of a change in control of the Company and, accordingly, this Agreement, though taking effect upon execution thereof, will be operative only upon a change of control of the Company, as that term is defined herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and the agreements of the parties contained herein, the parties do hereby agree as follows: 1. OPERATION OF AGREEMENT This Agreement shall be effective immediately upon its execution by the parties hereto. Anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any provision thereof shall be operative unless and until there has been a "Change in Control" of the Company as defined in SECTION 5 below. Upon such a Change in Control of the Company, this Agreement and all provisions hereof shall become operative immediately. 2. PURPOSE AND INTENT The Board of Directors of the Company (the "BOARD") recognizes that the possibility of a Change in Control of the Company exists and that such possibility, and the uncertainty and questions which it necessarily raises among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its shareholders in this period when their undivided attention and commitment to the best interests of the Company and its Page 1 of 8 shareholders are particularly important. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company. 3. TERM OF AGREEMENT This Agreement shall be effective upon the execution thereof by the parties, and shall remain in effect until December 31, 2002, at which time it shall terminate; provided, however, that the term of this Agreement shall be extended by one day for each day after December 31, 2000 that notice of termination by either party has not been given to the other, so that at all times after December 31, 2000, if neither party has given notice of termination then this Agreement shall have a two (2) year remaining term. Either party may give notice of termination of this Agreement at any time, with or without cause. If any notice of termination is given on or before December 31, 2000, then this Agreement shall terminate December 31, 2002. If any notice of termination is given after December 31, 2000, then this Agreement shall terminate on that date two years after such notice is given. 4. TERMINATION FOLLOWING CHANGE IN CONTROL. For purposes hereof only, a termination of the Executive's employment following a Change in Control (" TERMINATION FOLLOWING CHANGE IN CONTROL") shall be deemed to occur if at any time during the two-year period immediately following a Change in Control: (a) there has been an actual termination by the Company of the Executive's employment, other than "for cause" as defined herein; (b) the Company reduces the Executive's base salary, bonus computation or title; (c) the Company substantially reduces the Executive's responsibilities as in effect immediately prior to the Change in Control or as the same may be increased from time to time, or there is a change in employment conditions deemed by the Executive to be materially adverse as compared to those in effect immediately prior to the Change in Control, any of which is not remedied within 30 days after receipt by the Company of notice by the Executive, of such reduction in responsibilities or change in employment conditions; (d) without the Executive's express written consent, the Company requires the Executive to be based anywhere other than Pinellas County, Florida, except for required travel on the Company's business to an extent substantially consistent with that prior to the Change in Control; Page 2 of 8 (e) the Company fails to obtain the assumption of the performance of this Agreement by any successor of the Company; or (f) the Company takes any action which would deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the Company fails to provide the Executive with the number of paid vacation days to which the Executive is then entitled in accordance with the Company's normal vacation policy in effect on the date of the Change in Control. The voluntary termination by the Executive of his employment by the Company shall in no event constitute a "Termination Following Change in Control." 5. DEFINITION OF CHANGE IN CONTROL. A Change in Control will be deemed to have occurred if: (a) any "person," as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the "EXCHANGE ACT"), is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding equity securities; (b) during any period of twenty-four (24) consecutive months, commencing before or after the date of this Agreement, individuals who at the beginning of such twenty-four (24) month period were directors of the Company for whom the Executive shall have voted cease for any reason to constitute at least a majority of the Board of Directors of the Company; (c) an event occurs which constitutes a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirements; (d) there is a merger or consolidation of the Company in which the Company does not survive as an independent public company; or (e) the business or businesses of the Company for which the Executive's services are principally performed are disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise. Page 3 of 8 6. COMPENSATION FOLLOWING TERMINATION. (a) Subject to the terms and conditions of this Agreement, upon a Termination Following Change in Control, as defined in SECTION 4, which occurs during the term of this Agreement, the Executive shall be entitled to (i) a lump sum payment, within fifteen (15) days following such termination, in an amount equal to two and one-half times the highest annual level of total cash compensation (including any and all bonus amounts) paid to the Executive by the Company (as reported on Form W-2) during the three calendar years ended immediately prior to such termination, (ii) the immediate vesting of all previously granted but unvested stock options to acquire securities from the Company which were outstanding on the date of the termination, and (iii) continuing health coverage for a period of twenty-four (24) months, at a level commensurate with that which the Executive enjoyed with the Company immediately prior to such Change in Control. (b) The Executive shall not be required to mitigate the amount of any payment provided for in this SECTION 6 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this SECTION 6 be reduced by any amounts to which the Executive shall be entitled by law (nor shall payment hereunder be deemed in lieu of such amounts), by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the date of termination or voluntary termination, or otherwise. (c) Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Executive or his estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or registration. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of any or all of such payments. 7. DEFINITION OF "FOR CAUSE." The Termination of the Executive's employment by the Company shall be deemed "For Cause" if it results from: (a) the willful and continued failure by the Executive substantially to perform his duties hereunder or regular failure to follow the specific directives of the Board, after demand for substantial performance that specifically identifies the manner in which the Company believes the Executive has not substantially performed his duties is delivered by the Company; Page 4 of 8 (b) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; (c) the Executive's death; or (d) an accident or illness which renders the Executive unable, for a period of at least six (6) consecutive months, to perform the essential functions of his job, notwithstanding the provision of reasonable accommodation by Employer. For purposes of this section, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated For Cause under subsection (a) or (b)without (i) reasonable notice to the Executive setting forth the reasons for the Company's intention to terminate For Cause, (ii) an opportunity for the Executive, together with his counsel, to be heard before the Board, and (iii) delivery to the Executive of a notice of termination from the Board finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth above in clause (a) or (b) of the preceding sentence and specifying the particulars thereof in detail. 8. TAX TREATMENT. It is the intention of the parties that no portion of the payment made under SECTION 6 hereof (The "TERMINATION PAYMENT") or any other payment under this Agreement, or payments to or for the Executive's benefit under any other agreement or plan, be deemed to be an excess parachute payment as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "CODE"), or its successors. It is agreed that the present value of the Termination Payment and any other payment to or for the Executive's benefit in the nature of compensation, receipt of which is contingent on the Change in Control of the Company, and to which Section 280G of the Code or any successor provision thereto applies (in the aggregate "Total Payments") shall not exceed an amount equal to one dollar less than the maximum amount which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code or any successor provisions or which the Company may pay without loss of deduction under Section 280G of the Code or any successor provision. Present value for purposes of this Agreement shall be calculated in accordance with Section 1274(b)(2) the Code or any successor provision. Within six (6) days following delivery of written notice by the Company to the Executive of the Company's belief that there is a payment or benefit due which will result in an excess parachute payment as defined in Section 280G of the Code or any successor provision, the Company and the Executive, at the Company's expense, shall obtain the opinion of legal counsel and certified public accountants, as the Company and Executive may mutually agree upon, which opinions need not be unqualified, which sets forth (i) the amount of the Executive's Base Period Page 5 of 8 Income, as defined in Section 280G of the Code, (ii) the present value of Total Payments, and (iii) the amount and present value of any excess parachute payments. In the event such opinions reunder, or any other payment determined by such counsel to be includable in Total Payments, shall be reduced or eliminated in the following order: (i) by the amount of any options to purchase securities of the Company which have had their vesting rights accelerated hereunder, and (ii) by the amount of any cash received hereunder, so that under the bases of calculation set forth in such opinions there will be no excess parachute payment. The provisions of this Section, including the calculations, notices and opinions provided herein, shall be based upon the conclusive presumption that (i) the compensation and benefits provided herein and (ii) any other compensation, including but not limited to any accrued benefits, earned by the Executive prior to the Change in Control of the Company pursuant to the Company's compensation programs, would have been reasonable if made in the future in any event, even though the timing of such payment is triggered by the Change in Control of the Company. In the event such legal counsel so requests in connection with the Section 280G opinion required by this Section, the Company and Executive shall obtain, at the Company's expense, the advice of a firm of recognized executive compensation consultants concerning the reasonableness of any item of compensation to be received by the Executive, on which advice legal counsel may rely in providing their opinion. In the event that the provisions of Sections 280G and 4999 of the Code or any successor provision are repealed without succession, this Section shall be of no further force or effect. 9. MISCELLANEOUS. (a) INTENT. This Agreement is made by the Company in order to induce the Executive to remain in the Company's employ, with the Company's acknowledgment and intent that it will be relied upon by the Executive, and in consideration of the services to be performed by the Executive from time to time hereafter. However, this Agreement is not an agreement to employ the Executive for any period of time or at all, and the terms and conditions of the Executive's employment, other than those expressly addressed herein, shall be subject to and governed by a separate agreement of employment between the Company and the Executive. This Agreement is intended only as an agreement to provide the Executive with a specified compensation and benefits if he or she is terminated following a Change in Control. (b) ATTORNEY'S FEES. If any action at law or in equity is commenced to enforce any of the provisions or rights under this Agreement, the unsuccessful party to such litigation, as determined by the court in a final judgment or decree, shall pay the successful party all costs, expenses and reasonable attorneys' fees incurred by the successful party or parties (including, without limitation, costs, expenses and fees on any appeals), and if the successful party recovers judgment in any such action or proceeding, such costs, expenses and attorneys' fees shall be included as part of the judgment. Page 6 of 8 (c) GOVERNING LAW. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Texas. (d) SUCCESSORS AND ASSIGNS. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree in writing to perform this Agreement. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall require the Company to pay to the Executive compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder in the event of a Termination Following Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed to be the date on which the Executive shall receive such compensation from the Company. As used in this Agreement, "Company" shall mean the Company as herein above defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation or law or otherwise. (ii) This Agreement shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee or other designee or, if there is no such designee, to Executive's estate. (e) NOTICES. Except as otherwise expressly provided herein, any notice, demand or payment required or permitted to be given or paid shall be deemed duly given or paid only if personally delivered or sent by United States mail and shall be deemed to have been given when personally delivered or two (2) days after having been deposited in the United States mail, certified mail, return receipt requested, properly addressed with postage prepaid. All notices or demands shall be effective only if given in writing. For the purpose hereof, the addresses of the parties hereto (until notice of a change thereof is given as provided in this Section 9(f)), shall be as follows: The Company: Maxxim Medical, Inc. 104 Industrial Boulevard Sugar Land, Texas 77478 Attn: Chief Operating Officer Page 7 of 8 Executive: Kenneth W. Davidson ------------------- ------------------- (f) SEVERABILITY. In the event any provision in this Agreement shall be invalid, illegal or unenforceable, such provision shall be severed from the rest of this Agreement and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. (g) ENTIRETY. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous agreement or understandings relating to the subject matter hereof. (h) AMENDMENT. This Agreement may be amended only by a written instrument signed by the parties hereto, which makes specific reference to this Agreement. (i) SETOFF. There shall be no right of setoff or counterclaim, in respect of any claim, debt or obligation, against any payments to the Executive, his dependents, beneficiaries or estate provided for in this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. THE COMPANY: MAXXIM MEDICAL, INC. By:_______________________________________ Richard O. Martiin, Phd., Chairman of Compensation Committee EXECUTIVE: __________________________________________ Kenneth W. Davidson Page 8 of 8 EX-27 3
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAXXIM MEDICAL, INC.'S 10-Q FOR THE QUARTER ENDED MAY 4, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS NOV-03-1997 MAY-04-1997 9,543 0 85,878 0 84,548 192,067 121,826 27,979 446,527 75,883 128,750 0 0 8 124,520 446,527 269,443 269,443 204,204 44,017 (247) 0 11,182 10,287 4,111 6,176 0 0 0 6,176 .75 .69
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