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Exhibit (c)(6)
AMENDED AND RESTATED
INVESTOR PARTICIPATION AGREEMENT
THIS INVESTOR PARTICIPATION AGREEMENT (this "Agreement"), dated June
13, 1999, as amended and restated on September 30, 1999, is made by and among
Fox ▇▇▇▇▇ Medic Acquisition Corporation, a Texas corporation ("Purchaser") and
the undersigned individuals, whose names are set forth on the signature page
below (collectively, the "Investors" and, together with Purchaser, the
"Parties"), acting in their individual capacities (other than ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, who is acting in his individual capacity and as general partner of
Davidson Management International Limited Partnership).
WHEREAS, concurrently herewith, Purchaser and Maxxim Medical, Inc., a
Texas corporation (the "Company"), are entering into an Agreement and Plan of
Merger, of even date herewith (the "Merger Agreement"), providing for a
recapitalization transaction that will result in Purchaser and the Investors
owning substantially all of the outstanding capital stock of the Company, as
more fully set forth therein;
NOW, THEREFORE, in consideration of the promises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
1. Parties to be Bound by Attached Term Sheet. The Parties, and each of
them, severally agree to all of the terms and conditions set forth in the term
sheet attached hereto as Annex A and the attachments thereto (the "Term Sheet")
and the stock and option treatment provided therein, and, unless and until
definitive documentation incorporating the terms set forth in the Term Sheet has
been executed and delivered, each of the Parties agrees that the Term Sheet
constitutes a binding agreement among the Parties, enforceable against each such
Party in accordance with its terms.
2. Execution of Definitive Documentation. Each Party agrees to
negotiate in good faith and use all reasonable efforts to prepare, execute and
deliver definitive agreements and other instruments implementing the terms set
forth in the Term Sheet on reasonable and customary terms; provided, however,
that no failure or delay in the delivery and execution of such definitive
agreements or instruments shall affect the validity, enforceability or binding
nature of the Term Sheet. Without limiting the foregoing, Purchaser agrees that
after Closing the Company will prepare, adopt and effectuate any employee
benefit plans, including stock option plans, and including issuing options to
purchase shares of its capital stock pursuant to such plans, as may be necessary
to effectuate the purposes and intent of the Term Sheet.
3. Merger Agreement. Each Investor hereby acknowledges that such
Investor has read the Merger Agreement and has had an opportunity to consult
with such Investor's counsel concerning the same, and the Investor accepts and
agrees to the terms and conditions of the Merger Agreement that relate to the
treatment of such Investor's shares of Company common stock (including as
provided in Section 1.8(b)) and such Investor's options to purchase shares of
Common Stock (including as provided in Section 1.10), and the Investor hereby
irrevocably waives any claim that the Merger Agreement, the Merger or any other
transaction contemplated by the Merger Agreement (including the Circon Sale (as
defined therein)) violates any right of
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the Investor under the Texas Business Corporation Act, any fiduciary obligation
owed by the Company or any of its directors or officers to the Investor, or any
obligation owed by the Company to the Investor pursuant to any agreement between
the Company and the Investor or pursuant to any employee benefit plan or stock
option or similar plan of the Company in which the Investor participates.
4. Miscellaneous. The Parties hereto agree as follows:
a) Amendments. This Agreement may not be amended except
by an instrument in writing signed by all of the Parties hereto; provided that
any Party may waive or amend any right of such Party hereunder.
b) Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more of the counterparts have
been signed by each of the Parties and delivered to the other Parties, it being
understood that each Party need not sign the same counterpart.
c) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware
without regard to the conflicts of law principles thereof.
d) Termination. In the event the Merger Agreement is
terminated in accordance with its terms prior to the occurrence of the Effective
Time, this Agreement shall terminate, and no party shall have any rights or
obligations hereunder and this Agreement shall become null and void and have no
further legal effect immediately following the termination of the Merger
Agreement in accordance with its terms. Nothing in this Section shall relieve
any party of liability for breach of this Agreement.
e) Obligations Several. The obligations of the Investors
hereunder shall be several and not joint and several.
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IN WITNESS WHEREOF, Purchaser, the Company, and each of the Investors
has executed this Agreement as of the date first written above.
FOX ▇▇▇▇▇ MEDIC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇
Title: Chief Executive Officer
(Investor Signatures appear on following page)
[Signature Page 1 of 2 to Investor Participation Agreement]
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INVESTORS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, in his individual
capacity and as general partner of
Davidson Management International
Limited Partnership
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[Signature Page 1 of 2 to Investor Participation Agreement]
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AMENDED AND RESTATED
PROJECT MEDIC
MANAGEMENT/DIRECTOR EQUITY INVESTMENT AND STOCK AND COMPENSATION TERM SHEET
This term sheet sets forth the principal terms and conditions under which the
executive management team (the "Management Investors") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Other Investors", and together with the Management
Investors, the "Rollover Investors") of Maxxim Medical, Inc. ("Medic" or the
"Company") are to retain an equity interest in Medic and Circon Corporation
("Citron") upon the recapitalization of the Company and related transactions
(the "Recapitalization") by the investment funds managed by Fox ▇▇▇▇▇ &
Company, LLC ("Fox ▇▇▇▇▇") and the Rollover Investors. It also sets forth the
principal terms and conditions of the ongoing stock and compensation
arrangements.
RECAPITALIZATION PRICE: $26 per share.
ROLLOVER INVESTORS: The names, share ownership, vested options, and
unvested options of each Rollover Investor are
summarized in Exhibit A. Exhibit B provides
additional detail concerning the split-up of Citron
from Medic and its effect on shares and options held
by the Rollover Investors. If, in order to
facilitate the Recapitalization, Fox ▇▇▇▇▇
reallocates its relative equity contributions
between Medic and Citron, the Rollover Investors
agree that their respective equity in Medic and
Citron will also be equitably adjusted in order to
preserve the proportionate ownership between the
Rollover Investors and Fox ▇▇▇▇▇ currently reflected
in Exhibits A and B.
SHARE OWNERSHIP The Rollover Investors collectively own 927,318
AND ROLLOVER: shares of Medic common stock (excluding shares owned
by the Other Investors not being rolled over) (see
Exhibit A). Each Rollover Investor will retain the
number of shares in Medic and acquire with the
proceeds of the cashout of Medic shares in the
Merger the number of shares in Citron in each case
as set forth in Annex III to Exhibit B.
VESTED AND The Management Investors collectively hold options
UNVESTED OPTIONS: to purchase 1,084,200 shares of Medic common stock
(see Exhibit A). Upon the consummation of the
transaction, the Management Investors will receive a
cash payment in respect of 668,025 options (both
vested or unvested) equal to the difference between
the Recapitalization Price and the exercise price of
each such option (less applicable withholding taxes)
on the same basis as other Medic option holders are
being cashed out in the transaction (options at
various purchase prices to be cashed out
proportionately). The after-tax cash proceeds from
the cancellation of the 668,025 Medic options will
be required to be reinvested in Medic common stock
at the Recapitalization Price (the "Medic Additional
Shares"). Each Management Investor will receive a
new option in respect of the number of shares of
Medic common stock set forth on Annex III to Exhibit
B at an exercise price equal to the
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Recapitalization Price (the aggregate being 668,025
less the Medic Additional Shares purchased pursuant
to the prior sentence). The remaining 416,175
options in Medic held by the Management Investors
will be canceled and each Management Investor will
also receive new options in respect of a number of
shares of Citron equal to such canceled option
shares and with an exercise price equal to the
Recapitalization Price. In addition, the Management
Investors will be entitled to receive a cash bonus
payment of approximately $5.0 million in the
aggregate as provided for in item 3 of the "Option
Rollover Mechanics" section of Exhibit B hereto. New
options will be fully vested and permit cashless
exercise with "mature" shares (payment of the
exercise price with previously owned shares).
CITRON TAX LOAN: In connection with the Citron share rollover from
Medic shares, tax loans will be extended to the
Rollover Investors in an amount sufficient to cover
the taxes due on the Medic shares sold to rollover
into the Citron rollover shares. Interest on the
loans will be imputed at the minimum allowable rate
and will be "bonused" and grossed-up for the tax on
any bonus amounts. The Citron tax loans will be
mandatorily repayable from the after-tax proceeds of
the sale of Citron shares (and not required to be
repaid from the proceeds of the sale of Medic
shares), and shall not accelerate on termination of
employment.
EXISTING MANAGEMENT In May 1997, the Company issued 400,000 shares of
PROMISSORY NOTES: common stock pursuant to a Senior Management Stock
Purchase Plan at $13.00 per share. The stock was
issued in exchange for an aggregate of $4,498,000
currently outstanding principal amount in
non-interest bearing, full recourse promissory notes
(the "Management Promissory Notes") due May 23, 2000
from the participating managers who are Management
Investors. The Management Promissory Notes will
remain outstanding after the Recapitalization and be
extended until the tenth anniversary of the closing
(except that (x) Management Promissory Notes from
any employee who is not a Management Investor will
be required to be repaid by the employee in
connection with the cash-out of his or her options
provided for in the Merger Agreement and (y) the
Management Investors will be required to prepay the
Notes with the after-tax proceeds of any sales of
stock or options made after the Effective Time). The
50% profit recovery provision currently in place
shall be amended out of the documents. The
Management Promissory Notes will not accelerate on
termination of employment. The Management Promissory
Notes and related security arrangements will be
split pro rata between Medic and Citron.
NEW MANAGEMENT EQUITY The Company and Citron each will provide a New
INCENTIVE PLAN: Management Equity Incentive Plan (the "New Incentive
Plan") which will grant to the Management Investors,
as of the Effective Time, options (the "Option
Pool") to purchase up to 10% of the common equity of
the
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Company and Citron (in each case on a fully diluted
basis) at a strike price equal to the
Recapitalization Price. The New Incentive Plan will
generally provide for a ten year option term and
will permit cashless exercise with "mature" shares
(payment of the exercise price with previously owned
shares). EBITDA Targets will be adjusted equitably
to reflect acquisitions and dispositions. The Option
Pool will consist of (x) half performance-based
options ("Pool A Options") that vest according to
the schedule below and (y) half time-based options
that vest in equal increments on each of the first
through fifth anniversaries of the closing (the "Time
Based Options").
VESTING SCHEDULE FOR POOL A COMPANY OPTIONS
------------------------------------------------------------
FISCAL EBITDA % OF OPTION POOL VESTING THROUGH
YEAR TARGET ACHIEVEMENT OF EBITDA TARGET
--------- ------ --------------------------------
(IN MILLIONS)
1999 $80.9 20%
2000 $84.3 20%
2001 $88.5 20%
2002 $92.9 20%
2003 $97.6 20%
VESTING SCHEDULE FOR POOL A CITRON OPTIONS
------------------------------------------------------------
FISCAL EBITDA % OF OPTION POOL VESTING THROUGH
YEAR TARGET ACHIEVEMENT OF EBITDA TARGET
--------- ------ --------------------------------
(IN MILLIONS)
1999 $24.6 20%
2000 $37.4 20%
2001 $38.9 20%
2002 $40.5 20%
2003 $42.1 20%
Pool A Options that do not vest will become "Pool B
Options" and will vest at the earliest of: (i) the
next fiscal year in which the EBITDA Target is
achieved, (ii) Fox ▇▇▇▇▇'▇ realization of its
investment in the Company or Citron, as the case may
be, provided that such realization yields an IRR to
Fox ▇▇▇▇▇ of at least 30.0% after giving effect to
the vesting and exercise of the Pool B Options
pursuant to this clause (ii), or (iii) the ninth
anniversary of the date of grant. For the purposes
of the Pool B Options, a primary initial public
offering of the Company's or Citron's stock, as the
case may be (an "Initial Public Offering"), shall
not constitute a realization of Fox ▇▇▇▇▇'▇
investment in the Company or Citron, respectively.
The Time Based Options and the Pool A Options will
also vest and be exercisable, regardless of the
passage of time, upon Fox ▇▇▇▇▇'▇ realization of an
IRR of at least 30.0%.
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ALLOCATION OF OPTION POOL: The total Option Pool will be granted to the
Management Investors, based on the recommendation of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ for approval by the Compensation
Committee of the Board of Directors.
TERMINATION OF NEW Stock options granted under the New Incentive Plans
INCENTIVE PLAN OPTIONS: that are unvested as of the date of a Management
Investor's termination of employment with the
Company, Citron and/or their respective subsidiaries
for any reason will be forfeited upon the date of
termination. Stock options (under old and new plans)
that are vested as of the date of termination may be
exercised for one year following the termination of
employment. Vested stock options that are not
exercised within one year of the date of termination
will be forfeited.
BONUSES: The Management Investors will receive aggregate
bonus compensation, as specified in Exhibit C.
EXISTING SEVERANCE Existing employment agreements and severance
AGREEMENTS/NEW agreements for the Management Investors will be
EMPLOYMENT terminated without payment and superseded by new
AGREEMENTS: employment agreements that will become effective
upon the consummation of the transaction. The
material terms of the new agreements are set forth
on Exhibit D.
TAG-ALONG RIGHT: If, at any time prior to an Initial Public Offering,
Fox ▇▇▇▇▇ or a Rollover Investor (as the case may
be) accepts a third party offer to sell any or all
of its common stock in either company (other than to
a permitted transferee), Fox ▇▇▇▇▇ and each other
Rollover Investor (as the case may be) will be able
to participate on a proportionate basis, based on
ownership, at the same price and on the same terms
in the sale of shares of such company.
DRAG-ALONG RIGHTS: Prior to an Initial Public Offering, if Fox ▇▇▇▇▇
sells at least 50% of its common stock in either
company in a bona fide arm's length transaction or
series of related transactions, Fox ▇▇▇▇▇ may
require the Rollover Investors to sell a
proportional number (on an as-converted basis) of
their shares of common stock in that same company in
the same transaction (at the same price and on the
same terms, with appropriate adjustments for
warrants or options).
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REGISTRATION RIGHTS: After an Initial Public Offering, the Rollover
Investors will have one demand in Citron and two in
Medic, and Fox ▇▇▇▇▇ will have five in each. All
such parties will have full piggybacks in each
other's demands, with no relative priority as to
cutbacks; cutbacks will be proportional based on
ownership among the parties, no matter who initiated
the demand. Fox ▇▇▇▇▇ and Rollover Investors will
also have customary "piggyback" registration rights.
Expenses, in both demands and piggybacks, to be
borne by Medic or Citron, as the case may be. Other
customary registration rights provisions will apply,
including holdbacks, indemnification and
contribution provisions. If Fox ▇▇▇▇▇ is permitted
to sell secondary shares in an Initial Public
Offering, the Rollover Investors will get a
proportionate opportunity.
RIGHT OF FIRST OFFER: Fox ▇▇▇▇▇ and the Rollover Investors will have
reciprocal proportional rights of first offer
(seller to propose minimum sale price) on transfers
of shares (acceptance must be all shares offered or
none as to the group), other than transfers to
customary permitted transferees (including with
respect to Fox ▇▇▇▇▇, its investors and affiliates,
and including with respect to Rollover Investors,
family members and trusts for them), prior to an
Initial Public Offering. Permitted transferees step
into shoes of transferor for transfer restriction
and registration rights provisions.
LIQUIDITY UPON DEATH OR Citron Shares: The Management Investors will have
DISABILITY AND CERTAIN the right to "put" all of their Citron shares to
TERMINATIONS: Citron at fair market value, upon death or
disability or termination of employment for Good
Reason, or by the companies without Cause (each as
defined in the Employment Agreement).
Medic Shares: The Management Investors will have the
right to "put" their shares of Medic which were
acquired upon the exercise of stock options
(provided that the shares have been held for at
least six months), less the number of shares used to
exercise in cashless exercises, but including the
Medic Additional Shares (the governing objective
being to preserve recapitalization accounting) to
Medic at fair market value, upon death or disability
or termination of employment for Good Reason or by
the companies without Cause.
Notwithstanding the above, the put rights described
above will be subject to each company's available
cash flow, debt restrictions and any legal
restrictions on distributions of cash from the
relevant company. In the event the payments with
respect to put rights are not satisfied in whole or
in part immediately, the payments will be a
continuing obligation of the relevant company and
such rights will be satisfied before the payment of
any dividends or distributions to shareholders. Any
unpaid amounts upon exercise of a put right will
accrue interest at applicable "afr" rate. The put
rights terminate upon an Initial Public Offering.
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CALL RIGHT: Prior to an Initial Public Offering, Citron will
have call rights at fair market value with respect
to Citron stock only, upon a termination of
employment by the companies for Cause or by the
Management Investor voluntarily (without Good
Reason).
BOARD OF DIRECTORS: Each Company's Board of Directors will initially
consist of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (Chairman), ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Ph.D. and one other member to be appointed
by the Rollover Investors and four members
designated by Fox ▇▇▇▇▇ (not limiting Fox ▇▇▇▇▇ or
the companies' rights to add additional directors).
The right to appoint Board members will terminate
upon an Initial Public Offering or significant
reduction in ownership percentage. While ▇▇▇
▇▇▇▇▇▇▇▇ is CEO or Chairman of the Board, all three
Rollover Investor representatives will be designated
by him; thereafter, by plurality vote of shares held
by the Rollover Investors.
INDEMNITY: Following the consummation of the transaction, the
Board of Directors of each Company will adopt a
customary mandatory indemnification and expense
advancement policy for officers, subject to any
limitations imposed by applicable law.