<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Schedule 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
----------------------
St. Jude Medical, Inc.
(Name of Issuer)
St. Jude Medical, Inc.
(Name of Person(s) Filing Statement)
----------------------
Common Stock, par value $.10 per Share
(Including Associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
790849103
(CUSIP Number of Class of Securities)
Kevin T. O'Malley
Vice President and General Counsel
St. Jude Medical, Inc.
One Lillehei Plaza
St. Paul, Minnesota 55117
(612) 483-2000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications
on Behalf of the Person Filing Statement)
----------------------
Copy to:
Gary L. Tygesson
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
(612) 340-8753
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February 12, 1998
(Date Tender Offer First Published, Sent or Given to Security Holders)
----------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
- --------------------------------------------------------------------------------
$312,000,000 $62,400
================================================================================
* Calculated solely for purposes of determining the filing fee, based upon
the purchase of 8,000,000 shares at the maximum tender offer price per
share of $39.00.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date File: N/A
<PAGE>
This Issuer Tender Offer Statement on Schedule 13E-4 (the "Statement")
relates to the tender offer by St. Jude Medical, Inc., a Minnesota corporation
(the "Company"), to purchase up to 8,000,000 shares of its common stock, par
value $.10 per share (the "Shares"), including the associated Preferred Stock
Purchase Rights, at prices, net to the seller in cash, not greater than $32.00
nor less than $39.00 per Share, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated February 12, 1998 (the "Offer to
Purchase") and the related Letter of Transmittal (which are herein collectively
referred to as the "Offer"). Copies of such documents are filed as Exhibits
(a)(1) and (a)(2), respectively, to this Statement.
Item 1. Security and Issuer
(a) The name of the issuer is St. Jude Medical, Inc., a Minnesota
corporation. The address of its principal executive offices is One Lillehei
Plaza, St. Paul, Minnesota 55117.
(b) The information set forth in "Introduction," "Section 1. Number of
Shares; Proration" and "Section 9. Interests of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares" in the Offer to
Purchase is incorporated herein by reference. The Offer is being made to all
holders of Shares, including officers, directors and affiliates of the Company,
although the Company has been advised that none of its directors or executive
officers intends to tender any Shares pursuant to the Offer.
(c) The information set forth in "Introduction" and "Section 7. Price Range
of Shares; Dividends" in the Offer to Purchase is incorporated herein by
reference.
(d) This Statement is being filed by the issuer.
Item 2. Source and Amount of Funds or Other Consideration
(a)-(b) The information set forth in "Section 10. Source and Amount of
Funds" in the Offer to Purchase is incorporated herein by reference.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer
(a)-(j) The information set forth in "Introduction," "Section 8. Background
and Purpose of the Offer; Certain Effects of the Offer," "Section 9. Interests
of Directors and Executive Officers; Transactions and Arrangements Concerning
the Shares," "Section 10. Source and Amount of Funds" and "Section 12. Effects
of the Offer on the Market for Shares; Registration Under the Exchange Act" in
the Offer to Purchase is incorporated herein by reference.
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Item 4. Interest in Securities of the Issuer
The information set forth in "Section 9. Interests of Directors and
Executive Officers; Transactions and Arrangements Concerning the Shares" and
"Schedule I-Certain Transactions Involving Shares" in the Offer to Purchase is
incorporated herein by reference.
Item 5. Contracts, Arrangements, Understandings or Relationships with Respect
to the Issuer's Securities.
The information set forth in "Introduction," "Section 8. Background and
Purpose of the Offer; Certain Effects of the Offer" and "Section 9. Interests of
Directors and Executive Officers; Transactions and Arrangements Concerning the
Shares" in the Offer to Purchase is incorporated herein by reference.
Item 6. Persons Retained, Employed or to be Compensated
The information set forth in "Introduction" and "Section 16. Fees and
Expenses" in the Offer to Purchase is incorporated herein by reference.
Item 7. Financial Information
(a)-(b) The information set forth in "Section 11. Certain Information About
the Company" in the Offer to Purchase is incorporated herein by reference. The
information set forth in (i) pages 4-23 and page 34 of the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission on February
11, 1998, filed as Exhibit (g)(1) hereto; and (ii) pages 2-7 of the Company's
Quarterly Report on Form 10-Q for the nine months ended September 30, 1997,
filed as Exhibit (g)(2) hereto, in each case, is incorporated herein by
reference.
Item 8. Additional Information
(a) Not applicable.
(b) The information set forth in "Section 13. Certain Legal Matters;
Regulatory and Foreign Approvals" in the Offer to Purchase is incorporated
herein by reference.
(c) The information set forth in "Section 12. Effects of the Offer on the
Market for Shares; Registration Under the Exchange Act" in the Offer to
Purchase is incorporated herein by reference.
(d) Not applicable.
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(e) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively, is incorporated herein by reference.
Item 9. Material to be Filed as Exhibits
(a)(1) Form of Offer to Purchase dated February 12, 1998.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Form of Letter dated February 12, 1998 to Shareholders from the Chairman
and Chief Executive Officer of the Company.
(a)(7) Form of Press Release issued by the Company dated February 11, 1998.
(a)(8) Form of Summary Advertisement dated February 12, 1998.
(a)(9) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(b) Commitment Letter dated February 11, 1998 between the Company and Bank of
America National Trust and Savings Association and Credit Suisse First
Boston Corporation and related Terms Sheet.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Pages 4-23 and 34 of the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 11, 1998.
(g)(2) Pages 2-7 of the Company's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1997.
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<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
St Jude Medical, Inc.
By: /s/ Robert E. Munzenrider
-----------------------------------
Robert E. Munzenrider
Vice President, Finance and
Dated: February 12, 1998 Chief Financial Officer
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Item Description Page
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(a)(1) Form of Offer to Purchase dated February 12, 1998...................
(a)(2) Form of Letter of Transmittal.......................................
(a)(3) Form of Notice of Guaranteed Delivery...............................
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees........................................
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees...........................
(a)(6) Form of Letter dated February 12, 1998 to Shareholders from the
Chairman and Chief Executive Officer of the Company......
(a)(7) Form of Press Release issued by the Company dated
February 11, 1998...................................................
(a)(8) Form of Summary Advertisement dated February 12, 1998...............
(a)(9) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9..............................................
(b) Commitment Letter dated February 11, 1998 between the Company
and Bank of America National Trust and Savings Association and
Credit Suisse First Boston
Corporation and related Terms Sheet.................................
(c) Not applicable......................................................
(d) Not applicable......................................................
(e) Not applicable......................................................
(f) Not applicable......................................................
(g)(1) Pages 4-23 and 34 of the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 11, 1998....
(g)(2) Pages 2-7 of the Company's Quarterly Report on Form 10-Q
for the nine months ended September 30, 1997........................
</TABLE>
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<PAGE>
EXHIBIT (a)(1)
ST. JUDE MEDICAL, INC.
OFFER TO PURCHASE FOR CASH UP TO
8,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT IN EXCESS OF $39.00
NOR LESS THAN $32.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, MARCH 12, 1998, UNLESS THE OFFER IS EXTENDED.
-----------
St. Jude Medical, Inc., a Minnesota corporation (the "Company"), hereby
invites its shareholders to tender shares of its common stock, par value
$.10 per share (the "Shares"), including the associated Preferred Stock
Purchase Rights (the "Rights"), to the Company at prices not in excess of
$39.00 nor less than $32.00 per Share in cash, as specified by
shareholders tendering their Shares, upon the terms and subject to the
conditions set forth in this Offer to Purchase and the related Letter
of Transmittal (which together constitute the "Offer"). Unless the
Rights are redeemed by the Company or become separately tradeable
prior to the Expiration Time (as defined herein), a tender of
Shares will also constitute a tender of the associated Rights.
Unless the context requires otherwise, all references herein to
Shares shall include the associated Rights.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price, not in excess of $39.00 nor less than
$32.00 per Share, net to the seller in cash (the "Purchase Price"), that
it will pay for Shares validly tendered and not withdrawn pursuant to
the Offer, taking into account the number of Shares so tendered and
the prices specified by tendering shareholders. The Company will
select the lowest Purchase Price that will allow it to buy
8,000,000 Shares (or such lesser number of Shares as are validly
tendered and not withdrawn at prices not in excess of $39.00 nor
less than $32.00 per Share) pursuant to the Offer. All Shares
validly tendered at prices at or below the Purchase Price and
not withdrawn will be purchased at the Purchase Price, upon
the terms and subject to the conditions of the Offer,
including the proration terms hereof. The Company
reserves the right, in its sole discretion, to
purchase more than 8,000,000 Shares pursuant to the
Offer. See Section 15.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
The Shares are listed and traded on the New York Stock Exchange, Inc.
(the "NYSE") under the symbol "STJ." On February 11, 1998, the last
full trading day on the NYSE prior to the announcement by the
Company of the Offer, the closing per Share sales price as
reported on the NYSE Composite Tape was $34.69.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES. SEE SECTION 7.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
SHARES. SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR
PRICES AT WHICH SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN
ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS
INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any shareholder desiring to tender all or any portion of his or her Shares
should either (i) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal,
mail or deliver it with any required signature guarantee and any other
required documents to American Stock Transfer & Trust Company (the
"Depositary"), and either mail or deliver the stock certificates for such
Shares to the Depositary (with all such other documents) or tender such Shares
pursuant to the procedure for book-entry delivery set forth in Section 3, or
(ii) request a broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such shareholder. A shareholder having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact that broker, dealer, commercial bank, trust company
or other nominee if such shareholder desires to tender such Shares.
Shareholders who desire to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply with the procedure
for book-entry transfer on a timely basis or whose other required
documentation cannot be delivered to the Depositary, in any case, by the
expiration of the Offer should tender such Shares by following the procedures
for guaranteed delivery set forth in Section 3.
TO EFFECT A VALID TENDER OF THEIR SHARES, SHAREHOLDERS MUST VALIDLY COMPLETE
THE LETTER OF TRANSMITTAL, INCLUDING THE SECTION RELATING TO THE PRICE AT
WHICH THEY ARE TENDERING SHARES.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery
may be directed to the Information Agent or to the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION
WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
The Dealer Manager for the Offer is:
[Credit Suisse First Boston Logo]
February 12, 1998
<PAGE>
SUMMARY
This general summary is provided for the convenience of the Company's
shareholders and is qualified in its entirety by reference to the full text and
more specific details of this Offer to Purchase.
Number of Shares to be 8,000,000 Shares (or such lesser number of Shares
Purchased................... as are validly tendered and not withdrawn at
prices not in excess of $39.00 nor less than
$32.00 per Share).
Purchase Price.............. The Company will determine a single per Share
cash price, not in excess of $39.00 nor less than
$32.00 per Share, that it will pay for Shares
validly tendered and not withdrawn taking into
account the number of Shares so tendered and the
prices specified by the tendering shareholders.
All Shares purchased by the Company will be
purchased at the Purchase Price even if tendered
below the Purchase Price. Each shareholder
desiring to tender Shares must specify in the
Letter of Transmittal the minimum price (not in
excess of $39.00 nor less than $32.00 per Share)
at which such shareholder is willing to have his
or her Shares purchased by the Company.
How to Tender Shares........ See Section 3. Call the Information Agent, the
Dealer Manager or consult your broker for
assistance.
Brokerage Commissions....... None for registered shareholders who tender their
Shares directly to the Depositary. Shareholders
holding Shares through brokers or banks are urged
to consult such brokers or banks to determine
whether transaction costs are applicable if
shareholders tender Shares through such brokers
or banks and not directly to the Depositary.
Stock Transfer Tax.......... None, if payment is made to the registered
holder.
Expiration Time and Thursday, March 12, 1998, at 12:00 Midnight, New
Proration Date.............. York City time, unless extended by the Company.
Payment Date................ As soon as practicable after the Expiration Time.
Position of the Company and
its Directors..............
Neither the Company nor its Board of Directors
makes any recommendation to any shareholder as to
whether to tender or refrain from tendering
Shares. Shareholders must make their own
decisions whether to tender Shares and, if so,
how many Shares to tender and the price or prices
at which Shares should be tendered. The Company
has been advised that none of its directors or
executive officers intends to tender any Shares
pursuant to the Offer.
Withdrawal Rights........... Tendered Shares may be withdrawn at any time
before 12:00 Midnight, New York City time, on
Thursday, March 12, 1998, unless the Offer is
extended by the Company and, unless previously
purchased, after 12:00 Midnight, New York City
time, on Thursday, April 9, 1998. See Section 4.
Odd Lots.................... There will be no proration of Shares tendered by
any shareholder owning beneficially fewer than
100 Shares in the aggregate (excluding Restricted
Shares (as defined herein)) as of the close of
business on February 11, 1998, and as of the
Expiration Time, provided such shareholder
tenders all such Shares at or below the Purchase
Price prior to the Expiration Time and checks the
"Odd Lots" box in the Letter of Transmittal. See
Section 2.
2
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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INTRODUCTION............................................................ 4
THE OFFER............................................................... 6
1. Number of Shares; Proration.................................... 6
2. Tenders by Owners of Fewer than 100 Shares..................... 8
3. Procedure for Tendering Shares................................. 8
4. Withdrawal Rights.............................................. 12
5. Purchase of Shares and Payment of Purchase Price............... 13
6. Certain Conditions of the Offer................................ 14
7. Price Range of Shares; Dividends............................... 16
8. Background and Purpose of the Offer; Certain Effects of the
Offer......................................................... 16
9. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares............................ 17
10. Source and Amount of Funds..................................... 18
11. Certain Information about the Company.......................... 19
12. Effects of the Offer on the Market for Shares; Registration
under the Exchange Act........................................ 28
13. Certain Legal Matters; Regulatory and Foreign Approvals........ 29
14. Certain U.S. Federal Income Tax Consequences................... 29
15. Extension of the Offer; Termination; Amendments................ 31
16. Fees and Expenses.............................................. 32
17. Miscellaneous.................................................. 33
</TABLE>
<TABLE>
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SCHEDULE I--Certain Transactions Involving Shares........................... S-1
</TABLE>
THIS OFFER TO PURCHASE CONTAINS CERTAIN "FORWARD LOOKING STATEMENTS" THAT
ARE SUBJECT TO RISK AND UNCERTAINTIES, SUCH AS THOSE DESCRIBED IN THE
COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1996
(SEE PAGE 25) AND FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 (SEE PAGE
10). ACTUAL RESULTS MAY DIFFER MATERIALLY FROM ANTICIPATED RESULTS.
3
<PAGE>
To the Holders of Shares of Common Stock of St. Jude Medical, Inc.:
INTRODUCTION
St. Jude Medical, Inc., a Minnesota corporation (the "Company"), invites its
shareholders to tender shares of its common stock, par value $.10 per share
(the "Shares"), including the associated Preferred Stock Purchase Rights (the
"Rights") to the Company at prices not in excess of $39.00 nor less than
$32.00 per Share in cash, as specified by shareholders tendering their Shares,
upon the terms and subject to the conditions set forth in this Offer to
Purchase and the related Letter of Transmittal (which together constitute the
"Offer"). Unless the Rights are redeemed by the Company or become separately
tradeable prior to the Expiration Time (as defined in Section 1), a tender of
Shares will also constitute a tender of the associated Rights. Unless the
context requires otherwise, all references herein to Shares shall include the
associated Rights.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price not in excess of $39.00 nor less than
$32.00 per Share, net to the seller in cash (the "Purchase Price"), that it
will pay for Shares validly tendered and not withdrawn pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified
by tendering shareholders. The Company will select the lowest Purchase Price
that will allow it to buy 8,000,000 Shares (or such lesser number of Shares as
are validly tendered and not withdrawn at prices not in excess of $39.00 nor
less than $32.00 per Share) pursuant to the Offer. All Shares validly tendered
prior to the Expiration Time at prices at or below the Purchase Price and not
withdrawn will be purchased at the Purchase Price, upon the terms and subject
to the conditions of the Offer, including the proration terms described below.
The Company reserves the right, in its sole discretion, to purchase more than
8,000,000 Shares pursuant to the Offer. See Section 15.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD
BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR
EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
If, at the Expiration Time, more than 8,000,000 Shares (or such greater
number of Shares as the Company may elect to purchase) are validly tendered at
or below the Purchase Price and not withdrawn, the Company will, upon the
terms and subject to the conditions of the Offer, purchase Shares first from
all Odd Lot Owners (as defined in Section 2) who validly tender all their
Shares at or below the Purchase Price and then on a pro rata basis from all
other shareholders who validly tender Shares at prices at or below the
Purchase Price. The Company will return at its own expense all Shares not
purchased pursuant to the Offer, including Shares tendered at prices in excess
of the Purchase Price and not withdrawn and Shares not purchased because of
proration.
The Purchase Price will be paid net to the tendering shareholders in cash
for all Shares purchased. Tendering shareholders will not be obligated to pay
brokerage commissions, solicitation fees or, subject to Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the Company's purchase of
Shares pursuant to the Offer. Shareholders holding Shares through brokers or
banks are urged to consult such brokers or banks to determine whether
transaction costs are applicable if shareholders tender Shares
4
<PAGE>
through such brokers or banks and not directly to the Depositary (as defined
herein). HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO
COMPLETE, SIGN AND RETURN TO THE DEPOSITARY (AS DEFINED BELOW) THE SUBSTITUTE
FORM W-9 THAT IS INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO
REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION
3. In addition, the Company will pay all fees and expenses of Credit Suisse
First Boston Corporation ("Credit Suisse First Boston" or the "Dealer
Manager"), Georgeson & Company Inc. (the "Information Agent") and American
Stock Transfer & Trust Company (the "Depositary") in connection with the
Offer. See Section 16.
Certain shareholders have been issued restricted Shares (the "Restricted
Shares") pursuant to the provisions of the Company's 1989 Stock Option Plan
(the "1989 Stock Option Plan"). PURSUANT TO THE PROVISIONS OF THE 1989 STOCK
OPTION PLAN, RESTRICTED SHARES TENDERED IN THE OFFER WILL NOT BE PURCHASED BY
THE COMPANY BUT, INSTEAD, WILL BE RETURNED TO THE SHAREHOLDER ATTEMPTING TO
TENDER SUCH RESTRICTED SHARES, UNLESS THE RESTRICTION PERIOD APPLICABLE TO
SUCH RESTRICTED SHARES HAS EXPIRED. Shareholders who hold Restricted Shares
should see "Procedure for Tendering Shares--Restricted Shares" in Section 3.
The Board of Directors believes that the purchase of Shares is an attractive
use of the Company's financial resources and that the use of cash and
borrowings to fund the Offer will result in a more efficient capital structure
for the Company. Accordingly, the Offer is consistent with the Company's long-
term corporate goal of increasing shareholder value. Over the past several
years, the Company's operations have generated substantial excess cash flow.
Historically, the Company has used a portion of this cash flow to reduce
acquisition-related debt, resulting in significant deleveraging and a strong
balance sheet. However, the continuing strong cash flow and relatively low
debt levels leave the Company underleveraged. The Board of Directors believes
the Company's financial condition and outlook for continuing strong cash flow
will allow it to meet the Company's first priority, which is to reinvest in
the business, including through acquisitions, and to use its excess cash and
debt capacity to fund the Offer.
The Company expects that even after the Offer is completed the Company will
have ready access to sources of capital sufficient to fund investments in the
business, including through attractive acquisition opportunities that might
become available.
The Offer provides shareholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
in excess of $39.00 nor less than $32.00 per Share) at which they are willing
to sell their Shares and, if any such Shares are purchased pursuant to the
Offer, to sell those Shares for cash to the Company without the usual
transaction costs associated with open-market sales. Any Odd Lot Owners whose
Shares are purchased pursuant to the Offer will avoid both the payment of
brokerage commissions and any applicable odd lot discounts payable on sales of
odd lots. To the extent the purchase of Shares in the Offer results in a
reduction in the number of shareholders of record, the costs to the Company
for services to shareholders will be reduced. Shareholders who determine not
to accept the Offer will increase their proportionate interest in the
Company's equity, and thus in the Company's future earnings and assets,
subject to the Company's right to issue additional Shares and other equity
securities in the future.
As of February 10, 1998, there were 91,940,672 Shares outstanding and
9,448,755 Shares issuable upon exercise of outstanding stock options under the
Company's stock option plans (the "Options"). The 8,000,000 Shares that the
Company is offering to purchase represent approximately 8.7% of the
outstanding Shares (approximately 7.9% assuming the exercise of all such
Options). The Shares are listed and traded on the New York Stock Exchange,
Inc. ("NYSE") under the symbol "STJ." On February 11, 1998, the last full
trading day on the NYSE prior to the announcement by the Company of the Offer,
the closing per Share sales price as reported on the NYSE Composite Tape was
$34.69. THE COMPANY URGES SHAREHOLDERS TO OBTAIN CURRENT QUOTATIONS ON THE
MARKET PRICE OF THE SHARES. SEE SECTION 7.
5
<PAGE>
This Offer to Purchase and the related Letter of Transmittal will be mailed
to holders of record of Shares as of February 10, 1998, and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on the Company's shareholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) 8,000,000 Shares or such lesser
number of Shares as are validly tendered before the Expiration Time (and not
withdrawn in accordance with Section 4) at a net cash price (determined in the
manner set forth below) not in excess of $39.00 nor less than $32.00 per
Share. The term "Expiration Time" means 12:00 Midnight, New York City time, on
Thursday, March 12, 1998, unless and until the Company in its sole discretion
shall have extended the period of time during which the Offer is open, in
which event the term "Expiration Time" shall refer to the latest time and date
at which the Offer, as so extended by the Company, shall expire. See Section
15 for a description of the Company's right to extend the time during which
the Offer is open and to delay, terminate or amend the Offer. Subject to
Section 2, if the Offer is oversubscribed, Shares tendered at or below the
Purchase Price before the Expiration Time will be eligible for proration. The
proration period also expires at the Expiration Time.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share Purchase Price that it will pay for Shares
validly tendered and not withdrawn pursuant to the Offer, taking into account
the number of Shares so tendered and the prices specified by tendering
shareholders. The Company will select the lowest Purchase Price that will
allow it to buy 8,000,000 Shares (or such lesser number as are validly
tendered and not withdrawn at prices not in excess of $39.00 nor less than
$32.00 per Share) pursuant to the Offer. The Company reserves the right, in
its sole discretion, to purchase more than 8,000,000 Shares pursuant to the
Offer. See Section 15. In accordance with applicable regulations of the
Securities and Exchange Commission (the "Commission"), the Company may
purchase pursuant to the Offer an additional amount of Shares not to exceed 2%
of the outstanding Shares without amending or extending the Offer. See Section
15. If (i) the Company increases or decreases the price to be paid for Shares,
the Company increases or decreases the Dealer Manager's soliciting fee, the
Company increases the number of Shares being sought and such increase in the
number of Shares being sought exceeds 2% of the outstanding Shares, or the
Company decreases the number of Shares being sought and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given in the manner specified
in Section 15, the Offer will be extended until the expiration of such period
of ten business days. For purposes of the Offer, a "business day" means any
day other than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
In accordance with Instruction 5 of the Letter of Transmittal, each
shareholder desiring to tender Shares must specify the price (not in excess of
$39.00 nor less than $32.00 per Share) at which such shareholder is willing to
sell such Shares to the Company. As promptly as practicable following the
Expiration Time, the Company will, in its sole discretion, determine the
Purchase Price (not in excess of $39.00 nor less than $32.00 per Share) that
it will pay for Shares validly tendered and not withdrawn pursuant to the
Offer, taking into account the number of Shares so tendered and the prices
specified by tendering shareholders. The Company will select the lowest
Purchase Price that will allow it to buy
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8,000,000 Shares (or such lesser number of Shares as are validly tendered and
not withdrawn) pursuant to the Offer. The Company will pay the Purchase Price,
even if such Shares were tendered below the Purchase Price, for all Shares
validly tendered prior to the Expiration Time at prices at or below the
Purchase Price and not withdrawn, upon the terms and subject to the conditions
of the Offer. All Shares not purchased pursuant to the Offer, including Shares
tendered at prices in excess of the Purchase Price and Shares not purchased
because of proration, will be returned to the tendering shareholders at the
Company's expense as promptly as practicable following the Expiration Time.
If the number of Shares validly tendered at or below the Purchase Price and
not withdrawn prior to the Expiration Time is less than or equal to 8,000,000
Shares (or such greater number of Shares as the Company may elect to
purchase), the Company will, upon the terms and subject to the conditions of
the Offer, purchase at the Purchase Price all Shares so tendered.
Priority. Upon the terms and subject to the conditions of the Offer, in the
event that prior to the Expiration Time more than 8,000,000 Shares (or such
greater number of Shares as the Company may elect to purchase pursuant to the
Offer) are validly tendered at prices at or below the Purchase Price and not
withdrawn, the Company will purchase such validly tendered Shares in the
following order of priority:
(i) all Shares validly tendered at prices at or below the Purchase Price
and not withdrawn prior to the Expiration Time by any Odd Lot Owner who:
(a) tenders all Shares beneficially owned by such Odd Lot Owner at or
below the Purchase Price (tenders of less than all Shares owned by such
shareholder will not qualify for this preference); and
(b) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery;
and
(ii) after purchase of all of the foregoing Shares, all other Shares
validly tendered at prices at or below the Purchase Price and not withdrawn
prior to the Expiration Time on a pro rata basis.
Proration. In the event that proration of tendered Shares is required, the
Company will determine the final proration factor as promptly as practicable
after the Expiration Time. Proration for each shareholder tendering Shares
(other than Odd Lot Owners) shall be based on the ratio of the number of
Shares tendered by such shareholder at or below the Purchase Price to the
total number of Shares tendered by all shareholders (other than Odd Lot
Owners) at or below the Purchase Price. This ratio will be applied to
shareholders tendering Shares (other than Odd Lot Owners) to determine the
number of Shares that will be purchased from each such shareholder pursuant to
the Offer (with appropriate adjustments to avoid the purchase of fractional
shares). Although the Company does not expect to be able to announce the final
results of such proration until approximately seven business days after the
Expiration Time, it will announce preliminary results of proration by press
release as promptly as practicable after the Expiration Time. Shareholders can
obtain such preliminary information from the Information Agent or the Dealer
Manager and may be able to obtain such information from their brokers.
THE COMPANY ALSO RESERVES THE RIGHT, BUT WILL NOT BE OBLIGATED, TO PURCHASE
ALL SHARES DULY TENDERED BY ANY SHAREHOLDER WHO TENDERED ALL SHARES
BENEFICIALLY OWNED AT OR BELOW THE PURCHASE PRICE AND WHO, AS A RESULT OF
PRORATION, WOULD THEN BENEFICIALLY OWN AN AGGREGATE OF FEWER THAN 100 SHARES.
IF THE COMPANY EXERCISES THIS RIGHT, IT WILL INCREASE THE NUMBER OF SHARES
THAT IT IS OFFERING TO PURCHASE IN THE OFFER BY THE NUMBER OF SHARES PURCHASED
THROUGH THE EXERCISE OF SUCH RIGHT. SEE SECTION 15.
As described in Section 14, the number of Shares that the Company will
purchase from a shareholder may affect the United States federal income tax
consequences to the shareholder of such purchase and therefore may be relevant
to a shareholder's decision whether to tender Shares. The Letter of
Transmittal affords each tendering shareholder the opportunity to designate
the order of priority in which Shares tendered are to be purchased in the
event of proration.
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2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES
The Company, upon the terms and subject to the conditions of the Offer, will
accept for purchase, without proration, all Shares validly tendered at or
below the Purchase Price by or on behalf of shareholders who beneficially
owned as of the close of business on February 11, 1998, and continue to
beneficially own as of the Expiration Time, an aggregate of fewer than 100
Shares (excluding Restricted Shares) ("Odd Lot Owners"). To avoid proration,
however, an Odd Lot Owner must validly tender at or below the Purchase Price
all such Shares (excluding Restricted Shares) that such Odd Lot Owner
beneficially owns; partial tenders will not qualify for this preference. This
preference is not available to partial tenders or to owners of 100 or more
Shares in the aggregate (excluding Restricted Shares), even if such owners
have separate accounts or stock certificates representing fewer than 100 such
Shares. Any Odd Lot Owner wishing to tender all such Shares beneficially owned
by such shareholder pursuant to this Offer must complete the box captioned
"Odd Lots" in the Letter of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery and must properly indicate in the section entitled "Price
(In Dollars) Per Share At Which Shares Are Being Tendered" in the Letter of
Transmittal the price at which such Shares are being tendered, except that an
Odd Lot Owner may check the box in the section entitled "Odd Lots" indicating
that the shareholder is tendering all of such shareholder's Shares (excluding
Restricted Shares) at the Purchase Price. See Section 3. Shareholders owning
an aggregate of less than 100 Shares whose Shares are purchased pursuant to
the Offer will avoid both the payment of brokerage commissions and any
applicable odd lot discounts payable on a sale of their Shares in transactions
on a stock exchange, including the NYSE.
3. PROCEDURE FOR TENDERING SHARES
Proper Tender of Shares. For Shares to be validly tendered pursuant to the
Offer:
(i) the certificates for such Shares (or confirmation of receipt of such
Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) with any required signature
guarantees, and any other documents required by the Letter of Transmittal,
must be received prior to the Expiration Time by the Depositary at its
address set forth on the back cover of this Offer to Purchase; or
(ii) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.
AS SPECIFIED IN INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, EACH SHAREHOLDER
DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST PROPERLY INDICATE IN THE
SECTION ENTITLED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING
TENDERED" IN THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $.125) AT
WHICH SUCH SHAREHOLDER'S SHARES ARE BEING TENDERED, EXCEPT THAT AN ODD LOT
OWNER MAY CHECK THE BOX IN THE SECTION OF THE LETTER OF TRANSMITTAL ENTITLED
"ODD LOTS" INDICATING THAT SUCH SHAREHOLDER IS TENDERING ALL OF SUCH
SHAREHOLDER'S SHARES AT THE PURCHASE PRICE. SHAREHOLDERS DESIRING TO TENDER
SHARES AT MORE THAN ONE PRICE MUST COMPLETE SEPARATE LETTERS OF TRANSMITTAL
FOR EACH PRICE AT WHICH SHARES ARE BEING TENDERED, EXCEPT THAT THE SAME SHARES
CANNOT BE TENDERED (UNLESS PROPERLY WITHDRAWN PREVIOUSLY IN ACCORDANCE WITH
THE TERMS OF THE OFFER) AT MORE THAN ONE PRICE. IN ORDER VALIDLY TO TENDER
SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION
ON EACH LETTER OF TRANSMITTAL.
In addition, Odd Lot Owners who tender all such Shares must complete the box
captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery, to qualify for the preferential treatment
available to Odd Lot Owners as set forth in Section 2.
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SHAREHOLDERS HOLDING SHARES THROUGH BROKERS OR BANKS ARE URGED TO CONSULT
SUCH BROKERS OR BANKS TO DETERMINE WHETHER TRANSACTION COSTS ARE APPLICABLE IF
SHAREHOLDERS TENDER SHARES THROUGH SUCH BROKERS OR BANKS AND NOT DIRECTLY TO
THE DEPOSITARY.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the Letter of Transmittal if (i) the Letter of Transmittal is
signed by the registered holder of the Shares (which term, for purposes of
this Section, includes any participant in The Depository Trust Company ("DTC")
whose name appears on a security position listing as the holder of the Shares)
tendered therewith and payment and delivery are to be made directly to such
registered holder, or (ii) if Shares are tendered for the account of a member
firm of a registered national securities exchange or the National Association
of Securities Dealers, Inc. or a commercial bank or trust company having an
office, branch or agency in the United States that is a member of one of the
Stock Transfer Association's approved medallion programs (such as Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program) (each of
the foregoing being referred to as an "Eligible Institution"). In all other
cases, all signatures on the Letter of Transmittal must be guaranteed by an
Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a
certificate representing Shares is registered in the name of a person other
than the person executing a Letter of Transmittal, or if payment is to be
made, or Shares not purchased or tendered are to be issued, to a person other
than the registered holder, the certificate must be endorsed or accompanied by
an appropriate stock power, in either case, signed exactly as the name of the
registered holder appears on the certificate, with the signature on the
certificate or stock power guaranteed by an Eligible Institution. In this
regard, see Section 5 for information with respect to applicable stock
transfer taxes.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at DTC as described
above), a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares at DTC for purposes of the Offer within two business days after
the date of this Offer to Purchase. Any financial institution that is a
participant in DTC's system may make book-entry delivery of the Shares by
causing such facility to transfer such Shares into the Depositary's account in
accordance with DTC's procedure for such transfer. Even though delivery of
Shares may be effected through book-entry transfer into the Depositary's
account at DTC, a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof), with any required signature guarantees
and other required documents must, in any case, be transmitted to and received
by the Depositary at its address set forth on the back cover of this Offer to
Purchase prior to the Expiration Time, or the guaranteed delivery procedure
set forth below must be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share certificates cannot be delivered to the
Depositary prior to the Expiration Time (or the procedures for book-entry
transfer cannot be completed on a timely basis) or if time will not permit all
required documents to reach the Depositary before the Expiration Time, such
Shares may nevertheless be tendered provided that all of the following
conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
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<PAGE>
(ii) the Depositary receives (by hand, mail, overnight courier, telegram
or facsimile transmission), at or prior to the Expiration Time, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form the Company has provided with this Offer to Purchase (indicating
the price at which the Shares are being tendered), including (where
required) a signature guarantee by an Eligible Institution in the form set
forth in such Notice of Guaranteed Delivery; and
(iii) the certificates for all tendered Shares in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depositary's account at DTC), together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) and
any required signature guarantees or other documents required by the Letter
of Transmittal, are received by the Depositary within three NYSE trading
days after the date the Depositary receives such Notice of Guaranteed
Delivery.
Return of Tendered Shares. If any tendered Shares are not purchased, or if
less than all Shares evidenced by a shareholder's certificates are tendered,
certificates for unpurchased Shares will be returned as promptly as
practicable after the expiration or termination of the Offer or, in the case
of Shares tendered by book-entry transfer at DTC, such Shares will be credited
to the appropriate account maintained by the tendering shareholder at DTC, in
each case without expense to such shareholder.
United States Federal Income Tax Backup Withholding. Under the United States
federal income tax backup withholding rules, 31% of the gross proceeds payable
to a shareholder or other payee pursuant to the Offer must be withheld and
remitted to the United States Internal Revenue Service (the "IRS"), unless an
exemption applies under applicable law and regulations or unless the
shareholder or other payee provides such person's taxpayer identification
number (employer identification number or social security number) to the
Depositary, as payor, and certifies under penalties of perjury that such
number is correct. Therefore, each tendering shareholder should complete and
sign the Substitute Form W-9 included as part of the Letter of Transmittal so
as to provide the information and certification necessary to avoid backup
withholding. If the Depositary is not provided with the correct taxpayer
identification number, the United States Holder (as defined in Section 14
herein) also may be subject to a penalty imposed by the IRS. If withholding
results in an overpayment of taxes, a refund may be obtained. Certain "exempt
recipients" (including, among others, all corporations and certain Non-United
States Holders (as defined in Section 14 herein)) are not subject to these
backup withholding and reporting requirements. In order for a Non-United
States Holder to qualify as an exempt recipient, that shareholder must submit
an IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury,
attesting to that shareholder's exempt status. Such statements can be obtained
from the Depositary. See Instructions 10 and 11 of the Letter of Transmittal.
TO PREVENT UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31%
OF THE GROSS PAYMENTS MADE TO SHAREHOLDERS FOR SHARES PURCHASED PURSUANT TO
THE OFFER, EACH SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM
SUCH BACKUP WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE SHAREHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION
BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF
TRANSMITTAL.
For a discussion of certain other United States federal income tax
consequences to tendering shareholders, see Section 14.
Withholding For Non-United States Holders. Even if a Non-United States
Holder has provided the required certification to avoid backup withholding,
the Depositary will withhold United States federal income taxes equal to 30%
of the gross payments payable to a Non-United States Holder or his or her
agent unless the Depositary determines that a reduced rate of withholding is
available pursuant to a tax treaty or that an exemption from withholding is
applicable because such gross proceeds are effectively connected with the
conduct of a trade or business within the United States. In order to obtain a
reduced rate of withholding pursuant to a tax treaty, a Non-United States
Holder must deliver to the Depositary before the
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payment a properly completed and executed IRS Form 1001. In order to obtain an
exemption from withholding on the grounds that the gross proceeds paid
pursuant to the Offer are effectively connected with the conduct of a trade or
business within the United States, a Non-United States Holder must deliver to
the Depositary a properly completed and executed IRS Form 4224. The Depositary
will determine a shareholder's status as a Non-United States Holder and
eligibility for a reduced rate of, or exemption from, withholding by reference
to any outstanding certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS
Form 4224) unless facts and circumstances indicate that such reliance is not
warranted. A Non-United States Holder may be eligible to obtain a refund of
all or a portion of any tax withheld if such Non-United States Holder meets
the "complete termination," "substantially disproportionate" or "not
essentially equivalent to a dividend" test described in Section 14 or is
otherwise able to establish that no tax or a reduced amount of tax is due.
Backup withholding generally will not apply to amounts subject to the 30% or a
treaty-reduced rate of withholding. NON-UNITED STATES HOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF UNITED STATES
FEDERAL INCOME TAX WITHHOLDING, INCLUDING ELIGIBILITY FOR A WITHHOLDING TAX
REDUCTION OR EXEMPTION, AND THE REFUND PROCEDURE. SEE INSTRUCTIONS 10 AND 11
OF THE LETTER OF TRANSMITTAL.
Restricted Shares. Certain shareholders have been issued Restricted Shares
pursuant to the provisions of the 1989 Stock Option Plan. Pursuant to the
provisions of the 1989 Stock Option Plan, certificates representing Restricted
Shares granted to plan participants must remain in escrow or bear an
appropriate legend with respect to the restrictions placed on such Restricted
Shares until the expiration of the applicable restriction period (determined
in accordance with the provisions of the 1989 Stock Option Plan). Restricted
Shares tendered in the Offer will not be purchased by the Company but,
instead, will be returned to the shareholder attempting to tender such
Restricted Shares, unless the restriction period applicable to such Restricted
Shares has expired. Upon the expiration of such applicable restriction period
and pursuant to the provisions of the 1989 Stock Option Plan, such Restricted
Shares shall no longer be restricted, may be tendered pursuant to the Offer
and must be included in determining a shareholder's status as an Odd Lot
Owner. Any questions with respect to the status of any Restricted Shares, as
to when restrictions with respect to a particular plan participant's
Restricted Shares expire or whether Restricted Shares (as to which the
applicable restriction period has expired) may be tendered pursuant to the
Offer may be directed to Kevin T. O'Malley, Vice President, General Counsel
and Secretary of the Company at (612) 483-2000.
Preferred Stock Purchase Rights. On July 16, 1997, the Board of Directors of
the Company declared a dividend of one Preferred Stock Purchase Right (a
"Right") for each outstanding Share. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series B Junior
Preferred Stock ("Preferred Stock") at a price of $200.00 per one one-
hundredth of a share. The Rights will not become exercisable unless and until,
among other things, any person acquires 15% or more of the outstanding Shares.
If a person acquires 15% or more of the outstanding Shares, each Right will
entitle the holder to purchase that number of shares of Preferred Stock having
a value equal to twice the exercise price of the Right. The Rights will not
become exercisable or separately tradeable as a result of the Offer. The
Rights are redeemable under certain circumstances at $.01 per Right and will
expire, unless earlier redeemed, on July 15, 2007.
Unless the Rights are redeemed prior to the Expiration Time, holders of
Shares are required to tender one Right for each Share tendered in order to
effect a valid tender of such Share. Absent circumstances causing the Rights
to become exercisable or separately tradeable prior to the Expiration Time, a
tender of Shares pursuant to the Offer will constitute a tender of the
associated Rights evidenced by the certificate for such Shares. If the Rights
become exercisable or separately tradeable, holders of such Shares will be
required to tender certificates representing a number of Rights equal to the
number of Shares tendered, and shareholders who have sold Rights separately
from the Shares will be unable to tender Shares unless the shareholder
reacquires Rights to tender with the Shares.
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Tendering Shareholder's Representation and Warranty; Company's Acceptance
Constitutes an Agreement. It is a violation of Rule 14e-4 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a
person acting alone or in concert with others, directly or indirectly, to
tender Shares for such person's own account unless at the time of tender and
at the Expiration Time such person has a "net long position" equal to or in
excess of the amount tendered in (i) the Shares, and will deliver or cause to
be delivered such Shares for the purpose of tender to the Company within the
period specified in the Offer, or (ii) other securities immediately
convertible into, exercisable for or exchangeable into Shares ("Equivalent
Securities") and, upon the acceptance of such tender, will acquire such Shares
by conversion, exchange or exercise of such Equivalent Securities to the
extent required by the terms of the Offer and will deliver or cause to be
delivered such Shares so acquired for the purpose of tender to the Company
within the period specified in the Offer. Rule 14e-4 also provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. A tender of Shares made pursuant to any method of delivery set
forth herein will constitute the tendering shareholder's acceptance of the
terms of the Offer, as well as the tendering shareholder's representation and
warranty to the Company that (i) such shareholder has a "net long position" in
Shares or Equivalent Securities being tendered within the meaning of Rule 14e-
4, and (ii) such tender of Shares complies with Rule 14e-4. The Company's
acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the tendering shareholder and the
Company upon the terms and subject to the conditions of the Offer.
Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted, the price to be paid therefor and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Company, in its sole discretion,
which determination shall be final and binding on all parties. The Company
reserves the absolute right to reject any or all tenders it determines not to
be in proper form or the acceptance of or payment for which may, in the
opinion of the Company's counsel, be unlawful. The Company also reserves the
absolute right to waive any of the conditions of the Offer and any defect or
irregularity in the tender of any particular Shares, and the Company's
interpretation of the terms of the Offer will be final and binding on all
parties. No tender of Shares will be deemed to be properly made until all
defects or irregularities have been cured or waived by the Company. None of
the Company, the Dealer Manager, the Depositary, the Information Agent or any
other person is or will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for
failure to give any such notice.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL,
MUST BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time before the Expiration Time and, unless accepted for
payment by the Company as provided in this Offer to Purchase, may also be
withdrawn after 12:00 Midnight, New York City time, on Thursday, April 9,
1998.
For a withdrawal to be effective, the Depositary must receive (at its
address set forth on the back cover of this Offer to Purchase) a notice of
withdrawal in written, telegraphic or facsimile transmission form on a timely
basis. Such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares tendered, the number
of Shares to be withdrawn and the name of the registered holder, if different
from that of the person who tendered such Shares. If the certificates have
been delivered or otherwise identified to the Depositary, then, prior to the
release of such certificates, the tendering shareholder must also submit the
serial numbers shown on the particular certificates evidencing the Shares and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution
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(except in the case of Shares tendered by an Eligible Institution). If Shares
have been tendered pursuant to the procedure for book-entry transfer set forth
in Section 3, the notice of withdrawal must specify the name and the number of
the account at DTC to be credited with the withdrawn Shares and otherwise
comply with the procedures of DTC. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Company, in its sole discretion, which determination shall be final and
binding on all parties. None of the Company, the Dealer Manager, the
Depositary, the Information Agent or any other person is or will be obligated
to give any notice of any defects or irregularities in any notice of
withdrawal, and none of them will incur any liability for failure to give any
such notice.
Withdrawals may not be rescinded and any Shares withdrawn will thereafter be
deemed not properly tendered for purposes of the Offer unless such withdrawn
Shares are validly retendered and not thereafter withdrawn before the
Expiration Time by again following any of the procedures described in Section
3.
If the Company extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain on behalf of the Company all tendered Shares, and
such Shares may not be withdrawn except to the extent tendering shareholders
are entitled to withdrawal rights as described in this Section 4.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the Offer, the Company will
(i) determine a single per Share Purchase Price that it will pay for Shares
validly tendered and not withdrawn pursuant to the Offer, taking into account
the number of Shares so tendered and the prices specified by tendering
shareholders, and (ii) accept for payment and pay for (and thereby purchase)
Shares validly tendered at or below the Purchase Price and not withdrawn as
soon as practicable after the Expiration Time. For purposes of the Offer, the
Company will be deemed to have accepted for payment (and therefore purchased),
subject to proration, Shares that are validly tendered at or below the
Purchase Price and not withdrawn when, as and if it gives oral or written
notice to the Depositary of its acceptance of such Shares for payment pursuant
to the Offer.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase and pay a single per Share Purchase Price for all of the Shares
accepted for payment pursuant to the Offer as soon as practicable after the
Expiration Time. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made promptly (subject to possible delay
in the event of proration) but only after timely receipt by the Depositary of
certificates for Shares (or of a timely confirmation of a book-entry transfer
of such Shares into the Depositary's account at DTC), a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof) and
any other required documents.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which
will act as agent for tendering shareholders for the purpose of receiving
payment from the Company and transmitting payment to the tendering
shareholders.
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as soon as practicable
after the Expiration Time. However, the Company does not expect to be able to
announce the final results of any such proration until approximately seven
business days after the Expiration Time. Under no circumstances will the
Company pay interest on the Purchase Price including, without limitation, by
reason of any delay in making payment. Certificates for all Shares tendered
and not purchased, including all Shares tendered at prices in excess of the
Purchase Price and Shares not purchased due to proration, will be returned
(or, in the case of Shares tendered by book-entry transfer, such Shares will
be credited to the account maintained with DTC by the participant who so
delivered such Shares) as promptly as practicable following the Expiration
Time or termination of
13
<PAGE>
the Offer without expense to the tendering shareholder. In addition, if
certain events occur, the Company may not be obligated to purchase Shares
pursuant to the Offer. See Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however,
that if payment of the Purchase Price is to be made to, or (in the
circumstances permitted by the Offer) if unpurchased Shares are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person signing the Letter of Transmittal, the amount of all stock transfer
taxes, if any (whether imposed on the registered holder or such other person),
payable on account of the transfer to such person will be deducted from the
Purchase Price unless evidence satisfactory to the Company of the payment of
such taxes or exemption therefrom is submitted. See Instruction 7 of the
Letter of Transmittal.
TO PREVENT UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31%
OF THE GROSS PAYMENTS MADE TO SHAREHOLDERS FOR SHARES PURCHASED PURSUANT TO
THE OFFER, EACH SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM
SUCH BACKUP WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE SHAREHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION
BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF
TRANSMITTAL. SEE SECTION 3. ALSO SEE SECTION 3 REGARDING FEDERAL INCOME TAX
CONSEQUENCES FOR FOREIGN SHAREHOLDERS.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and
may terminate or amend the Offer or may postpone the acceptance for payment
of, or the purchase of and the payment for Shares tendered, subject to Rule
13e-4(f) promulgated under the Exchange Act, if at any time on or after
February 12, 1998, and prior to the time of payment for any such Shares
(whether any Shares have theretofore been accepted for payment, purchased or
paid for pursuant to the Offer) any of the following events shall have
occurred (or shall have been determined by the Company to have occurred) that,
in the Company's reasonable judgment in any such case and regardless of the
circumstances giving rise thereto (including any action or omission to act by
the Company), makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payment:
(a) there shall have been threatened, instituted or pending before any
court, agency, authority or other tribunal any action, suit or proceeding
by any government or governmental, regulatory or administrative agency or
authority or by any other person, domestic or foreign, or any judgment,
order or injunction entered, enforced or deemed applicable by any such
court, authority, agency or tribunal, which:
(i) challenges or seeks to make illegal, or to delay or otherwise
directly or indirectly to restrain, prohibit or otherwise affect the
making of the Offer or the acquisition of some or all of the Shares
pursuant to the Offer or is otherwise related in any manner to, or
otherwise affects, the Offer; or
(ii) could, in the reasonable judgment of the Company, materially
affect the business, condition (financial or other), income, operations
or prospects of the Company and its subsidiaries, taken as a whole, or
otherwise materially impair in any way the contemplated future conduct
of the business of the Company and its subsidiaries, taken as a whole,
or otherwise materially impair the Offer's contemplated benefits to the
Company; or
(b) there shall have been any action threatened or taken, or any approval
withheld, or any statute, rule or regulation invoked, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be applicable
to the Offer or the Company or any of its subsidiaries, by any court,
government or governmental, regulatory or administrative authority or
agency or tribunal, domestic or
14
<PAGE>
foreign, which, in the reasonable judgment of the Company, would or might
directly or indirectly result in any of the consequences referred to in
clause (i) or (ii) of paragraph (a) above; or
(c) there shall have occurred:
(i) the declaration of any banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not
mandatory);
(ii) any general suspension of trading in, or limitation on prices
for, securities on any United States national securities exchange or in
the over-the-counter market;
(iii) the commencement of a war, armed hostilities or any other
national or international crisis directly or indirectly involving the
United States;
(iv) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event
which, in the reasonable judgment of the Company, might materially
affect, the extension of credit by banks or other lending institutions
in the United States;
(v) any significant decrease in the market price of the Shares;
(vi) any change in the general political, market, economic or
financial conditions in the United States or abroad that could have, in
the reasonable judgment of the Company, a material adverse effect on
the business, condition (financial or otherwise), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, or on
the trading in the Shares;
(vii) in the case of any of the foregoing existing at the time of the
announcement of the Offer, a material acceleration or worsening
thereof; or
(viii) any decline in either the Dow Jones Industrial Average or the
Standard and Poor's Index of 500 Industrial Companies by an amount in
excess of 10% measured from the close of business on February 11, 1998;
or
(d) any change or changes shall occur or be threatened in the business,
condition (financial or other), income, operations or prospects or stock
ownership of the Company and its subsidiaries, taken as a whole, which, in
the reasonable judgment of the Company, is or may be material to the
Company and its subsidiaries taken as a whole; or
(e) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or any merger, business combination or similar
transaction with or involving the Company or any subsidiary, shall have
been proposed, announced or made by any person; or
(f) any entity or "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) or person (other than entities, groups or persons, if
any, who have filed with the Commission on or before February 11, 1998 a
Schedule 13G or a Schedule 13D with respect to any of the Shares) shall
have acquired or proposed to acquire beneficial ownership of more than 5%
of the outstanding Shares; or
(g) any entity, group or person who has filed with the Commission on or
before February 11, 1998 a Schedule 13G or Schedule 13D with respect to the
Shares shall have acquired, or proposed to acquire, beneficial ownership of
additional Shares constituting more than 2% of the outstanding Shares or
shall have been granted any option or right to acquire beneficial ownership
of more than 2% of the outstanding Shares; or
(h) any person or group shall have filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting
an intent to acquire the Company or any of its Shares or assets.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition (including any action or inaction by the Company) or may be
waived by the Company in whole or in part. The Company's failure at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, and each such right
15
<PAGE>
shall be deemed an ongoing right that may be asserted at any time and from
time to time. Any determination by the Company concerning the events described
above and any related judgment or decision by the Company regarding the
inadvisability of proceeding with the purchase of or payment for any Shares
tendered will be final and binding on all parties.
7. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed and traded on the NYSE. The high and low sales prices
per Share on the NYSE Composite Tape as compiled from published financial
sources for the periods indicated are listed below:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1996
1st Quarter................................................. $46.00 $36.38
2nd Quarter................................................. 39.50 33.25
3rd Quarter................................................. 41.50 29.63
4th Quarter................................................. 43.25 35.00
FISCAL 1997
1st Quarter................................................. $42.38 $33.25
2nd Quarter................................................. 39.75 29.13
3rd Quarter................................................. 42.88 33.50
4th Quarter................................................. 35.06 27.06
FISCAL 1998
1st Quarter (through February 11, 1998)..................... $36.13 $29.06
</TABLE>
On February 11, 1998, the last full trading day on the NYSE prior to the
announcement of the Offer by the Company, the closing per Share sales price as
reported on the NYSE Composite Tape was $34.69. THE COMPANY URGES SHAREHOLDERS
TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES.
The Company discontinued its cash dividend subsequent to the third quarter
of 1994 in order to accelerate debt repayment and to provide additional funds
for investment in new businesses.
8. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
For information with respect to certain events relating to the Company, see
"Certain Information about the Company--Recent Developments" in Section 11 and
the text of the press release issued by the Company on February 11, 1998
contained therein. The Company announced on February 11, 1998 its intention to
commence the Offer on February 12, 1998 and included in such announcement
certain terms of the Offer consistent with those set forth in this Offer to
Purchase.
The Board of Directors believes that the purchase of Shares is an attractive
use of the Company's financial resources and that the use of cash and
borrowings to fund the Offer will result in a more efficient capital structure
for the Company. Accordingly, the Offer is consistent with the Company's long-
term corporate goal of increasing shareholder value. Over the past several
years, the Company's operations have generated substantial excess cash flow.
Historically, the Company has used a portion of this cash flow to reduce
acquisition-related debt, resulting in significant deleveraging and a strong
balance sheet. However, the continuing strong cash flow and relatively low
debt levels leave the Company underleveraged. The Board of Directors believes
the Company's financial condition and outlook for continuing strong cash flow
will allow it to meet the Company's first priority, which is to reinvest in
the business, including through acquisitions, and to use its excess cash and
debt capacity to fund the Offer.
The Company expects that even after the Offer is completed the Company will
have ready access to sources of capital sufficient to fund investments in the
business, including through attractive acquisition opportunities that might
become available.
16
<PAGE>
The Offer provides shareholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
in excess of $39.00 nor less than $32.00 per Share) at which they are willing
to sell their Shares and, if any such Shares are purchased pursuant to the
Offer, to sell those Shares for cash to the Company without the usual
transaction costs associated with open-market sales. Any Odd Lot Owners whose
Shares are purchased pursuant to the Offer will avoid both the payment of
brokerage commissions and any applicable odd lot discounts payable on sales of
odd lots. To the extent the purchase of Shares in the Offer results in a
reduction in the number of shareholders of record, the costs to the Company
for services to shareholders will be reduced. Shareholders who determine not
to accept the Offer will increase their proportionate interest in the
Company's equity, and thus in the Company's future earnings and assets,
subject to the Company's right to issue additional Shares and other equity
securities in the future.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD
BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR
EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
The Company may in the future purchase additional Shares on the open market,
in private transactions, through tender offers or otherwise. Any such
purchases may be on the same terms as, or on terms that are more or less
favorable to shareholders than, the terms of the Offer. However, Rule 13e-4
promulgated under the Exchange Act generally prohibits the Company and its
affiliates from purchasing any Shares, other than pursuant to the Offer, until
at least ten business days after the expiration or termination of the Offer.
Any possible future purchases by the Company will depend on many factors,
including the market price of the Shares, the results of the Offer, the
Company's business and financial position and general economic and market
conditions.
Shares the Company acquires pursuant to the Offer will become authorized but
unissued shares and will be available for the Company to issue without further
shareholder action (except as required by applicable law or the rules of any
securities exchange on which Shares are listed) for purposes including, but
not limited to, the acquisition of other businesses, the raising of additional
capital for use in the Company's business and the satisfaction of obligations
under existing or future employee benefit plans. The Company has no current
plans for issuance of the Shares repurchased pursuant to the Offer.
9. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES
As of February 10, 1998, there were 91,940,672 Shares outstanding and
9,448,755 Shares issuable upon exercise of outstanding Options. As of February
10, 1998, the Company's directors and executive officers as a group (19
persons) beneficially owned 3,772,339 Shares (including 1,747,260 Shares
issuable to such persons upon exercise of Options exercisable within sixty
days of such date) which constituted 4.0% of the outstanding Shares (including
Shares issuable if Options held by the Company's directors and executive
officers exercisable within sixty days of such date were exercised) at such
time. Each of the Company's executive officers and directors has advised the
Company that he or she does not intend to tender any Shares pursuant to the
Offer. If the Company purchases 8,000,000 Shares pursuant to the Offer (8.7%
of the outstanding Shares as of February 10, 1998 or 7.9% assuming exercise of
all outstanding Options) and no director or executive officer tenders Shares
pursuant to the Offer, then, after the purchase of Shares pursuant to the
Offer, the Company's directors and executive officers as a group would
beneficially own approximately 4.4% of the outstanding Shares (including
Shares issuable if Options held by the Company's directors and executive
officers exercisable within sixty days of such date were exercised).
17
<PAGE>
Except as set forth in Schedule I hereto, based upon the Company's records
and upon information provided to the Company by its directors, executive
officers, associates and subsidiaries, neither the Company nor any of its
associates or subsidiaries or persons controlling the Company nor, to the best
of the Company's knowledge, any of the directors or executive officers of the
Company or any of its subsidiaries, nor any associates or subsidiaries of any
of the foregoing, has effected any transactions in the Shares during the 40
business days prior to the date hereof.
Except as set forth in this Offer to Purchase, neither the Company nor any
person controlling the Company nor, to the Company's knowledge, any of its
directors or executive officers, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to the Offer with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of proxies,
consents or authorizations).
Except as disclosed herein, neither the Company nor its executive officers
or directors has current plans or proposals which relate to or would result in
any extraordinary corporate transaction involving the Company or its
subsidiaries, such as a merger, reorganization, sale or transfer of a material
amount of its or their assets, any material change in its present dividend
policy or indebtedness or capitalization, any other material change in its
business or corporate structure, any material change in its Articles of
Incorporation or Bylaws, or any actions causing a class of its equity
securities to be delisted by the NYSE or to become eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act, or the
suspension of the Company's obligation to file reports pursuant to Section
15(d) of the Exchange Act, or any actions similar to any of the foregoing.
10. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 8,000,000 Shares pursuant to the Offer
at the maximum purchase price of $39.00 per Share, the Company expects the
maximum aggregate cost, including all fees and expenses applicable to the
Offer, to be approximately $314.5 million. The Company anticipates that
approximately $312 million of the funds necessary to purchase Shares pursuant
to the Offer and to pay the related fees and expenses will come from a $350
million five-year unsecured revolving credit facility and a $150 million 364-
day unsecured revolving credit facility (the "Credit Facilities"), each to be
supplied by Bank of America National Trust and Savings Association and Credit
Suisse First Boston Corporation (collectively, the "Banks"), pursuant to a
Commitment Letter dated February 11, 1998 and related Terms Sheet
(collectively, the "Commitment Letter"). Each of the Banks reserves the right
to syndicate a portion of its aggregate commitment to one or more other
financial institutions. The balance of the funds will come from cash, cash
equivalents and marketable securities held by the Company.
The interest rates under the Credit Facilities will be variable rates, based
on the Company's debt-to-capitalization ratio or, if applicable, the Company's
credit rating. Based on current market conditions, the annualized interest
rate for funds borrowed under the Credit Facilities, as of the date of this
Offer to Purchase, would be approximately 6%.
The Commitment Letter provides that the definitive agreement for the Credit
Facilities will obligate the Company to pay certain facility fees, arrangement
fees, annual administrative fees and to reimburse the lenders thereunder for
certain fees and expenses they incur in making the loan. The Commitment Letter
also provides that the definitive loan agreement will contain certain
financial covenants related to the Company's maximum leverage ratios and
minimum interest coverage ratio. The Commitment Letter provides that the
definitive loan agreement will contain usual and customary (i) affirmative and
negative covenants, including restrictions on the Company's ability, and the
ability of certain of its subsidiaries,
18
<PAGE>
subject to certain exceptions, to incur debt, pay dividends, make investments
and acquisitions, sell assets, enter into mergers and redeem or repurchase
stock and (ii) events of default, including failure to pay principal or
interest, breaches of representations or covenants, certain events of
bankruptcy or insolvency and a change of control (as defined therein). The
Commitment Letter provides that the availability of the Credit Facilities will
be subject to the satisfaction of certain customary conditions, including, but
not limited to, the execution of definitive loan documentation, the accuracy
of representations and warranties and the absence of any default.
The Company expects to repay the borrowings used to purchase Shares pursuant
to the Offer primarily through internally generated funds. Depending on
business and market conditions, the Company may refinance all or a portion of
such borrowings through the public and/or private offering of securities,
issuance of commercial paper or other financing, or a combination of the
foregoing, as the Company may deem appropriate. See "Certain Information About
the Company--Certain Financial Information--Summary Unaudited Condensed
Consolidated Pro Forma Financial Information" in Section 11 for further
information concerning the assumed cost of funds for the Offer.
The preceding description of the Commitment Letter is qualified in its
entirety by reference to the text of the Commitment Letter, which is
incorporated by reference as an exhibit to the Issuer Tender Offer Statement
on Schedule 13E-4 (the "Schedule 13E-4") of which this Offer to Purchase forms
a part. A copy of the Schedule 13E-4 may be obtained from the Commission. See
"Certain Information About the Company--Additional Information" in Section 11.
11. CERTAIN INFORMATION ABOUT THE COMPANY
GENERAL
The Company designs, manufactures and markets medical devices and provides
services for the cardiovascular segment of the medical device industry. The
Company's products are distributed in more than 100 countries worldwide
through a combination of direct sales personnel, independent manufacturers'
representatives and distribution organizations. The main markets for the
Company's products are the United States, Western Europe and Japan. The
principal executive offices of the Company are located at One Lillehei Plaza,
St. Paul, Minnesota 55117, and its telephone number at that address is (612)
483-2000.
RECENT DEVELOPMENTS
On February 11, 1998, the Company issued a press release reporting its 1997
financial results. The Company, however, has not yet prepared the consolidated
financial statements and related notes, in conformity with generally accepted
accounting principles, required to be included in the Company's Annual Report
on Form 10-K. The summary historical consolidated financial information for
the three months ended December 31, 1997 and 1996 and for the year ended
December 31, 1997 included as part of the press release summarizing these
financial results reflect, in the opinion of management of the Company, all
adjustments necessary for a fair statement of the results of operations for
such periods. Set forth below is the full text of the press release.
St. Paul, Minnesota, February 11, 1998--St. Jude Medical, Inc.
(NSYE:STJ) today reported record fourth quarter and annual sales. Net
sales for the fourth quarter 1997 increased 11% on a constant currency
basis compared to the fourth quarter of 1996. As reported, sales
increased 7% to $249 million, compared to $232 million in the fourth
quarter 1996. Net sales for 1997 increased 16% on a constant currency
basis compared to 1996. As reported, net sales increased 13% to $994
million, compared to $877 million in 1996. The stronger U.S. dollar
reduced 1997 net sales by $7.5 million in the fourth quarter and $26
million for the year compared to 1996.
19
<PAGE>
Net income for the 1997 fourth quarter, before special charges, and
the cumulative effect of an accounting change relating to business
process reengineering, was $28 million, or $.30 per diluted share,
compared to $23 million, or $.26 per diluted share, in the fourth
quarter of 1996 before special charges and purchased R&D, a 22%
increase. Reported net income for the fourth quarter 1997, including
special charges and the accounting change, was $3 million, or $.03 per
diluted share, compared to a loss of $30 million, or $.32 per diluted
share in the fourth quarter of 1996.
Exclusive of special charges and the accounting change, net income
for 1997 was $98 million, or $1.06 per diluted share, compared to $122
million exclusive of special charges and purchased R&D, or $1.32 per
diluted share, for 1996. Reported net income for 1997 including special
charges and the accounting change, was $53 million, or $.58 per diluted
share, compared to $61 million, or $.66 per diluted share in 1996.
Current and historical results include the combined results of St.
Jude Medical, Inc. and Ventritex, Inc. reflecting the stock-for-stock
merger completed in the second quarter 1997. Results also include the
post-acquisition operating results of Telectronics that was acquired on
November 29, 1996. Certain reclassifications of previously reported
amounts have been made to conform with the current year presentation.
Ronald A. Matricaria, Chairman and CEO, said, "We achieved record
sales in 1997. Both the Cardiac Rhythm Management Division (CRMD) and
Daig had strong growth for the quarter and year and the Heart Valve
Division grew at twice the rate of market growth. While earnings were
negatively affected by costs associated with integrating strategic
acquisitions in our Cardiac Rhythm Management business, we believe we
have now positioned this business to be very competitive. We are
already seeing a positive trend as evidenced by implantable
cardioverter defibrillator (ICD) sales of $28 million in the fourth
quarter. Our focus for 1998 is on improving operational profitability.
"During the fourth quarter and so far in 1998, we have announced
several important product milestones. Our Toronto SPV(R) bioprosthetic
heart valve received U.S. Food and Drug Administration (FDA) approval
in November. We have already seen positive reaction from surgeons to
this important new product. CRMD also launched two pacemaker systems
with our advanced Minute Ventilation sensor technology, the Pacesetter
META(TM) DDDR and the Pacesetter Tempo(TM). The Tempo device
incorporates the fifth generation of Minute Ventilation sensor
technology, representing ten years of clinical experience. Our CRMD
business launched in the U.S. both an innovative pocket-sized
programmer, the APS Micro, and our universal programming platform, the
APS(TM) III programmer," Matricaria added.
"In addition, our next generation ICD platforms, the Angstrom(TM) II
and Contour(R) II, are now approved in the U.S. and Europe. The
Angstrom(TM) II is the world's smallest ICD and the Contour(R) II
delivers the highest defibrillation output. Both are also the thinnest
ICD's available," Matricaria continued.
"We also announced the appointment of Fred B. Parks as President and
Chief Operating Officer. Fred's strong operations background and global
perspective will help St. Jude Medical execute our strategic plan going
forward," concluded Matricaria.
Any statements made regarding the Company's anticipated revenues,
expenses and earnings are forward-looking statements which are subject
to risks and uncertainties, such as those described in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 (see
page 25) and Form 10-Q for the quarter ended September 30, 1997 (see
page 10). Actual results may differ materially from anticipated
results.
20
<PAGE>
St. Jude Medical, Inc. (www.sjm.com) develops, manufactures and
distributes medical devices for the global cardiovascular market. The
Company serves patients and its physician customers worldwide with the
highest quality products and services including heart valves, cardiac
rhythm management systems, specialty catheters and other cardiovascular
devices.
CONSOLIDATED CONDENSED INCOME STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER
DECEMBER 31, 31,
--------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales....................... $249,361 $231,964 $994,396 $876,747
Cost of sales................... 93,603 81,825 365,717 294,888
Gross profit.................... 155,758 150,139 628,679 581,859
Selling, general and
administrative expense......... 95,722 85,967 378,500 311,470
Research and development
expense........................ 20,504 29,843 104,693 107,644
Purchased research and
development.................... -- 35,350 -- 40,350
Special charges................. 28,024 47,808 58,669 52,926
Operating profit (loss)......... 11,508 (48,829) 86,817 69,469
Other income (expense).......... (791) 2,533 1,419 21,140
Income (loss) before taxes...... 10,717 (46,296) 88,236 90,609
Income tax provision (benefit).. 6,205 (16,776) 33,530 29,972
Net income (loss) before the
cumulative effect of accounting
change for business process
reengineering.................. 4,512 (29,520) 54,706 60,637
Cumulative effect of accounting
change, net of taxes........... 1,566 -- 1,566 --
Net income (loss)............... $ 2,946 $(29,520) $ 53,140 $ 60,637
Earnings per common share:
Income (loss) before accounting
change........................ $ .05 $ (.32) $ .60 $ .67
Cumulative effect of accounting
change........................ $ (.02) -- $ (.02) --
Net income (loss) per common
share......................... $ .03 $ (.32) $ .58 $ .67
Earnings per common share-
assuming dilution:
Income (loss) before accounting
change........................ $ .05 $ (.32) $ .59 $ .66
Cumulative effect of accounting
change........................ $ (.02) -- $ (.01) --
Net income (loss) per common
share......................... $ .03 $ (.32) $ .58 $ .66
Basic shares.................... 91,828 91,336 91,426 90,989
Diluted shares.................. 92,283 91,403 92,052 92,372
</TABLE>
SELECTED BALANCE SHEET INFORMATION
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash and marketable securities........................ $184,536 $235,395
Accounts receivable, less allowances ................. 247,146 216,813
Inventories, net...................................... 241,039 217,661
Property, plant and equipment, net.................... 307,645 289,274
Long-term debt........................................ 220,000 229,500
</TABLE>
- --------
Note: Historical amounts have been restated to include Ventritex, Inc.
21
<PAGE>
CERTAIN FINANCIAL INFORMATION
SUMMARY HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The table below sets forth summary historical condensed consolidated
financial information of the Company and its subsidiaries. The summary
historical condensed consolidated financial information for fiscal years ended
December 31, 1996 and 1995 has been derived from the audited supplemental
consolidated financial statements of the Company, which give effect to the
acquisition of Ventritex, Inc. on May 15, 1997 under the pooling of interests
method, as reported in the Company's Current Report on Form 8-K filed with the
Commission on February 11, 1998. The summary historical condensed consolidated
financial information for the nine months ended September 30, 1997 and 1996
has been derived from the unaudited condensed consolidated financial
statements of the Company as reported in the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1997. In the opinion of
management of the Company, the unaudited condensed consolidated financial
statements for the nine months ended September 30, 1997 and 1996 reflect all
adjustments necessary for a fair statement of the results of operations for
such periods.
The summary historical condensed consolidated financial information should
be read in conjunction with, and is qualified in its entirety by reference to,
the financial statements and the related notes thereto from which it has been
derived and which are included in the reports referred to above. Copies of
such reports may be inspected or obtained from the Commission in the manner
specified in "Additional Information" below.
22
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------------------------
(UNAUDITED)
1996 1995 1997 1996
--------------- --------------- --------------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C> <C>
SUMMARY CONDENSED
CONSOLIDATED STATEMENTS
OF INCOME:
Net sales............... $ 876,747 $ 848,078 $ 745,035 $ 644,783
Cost of sales........... 294,888 292,788 272,114 213,063
--------------- --------------- --------------- ---------------
Gross profit.......... 581,859 555,290 472,921 431,720
Selling, general and ad-
ministrative expense... 311,470 284,940 282,778 225,503
Research and development
expense................ 107,644 101,264 84,189 77,801
Purchased research and
development charges.... 40,350 -- -- 5,000
Special charges......... 47,808 -- 30,645 --
--------------- --------------- --------------- ---------------
Operating profit........ 74,587 169,086 75,309 123,416
Other income (expense),
net.................... 16,022 (1,992) 2,210 13,489
--------------- --------------- --------------- ---------------
Income before taxes..... 90,609 167,094 77,519 136,905
Income tax provision.... 29,972 49,978 27,325 46,748
--------------- --------------- --------------- ---------------
Net income.............. $ 60,637 $ 117,116 $ 50,194 $ 90,157
=============== =============== =============== ===============
Earnings per share:
Primary............... $ .66 $ 1.28 $ .54 $ .98
=============== =============== =============== ===============
Fully diluted......... $ .65 $ 1.28 $ .54 $ .98
=============== =============== =============== ===============
Weighted average shares
outstanding:
Primary............... 92,372 91,326 92,856 92,200
Fully diluted......... 92,663 91,802 93,053 92,331
Cash dividends paid per
share.................. $ -- $ -- $ -- $ --
Ratio of earnings to
fixed charges.......... 13.00 11.71 6.89 28.34
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------------------------
(UNAUDITED)
1996 1995 1997 1996
--------------- --------------- --------------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C> <C>
SUMMARY CONDENSED
CONSOLIDATED BALANCE
SHEETS:
ASSETS
Current Assets:
Cash and cash equiva-
lents................ $ 49,388 $ 62,638 $ 22,311 $ 57,665
Marketable securi-
ties................. 186,007 176,983 149,601 177,318
Accounts receivable,
less allowance....... 216,813 175,405 247,654 189,525
Total inventories..... 217,661 173,026 240,057 176,502
Other current assets.. 78,015 33,855 71,033 37,511
--------------- --------------- --------------- ---------------
Total current as-
sets................ 747,884 621,907 730,656 638,521
Net property, plant and
equipment.............. 289,274 188,928 312,825 221,808
Other assets, net:...... 435,336 381,400 423,155 377,111
--------------- --------------- --------------- ---------------
Total Assets......... $ 1,472,494 $ 1,192,235 $ 1,466,636 $ 1,237,440
=============== =============== =============== ===============
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Accounts payable and ac-
crued expenses......... $ 320,933 $ 216,847 $ 257,812 $ 211,732
Long-term debt.......... 229,500 120,000 229,500 57,500
Total shareholders' eq-
uity................... 922,061 855,388 979,324 968,208
--------------- --------------- --------------- ---------------
Total Liabilities and
Shareholders' Equi-
ty.................. $ 1,472,494 $ 1,192,235 $ 1,466,636 $ 1,237,440
=============== =============== =============== ===============
Working capital......... $ 426,951 $ 405,060 $ 472,844 $ 426,789
Total assets less excess
of cost of assets ac-
quired over book val-
ue..................... $ 1,111,135 $ 875,059 $ 1,116,132 $ 937,648
Total debt.............. $ 229,500 $ 120,000 $ 229,500 $ 57,500
Book value per common
share.................. $ 10.08 $ 9.47 $ 10.67 $ 10.59
</TABLE>
See Notes to Summary Historical Condensed Consolidated Financial Information.
23
<PAGE>
NOTES TO SUMMARY HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
ACQUISITIONS--DIVESTITURE
Effective May 15, 1997, the Company acquired Ventritex, Inc. ("Ventritex"),
a Sunnyvale, California based manufacturer of implantable cardioverter
defibrillators and related products. Each share of Ventritex common stock was
converted into .5 shares of the Company's common stock. The Company issued
10,437,800 Shares to Ventritex shareholders in connection with the
acquisition. The transaction was accounted for as a pooling of interests. The
accompanying financial statements, for all periods presented, are presented on
a pooled basis. The results of Ventritex's operations have been included in
the summary historical condensed consolidated results of operations as if the
merger had occurred at the beginning of 1995. These results are not
necessarily indicative of the results that would have occurred had the merger
actually taken place at the beginning of 1995, or of the expected future
results of operations.
On November 29, 1996, the Company acquired substantially all of the
worldwide cardiac rhythm management assets of Telectronics Pacing Systems,
Inc. ("Telectronics") for $135,000. The acquisition was accounted for under
the purchase accounting method. The initial price can be adjusted upward or
downward based upon the change in net asset value between June 30, 1996 and
November 29, 1996. The Company and the seller currently disagree about the
final adjustment to the purchase price and are following procedures in the
purchase agreement to resolve their differences. The Company expects that any
adjustment to the purchase price would be recorded as an adjustment to
goodwill. Goodwill of approximately $76,000 including approximately $43,000 of
consolidation charges, is being amortized on a straight line basis over 20
years. Telectronics' operations have been included in the consolidated results
of operations from the date of acquisition. The following unaudited pro forma
summary information presents the results of operations of the Company and
Telectronics for the nine months ended September 30, 1996, as if the
acquisition had occurred at the beginning of 1996.
<TABLE>
<CAPTION>
NINE MONTHS
ENDING
SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C>
Net sales...................................................... $715,699
Net (loss)..................................................... $(11,585)
Primary (loss) per share....................................... $ (.13)
</TABLE>
These pro forma results are not necessarily indicative of the results that
would have occurred had the acquisition actually taken place at the beginning
of 1996, or of the expected future results of the combined operations.
On August 29, 1997, the Company sold Medtel, a Far East distribution
company, to Getz Brothers and Co., Inc. The gain on the sale of this business
was recorded as an adjustment to previously recorded goodwill. The results of
operations of Medtel were not material to the consolidated results.
CONTINGENCIES
The Company is involved in various products liability lawsuits, claims and
proceedings of a nature considered normal to its business with the exception
noted below. Subject to self-insured retentions, the Company has products
liability insurance sufficient to cover such claims and suits. In connection
with two pacemaker lead models, the Company may be subject to future uninsured
claims. The Company's products liability insurance carrier has denied coverage
for these models and has filed suit against the Company seeking rescission of
the policy covering Pacesetter business retroactive to the date the Company
acquired Pacesetter. The Company was a codefendant in a 1995 class action suit
with respect to these leads. This case was settled in November 1995. The
Company's share of the settlement is
24
<PAGE>
approximately $5,000. Additional claims could be filed by patients with these
leads who were not class members. Further, claims may be filed in the future
relative to events currently unknown to management. Management believes losses
that might be sustained from such actions would not have a material adverse
effect on the Company's liquidity or financial condition, but could
potentially be material to the net income of a particular future period if
resolved unfavorably.
EARNINGS PER SHARE
All net earnings per Share data is based on the weighted average Shares and
Share equivalents outstanding during the applicable periods. In February 1997,
the Financial Accounting Standards Board issued Statement No. 128, Earnings
per Share, which is required to be adopted for all financial statements issued
for periods ending after December 15, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be excluded. The
impact is expected to result in an increase in basic earnings per share of
$.01 per share for the year-to-date amounts for both years presented and no
change for the third quarter for both years presented.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings include earnings before taxes and
fixed charges. Fixed charges include interest and amortization of debt
expenses and the estimated interest component of rentals.
BOOK VALUE PER SHARE
Book value per Share is calculated as total shareholders' equity divided by
the number of Shares outstanding at the end of the period.
SUMMARY UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
The following summary unaudited condensed consolidated pro forma financial
information gives effect to the purchase of 8,000,000 Shares pursuant to the
Offer at a Purchase Price of $32.00 per Share and at a Purchase Price of
$39.00 per Share, the minimum and maximum possible Share Purchase Prices in
the Offer, based on certain assumptions described in the Notes to Summary
Unaudited Condensed Consolidated Pro Forma Financial Information. The pro
forma adjustments assume the Offer occurred as of the first day of the period
presented for purposes of the Summary Condensed Consolidated Statements of
Income, and as of the balance sheet date for purposes of the Summary Condensed
Consolidated Balance Sheets. The summary unaudited condensed consolidated pro
forma financial information should be read in conjunction with the summary
historical condensed consolidated financial information and accompanying
notes. The summary unaudited condensed consolidated pro forma financial
information does not purport to be indicative of the results that would
actually have been obtained had the purchase of the Shares pursuant to the
Offer been completed at the dates indicated or of the results that may be
obtained in the future.
25
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------
AT $32 AT $39
HISTORICAL PURCHASE PRICE PURCHASE PRICE
---------- -------------- --------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C>
SUMMARY CONDENSED CONSOLIDATED
STATEMENTS OF INCOME:
Net sales............................ $ 876,747 $ 876,747 $ 876,747
Cost of sales........................ 294,888 294,888 294,888
---------- ---------- ----------
Gross profit...................... 581,859 581,859 581,859
Selling, general and administrative
expense............................. 311,470 311,470 311,470
Research and development expense..... 107,644 107,644 107,644
Purchased research and development
charges............................. 40,350 40,350 40,350
Special charges...................... 47,808 47,808 47,808
---------- ---------- ----------
Operating profit..................... 74,587 74,587 74,587
Other income (expense), net.......... 16,022 (29) (3,445)
---------- ---------- ----------
Income before taxes.................. 90,609 74,558 71,142
Income tax provision................. 29,972 23,784 22,424
---------- ---------- ----------
Net income........................... $ 60,637 $ 50,774 $ 48,718
========== ========== ==========
Earnings per share:
Primary........................... $ .66 $ .60 $ .58
========== ========== ==========
Fully diluted..................... $ .65 $ .60 $ .58
========== ========== ==========
Weighted average shares outstanding:
Primary........................... 92,372 84,372 84,372
Fully diluted..................... 92,663 84,663 84,663
Cash dividends paid per share........ $ -- $ -- $ --
Ratio of earnings to fixed charges... 13.00 4.16 3.63
<CAPTION>
DECEMBER 31, 1996
----------------------------------------
AT $32 AT $39
HISTORICAL PURCHASE PRICE PURCHASE PRICE
---------- -------------- --------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C>
SUMMARY CONDENSED CONSOLIDATED
BALANCE SHEETS:
ASSETS
Current Assets
Cash and cash equivalents.......... $ 49,388 $ 47,078 $ 47,078
Marketable securities.............. 186,007 186,007 186,007
Accounts receivable, less
allowance......................... 216,813 216,813 216,813
Total inventories.................. 217,661 217,661 217,661
Other current assets............... 78,015 78,015 78,015
---------- ---------- ----------
Total current assets............. 747,884 745,574 745,574
Net property, plant and equipment.... 289,274 289,274 289,274
Other assets, net ................... 435,336 436,576 436,576
---------- ---------- ----------
Total Assets..................... $1,472,494 $1,471,424 $1,471,424
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued
expenses............................ $ 320,933 $ 320,933 $ 320,933
Long-term debt....................... 229,500 485,500 541,500
Total shareholders' equity........... 922,061 664,991 608,991
---------- ---------- ----------
Total Liabilities and
Shareholders' Equity............ $1,472,494 $1,471,424 $1,471,424
========== ========== ==========
Working capital...................... $ 426,951 $ 424,641 $ 424,641
Total assets less excess of cost of
assets acquired over book value..... $1,111,135 $1,110,065 $1,110,065
Total debt........................... $ 229,500 $ 485,500 $ 541,500
Book value per common share.......... $ 10.08 $ 7.27 $ 6.66
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------
AT $32 AT $39
PURCHASE PURCHASE
HISTORICAL PRICE PRICE
------------------------- ------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C>
SUMMARY CONSOLIDATED STATEMENTS OF
INCOME:
Net sales............................ $ 745,035 $ 745,035 $ 745,035
Cost of sales........................ 272,114 272,114 272,114
------------ ------------ ------------
Gross profit..................... 472,921 472,921 472,921
Selling, general and administrative
expense............................. 282,778 282,778 282,778
Research and development expense..... 84,189 84,189 84,189
Purchased research and development
charges............................. -- -- --
Special charges...................... 30,645 30,645 30,645
------------ ------------ ------------
Operating profit..................... 75,309 75,309 75,309
Other income (expense)............... 2,210 (9,720) (12,282)
------------ ------------ ------------
Income before taxes.................. 77,519 65,589 63,027
Income tax provision................. 27,325 22,805 21,820
------------ ------------ ------------
Net income........................... $ 50,194 $ 42,784 $ 41,207
============ ============ ============
Earnings per share:
Primary............................ $ .54 $ .50 $ .49
============ ============ ============
Fully diluted...................... $ .54 $ .50 $ .49
============ ============ ============
Weighted average shares outstanding:
Primary............................ 92,856 84,856 84,856
Fully diluted...................... 93,053 85,053 85,053
Cash dividends paid per share........ $ -- $ -- $ --
Ratio of earnings to fixed charges... 6.89 3.61 3.29
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------
AT $32 AT $39
PURCHASE PURCHASE
HISTORICAL PRICE PRICE
------------------------- ------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C>
SUMMARY CONDENSED CONSOLIDATED BAL-
ANCE SHEETS:
ASSETS
Current Assets
Cash and cash equivalents.......... $ 22,311 $ 20,001 $ 20,001
Marketable securities.............. 149,601 149,601 149,601
Accounts receivable, less allow-
ance.............................. 247,654 247,654 247,654
Total inventories.................. 240,057 240,057 240,057
Other current assets............... 71,033 71,033 71,033
------------ ------------ ------------
Total current assets............. 730,656 728,346 728,346
Net property, plant and equipment.... 312,825 312,825 312,825
Other assets, net.................... 423,155 424,395 424,395
------------ ------------ ------------
Total Assets..................... $ 1,466,636 $ 1,465,566 $ 1,465,566
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued ex-
penses.............................. $ 257,812 $ 257,812 $ 257,812
Long-term debt....................... 229,500 485,500 541,500
Total shareholders' equity........... 979,324 722,254 666,254
------------ ------------ ------------
Total Liability and Shareholders'
Equity............................ $ 1,466,636 $ 1,465,566 $ 1,465,566
============ ============ ============
Working capital...................... $ 472,844 $ 470,534 $ 470,534
Total assets less excess of cost of
assets acquired over book value..... $ 1,116,132 $ 1,115,062 $ 1,115,062
Total debt........................... $ 229,500 $ 485,500 $ 541,500
Book value per common share.......... $ 10.67 $ 7.87 $ 7.26
</TABLE>
27
<PAGE>
NOTES TO SUMMARY CONDENSED CONSOLIDATED UNAUDITED
PRO FORMA FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The summary condensed consolidated unaudited proforma financial information
assumes 8,000,000 Shares are purchased by the Company at $32.00 per Share and
$39.00 per Share, with the purchase being financed with the proceeds from
borrowings of $256,000 and $312,000, respectively. The assumed annualized
interest rate used for proforma income statement purposes is 6.1%, and
represents the current average interest rates under the Credit Facilities. The
provision for income taxes has been adjusted based on the appropriate
statutory rates. Fees assumed incurred in connection with such borrowings have
been capitalized as deferred financing costs and amortized over the average
life of the borrowing. Expenses directly related to the Offer are assumed to
be $1,070 and are included as part of the cost of the Shares acquired. The pro
forma financial information assumes that none of the 9,448,755 Shares issuable
upon exercise of outstanding Options are purchased pursuant to the Offer.
ADDITIONAL INFORMATION
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is obligated to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
the Company's directors and officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in proxy statements distributed to the Company's shareholders and
filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington
D.C. 20549; and at its regional offices located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, New York, New
York 10048. Copies of such material may also be obtained by mail, upon payment
of the Commission's customary charges, from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C.
20549. The Commission also maintains a Web site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Such reports, proxy statements and other information concerning
the Company also can be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005, on which the Shares are listed.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce
the number of shareholders. Nonetheless, there will still be a sufficient
number of Shares outstanding and publicly traded following the Offer to ensure
a continued trading market in the Shares. Based on the published guidelines of
the NYSE, the Company does not believe that its purchase of Shares pursuant to
the Offer will cause its remaining Shares to be delisted from such exchange.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the purchase of Shares pursuant to the Offer, the Shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its shareholders
and to the Commission and comply with the
28
<PAGE>
Commission's proxy rules in connection with meetings of the Company's
shareholders. The Company believes that its purchase of Shares pursuant to the
Offer will not result in the Shares becoming eligible for deregistration under
the Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its
acquisition of Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
Company's acquisition or ownership of Shares as contemplated by the Offer.
Should any such approval or other action be required, the Company currently
contemplates that it will seek such approval or other action. The Company
cannot predict whether it may determine that it is required to delay the
acceptance for payment of, or payment for, Shares tendered pursuant to the
Offer pending the outcome of any such matter. There can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that the failure to obtain any such
approval or other action might not result in adverse consequences to the
Company's business. The Company's obligations under the Offer to accept for
payment and pay for Shares are subject to certain conditions. See Section 6.
14. CERTAIN U. S. FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences relevant to the Offer. The discussion contained in this summary
is based upon the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"), existing and proposed United States Treasury regulations
promulgated thereunder, rulings, administrative pronouncements and judicial
decisions, changes to which could materially affect the tax consequences
described herein and could be made on a retroactive basis. As discussed below,
depending upon a shareholder's particular circumstances, the Company's
purchase of such shareholder's Shares pursuant to the Offer may be treated
either as a sale or a dividend for United States federal income tax purposes.
Accordingly, such a purchase generally will be referred to in this section of
the Offer to Purchase as an exchange of Shares for cash.
This summary may not apply to Shares acquired as compensation (including
Shares acquired upon the exercise of Options or which were or are subject to
forfeiture restrictions). The summary also does not address the state, local
or foreign tax consequences of participating in the Offer. The summary
discusses only Shares held as capital assets, within the meaning of Section
1221 of the Code, and does not address all of the tax consequences that may be
relevant to particular shareholders in light of their personal circumstances,
or to certain types of shareholders (such as certain financial institutions,
dealers in securities or commodities, insurance companies, tax exempt
organizations or persons who hold Shares as a position in a "straddle" or as a
part of a "hedging" or "conversion" transaction for United States federal
income tax purposes). In particular, the discussion of the consequences of an
exchange of Shares for cash pursuant to the Offer applies only to a United
States Holder. For purposes of this summary, a "United States Holder" is a
holder of shares that is (i) a citizen or resident of the United States, (ii)
a corporation, partnership or other entity created or organized in or under
the laws of the United States, any State or any political subdivision thereof,
(iii) an estate, or (iv) a trust (a) of which one or more United States
persons have the authority to control all substantial decisions and over the
administration of which a court within the United States is able to exercise
primary supervision or (b) that was in existence on August 20, 1996, was
treated as a United States person under the law in effect immediately prior to
such date and has in effect an election to continue to be treated as a United
States person. A "Non-United States Holder" is a holder of Shares other than a
United States Holder. This discussion does not address the tax consequences to
Non-United States Holders who will be subject to United States federal income
tax on a net basis on the proceeds of their exchange of Shares pursuant to the
Offer because such income is effectively connected with the conduct of a trade
or business within the United States. Such Non-United States Holders are
generally taxed in a manner similar to United States Holders; however, certain
special
29
<PAGE>
rules apply. Non-United States Holders who are not subject to United States
federal income tax on a net basis should see Section 3 for a discussion of the
applicable United States withholding rules and the potential for obtaining a
refund of all or a portion of the tax withheld. EACH SHAREHOLDER SHOULD
CONSULT SUCH SHAREHOLDER'S TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF
PARTICIPATION IN THE OFFER.
Consequences to United States Holders who receive cash pursuant to the
Offer. An exchange of Shares for cash pursuant to the Offer by a United States
Holder will be a taxable transaction for United States federal income tax
purposes. As a consequence of the exchange, a United States Holder will,
depending on such holder's particular circumstances, be treated either as
having sold such holder's Shares or as having received a dividend distribution
from the Company, with the tax consequences described below.
Under Section 302 of the Code, a United States Holder whose Shares are
exchanged pursuant to the Offer will be treated as having sold such holder's
Shares, and thus will recognize gain or loss if the exchange (i) is "not
essentially equivalent to a dividend" with respect to the holder, (ii) is
"substantially disproportionate" with respect to such holder or (iii) results
in a "complete termination" of such holder's equity interest in the Company,
each as discussed below. In applying these tests, a United States Holder will
be treated as owning Shares actually or constructively owned by certain
related individuals and entities.
If a United States Holder sells Shares to persons other than the Company at
or about the time such holder also sells Shares to the Company pursuant to the
Offer, and the various sales effected by the holder are part of an overall
plan to reduce or terminate such holder's proportionate interest in the
Company, then the sales to persons other than the Company may, for United
States federal income tax purposes, be integrated with the holder's exchange
of Shares pursuant to the Offer and, if integrated, should be taken into
account in determining whether the holder satisfies any of the three tests
described below.
A United States Holder will satisfy the "not essentially equivalent to a
dividend" test if the reduction in such holder's proportionate interest in the
Company constitutes a "meaningful reduction" given such holder's particular
facts and circumstances. The IRS has indicated in published rulings that any
reduction in the percentage interest of a shareholder whose relative stock
interest in a publicly held corporation is minimal (an interest of less than
1% should satisfy this requirement) and who exercises no control over
corporate affairs should constitute such a "meaningful reduction."
An exchange of Shares for cash will be "substantially disproportionate" with
respect to a United States Holder if the percentage of the then outstanding
Shares actually and constructively owned by such holder immediately after the
exchange is less than 80% of the percentage of the Shares actually and
constructively owned by such holder immediately before the exchange.
A United States Holder that exchanges all Shares actually or constructively
owned by such holder for cash pursuant to the Offer will be treated as having
completely terminated such holder's equity interest in the Company.
If a United States Holder is treated as having sold such holder's Shares
under the tests described above, such holder will recognize gain or loss equal
to the difference between the amount of cash received and such holders' tax
basis in the Shares exchanged therefor. Any such gain or loss will be capital
gain or loss. Any such capital gain will be taxed at long-term rates if the
holding period of the Shares exceeds eighteen months, at mid-term rates if the
holding period of the Shares exceeds twelve months but is not more than
eighteen months and at short-term rates if the holding period of the Shares is
not more than twelve months, each as of the date of the exchange.
If a United States Holder who exchanges Shares pursuant to the Offer is not
treated under Section 302 as having sold such holder's Shares for cash, the
entire amount of cash received by such holder will be treated as a dividend to
the extent of the Company's current and accumulated earnings and profits,
30
<PAGE>
which the Company anticipates will be sufficient to cover the amount of any
such dividend and will be includible in the holder's gross income as ordinary
income in its entirety, without reduction for the tax basis of the Shares
exchanged. No loss will be recognized. The United States Holder's tax basis in
the Shares exchanged generally will be added to such holder's tax basis in
such holder's remaining Shares. To the extent that cash received in exchange
for Shares is treated as a dividend to a corporate United States Holder, such
holder will be (i) eligible for a dividends received deduction (subject to
applicable limitations) and (ii) subject to the "extraordinary dividend"
provisions of the Code. To the extent, if any, that the cash received by a
United States Holder exceeds the Company's current and accumulated earnings
and profits, it will be treated first as a tax free return of such holder's
tax basis in the Shares and thereafter as capital gain.
The Company cannot predict whether or to what extent the Offer will be
oversubscribed. If the Offer is oversubscribed, proration of tenders pursuant
to the Offer will cause the Company to accept fewer Shares than are tendered.
Therefore, a Holder can be given no assurance that a sufficient number of such
Holder's Shares will be exchanged pursuant to the Offer to ensure that such
exchange will be treated as a sale, rather than as a dividend, for United
States federal income tax purposes pursuant to the rules discussed above.
Consequences to Shareholders who do not receive cash pursuant to the
Offer. Shareholders, none of whose Shares are exchanged pursuant to the Offer,
will not incur any tax liability as a result of the consummation of the Offer.
See Section 3 with respect to the application of United States federal
income tax withholding to payments made to foreign shareholders and backup
withholding.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
EACH SHAREHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE OFFER,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 6 shall have occurred or shall have been deemed by the
Company to have occurred, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary,
followed by a public announcement thereof no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Time. There can be no assurance that the Company will exercise its right to
extend the Offer. During any such extension, all Shares previously tendered
and not accepted for payment or withdrawn will remain subject to the Offer and
may be accepted for payment by the Company, except to the extent that such
Shares may be withdrawn as set forth in Section 4.
The Company also expressly reserves the right, in its sole discretion, to
terminate the Offer and not accept for payment or pay for any Shares not
theretofore accepted for payment or paid for or, subject to applicable law, to
postpone payment for Shares upon the occurrence of any of the conditions
specified in Section 6 hereof by giving oral or written notice of such
termination or postponement to the Depositary and making a public announcement
thereof. The Company's reservation of the right to delay payment for Shares
which it has accepted for payment is limited by Rule 13e-4(f)(5) promulgated
under the Exchange Act, which requires that the Company must pay the
consideration offered or return the Shares tendered promptly after termination
or withdrawal of a tender offer. Subject to compliance with applicable law,
the Company further reserves the right, in its sole discretion, and regardless
of whether any of the events set forth in Section 6 shall have occurred or
shall be deemed by the Company to have occurred, to amend the Offer in any
respect (including, without limitation, by decreasing or increasing the
consideration offered
31
<PAGE>
in the Offer to holders of Shares or by decreasing or increasing the number of
Shares being sought in the Offer). Amendments to the Offer may be made at any
time and from time to time effected by public announcement thereof, such
announcement, in the case of an extension, to be issued no later than 9:00
a.m., New York City time, on the next business day after the last previously
scheduled or announced Expiration Time.
Any public announcement made pursuant to the Offer will be disseminated
promptly to shareholders in a manner reasonably designated to inform
shareholders of such change. Without limiting the manner in which the Company
may choose to make any public announcement, except as provided by applicable
law (including Rule 13e-4(e)(2) promulgated under the Exchange Act), the
Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules 13e-
4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which require that
the minimum period during which an offer must remain open following material
changes in the terms of the offer or information concerning the offer (other
than a change in price, a change in the Dealer Manager's soliciting fee or a
change in percentage of securities sought) will depend upon the facts and
circumstances, including the relative materiality of such terms or
information. If (i) the Company increases or decreases the price to be paid
for Shares, the Company increases or decreases the Dealer Manager's soliciting
fee, the Company increases the number of Shares being sought and such increase
in the number of Shares being sought exceeds 2% of the outstanding Shares, or
the Company decreases the number of Shares being sought, and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given, the Offer will be
extended until the expiration of such period of ten business days.
16. FEES AND EXPENSES
The Company has retained Credit Suisse First Boston to act as its financial
advisor, as well as the Dealer Manager, in connection with the Offer. Credit
Suisse First Boston will receive a fee for its services as financial advisor
and Dealer Manager of $0.07 for each Share purchased by the Company pursuant
to the Offer. The Company also has agreed to reimburse Credit Suisse First
Boston for certain expenses incurred in connection with the Offer, including
out-of-pocket expenses and the reasonable fees and disbursements of their
counsel, and to indemnify Credit Suisse First Boston against certain
liabilities in connection with the Offer, including certain liabilities under
the federal securities laws. Credit Suisse First Boston has rendered various
investment banking and other advisory services to the Company in the past, for
which it has received customary compensation, and can be expected to render
similar services to the Company in the future. Credit Suisse First Boston will
also act as syndicating agent and as a lender under the Credit Facilities. See
Section 10.
The Company has retained Georgeson & Company Inc. as Information Agent and
American Stock Transfer & Trust Company as Depositary in connection with the
Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services. The Company will also reimburse the
Information Agent and the Depositary for out-of-pocket expenses, including
reasonable attorneys' fees, and has agreed to indemnify the Information Agent
and the Depositary against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws.
The Dealer Manager and Information Agent may contact shareholders by mail,
telephone, telex, telegraph and in person, and may request brokers, dealers
and other nominee shareholders to forward materials relating to the Offer to
beneficial owners. Neither the Information Agent nor the Depositary has been
retained to make solicitations or recommendations in connection with the
Offer.
32
<PAGE>
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than the Dealer Manager)
for soliciting any Shares pursuant to the Offer. The Company will, however, on
request, reimburse such persons for customary handling and mailing expenses
incurred in forwarding materials in respect of the Offer to the beneficial
owners for which they act as nominees. No such broker, dealer, commercial bank
or trust company has been authorized to act as the Company's agent for
purposes of the Offer. The Company will pay (or cause to be paid) any stock
transfer taxes on its purchase of Shares, except as otherwise provided in
Instruction 7 of the Letter of Transmittal.
17. MISCELLANEOUS
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such
law, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares residing in such jurisdiction. In any
jurisdiction the securities or blue sky laws of which require the Offer to be
made by a licensed broker or dealer, the Offer is being made on the Company's
behalf by the Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has
filed with the Commission the Schedule 13E-4 which contains additional
information with respect to the Offer. The Schedule 13E-4, including the
exhibits and any amendments thereto, may be examined, and copies may be
obtained, at the same places and in the same manner as is set forth in Section
11 with respect to information concerning the Company.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION
WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
St. Jude Medical, Inc.
February 12, 1998
33
<PAGE>
SCHEDULE I
CERTAIN TRANSACTIONS INVOLVING SHARES
Except as set forth below, based upon the Company's records and upon
information provided to the Company by its directors, executive officers,
associates and subsidiaries, neither the Company nor any of its associates or
subsidiaries or persons controlling the Company nor, to the best of the
Company's knowledge, any of the directors or executive officers of the Company
or any of its subsidiaries, nor any associates or subsidiary of any of the
foregoing, has effected any transactions in the Shares during the 40 business
days prior to February 12, 1998:
1. On December 16, 1997, Thomas H. Garrett disposed of 150 Shares by
gift.
2. On December 18, 1997, Walter L. Sembrowich purchased 2,000 Shares at
$29.1875 per Share through a broker transaction on the NYSE.
3. On December 19, 1997, Daniel J. Starks purchased 34,000 Shares at
prices ranging from $29.0625 to $29.625 per Share through broker
transactions on the NYSE.
4. On December 30, 1997, Fred Parks purchased 4,000 Shares at $30.00 per
Share through a broker transaction on the NYSE.
5. On January 8, 1998, Roger G. Stoll purchased 2,200 Shares at $31.50
per Share through a broker transaction on the NYSE.
S-1
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for the Shares and any
other required documents should be sent or delivered by each shareholder or
such shareholder's broker, dealer, commercial bank, trust company or other
nominee to the Depositary at its address set forth below:
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail: By Overnight Courier:
American Stock Transfer & Trust American Stock Transfer & Trust
Company Company
40 Wall Street 40 Wall Street
New York, New York 10005 New York, New York 10005
By Hand:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Facsimile for Eligible Institutions: Confirm by Telephone:
(718) 234-5001 (800) 937-5449
(718) 921-8200
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent, at the telephone number and
address below, or to the Dealer Manager, at the address and telephone number
below. Shareholders may also contact their broker, dealer, commercial bank or
trust company for assistance concerning the Offer. To confirm delivery of
Shares, shareholders are directed to contact the Depositary.
The Information Agent for the Offer is:
[Georgeson & Company Inc. Logo]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll-Free:
(800) 223-2064
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 646-4543
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
ST. JUDE MEDICAL, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 12, 1998
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, MARCH 12, 1998, UNLESS THE OFFER IS
EXTENDED.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail: By Overnight Courier:
American Stock Transfer & Trust American Stock Transfer & Trust
Company Company
40 Wall Street 40 Wall Street
New York, New York 10005 New York, New York 10005
By Hand:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Facsimile for Eligible Institutions: Confirm by Telephone:
(718) 234-5001 (800) 937-5449
(718) 921-8200
DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS
NAME(S) APPEAR(S) ON SHARES TENDERED (ATTACH ADDITIONAL
CERTIFICATE(S)) SIGNED LIST IF NECESSARY)
- -----------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES NUMBER
CERTIFICATE REPRESENTED OF SHARES
NUMBER(S)* BY CERTIFICATE(S) TENDERED**
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
</TABLE>
- --------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which shares are
to be purchased in the event of proration.*** (Attach additional signed list
if necessary.)
See Instruction 14
1st: ; 2nd: ; 3rd: ; 4th: ; 5th:
- --------------------------------------------------------------------------------
[_] Check here if any of the Share certificates that you own have been lost,
stolen or destroyed. See Instruction
15. Number of Shares represented by lost, stolen or destroyed Share
certificates:
- --------------------------------------------------------------------------------
* Need not be completed by shareholders tendering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by each Share certificate delivered to the Depositary are
being tendered hereby. See Instruction 4.
*** If you do not designate an order, then in the event less than all Shares
tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary. See Instruction 14.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL
CAREFULLY.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE COMPANY WILL NOT
BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID
DELIVERY. DELIVERIES TO THE DEPOSITORY TRUST COMPANY WILL NOT CONSTITUTE VALID
DELIVERY TO THE DEPOSITARY.
This Letter of Transmittal is to be used only if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made
by book-entry transfer to the Depositary's account at The Depository Trust
Company ("DTC") pursuant to the procedures set forth in Section 3 of the Offer
to Purchase (as defined below).
Shareholders who cannot deliver their Share certificates and any other
documents required to the Depositary by the Expiration Time (as defined in the
Offer to Purchase) must tender their Shares using the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account No. at DTC _________________________________________________________
Transaction Code No. _______________________________________________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution that Guaranteed Delivery _______________________________
If delivery is by book-entry transfer:
Name of Tendering Institution ______________________________________________
Account No. at DTC _________________________________________________________
Transaction Code No. _______________________________________________________
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to St. Jude Medical, Inc., a Minnesota
corporation (the "Company"), the above-described shares of its common stock,
par value $.10 per share (the "Shares"), including the associated Preferred
Stock Purchase Rights (the "Rights"), at the price per Share indicated in this
Letter of Transmittal, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated February 12, 1998
(the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which together constitute the "Offer"). Unless the
Rights are redeemed by the Company or become separately tradeable prior to the
Expiration Time (as defined in the Offer to Purchase), a tender of Shares will
also constitute a tender of the associated Rights. Unless the context
otherwise requires, all references to Shares shall include the associated
Rights.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to all the Shares that are being tendered
hereby or orders the registration of such Shares tendered by book-entry
transfer that are purchased pursuant to the Offer to or upon the order of the
Company and hereby irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to:
(i) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by DTC, together, in any such case,
with all accompanying evidences of transfer and authenticity, to or upon
the order of the Company upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price (as defined below) with respect
to such Shares;
(ii) present certificates for such Shares for cancellation and transfer
on the books of the Company; and
(iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of
the Offer.
The undersigned hereby represents and warrants to the Company that the
undersigned has full power and authority to tender, sell, assign and transfer
the Shares tendered hereby and that, when and to the extent the same are
accepted for payment by the Company, the Company will acquire good, marketable
and unencumbered title thereto, free and clear of all liens, restrictions,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale or transfer thereof, and the same will not be subject to
any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Depositary or the Company to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby.
The undersigned represents and warrants to the Company that the undersigned
has read and agrees to all of the terms of the Offer. All authority herein
conferred or agreed to be conferred shall not be affected by and shall survive
the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Except as stated
in the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
Instructions will constitute the undersigned's representation and warranty to
the Company that (i) the undersigned has a net long position in the Shares or
equivalent securities being tendered within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended, and (ii)
the tender of such Shares complies with Rule 14e-4. The Company's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Offer.
The names and addresses of the registered holders should be printed, if they
are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates, the number of Shares that the
undersigned wishes to tender and the purchase price at which such Shares are
being tendered should be indicated in the appropriate boxes on this Letter of
Transmittal.
3
<PAGE>
The undersigned understands that the Company, upon the terms and subject to
the conditions of the Offer, will determine a single per Share price not in
excess of $39.00 nor less than $32.00 per Share, net to the Seller in cash
(the "Purchase Price"), that it will pay for Shares validly tendered and not
withdrawn pursuant to the Offer, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders. The undersigned
understands that the Company will select the lowest Purchase Price that will
allow it to buy 8,000,000 Shares (or such lesser number of Shares as are
validly tendered and not withdrawn at prices not in excess of $39.00 nor less
than $32.00 per Share) pursuant to the Offer. The undersigned understands that
all Shares validly tendered at prices at or below the Purchase Price and not
withdrawn will be purchased at the Purchase Price, net to the seller in cash,
upon the terms and subject to the conditions of the Offer, including its
proration terms, and that the Company will return all other Shares, including
Shares tendered at prices greater than the Purchase Price and not withdrawn
and Shares not purchased because of proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may not be required to purchase any of the Shares tendered hereby or may
accept for payment fewer than all of the Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price of any Shares purchased, and/or return
any Shares not tendered or not purchased, in the name(s) of the undersigned
(and, in the case of Shares tendered by book-entry transfer, by credit to the
account at DTC designated above). Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail the check for the Purchase Price
of any Shares purchased and/or any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the undersigned at
the address shown below the undersigned's signature(s). In the event that both
"Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the check for the Purchase Price of any Shares
purchased and/or return any Shares not tendered or not purchased in the
name(s) of, and mail such check and/or any certificates to, the person(s) so
indicated. The undersigned recognizes that the Company has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from
the name of the registered holder(s) thereof if the Company does not accept
for payment any of the Shares so tendered.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
4
<PAGE>
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
- --------------------------------------------------------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE LETTER OF
TRANSMITTAL FOR EACH PRICE SPECIFIED MUST BE USED.
(See Instruction 5)
- --------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED
(EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO
VALID TENDER OF SHARES.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
[_] $ 32.000 [_] $ 33.500 [_] $ 35.000 [_] $ 36.375 [_] $ 37.750
[_] $ 32.125 [_] $ 33.625 [_] $ 35.125 [_] $ 36.500 [_] $ 37.875
[_] $ 32.250 [_] $ 33.750 [_] $ 35.250 [_] $ 36.625 [_] $ 38.000
[_] $ 32.375 [_] $ 33.875 [_] $ 35.375 [_] $ 36.750 [_] $ 38.125
[_] $ 32.500 [_] $ 34.000 [_] $ 35.500 [_] $ 36.875 [_] $ 38.250
[_] $ 32.625 [_] $ 34.125 [_] $ 35.625 [_] $ 37.000 [_] $ 38.375
[_] $ 32.750 [_] $ 34.250 [_] $ 35.750 [_] $ 37.125 [_] $ 38.500
[_] $ 32.875 [_] $ 34.375 [_] $ 35.875 [_] $ 37.250 [_] $ 38.625
[_] $ 33.000 [_] $ 34.500 [_] $ 36.000 [_] $ 37.375 [_] $ 38.750
[_] $ 33.125 [_] $ 34.625 [_] $ 36.125 [_] $ 37.500 [_] $ 38.875
[_] $ 33.250 [_] $ 34.750 [_] $ 36.250 [_] $ 37.625 [_] $ 39.000
[_] $ 33.375 [_] $ 34.875
</TABLE>
ODD LOTS
(SEE INSTRUCTION 9)
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person who owns beneficially, as of the close of business on
February 11, 1998, and who continues to own beneficially as of the Expiration
Time, an aggregate of fewer than 100 Shares (excluding Restricted Shares (as
defined in the Offer to Purchase)).
The undersigned either (check one box):
[_] owned beneficially, as of the close of business on February 11, 1998,
and continues to own beneficially as of the Expiration Time, an
aggregate of fewer than 100 Shares (excluding Restricted Shares), all
of which are being tendered, or
[_] is a broker, dealer, commercial bank, trust company or other nominee
that (i) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner, and (ii) believes, based upon
representations made to it by each such beneficial owner, that such
beneficial owner owned beneficially, as of the close of business on
February 11, 1998 and continues to own beneficially as of the
Expiration Time, an aggregate of fewer than 100 Shares (excluding
Restricted Shares), and is tendering all of such Shares.
- --------------------------------------------------------------------------------
If you do not wish to specify a purchase price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price
determined by the Company in accordance with the terms of the Offer (persons
checking this box need not indicate the price per Share in the box entitled
"Price (In Dollars) Per Share At Which Shares are Being Tendered" in this
Letter of Transmittal). [_]
5
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 6, 7 AND 8) (SEE INSTRUCTIONS 6 AND 8)
To be completed ONLY if the To be completed ONLY if the
check for the aggregate Purchase check for the Purchase Price of
Price of Shares purchased and/or Shares purchased and/or certifi-
certificates for Shares not ten- cates for Shares not tendered or
dered or not purchased are to be not purchased are to be mailed to
issued in the name of someone someone other than the under-
other than the undersigned. signed or to the undersigned at
an address other than that shown
below the undersigned's signa-
ture(s).
Issue [_] check
and/or [_] certificate(s) to:
Name _____________________________ Mail [_] check
---------------------------------- and/or [_] certificates to:
(Please Print) Name______________________________
Address __________________________ ----------------------------------
---------------------------------- (Please Print)
(Include Zip Code) Address __________________________
---------------------------------- ----------------------------------
(Taxpayer Identification or (Include Zip Code)
Social Security No.)
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL SHAREHOLDERS)
Signature(s) of Owner(s) ______________________________
Dated: , 1998
Name(s) _______________________________________________
(Please Print)
Capacity (full title) _________________________________
Address _______________________________________________
_______________________________________________________
_______________________________________________________
(Include Zip Code)
Area Code and Telephone No. ___________________________
(Must be signed by registered holder(s) exactly as
name(s) appear(s) on Share certificate(s) or on a
security position listing or by person(s) authorized
to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person
acting in a fiduciary or representative capacity,
please set forth full title and see Instruction 6.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm __________________________________________
Authorized Signature __________________________________
Name __________________________________________________
(Please Print)
Title _________________________________________________
Address _______________________________________________
(Include Zip Code)
Area Code and Telephone No. ___________________________
Dated: , 1998
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is
a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office, branch or agency in the United States that is a member of
one of the Stock Transfer Association's approved medallion programs (such as
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program)
(each of the foregoing being referred to as an "Eligible Institution"), unless
(i) this Letter of Transmittal is signed by the registered holder(s) of the
Shares (which term, for purposes of this document, shall include any
participant in DTC's system whose name appears on a security position listing
as the owner of the Shares) tendered herewith and such holder(s) have not
completed the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on this Letter of Transmittal, or (ii) such
Shares are tendered for the account of an Eligible Institution. See
Instruction 6.
2. Delivery of Letter of Transmittal and Share Certificates; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be used either if Share
certificates are to be forwarded herewith or if delivery of Shares is to be
made by book-entry transfer pursuant to the procedures set forth in Section 3
of the Offer to Purchase. Certificates for all physically delivered Shares, or
a confirmation of a book-entry transfer into the Depositary's account at DTC
of all Shares delivered electronically, as well as a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof) and
any other documents required by this Letter of Transmittal, must be received
by the Depositary at its address set forth on the front page of this Letter of
Transmittal prior to the Expiration Time. If certificates are forwarded to the
Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery.
Shareholders whose Share certificates are not immediately available, who
cannot deliver their Shares and all other required documents to the Depositary
or who cannot complete the procedures for delivery by book-entry transfer
prior to the Expiration Time may tender their Shares pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery substantially in the form provided by the
Company (with any required signature guarantees) must be received by the
Depositary prior to the Expiration Time, and (iii) the certificates for all
physically delivered Shares in proper form for transfer by delivery, or a
confirmation of a book-entry transfer into the Depositary's account at DTC of
all Shares delivered electronically, in each case together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
any other documents required by this Letter of Transmittal, must be received
by the Depositary within three New York Stock Exchange, Inc. trading days
after the date the Depositary receives such Notice of Guaranteed Delivery, all
as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL, AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION
AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative or contingent tenders will be accepted. By executing this
Letter of Transmittal (or facsimile thereof), the tendering shareholder waives
any right to receive any notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule and attached to this Letter of Transmittal.
4. Partial Tenders (Not Applicable to Shareholders Who Tender by Book-Entry
Transfer). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new certificate for the remainder of the Shares represented by
the old certificate will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the "Special Payment Instructions"
or "Special Delivery Instructions" boxes on this Letter of
7
<PAGE>
Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. Indication of Price At Which Shares Are Being Tendered. For Shares to be
validly tendered, the shareholder must check the box indicating the price per
Share at which such shareholder is tendering Shares under "Price (In Dollars)
Per Share At Which Shares Are Being Tendered" in this Letter of Transmittal,
except that Odd Lot Owners (as defined in Section 2 of the Offer to Purchase)
may check the box above in the section entitled "Odd Lots" indicating that
such shareholder is tendering all Shares at the Purchase Price determined by
the Company. ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR
(OTHER THAN AS DESCRIBED ABOVE FOR ODD LOT OWNERS) IF NO BOX IS CHECKED, THERE
IS NO VALID TENDER OF SHARES. A shareholder wishing to tender portions of such
shareholder's Share holdings at different prices must complete a separate
Letter of Transmittal for each price at which such shareholder wishes to
tender each such portion of such shareholder's Shares. The same Shares cannot
be tendered (unless previously validly withdrawn as provided in Section 4 of
the Offer to Purchase) at more than one price.
6. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby is held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s), in which case the certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such certificates. Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates evidencing
the Shares tendered hereby must be endorsed or accompanied by appropriate
stock powers, in either case, signed exactly as the name(s) of the registered
holder(s) appear(s) on such certificate(s). Signature(s) on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
See Instruction 1.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Company of the authority of such person so to act must be submitted.
7. Stock Transfer Taxes. The Company will pay or cause to be paid any stock
transfer taxes with respect to the sale and transfer of any Shares to it or
its order pursuant to the Offer. If, however, payment of the aggregate
Purchase Price is to be made to, or Shares not tendered or not purchased are
to be registered in the name of, any person other than the registered
holder(s), or if tendered Shares are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such person will be
deducted from the Purchase Price unless satisfactory evidence of the payment
of such taxes, or exemption therefrom, is submitted. See Section 5 of the
Offer to Purchase. Except as provided in this Instruction 7, it will not be
necessary to affix transfer tax stamps to the certificates representing Shares
tendered hereby.
8. Special Payment and Delivery Instructions. If a check for the Purchase
Price of any Shares tendered hereby is to be issued in the name of, and/or any
Shares not tendered or not purchased are to be returned to, a person other
8
<PAGE>
than the person(s) signing this Letter of Transmittal, or if the check and/or
any certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of
Shares Tendered," then the boxes captioned "Special Payment Instructions"
and/or "Special Delivery Instructions" on this Letter of Transmittal should be
completed. Shareholders tendering Shares by book-entry transfer will have any
Shares not accepted for payment returned by crediting the account maintained
by such shareholder at DTC.
9. Odd Lots. As described in Section 1 of the Offer to Purchase, if fewer
than all Shares validly tendered at or below the Purchase Price and not
withdrawn prior to the Expiration Time are to be purchased, the Shares
purchased first will consist of all Shares tendered by any shareholder who
owned beneficially, as of the close of business on February 11, 1998, and
continues to own beneficially as of the Expiration Time, an aggregate of fewer
than 100 Shares (excluding Restricted Shares) and who validly tendered all
such Shares at or below the Purchase Price (including by not designating a
purchase price as described above). Partial tenders of Shares will not qualify
for this preference and this preference will not be available unless the box
captioned "Odd Lots" in this Letter of Transmittal and the Notice of
Guaranteed Delivery, if any, is completed.
10. Substitute Form W-9 and Form W-8. Under the United States federal income
tax backup withholding rules, 31% of the gross proceeds payable to a
shareholder or other payee pursuant to the Offer must be withheld and remitted
to the United States Internal Revenue Service (the "IRS"), unless an exemption
applies under applicable law and regulations or unless the shareholder or
other payee provides such person's taxpayer identification number (employer
identification number or social security number) to the Depositary, as payor,
and certifies under penalties of perjury that such number is correct.
Therefore, each tendering shareholder should complete and sign the Substitute
Form W-9 included as part of the Letter of Transmittal so as to provide the
information and certification necessary to avoid backup withholding. If the
Depositary is not provided with the correct taxpayer identification number,
the United States Holder (as defined in Section 14 of the Offer to Purchase)
also may be subject to a penalty imposed by the IRS. If withholding results in
an overpayment of taxes, a refund may be obtained. Certain "exempt recipients"
(including, among others, all corporations and certain Non-United States
Holders (as defined in Section 14 of the Offer to Purchase)) are not subject
to these backup withholding and reporting requirements. In order for a Non-
United States Holder to qualify as an exempt recipient, that shareholder must
submit an IRS Form W-8 or a Substitute Form W-8, signed under penalties of
perjury, attesting to that shareholder's exempt status. Such statements can be
obtained from the Depositary.
11. Withholding on Non-United States Holders. Even if a Non-United States
Holder has provided the required certification to avoid backup withholding,
the Depositary will withhold United States federal income taxes equal to 30%
of the gross payments payable to a Non-United States Holder or his or her
agent unless the Depositary determines that a reduced rate of withholding is
available pursuant to a tax treaty or that an exemption from withholding is
applicable because such gross proceeds are effectively connected with the
conduct of a trade or business within the United States. In order to obtain a
reduced rate of withholding pursuant to a tax treaty, a Non-United States
Holder must deliver to the Depositary before the payment a properly completed
and executed IRS Form 1001. In order to obtain an exemption from withholding
on the grounds that the gross proceeds paid pursuant to the Offer are
effectively connected with the conduct of a trade or business within the
United States, a Non-United States Holder must deliver to the Depositary a
properly completed and executed IRS Form 4224. The Depositary will determine a
shareholder's status as a Non-United States Holder and eligibility for a
reduced rate of, or exemption from, withholding by reference to any
outstanding certificates or statements concerning eligibility for a reduced
rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form 4224)
unless facts and circumstances indicate that such reliance is not warranted. A
Non-United States Holder may be eligible to obtain a refund of all or a
portion of any tax withheld if such Non-United States Holder meets the
"complete termination," "substantially disproportionate" or "not essentially
equivalent to a dividend" test described in Section 14 of the Offer to
Purchase or is otherwise able to establish that no tax or a reduced amount of
tax is due. Backup withholding generally will not apply to amounts subject to
the 30% or a treaty-reduced rate of withholding. Non-United States Holders are
urged to consult their own tax advisors regarding the application of United
States federal income tax withholding, including eligibility for a withholding
tax reduction or exemption, and the refund procedure.
9
<PAGE>
12. Questions and Requests for Assistance or Additional Copies. Questions or
requests for assistance may be directed to the Information Agent or the Dealer
Manager at their respective telephone numbers or addresses listed below.
Additional copies of the Offer to Purchase, this Letter of Transmittal or
other tender offer materials may be obtained from the Information Agent or the
Dealer Manager. Shareholders may also contact their local broker, dealer,
commercial bank or trust company for documents relating to, or assistance
concerning, the Offer.
13. Irregularities. All questions as to the number of Shares to be accepted,
the price to be paid therefor and the validity, form, eligibility (including
time of receipt) and acceptance for payment of any tender of Shares will be
determined by the Company, in its sole discretion, which determination shall
be final and binding on all parties. The Company reserves the absolute right
to reject any or all tenders it determines not to be in proper form or the
acceptance of or payment for which may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares or any particular shareholder. No tender of
Shares will be deemed to be validly made until all defects or irregularities
have been cured or waived. None of the Company, the Dealer Manager, the
Depositary, the Information Agent or any other person is or will be obligated
to give notice of any defects or irregularities in tenders, and none of them
will incur any liability for failure to give any such notice.
14. Order of Purchase in Event of Proration. As described in Section 1 of
the Offer to Purchase, shareholders may designate the order in which their
Shares are to be purchased in the event of proration. The order of purchase
may have an effect on the United States federal income tax treatment of any
gain or loss on the Shares purchased. See Sections 1 and 14 of the Offer to
Purchase.
15. Lost, Destroyed or Stolen Certificates. If any Share certificate(s) have
been lost, destroyed or stolen, the shareholder should promptly notify the
Depositary by checking the box provided in the box titled "Description of
Shares Tendered" and indicating the number of Shares so lost, destroyed or
stolen. The shareholder will then be instructed by the Depositary as to the
steps that must be taken in order to replace such Share certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedure for replacing lost, destroyed or stolen Share certificate(s) has
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) TOGETHER WITH
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE
EXPIRATION TIME. SHAREHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE
FORM W-9 WITH THEIR LETTER OF TRANSMITTAL.
10
<PAGE>
PAYOR'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
PART 1: PLEASE PROVIDE YOUR Social Security Number
SUBSTITUTE TIN IN THE BOX AT RIGHT AND or Employer
FORM W-9 CERTIFY BY SIGNING AND Identification Number
DATING BELOW
PART 2: For Payees exempt from backup withholding,
see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form
NUMBER W-9 and complete as instructed therein.
--------------------------------------------------------
PART 3: Awaiting TIN [_]
--------------------------------------------------------
PAYOR'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN)
--------------------------------------------------------
CERTIFICATION -- Under the penalties of perjury, I
certify that (i) the number shown on this form is my
correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me) and either
(a) I have mailed or delivered an application to
receive a taxpayer identification number to the
appropriate IRS center or Social Security
Administration office or (b) I intend to mail or
deliver an application in the near future and (ii) I
am not subject to backup withholding because: (a) I
am exempt from backup withholding; or (b) I have not
been notified by the IRS that I am subject to backup
withholding as a result of a failure to report all
interest or dividends; or (c) the IRS has notified me
that I am no longer subject to backup withholding.
You must cross out Item (ii) above if you have been
notified by the IRS that you are currently subject to
backup withholding because of underreporting interest
or dividends on your tax return.
SIGNATURE ___________________________ DATE _____, 1998
Name (Please Print) __________________________________
Address (Include Zip Code) ___________________________
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF
31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments of the
purchase price made to me thereafter will be withheld until I provide a
number.
SIGNATURE ___________________________ DATE ______, 1998
11
<PAGE>
The Information Agent for the Offer is:
[Georgeson & Company Inc. Logo]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll-Free:
(800) 223-2064
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 646-4543
<PAGE>
EXHIBIT (a)(3)
ST. JUDE MEDICAL, INC.
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if certificates for the shares of common
stock of St. Jude Medical, Inc. are not immediately available, if the
procedure for book-entry transfer cannot be completed on a timely basis, or if
time will not permit all other documents required by the Letter of Transmittal
to be delivered to the Depositary (as defined below) prior to the Expiration
Time (as defined in Section 1 of the Offer to Purchase (as defined below)).
Such form, properly completed and duly executed, may be delivered by hand or
transmitted by mail or overnight courier, or (for Eligible Institutions (as
defined in the Offer to Purchase) only) by facsimile transmission, to the
Depositary. See Section 3 of the Offer to Purchase. The Eligible Institution
which completes this form must communicate the Guarantee to the Depositary and
must deliver the Letter of Transmittal and Shares to the Depositary within the
time shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail: By Overnight Courier: By Hand:
American Stock Transfer
& Trust Company
American Stock Transfer & Trust Company
American Stock Transfer
40 Wall Street & Trust Company
40 Wall Street New York, New York 10005 40 Wall Street, 46th
New York, New York 10005 Floor
New York, New York 10005
Facsimile for Eligible Institutions:
(718) 234-5001
Confirm by Telephone:
(800) 937-5449
(718) 921-8200
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
THE GUARANTEE INCLUDED HEREIN MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to St. Jude Medical, Inc., a Minnesota
corporation (the "Company"), at the price per Share indicated in this Notice
of Guaranteed Delivery, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated February 12, 1998 (the "Offer to Purchase"),
and the related Letter of Transmittal (which together constitute the "Offer"),
receipt of which is hereby acknowledged, the number of shares of common stock,
par value $.10 per share (the "Shares"), including the associated Preferred
Stock Purchase Rights (the "Rights"), of the Company listed below, pursuant to
the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. Unless the Rights are redeemed by the Company or become separately
tradeable prior to the Expiration Time (as defined in the Offer to Purchase),
a tender of Shares will also constitute a tender of the associated Rights.
Unless the context otherwise requires, all references to Shares shall include
the associated Rights.
Number of Shares: ___________________ -------------------------------------
Certificate Nos.: (if available) -------------------------------------
SIGNATURE(S)
- -------------------------------------
Dated:_________________________, 1998
- -------------------------------------
Name(s)
If Shares will be tendered by book-
entry transfer: -------------------------------------
Name of Tendering Institution:
-------------------------------------
- ------------------------------------- (Please Print)
Account No. at DTC __________________ -------------------------------------
-------------------------------------
Address
-------------------------------------
Area Code and Telephone Number
<PAGE>
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
- --------------------------------------------------------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE NOTICE OF
GUARANTEED DELIVERY FOR EACH PRICE SPECIFIED MUST BE USED.
- --------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS
CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS
BELOW), THERE IS NO VALID TENDER OF SHARES.
[_] $32.000 [_] $33.500 [_] $35.000 [_] $36.375 [_] $37.750
[_] $32.125 [_] $33.625 [_] $35.125 [_] $36.500 [_] $37.875
[_] $32.250 [_] $33.750 [_] $35.250 [_] $36.625 [_] $38.000
[_] $32.375 [_] $33.875 [_] $35.375 [_] $36.750 [_] $38.125
[_] $32.500 [_] $34.000 [_] $35.500 [_] $36.875 [_] $38.250
[_] $32.625 [_] $34.125 [_] $35.625 [_] $37.000 [_] $38.375
[_] $32.750 [_] $34.250 [_] $35.750 [_] $37.125 [_] $38.500
[_] $32.875 [_] $34.375 [_] $35.875 [_] $37.250 [_] $38.625
[_] $33.000 [_] $34.500 [_] $36.000 [_] $37.375 [_] $38.750
[_] $33.125 [_] $34.625 [_] $36.125 [_] $37.500 [_] $38.875
[_] $33.250 [_] $34.750 [_] $36.250 [_] $37.625 [_] $39.000
[_] $33.375 [_] $34.875
ODD LOTS
This section is to be completed ONLY if Shares are being tendered by or
on behalf of a person who owned beneficially, as of the close of business
on February 11, 1998, and who continues to own beneficially as of the
Expiration Time, an aggregate of fewer than 100 Shares (excluding
Restricted Shares (as defined in the Offer to Purchase)).
The undersigned either (check one box):
[_]owned beneficially, as of the close of business on February 11, 1998,
and continues to own beneficially as of the Expiration Time, an
aggregate of fewer than 100 Shares (excluding Restricted Shares), all
of which are being tendered, or
[_]is a broker, dealer, commercial bank, trust company or other nominee
that (i) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner, and (ii) believes, based upon
representations made to it by each such beneficial owner, that such
beneficial owner owned beneficially, as of the close of business on
February 11, 1998, and continues to own beneficially as of the
Expiration Time, an aggregate of fewer than 100 Shares (excluding
Restricted Shares) and is tendering all of such Shares.
- --------------------------------------------------------------------------------
If you do not wish to specify a purchase price, check the following box,
in which case you will be deemed to have tendered at the Purchase Price
determined by the Company in accordance with the terms of the Offer
(persons checking this box need not indicate the price per Share in the
box entitled "Price (In Dollars) Per Share At Which Shares Are Being
Tendered" above). [_]
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or the National Association of Securities Dealers,
Inc. or a commercial bank or trust company having an office, branch or
agency in the United States that is a member of one of the Stock Transfer
Association's approved medallion programs (such as Security Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program), hereby
guarantees (i) that the above-named person(s) has a net long position in
the Shares being tendered within the meaning of Rule 14e-4 promulgated
under the Securities Exchange Act of 1934, as amended, (ii) that such
tender of Shares complies with Rule 14e-4, and (iii) to deliver to the
Depositary at its address set forth above certificate(s) for the Shares
tendered hereby, in proper form for transfer, or a confirmation of the
book-entry transfer of the Shares tendered hereby into the Depositary's
account at The Depository Trust Company together with a properly completed
and duly executed Letter(s) of Transmittal (or facsimile(s) thereof), with
any required signature guarantee(s) and any other required documents, all
within three New York Stock Exchange, Inc. trading days after the date
hereof.
Name of Firm ______________________________________________________________
Address ___________________________________________________________________
City, State, Zip Code
Authorized Signature ______________________________________________________
Name ______________________________________________________________________
___________________________________________________________________________
Title _____________________________________________________________________
Area Code and Telephone Number ____________________________________________
Dated: ___________ , 1998
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. YOUR SHARE CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(4)
CREDIT SUISSE FIRST BOSTON
CORPORATION
[Credit Suisse Eleven Madison Avenue
First Boston Telephone (212) 325-2000
Logo] New York, New York 10010-3629
ST. JUDE MEDICAL, INC.
OFFER TO PURCHASE FOR CASH UP TO
8,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT IN EXCESS OF $39.00
NOR LESS THAN $32.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 12, 1998, UNLESS THE
OFFER IS EXTENDED.
February 12, 1998
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
In our capacity as Dealer Manager, we are enclosing the material listed
below relating to the offer of St. Jude Medical, Inc., a Minnesota corporation
(the "Company"), to purchase up to 8,000,000 shares of its common stock, par
value $.10 per share (the "Shares"), including the associated Preferred Stock
Purchase Rights (the "Rights"), at prices not in excess of $39.00 nor less
than $32.00 per Share in cash, as specified by shareholders tendering their
Shares, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated February 12, 1998 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer"). Unless
the Rights are redeemed by the Company or become separately tradeable prior to
the Expiration Time (as defined in the Offer to Purchase), a tender of Shares
will also constitute a tender of the associated Rights. Unless the context
otherwise requires, all references to Shares shall include the associated
Rights.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price not in excess of $39.00 nor less than
$32.00 per Share, net to the seller in cash (the "Purchase Price"), that it
will pay for Shares validly tendered and not withdrawn pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified
by tendering shareholders. The Company will select the lowest Purchase Price
that will allow it to buy 8,000,000 Shares (or such lesser number of Shares as
are validly tendered and not withdrawn at prices not in excess of $39.00 nor
less than $32.00 per Share) pursuant to the Offer. All Shares validly tendered
at prices at or below the Purchase Price and not withdrawn will be purchased
at the Purchase Price, upon the terms and subject to the conditions of the
Offer, including the provisions relating to proration described in the Offer
to Purchase. See Section 1 of the Offer to Purchase.
The Purchase Price will be paid in cash, net to the seller, with respect to
all Shares purchased. Shares tendered at prices in excess of the Purchase
Price and Shares not purchased because of proration will be returned.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF
THE OFFER TO PURCHASE.
<PAGE>
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. The Company will, upon request, reimburse you for
reasonable and customary handling and mailing expenses incurred by you in
forwarding any of the enclosed materials to your clients.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal for your use and for the information of your
clients (together with accompanying Substitute Form W-9).
3. A letter to shareholders of the Company from Ronald A. Matricaria, the
Chairman and Chief Executive Officer of the Company.
4. The Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents cannot be delivered to the Depositary
by the Expiration Time (each as defined in the Offer to Purchase).
5. A letter that may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space for
obtaining such clients' instructions with regard to the Offer.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 providing information relating to backup federal income
tax withholding.
7. A return envelope addressed to American Stock Transfer & Trust Company,
the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 12, 1998, UNLESS THE OFFER IS
EXTENDED.
The Company will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer (other
than the Dealer Manager). The Company will, upon request, reimburse brokers,
dealers, commercial banks and trust companies for reasonable and customary
handling and mailing expenses incurred by them in forwarding materials
relating to the Offer to their customers. The Company will pay all stock
transfer taxes applicable to its purchase of Shares pursuant to the Offer,
subject to Instruction 7 of the Letter of Transmittal.
As described in the Offer to Purchase, if more than 8,000,000 Shares have
been validly tendered at or below the Purchase Price and not withdrawn prior
to the Expiration Time (as defined in Section 1 of the Offer to Purchase) the
Company will accept Shares for purchase in the following order of priority:
(i) all Shares validly tendered at or below the Purchase Price and not
withdrawn prior to the Expiration Time by any shareholder who owned
beneficially, as of the close of business on February 11, 1998, and who
continues to own beneficially as of the Expiration Time, an aggregate of fewer
than 100 Shares (excluding Restricted Shares (as defined in the Offer to
Purchase)) and who validly tenders all of such Shares (partial tenders will
not qualify for this preference) and completes the box captioned "Odd Lots" in
the Letter of Transmittal and, if applicable, the Notice of Guaranteed
Delivery; and (ii) after purchase of all of the foregoing Shares, all other
Shares validly tendered at or below the Purchase Price and not withdrawn prior
to the Expiration Time on a pro rata basis.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
2
<PAGE>
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD
BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR
EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
Any questions or requests for assistance or additional copies of the
enclosed materials may be directed to the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth on the
back cover of the enclosed Offer to Purchase.
Very truly yours,
Credit Suisse First Boston Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE
INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION
WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
3
<PAGE>
EXHIBIT (a)(5)
ST. JUDE MEDICAL, INC.
OFFER TO PURCHASE FOR CASH
UP TO 8,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT IN EXCESS OF $39.00
NOR LESS THAN $32.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 12, 1998, UNLESS THE
OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated February
12, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal
(which together constitute the "Offer") setting forth an offer by St. Jude
Medical, Inc., a Minnesota corporation (the "Company"), to purchase up to
8,000,000 shares of its common stock, par value $.10 per share (the "Shares"),
including the associated Preferred Stock Purchase Rights (the "Rights"), at
prices not in excess of $39.00 nor less than $32.00 per Share in cash, as
specified by shareholders tendering their Shares, upon the terms and subject
to the conditions of the Offer. Unless the Rights are redeemed by the Company
or become separately tradeable prior to the Expiration Time (as defined in the
Offer to Purchase), a tender of Shares will also constitute a tender of the
associated Rights. Unless the context otherwise requires, all references to
Shares shall include the associated Rights. Also enclosed herewith is certain
other material related to the Offer, including a letter from Ronald A.
Matricaria, Chairman and Chief Executive Officer of the Company, to
shareholders.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price not in excess of $39.00 nor less than
$32.00 per Share, net to the seller in cash (the "Purchase Price"), that it
will pay for Shares validly tendered and not withdrawn pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified
by tendering shareholders. The Company will select the lowest Purchase Price
that will allow it to buy 8,000,000 Shares (or such lesser number of Shares as
are validly tendered and not withdrawn at prices not in excess of $39.00 nor
less than $32.00 per Share) pursuant to the Offer. All Shares validly tendered
at prices at or below the Purchase Price and not withdrawn will be purchased
at the Purchase Price, upon the terms and subject to the conditions of the
Offer, including the provisions thereof relating to proration. See Section 1
of the Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD FOR YOUR
ACCOUNT. AS SUCH, A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER
OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to tender on your behalf
any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. You may tender Shares at prices, not in excess of $39.00 nor less than
$32.00 per Share, as indicated in the attached Instruction Form, net to you in
cash.
2. You may designate the priority in which your Shares shall be purchased in
the event of proration.
3. The Offer is for up to 8,000,000 Shares, constituting approximately 8.7%
of the total Shares outstanding as of February 10, 1998. The Offer is not
conditioned on any minimum number of Shares being tendered. The Offer is,
however, subject to certain other conditions set forth in the Offer to
Purchase.
4. The Offer, proration period and withdrawal rights will expire at 12:00
Midnight, New York City time, on Thursday, March 12, 1998, unless the Offer is
extended. Your instructions to us should be forwarded to us in ample time to
permit us to submit a tender on your behalf.
<PAGE>
5. As described in the Offer to Purchase, if more than 8,000,000 Shares have
been validly tendered at or below the Purchase Price and not withdrawn prior
to the Expiration Time, as defined in Section 1 of the Offer to Purchase, the
Company will purchase Shares in the following order of priority:
(i) all Shares validly tendered at or below the Purchase Price and not
withdrawn prior to the Expiration Time by any shareholder who owned
beneficially, as of the close of business on February 11, 1998, and who
continues to own beneficially as of the Expiration Time, an aggregate of
fewer than 100 Shares (excluding Restricted Shares (as defined in the Offer
to Purchase)) and who validly tenders all of such Shares (partial tenders
will not qualify for this preference) and completes the box captioned "Odd
Lots" in the Letter of Transmittal and, if applicable, the Notice of
Guaranteed Delivery; and
(ii) after purchase of all the foregoing Shares, all other Shares validly
tendered at or below the Purchase Price and not withdrawn prior to the
Expiration Time on a pro rata basis. See Section 1 of the Offer to Purchase
for a discussion of proration.
6. Tendering shareholders will not be obligated to pay any brokerage
commissions or solicitation fees on the Company's purchase of Shares in the
Offer. Any stock transfer taxes applicable to the purchase of Shares by the
Company pursuant to the Offer will be paid by the Company, except as otherwise
provided in Instruction 7 of the Letter of Transmittal. A tendering
shareholder who holds Shares with a broker may be required by such broker to
pay a service charge or other fee.
7. If you wish to tender portions of your Shares at different prices, you
must complete a separate Instruction Form for each price at which you wish to
tender each portion of your Shares. We must submit separate Letters of
Transmittal on your behalf for each price you will accept.
8. If you owned beneficially, as of the close of business on February 11,
1998, and continue to own beneficially as of the Expiration Time, an aggregate
of fewer than 100 Shares (excluding Restricted Shares), and you instruct us to
tender at or below the Purchase Price on your behalf all such Shares prior to
the Expiration Time and check the box captioned "Odd Lots" in the Instruction
Form, all such Shares will be accepted for purchase before proration, if any,
of the other tendered Shares.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD
BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR
EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
If you wish to have us tender any or all of your Shares held by us for your
account upon the terms and subject to the conditions set forth in the Offer to
Purchase, please so instruct us by completing, executing and returning to us
the attached Instruction Form. An envelope to return your instructions to us
is enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified on the Instruction Form. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON
YOUR BEHALF BY THE EXPIRATION OF THE OFFER.
The Offer is being made to all holders of Shares. The Company is not aware
of any jurisdiction where the making of the Offer is not in compliance with
applicable law. If the Company becomes aware of any jurisdiction where the
making of the Offer is not in compliance with any valid applicable law, the
Company will make a good faith effort to comply with such law. If, after such
good faith effort, the Company cannot comply with such law, the Offer will not
be made to (nor will tenders be accepted from or on behalf of) the holders of
Shares residing in such jurisdiction. In any jurisdiction the securities or
blue sky laws of which require the Offer to be made by a licensed broker or
dealer, the Offer is being made on the Company's behalf by the Dealer Manager
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
2
<PAGE>
INSTRUCTION FORM
WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 8,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
ST. JUDE MEDICAL, INC.
AT A PURCHASE PRICE NOT IN EXCESS OF
$39.00 NOR LESS THAN $32.00 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated February 12, 1998, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the Offer by St.
Jude Medical, Inc. (the "Company") to purchase up to 8,000,000 shares of its
common stock, par value $.10 per share (the "Shares"), including the
associated Preferred Stock Purchase Rights (the "Rights"), at prices not in
excess of $39.00 nor less than $32.00 per Share, net to the undersigned in
cash, as specified by the undersigned, upon the terms and subject to the
conditions of the Offer. Unless the Rights are redeemed by the Company or
become separately tradeable prior to the Expiration Time (as defined in the
Offer to Purchase), a tender of Shares will also constitute a tender of the
associated Rights. Unless the context otherwise requires, all references to
Shares shall include the associated Rights.
This will instruct you to tender to the Company the number of Shares
indicated below (or, if no number is indicated below, all Shares) that are
held by you for the account of the undersigned, at the price per Share
indicated below, upon the terms and subject to the conditions of the Offer.
SHARES TENDERED
[_]By checking this box, the undersigned hereby instructs us to tender the
following number of Shares held by us for the account of the
undersigned, at the Purchase Price per Share indicated in the box
entitled "Price (In Dollars) Per Share At Which Shares Are Being
Tendered":
Shares*
--------
* The undersigned understands and agrees that all Shares held by us
for the account of the undersigned will be tendered if the above box
is checked and the space above is left blank.
3
<PAGE>
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
- -------------------------------------------------------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE
INSTRUCTION FORM FOR EACH PRICE SPECIFIED MUST BE USED
- -------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS
CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS
BELOW), THERE IS NO VALID TENDER OF SHARES.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
[_] $32.000 [_] $33.500 [_] $35.000 [_] $36.375 [_] $37.750
[_] $32.125 [_] $33.625 [_] $35.125 [_] $36.500 [_] $37.875
[_] $32.250 [_] $33.750 [_] $35.250 [_] $36.625 [_] $38.000
[_] $32.375 [_] $33.875 [_] $35.375 [_] $36.750 [_] $38.125
[_] $32.500 [_] $34.000 [_] $35.500 [_] $36.875 [_] $38.250
[_] $32.625 [_] $34.125 [_] $35.625 [_] $37.000 [_] $38.375
[_] $32.750 [_] $34.250 [_] $35.750 [_] $37.125 [_] $38.500
[_] $32.875 [_] $34.375 [_] $35.875 [_] $37.250 [_] $38.625
[_] $33.000 [_] $34.500 [_] $36.000 [_] $37.375 [_] $38.750
[_] $33.125 [_] $34.625 [_] $36.125 [_] $37.500 [_] $38.875
[_] $33.250 [_] $34.750 [_] $36.250 [_] $37.625 [_] $39.000
[_] $33.375 [_] $34.875
</TABLE>
ODD LOTS
[_]By checking this box, the undersigned represents that the undersigned
owned beneficially, as of the close of business on February 11, 1998,
and continues to own beneficially as of the Expiration Time, an
aggregate of fewer than 100 Shares (excluding Restricted Shares) and is
tendering all of such Shares.
_______________________________________________________________________________
If you do not wish to specify a purchase price, check the following box,
in which case you will be deemed to have tendered at the Purchase Price
determined by the Company in accordance with the terms of the Offer
(persons checking this box need not indicate the price per Share in the
box entitled "Price (In Dollars) Per Share At Which Shares Are Being
Tendered" above). [_]
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE
TENDERING SHAREHOLDERS. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
SIGN HERE
-----------------------------------
Signature(s)
Dated: ___________ , 1998 Name ______________________________
Address ___________________________
-----------------------------------
-----------------------------------
Social Security or Taxpayer ID No.
4
<PAGE>
EXHIBIT (a)(6)
[St. Jude Medical, Inc. Logo]
February 12, 1998
Dear Shareholder:
St. Jude Medical, Inc. is offering to purchase up to 8,000,000 shares of its
common stock, par value $.10 per share (the "Shares"), at a price not in
excess of $39.00 nor less than $32.00 per share (the "Offer"). The Company is
conducting the Offer through a procedure commonly referred to as a modified
"Dutch Auction." This procedure allows you to select the price within the
specified price range at which you are willing to sell all or a portion of
your Shares to the Company.
Based upon the number of Shares tendered and the prices specified by the
tendering shareholders, the Company will determine a single per Share price
within that price range that will allow it to buy 8,000,000 Shares (or such
lesser number of Shares as are properly tendered). All of the Shares that are
properly tendered at prices at or below that purchase price (and are not
withdrawn) will, subject to possible proration, be purchased for cash at that
purchase price, net to the selling shareholder. All other Shares that have
been tendered and not purchased will be returned to the shareholder. The Offer
is not conditioned on any minimum number of Shares being tendered.
If you do not wish to participate in the Offer, you do not need to take any
action.
The Board of Directors believes that the purchase of Shares is an attractive
use of the Company's financial resources and that the use of cash and
borrowings to fund the Offer will result in a more efficient capital structure
for the Company. Accordingly, the Offer is consistent with the Company's long-
term corporate goal of increasing shareholder value. Over the past several
years, the Company's operations have generated substantial excess cash flow.
Historically, the Company has used a portion of this cash flow to reduce
acquisition-related debt, resulting in significant deleveraging and a strong
balance sheet. However, the continuing strong cash flow and relatively low
debt levels leave the Company underleveraged. The Board of Directors believes
the Company's financial condition and outlook for continuing strong cash flow
will allow it to meet the Company's first priority, which is to reinvest in
the business, including through acquisitions, and to use its excess cash and
debt capacity to fund the Offer.
The Offer provides shareholders the opportunity to sell Shares for cash
without the usual transaction costs and, in the case of those shareholders who
own less than 100 Shares, without incurring any applicable odd lot discounts.
The Offer is explained in detail in the enclosed Offer to Purchase and
Letter of Transmittal. If you wish to tender any or all of your Shares,
instructions on how to tender Shares are provided in the enclosed materials. I
encourage you to read these materials carefully before making any decision
with respect to the Offer. The Board of Directors of the Company has approved
the Offer. However, neither the Company nor its Board of Directors makes any
recommendation to any shareholder as to whether to tender or refrain from
tendering Shares. Neither I nor any other director or executive officer of the
Company intends to tender any Shares pursuant to the Offer.
Please note that the Offer is scheduled to expire at 12:00 Midnight, New
York City time, on Thursday, March 12, 1998, unless extended by the Company.
Questions regarding the Offer should not be directed to the Company but should
instead be directed to Georgeson & Company Inc., the Information Agent, at
(800) 223-2064 or Credit Suisse First Boston Corporation, the Dealer Manager,
at (800) 646-4543.
Sincerely,
/s/ Ronald A. Matricaria
Ronald A. Matricaria
Chairman and
Chief Executive Officer
<PAGE>
EXHIBIT (a)(7)
St. Jude Medical to Launch Modified
"Dutch Auction" Self-Tender Offer
St. Paul, MN, February 11, 1998 -- St. Jude Medical, Inc. (NYSE:STJ) announced
today that its Board of Directors has authorized a self-tender offer for up to 8
million shares of the Company's common stock. The offer is a modified "Dutch
Auction" and the tender price range will be $32.00 to $39.00 per share. The
offer will commence on Thursday, February 12, 1998, with the distribution of the
offering materials, and will be subject to the terms and conditions contained
therein. The offer will expire at 12:00 midnight, New York City time, on
Thursday, March 12, 1998. The Company has reserved the right to purchase more
than 8 million shares in the offer and extend the deadline.
As of February 10, 1998, St. Jude Medical had 91,940,672 shares of common stock
outstanding. The closing price for St. Jude Medical common stock on February 11,
1998, was $34.6875.
Under the terms of the offer, St. Jude Medical's shareholders are given an
opportunity to specify prices, within the stated price range, at which they are
willing to tender their shares. Upon receipt of the tenders, St. Jude Medical
will select a final price that enables it to purchase up to the stated amount
of shares from those shareholders who agreed to sell at or below the selected
purchase price. If St. Jude Medical agrees to purchase their shares, sellers
will avoid the normal transaction costs associated with market sales.
Commenting on the self-tender offer, Ronald A. Matricaria, Chairman and CEO
said, "The Board of Directors believes this offer is an attractive use of the
Company's financial resources and that the use of cash and borrowing to fund the
offer will result in a more efficient capital structure for St. Jude Medical."
The Company is not making any recommendation to its shareholders regarding the
tendering of shares. The dealer manager for the offer will be Credit Suisse
First Boston Corporation, and the information agent will be Georgeson & Company
Inc.
St. Jude Medical, Inc. (www.sjm.com) develops, manufactures and distributes
medical devices for the global cardiovascular market. The Company serves
patients and its physician customers worldwide with the highest quality products
and services including heart valves, cardiac rhythm management systems,
specialty catheters and other cardiovascular devices.
<PAGE>
EXHIBIT (a) (8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase and the
related Letter of Transmittal which are being mailed to shareholders of St. Jude
Medical, inc. on or about February 12, 1998. While the Offer is being made to
all shareholders of the Company, tenders will not be accepted from or on behalf
of the shareholders in any jurisdiction in which the acceptance thereof would
not be in compliance with the laws of such jurisdiction. In those jurisdictions
whose laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Company by Credit Suisse First
Boston Corporation ("Credit Suisse First Boston"), or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
by
St. Jude Medical Inc.
Up to 8,000,000 Shares of its Common Stock
(including the associated Preferred Stock Purchase Rights)
at a Purchase Price Not in Excess Of $39.00
Nor Less than $32.00 Per Share
St. Jude Medical, Inc., a Minnesota corporation (the "Company"),
invites its shareholders to tender shares of its common stock, par value $.10
per share (the "Shares"), including the associated Preferred Stock Purchase
Rights , to the Company at prices not in excess of $39.00 nor less than $32.00
per Share in cash, as specified by shareholders tendering their Shares, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
February 12, 1998 (the "Offer to Purchase") and the related Letter of
Transmittal (which together constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 12, 1998, UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer to Purchase.
The Board of Directors of the Company has approved the Offer. However,
neither the Company nor its Board of Directors makes any recommendation to any
shareholder as to whether to tender or refrain from tendering Shares.
Shareholders must make their own decisions whether to tender Shares and, if so,
how many Shares to tender and the price or prices at which Shares should be
tendered. The Company has been advised that none of its Directors or Executive
Officers intends to tender any Shares pursuant to the Offer.
The Company will, upon the terms and subject to the conditions of the
Offer, determine a single per Share price, not in excess of $39.00 nor less than
$32.00 per Share, net to the seller in cash (the "Purchase Price"), that it will
pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking
into account the number of Shares so tendered and the prices specified by
tendering shareholders. The
<PAGE>
Company will select the lowest Purchase Price that will allow it to buy
8,000,000 Shares (or such lesser number of Shares as are validly tendered and
not withdrawn at prices not in excess of $39.00 nor less than $32.00 per Share)
pursuant to the Offer. All Shares validly tendered prior to the Expiration Time
(as defined below) at prices at or below the Purchase Price and not withdrawn
will be purchased at the Purchase Price, upon the terms and subject to the
conditions of the Offer, including the proration terms described below. The term
"Expiration Time" means 12:00 Midnight, New York City time, on Thursday, March
12, 1998, unless and until the Company in its sole discretion shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Time" shall refer to the latest time and date at which the
Offer, as so extended by the Company, shall expire. The Company reserves the
right, in its sole discretion, to purchase more than 8,000,000 Shares pursuant
to the Offer. For purposes of the Offer, the Company will be deemed to have
accepted for payment (and therefore purchased), subject to proration, Shares
that are validly tendered at or below the Purchase Price and not withdrawn when,
as and if it gives oral or written notice to American Stock Transfer & Trust
Company (the "Depositary") of its acceptance of such Shares for payment pursuant
to the Offer. Payment for Shares tendered and accepted for payment pursuant to
the Offer will be made promptly (subject to possible delay in the event of
proration) but only after timely receipt by the Depositary of certificates for
such Shares (or a timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company ("DTC")), a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) and any other required documents.
The Offer provides shareholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not in
excess of $39.00 nor less than $32.00 per Share) at which they are willing to
sell their Shares and, if any such Shares are purchased pursuant to the Offer,
to sell those Shares for cash to the Company without the usual transaction costs
associated with open-market sales. The Company is making the Offer because the
Board of Directors believes that the purchase of Shares is an attractive use of
the Company's financial resources and that the use of cash and borrowings to
fund the Offer will result in a more efficient capital structure for the
Company.
Upon the terms and subject to the conditions of the Offer, in the event
that prior to the Expiration Time more than 8,000,000 Shares (or such greater
number of Shares as the Company may elect to purchase pursuant to the Offer) are
validly tendered at or below the Purchase Price and not withdrawn, the Company
will purchase such validly tendered Shares in the following order of priority:
(i) all Shares validly tendered at or below the Purchase Price and not withdrawn
prior to the Expiration Time by any Odd Lot Owner (as defined in the Offer to
Purchase) who (a) tenders all Shares beneficially owned by such Odd Lot Owner at
or below the Purchase Price (tenders of less than all Shares owned by such
shareholder will not qualify for this preference), and (b) completes the box
captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery; and (ii) after purchase of all of the foregoing
Shares, all other Shares validly tendered at prices at or below the Purchase
Price and not withdrawn prior to the Expiration Time on a pro rata basis (with
appropriate adjustments to avoid the purchase of fractional Shares).
The Company expressly reserves the right, in its sole discretion, at
any time and from time to time, to extend the period of time during which the
Offer is open by giving notice of such extension to the Depositary and making a
public announcement thereof. Subject to certain conditions set forth in the
Offer to Purchase, the Company also expressly reserves the right, in its sole
discretion, to terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurence of certain
conditions specified in the Offer to Purchase.
Shares tendered pursuant to the Offer may be withdrawn at any time
before the Expiration Time and, unless accepted for payment by the Company as
provided in the Offer to Purchase, may also be
2
<PAGE>
withdrawn after 12:00 Midnight, New York City time, on Thursday, April 9, 1998.
For a withdrawal to be effective, the Depositary must receive a notice of
withdrawal in written, telegraphic or facsimile transmission form on a timely
basis at its address set forth on the back cover of the Offer to Purchase. Such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares tendered, the number of Shares to be
withdrawn and the name of the registered holder, if different from that of the
person who tendered such Shares. If the certificates have been delivered or
otherwise identified to the Depositary, then, prior to the release of such
certificates, the tendering shareholder must also submit the serial numbers
shown on the particular certificates evidencing the Shares and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in the Offer to Purchase) (except in the case of Shares tendered by an
Eligible Institution). If Shares have been tendered pursuant to the procedure
for book-entry transfer, the notice of withdrawal must specify the name and the
number of the account at DTC to be credited with the withdrawn Shares and
otherwise comply with the procedures of DTC.
The Offer to Purchase and the Letter of Transmittal contain important
information which should be read carefully before shareholders decide whether to
accept or reject the Offer and, if accepted, at what price or prices to tender
their Shares. The information required to be disclosed by Rule 13e-4(d)(1) under
the Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated by reference herein. The Offer to Purchase and
related Letter of Transmittal are being mailed to record holders of Shares and
are being furnished to brokers, banks and similar persons whose names, or the
names of whose
nominees, appear on the Company's shareholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing for
transmittal to beneficial owners of Shares.
Additional copies of the Offer to Purchase and the Letter of
Transmittal may be obtained from the Information Agent or the Dealer Manager and
will be furnished at the Company's expense. Questions and requests for
assistance may be directed to the Information Agent or the Dealer Manager as set
forth below:
The Information Agent for the Offer is:
[Georgeson & Company Inc. Logo]
Wall Street Plaza
New York, New York 10005
Bankers and Brokers Call Collect:
(212) 440-9800
All Others Call Toll-Free:
(800) 223-2064
The Dealer Manager for the Offer is:
[Credit Suisse First Boston Logo]
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll-Free (800) 646-4543
February 12, 1998
3
<PAGE>
EXHIBIT (a)(9)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4.a The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
5. Sole proprietorship The owner(3)
account
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
--
<S> <C>
6. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(4)
7. Corporate account The corporation
8. Religious, charitable, The organization
or educational
organization account
9. Partnership The partnership
10. Association, club, or The organization
other tax-exempt
organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
--
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employeer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to
a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (b)
BANK AMERICA LOGO CREDIT SUISSE/FIRST BOSTON LOGO
February 11, 1998 CONFIDENTIAL
Mr. Robert E. Munzenrider
Vice President, Finance and
Chief Financial Officer
St. Jude Medical, Inc.
One Lillehei Plaza
St. Paul, MN 55117
Ladies and Gentlemen:
Re: Commitment Letter
-----------------
Ladies and Gentlemen:
You have advised Bank of America National Trust and Savings Association ( "Bank
of America" or the "Administrative Agent") and Credit Suisse First Boston
("CSFB" or the "Syndication Agent") (collectively, the "Agents"), and
BancAmerica Robertson Stephens ("BARS" or the "Arranger"), that St. Jude
Medical, Inc. ("SJM" or the "Company") intends to repurchase up to $300 million
of its common stock pursuant to a "dutch auction" tender offer (the "Tender
Offer"). SJM anticipates that a portion of the Tender Offer will be funded by
the facilities described below and in the summary of terms and conditions
attached hereto (the "Term Sheet").
In connection with the foregoing, you have requested that BARS agree to
structure, arrange and syndicate senior unsecured revolving credit facilities in
an aggregate amount of $500 million, consisting of a $350 million, 5-year
revolving credit facility and a $150 million, 364-day revolving credit facility
(the "Facilities"), to (i) finance the Tender Offer, (ii) refinance existing
indebtedness, and (iii) for general corporate purposes including funding working
capital and permitted acquisitions. Bank of America is pleased to advise you of
its commitment to provide up to $350 million of the Facilities and CSFB is
pleased to advise you of its commitment to provide up to $150 million of the
Facilities (collectively the "Commitment") all upon the terms and subject to the
conditions set forth or referred to in this commitment letter (the "Commitment
Letter"), and in the Term Sheet. The commitments of each Agent will be
allocated pro rata between the Facilities. The obligations of the Agents
hereunder are several and not joint. BARS and Bank of America each will, in
such capacity as Arranger and Administrative Agent respectively, perform the
duties and exercise the authority customarily performed and exercised by it in
such roles.
<PAGE>
ST. JUDE MEDICAL, INC.
February 11, 1998
Page 2
The Company agrees to pay the Agents upon closing, solely for their own account,
an upfront fee of $1,125,000 (the equivalent of 22.5 basis points on the total
Commitment), to be ratably distributed based on each Agent's several commitment
to the Facilities. You agree that the Agents may, in their sole discretion,
share all or a portion of any of the fees payable pursuant to this Commitment
Letter with any of the other Lenders.
It is agreed that Bank of America will act as the sole and exclusive
Administrative Agent for the Facilities, and that BARS will act as the sole and
exclusive Arranger for the Facilities. The Company also agrees that except for
CSFB, no other agents, co-agents or arrangers will be appointed, and no other
titles will be awarded without the mutual consent of both BARS and you.
You hereby authorize BARS to commence syndication efforts immediately and agree
actively to assist BARS in achieving a syndication that is satisfactory to BARS,
the Agents and the Company. To assist BARS in its syndication efforts, (i) you
agree to promptly prepare and provide to BARS all information which we may
reasonably request, including all financial information and projections, (ii)
you understand that in arranging and syndicating the Facilities we may use and
rely upon the information and projections without independent verification
thereof, (iii) you agree to use commercially reasonable efforts to ensure that
the syndications efforts benefit materially from your existing lending
relationships, (iv) you agree to host with BARS one or more meetings with
prospective Lenders and you agree to make senior management available for these
meetings, and (v) you agree to assist in the preparation of a Confidential
Information Memorandum and other marketing materials to be used in connection
with the syndication. BARS, as Arranger, will manage all aspects of the
syndication and reserves the right, in consultation with the Company, to
allocate the commitments from and fees offered to the Lenders.
In addition to the conditions to funding or closing set forth in the Term Sheet,
the Commitment to provide financing hereunder is subject to, among other
conditions (i) the negotiation and execution of a definitive credit agreement
and other related documentation satisfactory to the Lenders, (ii) there being no
material adverse change in the opinion of BARS and the Agents in the financial
condition, business, operations, properties or prospects of the Company and its
consolidated subsidiaries from the date of the audited financial statements most
recently provided prior to the date hereof, (iii) the non-occurrence of any
material adverse change in loan syndication or capital market conditions after
the date of this letter, generally, which in the opinion of BARS, would affect
our syndication efforts in respect of any portion of the Facilities, and (iv)
until the earlier of April 15, 1998 or notification by BARS of the completion of
the syndication of the Facilities, there be no competing offering, placement, or
arrangement of any debt securities or bank financing by or on behalf of the
Company.
<PAGE>
ST. JUDE MEDICAL, INC.
February 11, 1998
Page 3
Whether or not the transactions contemplated hereby are consummated, the Company
hereby agrees to indemnify and hold harmless each of BARS and the Agents, and
their respective directors, officers, employees and affiliates (each, an
"indemnified person") from and against any and all losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) and expenses that arise out of, result from or in any way relate to
this Commitment Letter, or the providing or syndication of the Facilities, and
to reimburse each indemnified person, upon its demand, for any legal or other
expenses (including the allocated cost of in-house counsel) incurred in
connection with investigating, defending or participating in any such loss,
claim, damage, liability or action or other proceeding (whether or not such
indemnified person is a party to any action or proceeding out of which any such
expenses arise), other than any of the foregoing claimed by any indemnified
person to the extent incurred by reason of the gross negligence or willful
misconduct of such person. Neither BARS nor the Agents, nor any of their
affiliates, shall be responsible or liable to the Company or any other person
for any consequential damages which may be alleged. The obligations contained in
this paragraph will survive the closing of the Facilities.
In addition, the Company hereby agrees to reimburse Bank of America and BARS
from time to time upon demand for their reasonable out-of-pocket costs and
expenses (including the allocated cost of in-house counsel) incurred by Bank of
America or BARS in connection with the negotiation and preparation of documents
for the Facilities, regardless of whether the credit agreement is executed or
the Facilities close.
The terms contained in this letter and the Term Sheet are confidential and,
except for disclosure to your board of directors, officers and employees, to
professional advisors retained by you in connection with this transaction, or as
may be required by law, may not be disclosed in whole or in part to any other
person or entity without our prior written consent.
You represent that to the best of your knowledge (i) all information that has
been or will hereafter be made available to the Agents, the Arranger, any Lender
or any potential lender by you or any of your representatives in connection with
the transactions contemplated hereby is and will be complete and correct in all
material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such statements were or are made and (ii) all financial projections, if
any, that have been or will be prepared by you and made available to the Agents,
the Arranger, any Lender or any potential Lender have been or will be prepared
in good faith based upon reasonable assumptions (it being understood that such
projections are subject to significant uncertainties and contingencies, many of
which are beyond the Company's control, and that no assurance can be given that
the projections will be realized). You agree to supplement the information and
projections from time to time so that the representations and warranties
contained in this paragraph remain correct. In
<PAGE>
ST. JUDE MEDICAL, INC.
February 11, 1998
Page 4
issuing the Commitment and arranging the Facilities, the Agents and the Arranger
will be entitled to use and rely on the accuracy of the information furnished by
or on behalf of the Company and its affiliates without independent verification
thereof.
Upon your delivery to each of the Agents a signed copy of this letter, the
Commitment Letter shall become a binding agreement under Illinois law as of the
date so accepted. The Agents' Commitment hereunder shall remain in effect until
5:00 p.m. Chicago time, on February 11, 1998 when, if not so accepted, the
Agents' Commitment hereunder will terminate. This Commitment will expire on
April 15, 1998 if the Facilities have not closed on or before that date.
We are pleased to have the opportunity to work with you on this important
financing.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST BANCAMERICA ROBERTSON
AND SAVINGS ASSOCIATION STEPHENS
AS ADMINISTRATIVE AGENT AS ARRANGER
By: /s/ John C. Masters By: /s/ Thomas M. Brown
----------------------------- --------------------------------
Title: Senior Managing Director Title: Vice President
-------------------------- -----------------------------
CREDIT SUISSE FIRST BOSTON CREDIT SUISSE FIRST BOSTON
AS SYNDICATION AGENT
By: /s/ David Malletta II /s/ Robert N. Finney
--------------------------------- -----------------------------------
Title: Managing Director Managing Director
----------------------------- -----------------------------------
ACCEPTED AND AGREED TO:
this 11 day of February, 1998
-- --------
ST. JUDE MEDICAL, INC.
By: /s/ Robert E. Munzenrider
-------------------------------
Title: VP Finance, CFO
-----------------------------
<PAGE>
SUMMARY OF TERMS AND CONDITIONS
St. Jude Medical, Inc.
$500,000,000 Revolving Credit Facilities
BORROWER: St. Jude Medical, Inc. and Pacesetter, Inc.
(collectively, the "Borrower").
FACILITIES: $500 Million of senior unsecured credit facilities,
consisting of:
Tranche A: $150,000,000, 364-day revolving credit
facility.
TRANCHE B: $350,000,000, five-year revolving credit
facility.
The Facilities will be available for short-term committed
advances ("Committed Advances") and uncommitted Bid
Option Advances ("Bid Advances") as described below.
ARRANGER: BancAmerica Robertson Stephens (in such capacity, the
"Arranger").
ADMINISTRATIVE AGENT: Bank of America National Trust and Savings
Association ("Bank of America" and in such capacity, the
"Administrative Agent").
SYNDICATION AGENT: Credit Suisse First Boston ("CSFB").
Bank of America and CSFB are collectively referred to
as the "Agents".
LENDERS: Bank of America, CSFB and a group of financial
institutions acceptable to the Arranger, the
Administrative Agent and the Borrower. All institutions
participating in the financing, including the Agents, are
collectively referred to as the "Lenders" or singularly
as a "Lender".
PURPOSE: The Facilities will be used by the Borrower (i) to
refinance existing indebtedness, (ii) to finance share
repurchases, (iii) to provide for working capital
availability, and (iii) for general corporate purposes,
including permitted acquisitions.
MATURITY: TRANCHE A: Tranche A will terminate and all outstanding
amounts will become due 364-days from execution of the
Credit Agreement (the "Closing").
TRANCHE B: Tranche B will terminate and all
outstanding amounts will become due five years from
Closing.
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
INTEREST RATES
and PERIODS: At the Borrower's option, interest on Committed Advances
shall accrue on the following indexes plus the applicable
spreads indicated in the attached Pricing Grid, Option A.
Pricing Grid, Option B, will be available if the Company
obtains a long-term debt rating, corporate credit rating
or bank loan rating.
LIBOR: The rate of interest per annum determined by the
Administrative Agent to be the arithmetic mean (rounded
upward to the nearest 1/16th of 1%) of the rates of
interest per annum notified to the Administrative Agent
by each Reference Bank as the rate of interest at which
dollar deposits would be offered to major banks in the
London interbank market at their request at approximately
11:00 a.m. (London time) two business days prior to the
commencement of the applicable interest period.
Base Rate: The higher of (a) the rate as publicly
announced from time to time by Bank of America as its
"Reference Rate" or (b) Federal Funds Rate plus one-half
of one percent per annum.
INTEREST PAYMENTS: Interest on Base Rate Committed Advances shall be payable
quarterly. Interest on LIBOR Committed Advances shall be
payable at the end of each applicable Interest Period or
quarterly, if earlier.
FACILITY FEE: A rate per annum determined in accordance with the
attached Pricing Grid (Option A) and payable on each
Lenders commitment amount, regardless of usage. The
Facility Fee is payable quarterly in arrears commencing
upon Closing.
UTILIZATION FEE: A rate per annum determined in accordance with the
attached Pricing Grid and payable on all outstandings if
total outstandings exceed 50% of the aggregate amount of
the Facilities. The Utilization Fee is payable quarterly
in arrears commencing upon Closing.
CALCULATION OF
INTEREST & FEES: Other than calculations in respect of interest at the
Reference Rate (which shall be made on the basis of a
365/366-day year and actual days elapsed), all
calculations of interest and fees shall be made on the
basis of a 360-day year and actual days elapsed.
BID OPTION
DESCRIPTION: The Bid Option will be provided on an uncommitted basis
through a competitive auction mechanism.
The Borrower may, from time to time, request the
Administrative Agent to solicit competitive bids from the
Lenders through an auction for short-term advances (a
"Bid Auction") priced either:
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
(i) at a margin above or below LIBOR upon four business
days' prior notice ("LIBOR Bids"); or
(ii) at an absolute interest rate upon two business days'
prior notice ("Absolute Rate Bids").
LIBOR Bids may be requested for 1, 2, 3 or 6 month
periods. Absolute Rate Bids may be requested for periods
of 14 days to 365/366 days. Pricing on Bid Advances is
not reserve-adjusted. Bid Advances may not be prepaid.
The Borrower may request a Bid Auction no more frequently
than once every five business days, and at each Bid
Auction may request no more than three maturities.
Requests for Bid Advances shall be for minimum principal
amounts of $5,000,000 and in multiples of $1,000,000 in
excess thereof.
The Lenders may bid for Bid Advances, but are under no
obligation to do so. Such bids may be for amounts greater
than (or less than) their respective commitments. Any Bid
Advance made by a Lender shall be deemed utilization of
the Facilities for the purposes of computing aggregate
availability under the Facilities. The Borrower will be
under no obligation to accept any of the bids received
from the Lenders. Bid Loan Advances for any requested
maturity will be awarded to the bidding Lenders in order
of the effective yield, starting from the lowest yield
and rising to the highest yield acceptable to the
Borrower.
Interest on Bid Advances is payable at the maturity of
each Bid Loan Advance or quarterly, whichever is earlier.
AVAILABILITY: Committed Advances under the Facilities shall be in
minimum principal amounts of $5,000,000 and in multiples
of $1,000,000 in excess thereof, upon three business days
prior written notice for LIBOR advances and same day's
notice for Base Rate advances.
PREPAYMENTS: Base Rate Committed Advances may be prepaid at any time
on one business day's notice. LIBOR Committed Advances
may be prepaid on not less than three business day's
notice, subject to funding loss indemnity.
VOLUNTARY REDUCTION
OF COMMITMENT : The Borrower may at any time upon five business days'
notice permanently reduce the unused portion of the
Facilities without penalty, but subject to funding loss
indemnity if mandatory
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
prepayment results therefrom, by an amount equal to
$5,000,000 and in multiples of $1,000,000 in excess
thereof.
OPTIONAL INCREASE IN
COMMITMENTS: The Borrower shall have the right to request the Lenders
to increase the aggregate commitments. Each Lender will
have the option, in its sole discretion, to subscribe for
its proportionate share of such requested increase,
according to its then existing pro rata share. At the
option of the Borrower, any part of the increase not so
subscribed may be assumed by one or more existing banks
or assumed by other institutions meeting the definition
of Eligible Assignee acceptable to the Administrative
Agent (which such consent shall not be unreasonably
withheld) and the Borrower.
FINANCIAL COVENANTS: The Borrower shall observe, according to generally
accepted accounting principles, the following financial
covenants:
1. Maximum Leverage Ratio. Not permit its ratio of Total
Debt to Total Capitalization to be greater than 55%.
2. Minimum Interest Coverage Ratio. Not permit as of the
end of any fiscal quarter, calculated upon the basis
of the four fiscal quarter period then ending, its
ratio of Earnings before Interest and Taxes to
Interest Expense, to be less than 3.00:1.0.
OTHER COVENANTS: Those affirmative and negative covenants substantially
similar to the Borrower's existing credit agreement,
including but not limited to:
1. Affirmative Covenants.
---------------------
- Financial Statements;
- Preserve corporate existence;
- Maintain properties and insurance;
- Comply with laws (including environmental laws
and ERISA);
- Permit inspection of properties, books and
records;
- Use of proceeds.
3. Negative Covenants.
------------------
- Limitation on liens (baskets same as existing
agreement);
- Sell or dispose of assets;
- Consolidations and mergers (baskets same as
existing agreement);
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
- Limitation on loans and investments (baskets
same as existing agreement), excluding a
carve-out of up to $25 million for guarantees of
employee loans used strictly for the purchase of
the Borrower's stock.
- Limitation of subsidiary indebtedness, excluding
Pacesetter, Inc. ($50 million basket) and
subsidiary dividends;
- Restricted Payments (modified to permit a level
of share repurchases);
- Change businesses or accounting methods.
INCREASED COSTS/
CHANGE OF CIRCUMSTANCE/
CAPITAL ADEQUACY/
INDEMNITIES: The Credit Agreement shall contain customary provisions
protecting and indemnifying the Lenders in the event of
unavailability of funding, illegality, increased costs,
capital adequacy charges and funding losses, and shall
provide for a withholding tax gross-up, and general
indemnification of the Administrative Agent, the Arranger
and affiliates, and the Lenders by the Borrower.
REPRESENTATIONS
AND WARRANTIES: Substantially similar to those found in the Borrower's
existing credit agreement, including but not limited to
representations related to corporate existence, financial
condition, litigation, corporate authority, approvals,
ERISA, taxes, credit agreements and other material
agreements, investments, compliance with laws and
regulations, disclosure, assets, solvency, labor matters,
environmental matters, proprietary rights, real property and
insurance.
EVENTS OF DEFAULT: Substantially similar to those found in the Borrower's
existing credit agreement, including but not limited to:
- Failure to pay any principal, interest or fees when
due; under the Credit Agreement;
- Failure to perform or observe any covenant;
- Any representation or warranty of the Borrower shall
be materially incorrect when made or when deemed made;
- Cross default to other material indebtedness and to
other material agreements of the Borrower or its
subsidiaries ($10 million threshold - same as
existing agreement);
- Change of ownership or control;
- Monetary judgments ($50 million threshold - same as
existing agreement) and non-monetary judgments;
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
- Loss of licenses by the Food and Drug Administration
or any other Governmental Authority; and
- Other defaults relating to the Borrower or its
subsidiaries, including but not limited to
insolvency, bankruptcy and ERISA.
CONDITIONS TO
ADVANCES: Substantially similar to those found in the Borrower's existing
Credit Agreement, including but not limited to:
- All documents and agreements signed and delivered;
- No Event of Default or incipient default;
- All representations and warranties are true as of the
date of each advance;
- Opinions of legal counsel delivered at Closing;
- No material adverse change in operations, business,
properties, condition (financial or otherwise) or
prospects of the Borrower and any of its subsidiaries
taken as a whole (at Closing only); and
- Non-occurrence of any material adverse change in the
loan syndication or capital markets generally, which
in the opinion of the Arranger, would affect the
syndication efforts in respect of any portion of the
Facilities (at Closing only).
ASSIGNMENTS/PARTICIPATIONS:
Any Lender may, with the prior approval of the Administrative
Agent and (so long as no event of default has occurred and is
continuing) the Borrower (which consent in each case shall not
be unreasonably withheld), assign all or a portion of its
commitment in minimum amounts of $10,000,000 to Eligible
Assignees. Each Lender may also sell participations in all or a
portion of its commitment (without prior consent), provided
that participations have voting rights only with respect to
"money terms", including matters involving (i) decrease in
fees, interest rate spreads or principal, (ii) increase in
commitments only if the participant's commitment is increased,
or (iii) extension of the date of final maturity.
EXPENSES: The Borrower will pay all costs and expenses incurred at any
time by the Administrative Agent and the Arranger (including,
without duplication, reasonable attorneys' fees and allocated
costs of internal counsel) in connection with the preparation
and delivery of the Credit Agreement and all related documents,
and in the negotiation, syndication, closing, and enforcement
of the Facilities, regardless of whether the Facilities close.
The Borrower shall also pay all costs and expenses of the
Administrative Agent associated with amendments and other
changes to the Credit Agreement, and all
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
costs and expenses of the Lenders in the collection of the
obligations of the Borrower (including reasonable attorney's
fees and allocated costs of internal counsel).
DOCUMENTATION: Closing is subject to (among other conditions precedent) the
receipt by the Administrative Agent and the Lenders of loan
documentation in form and substance satisfactory to them. The
Credit Agreement will likely be an amendment and restatement of
the Borrower's existing credit agreement.
GOVERNING LAW: State of Illinois.
This Summary of Terms and Conditions (the "Term Sheet") does not attempt to
describe all of the terms and conditions that would pertain to the Facilities,
nor do its terms suggest the specific phrasing of documentation clauses.
Instead, it is intended to outline certain points of business understanding
around which the Facilities will be structured. The closing of any financial
transaction relating to the Facilities would be subject to definitive loan
documentation mutually acceptable to the Borrower, the Arranger, the
Administrative Agent and the Lenders and would include various conditions
precedent, including without limitations the conditions set forth above.
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
PRICING GRID
------------
Option A - BASED ON RATIO OF TOTAL DEBT/CAPITALIZATION
<TABLE>
<CAPTION>
364-DAY FACILITY
(in basis points)
<S> <C> <C> <C> <C> <C>
Ratio of Total Level I Level II Level III Level IV Level V
Debt/Capitalization ------------ -------------- -------------- -------------- ----------------
(less than 15%) 15% - 25% 25% - 35% 35% - 45% (greater than 45%)
------------------------------------------------------------------------------------
Facility Fee: 5.0 6.0 8.0 9.0 12.5
- -----------------------------------------------------------------------------------------------------
LIBOR Margin: 17.5 19.0 22.0 28.5 32.5
- -----------------------------------------------------------------------------------------------------
Utilization Fee: (1) 5.0 5.0 5.0 5.0 5.0
- -----------------------------------------------------------------------------------------------------
All-In Drawn Cost: 22.5 25.0 30.0 37.5 45.0
- -----------------------------------------------------------------------------------------------------
Base Rate Margin: 0.0 0.0 0.0 0.0 0.0
- -----------------------------------------------------------------------------------------------------
(1) Payable on all outstandings if total outstandings exceed 50% of the
aggregate amount of the Facilities.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
5-YEAR FACILITY
(in basis points)
<S> <C> <C> <C> <C> <C>
Ratio of Total Level I Level II Level III Level IV Level V
Debt/Capitalization ------------ -------------- -------------- -------------- ---------------
(less than 15%) 15% - 25% 25% - 35% 35% - 45% (greater than 45%)
-----------------------------------------------------------------------------------
Facility Fee: 7.0 8.0 10.0 11.0 15.0
- -----------------------------------------------------------------------------------------------------
LIBOR Margin: 15.5 17.0 20.0 26.5 30.0
- -----------------------------------------------------------------------------------------------------
Utilization Fee: (1) 5.0 5.0 5.0 5.0 5.0
- -----------------------------------------------------------------------------------------------------
All-In Drawn Cost: 22.5 25.0 30.0 37.5 45.0
- -----------------------------------------------------------------------------------------------------
Base Rate Margin: 0.0 0.0 0.0 0.0 0.0
- -----------------------------------------------------------------------------------------------------
(1) Payable on all outstandings if total outstandings exceed 50% of the
aggregate amount of the Facilities.
- -----------------------------------------------------------------------------------------------------
</TABLE>
BANK AMERICA LOGO CREDIT SUISSE FIRST BOSTON LOGO
<PAGE>
PRICING GRID
------------
Option B - BASED ON RATINGS
Available if the Company obtains a long-term debt rating, corporate credit
rating or bank loan rating.
<TABLE>
<CAPTION>
364-DAY FACILITY
(in basis points)
- -------------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V Level VI
------------ ------------ ------------ ------------ ------------ ------------
Ratio of Total
Debt/Capitalization A OR HIGHER A- BBB+ BBB BBB- BB+ or lower
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facility Fee: 5.0 6.0 8.0 9.0 11.0 15.0
- -------------------------------------------------------------------------------------------------------
LIBOR Margin: 17.5 19.0 22.0 28.5 34.0 42.5
- -------------------------------------------------------------------------------------------------------
Utilization Fee: 5.0 5.0 5.0 5.0 5.0 5.0
(1)
- -------------------------------------------------------------------------------------------------------
All-In Drawn Cost: 22.5 25.0 30.0 37.5 45.0 57.5
- -------------------------------------------------------------------------------------------------------
Base Rate Margin: 0.0 0.0 0.0 0.0 0.0 0.0
- -------------------------------------------------------------------------------------------------------
(1) Payable on all outstandings if total outstandings exceed 50% of the
aggregate amount of the Facilities.
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Five-Year Facility
(in basis points)
- -------------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V Level VI
------------ ------------ ------------ ------------ ------------ ------------
Ratio of Total
Debt/Capitalization A OR HIGHER A- BBB+ BBB BBB- BB+ or lower
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facility Fee: 7.0 8.0 10.0 11.0 12.5 17.5
- -------------------------------------------------------------------------------------------------------
LIBOR Margin: 15.5 17.0 20.0 26.5 32.5 40.0
- -------------------------------------------------------------------------------------------------------
Utilization Fee: 5.0 5.0 5.0 5.0 5.0 5.0
(1)
- -------------------------------------------------------------------------------------------------------
All-In Drawn Cost: 22.5 25.0 30.0 37.5 45.0 57.5
- -------------------------------------------------------------------------------------------------------
Base Rate Margin: 0.0 0.0 0.0 0.0 0.0 0.0
- -------------------------------------------------------------------------------------------------------
(1) Payable on all outstandings if total outstandings exceed 50% of the
aggregate amount of the Facilities.
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT (g)(1)
Supplemental Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 876,747 $ 848,078 $ 517,433
Cost of sales 294,888 292,788 163,810
- ----------------------------------------------------------------------------------------------------------
Gross profit 581,859 555,290 353,623
Selling, general and administrative expense 311,470 284,940 138,789
Research and development expense 107,644 101,264 50,518
Purchased research and development charges 40,350 -- 40,800
Special charges 47,808 -- --
- ----------------------------------------------------------------------------------------------------------
Operating profit 74,587 169,086 123,516
Other income (expense), net 16,022 (1,992) 9,946
- ----------------------------------------------------------------------------------------------------------
Income before taxes 90,609 167,094 133,462
Income tax provision 29,972 49,978 37,713
- ----------------------------------------------------------------------------------------------------------
Net income $ 60,637 $ 117,116 $ 95,749
- ----------------------------------------------------------------------------------------------------------
Earnings per share:
Primary $ 0.66 $ 1.28 $ 1.06
Fully diluted $ 0.65 $ 1.28 $ 1.05
- ----------------------------------------------------------------------------------------------------------
Cash dividends paid per share $ -- $ -- $ --
Average shares outstanding:
Primary 92,372,000 91,326,000 90,514,000
Fully diluted 92,663,000 91,802,000 90,861,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to supplemental consolidated financial statements.
4
<PAGE>
Supplemental Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 49,388 $ 62,638
Marketable securities 186,007 176,983
Accounts receivable, less allowance (1996 - $8,160, 1995 - $9,845) 216,813 175,405
Inventories:
Finished goods 119,736 84,542
Work in process 30,227 28,229
Raw materials 67,698 60,255
- ---------------------------------------------------------------------------------------------------------------------------
Total inventories 217,661 173,026
Prepaid income taxes 44,234 17,409
Other current assets 33,781 16,446
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 747,884 621,907
- ---------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment
Land 14,232 9,949
Buildings and improvements 64,717 53,108
Machinery and equipment 249,550 180,539
Construction in progress 69,175 23,124
- ---------------------------------------------------------------------------------------------------------------------------
Gross property, plant and equipment 397,674 266,720
Less accumulated depreciation (108,400) (77,792)
- ---------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 289,274 188,928
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets 435,336 381,400
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,472,494 $ 1,192,235
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 201,107 $ 85,886
Accrued income taxes 24,267 41,346
Accrued employee compensation and related taxes 47,645 50,120
Other accrued expenses 47,914 39,495
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 320,933 216,847
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Liabilities
Long-term debt 229,500 120,000
- ---------------------------------------------------------------------------------------------------------------------------
Contingencies
- ---------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock, par value $1.00 per share --
25,000,000 shares authorized; no shares issued
Common stock, par value $.10 per share --
250,000,000 shares authorized; issued and outstanding
1996 - 91,447,656 shares; 1995 - 90,282,312 9,145 9,028
Additional paid-in capital 228,106 200,535
Retained earnings 692,892 632,255
Cumulative translation adjustment 386 4,319
Unrealized gain (loss) on available-for-sale securities (8,028) 9,691
Receivable for stock issued (440) (440)
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 922,061 855,388
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,472,494 $ 1,192,235
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to supplemental consolidated financial statements.
5
<PAGE>
Supplemental Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 60,637 $ 117,116 $ 95,749
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 38,533 30,667 14,850
Amortization 19,649 20,102 7,816
Purchased research and development charges 40,350 -- 40,800
Special charges 20,586 -- --
Gain on sale of business (10,486) -- --
Changes in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable (27,267) (3,997) (26,704)
Increase in inventories (9,331) (11,492) (6,089)
Decrease (increase) in other current assets (14,411) 1,354 (10,771)
Increase in accounts payable and accrued expenses 16,113 41,527 12,016
Increase (decrease) in accrued income taxes (31,380) 7,153 2,637
Increase in prepaid and deferred income taxes (13,208) (12,617) (14,331)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 89,785 189,813 115,973
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Purchase of property, plant and equipment (103,001) (57,203) (34,196)
Purchase of marketable securities (90,018) (85,097) (156,261)
Proceeds from sale or maturity of marketable securities 65,869 68,323 364,058
Investments in companies, joint ventures and partnerships (155) (3,701) (13,564)
Acquisitions, net of cash acquired (117,800) 13,000 (524,300)
Proceeds from sale of business 24,204 -- --
Other investing activities (5,393) 2,394 (7,675)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (226,294) (62,284) (371,938)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Proceeds from issuance of stock 20,818 6,187 2,622
Cash dividends paid -- -- (13,935)
Common stock repurchased (6,727) -- (125)
Proceeds from the issuance of long-term debt 229,500 -- 255,000
Repayment of long-term debt (120,000) (135,029) (96)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 123,591 (128,842) 243,466
- ----------------------------------------------------------------------------------------------------------------------------------
Effect of currency exchange rate changes on cash (332) 647 567
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (13,250) (666) (11,932)
Cash and cash equivalents at beginning of year 62,638 63,304 75,236
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 49,388 $ 62,638 $ 63,304
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to supplemental consolidated financial statements.
6
<PAGE>
Supplemental Consolidated Statements of Shareholders' Equity
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Common Stock
--------------------- Additional Cumulative Unrealized Receivable Total
Number of Paid-In Retained Translation Gain (Loss) on for Stock Shareholders'
Shares Amount Capital Earnings Adjustment Investments Issued Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993 89,424,019 $ 8,942 $ 187,280 $ 433,325 $ (3,609) $ - $ - $ 625,938
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 95,749 95,749
Issuance of common stock
upon exercise of stock
options, net of taxes
withheld 345,541 35 2,657 2,692
Tax benefit realized upon
exercise of stock options 1,337 1,337
Cash dividends ($.20
per share) (13,935) (13,935)
Purchase and retirement
of common shares (125) (125)
Translation adjustment 1,125 1,125
Unrealized gain on
investments, net of taxes 686 686
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 89,769,560 8,977 191,149 515,139 (2,484) 686 - 713,467
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 117,116 117,116
Issuance of common stock
upon exercise of stock
options, net of taxes
withheld 511,752 51 6,581 6,632
Tax benefit realized upon
exercise of stock options 2,805 2,805
Translation adjustment 6,803 6,803
Unrealized gain on
investments, net of taxes 9,005 9,005
Receivable for stock issued (440) (440)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 90,281,312 9,028 200,535 632,255 4,319 9,691 (440) 855,388
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 60,637 60,637
Issuance of common stock
upon exercise of stock
options, net of taxes
withheld 1,161,191 116 20,701 20,817
Tax benefit realized upon
exercise of stock options 7,597 7,597
Purchase and retirement
of common shares (145,000) (14) (6,712) (6,726)
Issuance of common stock
for business acquired 149,153 15 5,985 6,000
Translation adjustment (3,933) (3,933)
Unrealized gain (loss) on
investments, net of taxes (17,719) (17,719)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 91,446,656 $ 9,145 $ 228,106 $ 692,892 $ 386 $ (8,028) $ (440) $ 922,061
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to supplemental consolidated financial statements.
7
<PAGE>
Supplemental Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Note 1 Significant Accounting Policies
Nature of Operations: St. Jude Medical, Inc. develops, manufactures and
distributes medical devices with an emphasis on cardiac care products and
services. The Company's products are sold in more than 100 countries. Principal
products include prosthetic heart valves, pacemakers, implantable
cardioverter-defibrillators (ICD) and electrophysiology and interventional
catheters. The main markets for these products are the United States, Western
Europe and Japan. In the United States, the Company uses a direct employee-based
sales organization for its heart valve and catheter products and a combination
of independent contractors and an employee-based sales organization for its
pacemaker and ICD products. In Western Europe, the Company has a direct sales
presence in 14 countries. Throughout the rest of the world, the Company
principally uses distributor-based sales organizations.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. Significant
intercompany transactions and balances have been eliminated in consolidation.
Certain reclassifications of previously reported amounts have been made to
conform with the current year presentation.
Use of Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Accounting Period: The Company's fiscal year is the 52 or 53 week period ending
the Saturday nearest December 31. Fiscal years 1996, 1995 and 1994 consisted of
52 weeks.
Translation of Foreign Currencies: Assets and liabilities of the Company's
foreign subsidiaries are translated at exchange rates in effect on reporting
dates and differences due to changing exchange rates are recorded as "cumulative
translation adjustment" in shareholders' equity. Income and expenses are
translated at rates that approximate those in effect on transaction dates.
Cash Equivalents: Cash equivalents, consisting of liquid investments with a
maturity of three months or less when purchased, are stated at cost which
approximates market.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined under the first- in, first-out method. Allowances are made for
slow-moving, obsolete, unsalable or unusable inventories.
8
<PAGE>
Stock-Based Compensation: Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," encourages but does not require
companies to record compensation cost for stock-based compensation plans at fair
value. The Company elected to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations. See Note 5.
Property, Plant and Equipment and Depreciation: Property, plant and equipment
are stated at cost and are depreciated using the straight line method based on
useful lives of 31.5 to 39 years for buildings and improvements and three to
seven years for machinery and equipment. Leasehold improvements are amortized
over the shorter of the life of the related asset or the term of the lease.
Accelerated depreciation is used by the Company for tax accounting purposes
only.
Long-Lived Assets: The Company adopted Statement of Financial Accounting
Standards (FAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," in 1996. FAS No. 121 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. There
was no financial impact to the Company upon adopting FAS No. 121.
Revenue Recognition: The Company's general practice is to recognize revenues
from product sales as shipped and for services as performed. For certain
products, the Company maintains consigned inventory at customer locations. For
these products, revenue is recognized at the time the Company is notified that
the device has been used.
Research and Development: Research and development expense includes all
expenditures for general research into scientific phenomena, development of
useful ideas into merchantable products and continuing support and upgrading of
various products. All such expense is charged to operations as incurred.
Earnings Per Share: Primary earnings per share are computed by dividing net
income for the year by the weighted average number of shares of common stock and
common stock equivalents outstanding. For fully diluted earnings per share, both
net income and shares outstanding have been adjusted as if the Company's $57,500
5.75% Convertible Debenture had been converted, unless the effect is
anti-dilutive.
Note 2 Acquisitions
On May 15, 1997, the Company acquired Ventritex, Inc. ("Ventritex"), a
manufacturer of implantable cardioverter defibrillators and related products.
Each share of Ventritex common stock was converted into .5 shares of Company
common stock. The Company issued 10,437,800 shares to Ventritex shareholders.
The transaction qualified as a tax-free reorganization and was accounted for as
a pooling of interests. The accompanying financial statements, for all periods
presented, have been restated to include the results of Ventritex.
9
<PAGE>
Separate results of operations for the periods prior to the merger with
Ventritex are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net Sales
St. Jude Medical $ 808,780 $ 761,835 $ 391,949
Ventritex 67,967 86,243 125,484
--------- --------- ---------
Combined $ 876,747 $ 848,078 $ 517,433
========= ========= =========
Net Income
St. Jude Medical $ 92,181 $ 138,848 $ 86,450
Ventritex (51,208) (34,535) 15,270
Adjustments 19,664 12,803 (5,971)
--------- --------- ---------
Combined $ 60,637 $ 117,116 $ 95,749
========= ========= =========
Other Changes in Shareholders' Equity
St. Jude Medical $ 7,471 $ 21,676 $ (11,312)
Ventritex (3,331) 1,673 1,978
Adjustments 1,896 1,456 1,114
--------- --------- ---------
Combined $ 6,036 $ 24,805 $ (8,220)
========= ========= =========
</TABLE>
On November 29, 1996, the Company acquired substantially all of the worldwide
cardiac rhythm management assets of Telectronics Pacing Systems, Inc.
("Telectronics") for $135 million. The initial price can be adjusted upward or
downward based upon the change in net asset value between June 30, 1996 and
November 29, 1996. The Company and the seller currently disagree about the final
adjustment to the purchase price and are following procedures in the purchase
agreement to resolve their differences. The Company expects that any adjustment
to the purchase price will be recorded in 1997. The acquisition was accounted
for under the purchase accounting method. Goodwill of approximately $76,000
including approximately $43,000 of consolidation charges, is amortized on a
straight line basis over 20 years. The results of Telectronics operations have
been included in the consolidated results of operations from the date of
acquisition. In conjunction with the Telectronics acquisition, the Company in
1996 recorded a pre-tax charge of $32,200 relating to that portion of the
purchase price attributable to purchased research and development.
On September 30, 1994, the Company acquired substantially all the Siemens AG
worldwide cardiac rhythm management business ("Pacesetter") for $511,300. The
acquisition was accounted for under the purchase method accounting. Goodwill is
amortized on a straight line basis over 20 years. The results of Pacesetter's
operations have been included in the consolidated results of operations from the
date of acquisition. In conjunction with the Pacesetter acquisition, the Company
recorded a non-cash pre-tax charge of $40,800 relating to that portion of the
purchase price attributable to purchased research and development. The purchased
research and development charge represents the appraised value of the in-process
research and development that must be expensed under generally accepted
accounting principles.
10
<PAGE>
The following unaudited pro forma information has been prepared assuming that
the acquisition of Pacesetter had occurred at the beginning of 1993, the
acquisition of Telectronics had occurred at the beginning of 1995 and the
acquisition of Ventritex had occurred at the beginning of 1994. Pro forma
adjustments include amortization of goodwill, increased interest expense,
decreased interest income and the related income tax effects. Pro forma results
are not necessarily indicative of the results that would have occurred had the
acquisitions actually taken place at the beginning of the specified periods, or
the expected results of future operations.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net sales $973,262 $1,008,163 $822,223
Net income/(loss) $ (8,400) 71,630 101,381
Earnings per share $ (.09) .78 1.12
</TABLE>
On September 23, 1996, the Company acquired Biocor Industria E Pesquisas Ltd.,
a Brazilian tissue heart valve manufacturer for $4,000 in cash and an earn-out
which could result in additional cash payments of up to $4,000 over the next
three years. On January 5, 1996, the Company acquired the remaining shares of
The Heart Valve Company for $1,000 in cash and 149,153 shares of its common
stock. In connection with the acquisitions of Biocor and The Heart Valve
Company, the Company recorded pre-tax charges of $3,150 and $5,000,
respectively, relating to purchased research and development. The results of
Biocor and The Heart Valve Company have been included in the Company's results
of operations since the dates of acquisition and were not material.
On May 31, 1996, the Company acquired Daig Corporation ("Daig"), a manufacturer
of specialized cardiovascular devices for the electrophysiology and
interventional cardiology markets. Each share of Daig common stock was converted
into .651733 shares of Company common stock. The Company issued 9,929,897 shares
to Daig shareholders. Additionally, one outstanding option to acquire 128,000
shares of Daig common stock was converted to an option to acquire 83,422 shares
of Company common stock. The transaction qualified as a tax-free reorganization
and was accounted for as a pooling of interests. The accompanying financial
statements, for all periods presented, have been restated to include the results
of Daig, which were not material.
Note 3 Special Charges
Results of operations for 1996 include pre-tax charges recorded in the fourth
quarter of $47,808 for costs relating to patent and litigation settlements and
repositioning several of the Company's operations. Patent and other legal
disputes between Pacesetter and a third party were settled for $25,000. The
repositioning charges of $22,808 related to the planned consolidation of tissue
heart valve manufacturing operations ($11,100), the termination of various
distributor agreements in conjunction with the conversion to direct sales
($7,700), the realignment of Pacesetter manufacturing operations in connection
with the Telectronics integration ($2,200), and other non-recurring expenses
($1,808).
11
<PAGE>
Note 4 Income Taxes
The components of income before taxes were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 89,305 $ 149,526 $ 124,411
Foreign 1,304 17,568 9,051
- -----------------------------------------------------------------
Income before taxes $ 90,609 $ 167,094 $ 133,462
- -----------------------------------------------------------------
</TABLE>
The components of the income tax provision were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 63,005 $ 47,389 $ 37,260
State and Puerto Rico 9,676 11,518 10,217
Foreign 1,022 6,226 3,107
- --------------------------------------------------------------------------------
Total current 73,703 65,133 50,584
- --------------------------------------------------------------------------------
Deferred:
Prepaid (28,304) (7,329) (5,757)
Deferred (15,427) (7,826) (7,114)
- --------------------------------------------------------------------------------
Total deferred (43,731) (15,155) (12,871)
- --------------------------------------------------------------------------------
Income tax provision $ 29,972 $ 49,978 $ 37,713
- --------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Deferred income tax assets (liabilities) were comprised of the following at
December 31:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards $ 41,978 $ 22,671
Tax credit carryforwards 3,837 3,883
Inventory (intercompany profit in inventory
and excess of tax over book valuation) 21,598 23,837
Intangibles 33,190 13,931
Accruals not currently deductible 11,676 12,469
Unrealized loss on investments 5,029 -
- -------------------------------------------------------------------------------------------------
Deferred income tax assets: 117,308 76,791
- -------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Unrealized gain on investments - (5,830)
Accumulated depreciation (7,757) (7,037)
- -------------------------------------------------------------------------------------------------
Deferred income tax liabilities: (7,757) (12,867)
- -------------------------------------------------------------------------------------------------
Net deferred income tax assets $ 109,551 $ 63,924
- -------------------------------------------------------------------------------------------------
</TABLE>
The reconciliation of the Company's effective income tax rate to the statutory
U.S. federal income tax rate of 35% is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax provision at
U.S. statutory rate $ 30,807 $ 58,483 $ 46,712
Increase (decrease) in taxes
resulting from:
State income taxes, net of
federal tax benefit 4,309 4,434 1,763
Tax benefits from Foreign
Sales Corporation (3,878) (1,886) (1,557)
Tax benefits from Puerto Rican
operations (3,128) (8,442) (7,880)
Tax exempt income - - (2,274)
Foreign taxes at higher
(lower) rates 1,849 (1,640) 194
Other 13 (971) 755
- -----------------------------------------------------------------------------------
Income tax provision $ 29,972 $ 49,978 $ 37,713
- -----------------------------------------------------------------------------------
Effective income tax rate 33.1% 29.9% 28.3%
- -----------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
At December 31, 1996, the Company has net operating loss and research and
development tax credit carryforwards for federal tax purposes of approximately
$126,645 and $3,682, respectively, that will expire through 2011, if not
utilized. The Company's effective income tax rate is favorably affected by
Puerto Rican tax exemption grants which result in Puerto Rican earnings being
partially tax exempt through the year 2003.
The Internal Revenue Service ("IRS") is currently examining the Company's
1992-1994 federal income tax returns. In addition, the IRS has completed an
audit examination of the Company's 1990-1991 income tax returns and has proposed
an adjustment of approximately $16,600 in additional taxes, not including
interest or state income taxes, for which the Company anticipates receiving
statutory notices of deficiency in the near future. The proposed adjustment
relates primarily to the Company's Puerto Rican operations. It is likely that
similar adjustments will be proposed for subsequent years. The Company is
vigorously contesting the proposed adjustment and expects that the ultimate
resolution will not have a material adverse effect on its financial position or
liquidity, but could potentially be material to the net income of a particular
future period if resolved unfavorably.
The Company has not recorded deferred income taxes applicable to undistributed
earnings of foreign subsidiaries ($15,906 at December 31, 1996) because
distribution of these earnings generally would not require additional taxes due
to available foreign tax credits.
The Company made income tax payments of $68,525, $53,313 and $49,565 in 1996,
1995 and 1994, respectively.
Note 5 Stock Purchase and Option Plans
Stock Purchase: The Company's employee stock purchase savings plan allows
participating employees to purchase, through payroll deductions, shares of
common stock at 85% of the fair market value at specified dates. Under the terms
of the plan, 750,000 shares of common stock have been reserved for purchase by
plan participants. Employees purchased 108,795, 97,525 and 26,041 shares in
1996, 1995 and 1994, respectively. At December 31, 1996, 494,442 shares were
available for purchase under the plan.
The Ventritex 1991 Employee Stock Purchase Plan that had 162,500 shares of
common stock reserved for purchase by plan participants was dissolved at the
time Ventritex was merged into Pacesetter. Eligible Ventritex employees were
allowed to invest up to 10% of compensation through payroll deductions to
purchase shares of Ventritex stock at 85% of the fair market value at specified
dates. Ventritex issued 40,404 shares under this plan during its 1996 fiscal
year.
14
<PAGE>
Stock Based-Compensation: Under the terms of the Company's various stock plans,
7,687,769 shares of common stock have been reserved for issuance to directors,
officers and employees upon the grant of restricted stock or the exercise of
stock options. Stock options are exercisable over periods up to 10 years from
date of grant and may be "incentive stock options" or "non-qualified stock
options" and may have stock appreciation rights attached. At December 31, 1996,
there were a maximum of 2,268,753 shares available for grant and 5,419,016
options outstanding. At December 31, 1996, 1995 and 1994, there were options
exercisable of 2,578,387, 3,029,516 and 1,786,701, respectively. Stock option
and long-term performance award transactions were:
Options/Awards Weighted Average
Outstanding Price Per Share
- --------------------------------------------------------------------------------
Balance at December 31, 1993 3,045,904 $ 21.36
- --------------------------------------------------------------------------------
Granted 1,518,338 27.31
Cancelled (363,563) 27.90
Exercised (218,585) 50.09
- --------------------------------------------------------------------------------
Balance at December 31, 1994 3,982,094 24.33
- --------------------------------------------------------------------------------
Granted 967,477 28.62
Cancelled (220,872) 28.23
Exercised (378,692) 32.87
- --------------------------------------------------------------------------------
Balance at December 31, 1995 4,350,007 26.27
- --------------------------------------------------------------------------------
Granted 2,288,998 36.36
Cancelled (302,785) 39.78
Exercised (917,204) 20.84
- --------------------------------------------------------------------------------
Balance at December 31, 1996 5,419,016 31.27
- --------------------------------------------------------------------------------
In conjunction with the merger of Ventritex into the Company, Ventritex
outstanding options were converted to St. Jude Medical, Inc. options. Each
option to purchase one share of Ventritex common stock was converted to the
right to purchase .5 St. Jude Medical shares at twice the Ventritex strike
price.
Pursuant to the terms of the Company's various stock plans, optionees can use
cash, previously owned shares or a combination of cash and previously owned
shares to reimburse the Company for the cost of the option and the related tax
liabilities. Shares are acquired from the optionee at the fair market value of
the stock on the transaction date.
All options have been granted at not less than fair market value at dates of
grant. When stock options are exercised, the par value of the shares issued is
credited to common stock and the excess of the proceeds over the par value is
credited to additional paid-in capital. When non-qualified options are
exercised, the Company realizes income tax benefits based on the difference
between the fair value of the stock on the date of exercise and the stock option
exercise price. These tax benefits do not affect the income tax provision, but
rather are credited directly to additional paid-in capital.
15
<PAGE>
In July 1996, the Board of Directors approved a stock option grant of 1,000,000
shares at an exercise price of $31.38 per share to the Company's CEO. This grant
is subject to shareholder approval at the May 1997 shareholders' meeting of a
one-time waiver of the 300,000 share annual limitation under the Company's 1994
Stock Option Plan which will have the effect of ratifying this grant.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations, in accounting for its
stock-based compensation plans. Accordingly, no compensation expense has been
recognized for its stock option awards. Had compensation expense for the
Company's stock option awards been determined based upon their grant date fair
value consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the
Company's net income and earnings per share would have been reduced by $ 4,985,
or $ .05 per share and $ 3,115, or $ .04 per share for 1996 and 1995,
respectively. These amounts are not necessarily indicative of the amounts that
will be reported in the future. The fair value of the options at the grant date
was estimated using the Black-Scholes model with the following weighted average
assumptions:
1996 1995
------ ------
Expected life (years) 6 6
Interest rate 6.3% 7.2%
Volatility 40.5% 31.1%
Dividend yield 0% 0%
Under the terms of the Company's shareholder rights agreement, upon the
occurrence of certain events which result in a change in control as defined by
the agreement, registered holders of common shares are entitled to purchase
one-tenth of a share of Series A Junior Participating Preferred Stock at a
stated price, or to purchase either the Company's shares or shares of the
acquiring entity at half their market value.
Note 6 Financial Instruments and Off-Balance Sheet Risk
Foreign Currency Instruments and Hedging Activities: The Company may enter into
foreign exchange contracts to manage its exposure to fluctuations in foreign
currency exchange rates. These contracts involve the exchange of foreign
currencies for U.S. dollars at specified rates at future dates. Counterparties
to these contracts are major international financial institutions. Maturities of
these instruments are typically one year or less from the transaction date.
Gains or losses from these contracts are included in other income (expense).
The Company had contracts totaling $25,217 and $12,483 at December 31, 1996 and
December 31, 1995, respectively. These contracts are related to the exchange of
French Francs, German Marks and Canadian Dollars into U.S. dollars. These
instruments were recorded at their fair value at each balance sheet date. The
cumulative unrealized gain (loss) on these contracts totaled $905, $45 and
$(128) at December 31, 1996, 1995 and 1994, respectively, and was recorded as
other income (expense).
16
<PAGE>
Long-Term Debt: The Company has an unsecured $130,000 committed revolving line
of credit with a group of seven banks that terminates in July 2001. The Company
also maintains $100,000 of non- committed lines of credit with two banks to
supplement the revolving line of credit, that expires in November 1999. The rate
of interest payable under these borrowing facilities is a floating rate and is a
function of the London Interbank Offered Rate. The weighted average interest
rates at December 31, 1996 and 1995 were 5.6% and 6.1%, respectively. A facility
fee of .08% of the revolving line commitment is paid quarterly. At December 31,
1996, the Company had borrowings under the committed line of $120,000 and
$52,000 under the non-committed lines.
The credit agreement contains various covenants that require the Company to
maintain a specified financial ratio, limit liens, regulate asset disposition
and subsidiary indebtedness and restrict certain acquisitions and investments.
At December 31, 1996, the Company was in compliance with these covenants.
Convertible Subordinated Debentures: In August 1996, the Company issued $57,500
aggregate principal amount of 5.75% convertible subordinated debentures due
August 15, 2001. The notes are convertible at any time prior to maturity, unless
previously redeemed or repurchased, into shares of common stock at a conversion
rate of 29.0909 shares per thousand dollars of principal amount of notes
(equivalent to a conversion price of $34.375 per share).
Other Financial Instruments: Marketable securities consist of equity
instruments, bank certificates of deposit, U.S. government obligations,
commercial paper, and Puerto Rico industrial development bonds. Under Statement
of Financial Accounting Standards (FAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," debt securities that the Company
does not have the positive intent to hold to maturity and all marketable equity
securities are classified as available-for-sale and are carried at fair value.
Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of shareholders' equity.
A net realized gain of $1,195 was recorded on sales of available-for-sale
securities in 1996. No net realized gains or losses were recorded in 1995. The
net unrealized holding loss on available-for-sale securities included as a
separate component of shareholders' equity was $8,028 (net of $5,029 of current
deferred income taxes) at December 31, 1996.
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
Estimated Estimated
Fair Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Assets:
Cash and Cash Equivalents $ 49,388 $ 49,388 $ 62,638 $ 62,638
Marketable Securities $ 199,064 $ 186,007 $ 161,462 $ 176,983
</TABLE>
17
<PAGE>
The Company also guarantees certain obligations of its subsidiaries. As of
December 31, 1996 and 1995, the maximum amount of such guarantees was $7,500.
Concentration of Credit Risk: Trade accounts receivables, certain marketable
securities and foreign exchange contracts are the financial instruments which
may subject the Company to concentration of credit risk.
Within the European Economic Union, payment of certain accounts receivable is
made by the national healthcare system within several countries. Although the
Company does not anticipate collection problems with these receivables, payment
is contingent to a certain extent upon the economic situation within these
countries. The credit risk associated with the balance of the trade receivables
is limited due to dispersion of the receivables over a large number of customers
in many geographic areas. The Company monitors the credit worthiness of its
customers to which it grants credit terms in the normal course of business.
Marketable securities are placed with high credit qualified financial
institutions and Company policy limits the credit exposure to any one financial
institution. Counterparties to foreign exchange contracts are major financial
institutions; therefore, credit loss from counterparty nonperformance is
unlikely.
Note 7 Retirement Plans
Defined Contribution Plan: The Company has a defined contribution profit sharing
plan, including features under section 401(k) of the Internal Revenue Code,
which provides retirement benefits to substantially all full-time U.S.
employees. Under the 401(k) portion of the plan, eligible employees may
contribute a percentage of their annual compensation, subject to IRS
limitations, with the Company matching certain eligible contributions. The
Company's level of contribution to the profit sharing portion of the plan is
subject to Board of Directors approval and is based on Company performance. The
Company has additional defined contribution programs for employees outside the
United States. The benefits under these plans are based primarily on
compensation levels. Total retirement plan expense was $5,783, $6,977 and $2,873
in 1996, 1995 and 1994, respectively.
Defined Benefit Plans: In certain countries outside the United States, the
Company maintains defined benefit plans. An accrual of $5,023 was recorded as of
December 31, 1996 which is approximately equal to the actuarially calculated
unfunded liability.
Note 8 Geographic Area
The Company operates in the medical products industry and is segmented into
three geographic areas - the United States (including export sales to
unaffiliated customers except to customers in Europe, the Middle East and
Africa), Europe (including export sales to unaffiliated customers in the Middle
East, Africa, Latin America and Asia-Pacific) and other international. Operating
profit for export sales is reported in the exporting geography.
18
<PAGE>
Sales between geographic areas are made at transfer prices which approximate
prices to unaffiliated third parties. Export sales to unaffiliated customers
included in United States sales were $ 67,639 $ 62,419 and $46,321 for 1996,
1995 and 1994, respectively.
Net sales by geographic area were as follows:
<TABLE>
<CAPTION>
Other
United Inter- Elimina-
States Europe national tions Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Customer
sales $ 586,879 $ 274,368 $ 15,500 $ -- $ 876,747
Inter-
company
sales 105,822 -- 8,198 (114,020) --
- --------------------------------------------------------------------------------------------------------------
1995 $ 692,701 $ 274,368 $ 23,698 $(114,020) $ 876,747
- --------------------------------------------------------------------------------------------------------------
Customer
sales $ 595,056 $ 249,052 $ 3,970 $ -- $ 848,078
Inter-
company
sales 91,523 -- 8,869 (100,392) --
- --------------------------------------------------------------------------------------------------------------
1994 $ 686,579 $ 249,052 $ 12,839 $(100,392) $ 848,078
- --------------------------------------------------------------------------------------------------------------
Customer
sales $ 402,869 $ 113,236 $ 1,328 $ -- $ 517,433
Inter-
company
sales 68,604 -- 3,800 (72,404) --
- --------------------------------------------------------------------------------------------------------------
$ 471,473 $ 113,236 $ 5,128 $ (72,404) $ 517,433
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Operating profit (loss) by geographic area was as follows:
Other
United Inter-
States Europe national Corporate Total
- --------------------------------------------------------------------------------
1996 $ 62,965 $ 59,264 $ (2,582) $ (45,060) $ 74,587
1995 $ 131,955 $ 50,924 $ (90) $ (13,703) $ 169,086
1994 $ 96,767 $ 38,799 $ (509) $ (11,541) $ 123,516
- --------------------------------------------------------------------------------
19
<PAGE>
Identifiable assets by geographic area were as follows:
Other
United Inter-
States Europe national Corporate Total
- -----------------------------------------------------------------------------
1996 $ 811,588 $ 282,610 $ 52,209 $ 326,087 $ 1,472,494
1995 $ 691,603 $ 204,054 $ 9,772 $ 286,806 $ 1,192,235
1994 $ 685,738 $ 181,470 $ 4,523 $ 229,552 $ 1,101,283
- -----------------------------------------------------------------------------
1996 operating profit reflects purchased research and development charges of
$40,350 and special charges of $47,808 and 1994 operating profit reflects
purchased research and development charges of $40,800.
Corporate expenses consist principally of non-allocable general and
administrative expenses. Corporate identifiable assets consist principally of
cash and cash equivalents and marketable securities.
Note 9 Other Income (Expense), Net
Other income (expense), net consisted of the following:
1996 1995 1994
Interest income $ 9,463 $ 11,926 $ 16,620
Interest expense (4,725) (12,967) (3,798)
Foreign exchange gains (losses) 2,165 474 (1,918)
Gain on the sale of a business 10,486 - -
Acquisition transaction costs (5,118) - -
Other 3,751 (1,425) (958)
-------- --------- --------
Other income (expense), net $ 16,022 $ (1,992) $ 9,946
======== ========= ========
Note 10 Other Assets
Other assets as of December 31, 1996 and 1995, net of accumulated amortization
of $42,792 and $34,923, respectively, consisted of the following:
1996 1995
Investments in companies, joint ventures and partnerships $ 7,984 $ 22,356
Intangibles and other 361,359 317,176
Other assets 65,993 41,868
-------- ---------
$435,336 $ 381,400
======== =========
20
<PAGE>
Investments in companies, joint ventures, and partnerships are stated at cost
which approximates market. Intangibles and other assets consist principally of
the excess of cost over net assets of certain acquired businesses and
technology. Intangibles and other assets are being amortized over periods
ranging from 10 to 20 years.
Note 11 Contingencies
The Company is involved in various products liability lawsuits, claims and
proceedings of a nature considered normal to its business with the exception
noted below. Subject to self-insured retentions, the Company has products
liability insurance sufficient to cover such claims and suits. In connection
with two pacemaker lead models, the Company may be subject to future uninsured
claims. The Company's products liability insurance carrier has denied coverage
for these models and has filed suit against the Company seeking rescission of
the policy covering Pacesetter business retroactive to the date the Company
acquired Pacesetter. The Company was a codefendant in a 1995 class action suit
with respect to these leads. This case was settled in November 1995. The
Company's share of the settlement is approximately $5,000. Additional claims
could be filed by patients with these leads who were not class members. Further,
claims may be filed in the future relative to events currently unknown to
management. Management believes losses that might be sustained from such actions
would not have a material adverse effect on the Company's liquidity or financial
condition, but could potentially be material to the net income of a particular
future period if resolved unfavorably.
Note 12 Shareholders' Equity
On October 17, 1995, the Board of Directors declared a three-for-two stock split
in the form of a 50% stock dividend to shareholders of record on November 2,
1995. Earnings per share, dividends per share, shares outstanding and weighted
average shares outstanding have been restated to reflect the stock dividend.
21
<PAGE>
Note 13 Quarterly Financial Data (Unaudited)
Quarterly data for 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
Quarter
First Second Third Fourth
<S> <C> <C> <C> <C>
Year Ended
December 31, 1996:
Net sales $ 211,829 $ 220,498 $ 212,456 $ 231,964
Gross profit 141,290 147,438 142,992 150,139
Net income/(loss) 30,058 29,920 30,179 (29,520)*
Earnings per share .33 .32 .33 (.32)*
Year Ended
December 31, 1995:
Net sales $ 231,199 $ 214,394 $ 200,401 $ 202,084
Gross profit 149,992 145,775 128,635 130,888
Net income/(loss) 36,602 32,275 24,186 24,053
Earnings per share .40 .35 .26 .26
</TABLE>
*Includes the effect of pre-tax charges of $35,350 for purchased research and
development associated with the Telectronics and Biocor acquisitions and special
charges of $47,808 for patent and litigation settlements and repositioning of
several of the Company's operations.
22
<PAGE>
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
1996(**) 1995 1994(***) 1993 1992
Summary of Operations for the Year Ended:
<S> <C> <C> <C> <C> <C>
Net sales $ 876,747 $ 848,078 $ 517,433 $ 339,942 $ 273,823
Gross profit $ 581,859 $ 555,290 $ 353,623 $ 236,375 $ 197,730
Percent of sales 66.4% 65.5% 68.3% 69.5% 72.2%
Operating profit $ 74,587 $ 169,086 $ 123,516 $ 110,099 $ 115,682
Percent of sales 8.5% 19.9% 23.9% 32.4% 42.2%
Net income $ 60,637 $ 117,116 $ 95,749 $ 94,544 $ 100,412
Percent of sales 6.9% 13.8% 18.5% 28.7% 36.7%
Primary earnings per share* $ 0.66 $ 1.28 $ 1.06 $ 1.08 $ 1.11
Financial Position at Year End:
Cash and marketable securities $ 235,395 $ 239,621 $ 209,099 $ 427,721 $ 400,701
Working capital $ 426,951 $ 405,060 $ 426,297 $ 498,758 $ 453,116
Total assets $ 1,472,494 $ 1,192,235 $ 1,101,283 $ 684,015 $ 586,304
Long-term debt $ 229,500 $ 120,000 $ 255,000 $ 36 $ 566
Total shareholders' equity $ 922,061 $ 855,388 $ 772,629 $ 625,938 $ 584,501
Other Data:
Dividends declared per share $ -- $ -- $ 0.20 $ 0.27 $ 0.20
Primary weighted average
shares outstanding* 92,372,000 91,326,000 90,228,000 90,403,000 90,199,000
Total employees 4,168 3,090 2,980 1,272 1,022
</TABLE>
Note: The Five-Year Summary of Selected Financial Data includes the results of
Ventritex, Inc. and Daig Corporation for all periods presented.
* Earnings per share and share data have been adjusted for a 50% stock
dividend paid in 1995.
** Results for 1996 include $88,158 pre-tax for purchased research and
development and special charges.
*** Results for 1994 include a $40,800 pre-tax charge for purchased research and
development.
23
<PAGE>
Report of Independent Auditors
Board of Directors
St. Jude Medical, Inc.
St. Paul, Minnesota
We have audited the supplemental consolidated balance sheets of St. Jude
Medical, Inc. and subsidiaries (formed as a result of the consolidation of St.
Jude Medical, Inc. and Ventritex, Inc.) as of December 31, 1996 and 1995 and the
related supplemental consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
The supplemental consolidated financial statements give retroactive effect to
the merger of St. Jude Medical, Inc. and Ventritex, Inc. on May 15, 1997, which
has been accounted for using the pooling of interests method as described in the
notes to the supplemental consolidated financial statements. These supplemental
financial statements are the responsibility of the management of St. Jude
Medical, Inc. Our responsibility is to express an opinion on these supplemental
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the supplemental financial statements referred to above present
fairly, in all material respects, the consolidated financial position of St.
Jude Medical, Inc. and subsidiaries at December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, after giving retroactive
effect to the merger of Ventritex, Inc. as described in the notes to the
supplemental consolidated financial statements, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
February 5, 1997, except for Note 2,
as to which the date is May 15, 1997
34
<PAGE>
EXHIBIT (g)(2)
PART I FINANCIAL INFORMATION
ST. JUDE MEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information, and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1997 are not necessarily indicative of the results that may be expected for
the full year ended December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
NOTE 2 - ACQUISITIONS/DIVESTITURE
Effective May 15, 1997, the Company acquired Ventritex, Inc., a Sunnyvale,
California based manufacturer of implantable cardioverter defibrillators and
related products.
Each share of Ventritex common stock was converted into .5 shares of St. Jude
Medical common stock. The Company issued 10,437,800 shares to Ventritex
shareholders. The transaction was accounted for as a pooling of interests. The
accompanying financial statements, for all periods presented, are presented on a
pooled basis.
The results of Ventritex's operations have been included in the condensed
consolidated results of operations as if the merger had occurred at the
beginning of 1996. These results are not necessarily indicative of the results
that would have occurred had the merger actually taken place at the beginning of
1996, or of the expected future results of operations.
On November 29, 1996, the Company acquired from Pacific Dunlop, Ltd.
substantially all of the worldwide cardiac rhythm management assets of
Telectronics Pacing Systems, Inc. ("Telectronics") for $135,000. The
acquisition was accounted for under the purchase accounting method. The initial
price can be adjusted upward or downward based upon the change in net asset
value between June 30, 1996 and November 29, 1996. The Company and Pacific
Dunlop, Ltd. currently disagree about the final adjustment to the purchase price
and are following procedures in the purchase agreement to resolve their
differences. The Company expects that any adjustment to the purchase price
would be recorded in 1997 as an adjustment to goodwill. Goodwill of
approximately $76,000 including approximately $43,000 of consolidation charges,
is being amortized on a straight line basis over 20 years. Telectronics
operations have been included in the consolidated results of operations from the
date of acquisition.
2 of 27
<PAGE>
PART I FINANCIAL INFORMATION (continued)
The following unaudited pro forma summary information presents the results of
operations of the Company and Telectronics for the nine months ended September
30, 1996, as if the acquisition had occurred at the beginning of 1996.
Nine Months
Ending September 30
1996
(Unaudited)
------------------
Net sales $715,699
Net (loss) $(11,585)
Primary (loss) per share $ (.13)
These pro forma results are not necessarily indicative of the results that would
have occurred had the acquisition actually taken place at the beginning of 1996,
or of the expected future results of the combined operations.
On August 29, 1997, the Company sold Medtel, a Far East distribution company, to
Getz Brothers and Co., Inc. The gain on the sale of this business was recorded
as an adjustment to previously recorded goodwill. The results of operations of
Medtel were not material to the consolidated results.
NOTE 3 - CONTINGENCIES
The Company is involved in various products liability lawsuits, claims and
proceedings of a nature considered normal to its business. In connection with
two pacemaker lead models, the Company may be subject to future uninsured
claims. The Company's products liability insurance carrier has denied coverage
for these models and has filed suit against the Company seeking rescission of
the policy covering Pacesetter business retroactive to the date the Company
acquired Pacesetter. The Company was a codefendant in a 1995 class action suit
with respect to these leads. This case was settled in November 1995. The
Company's share of the settlement is approximately $5,000. This case is more
fully described in Item I Part II of this Quarterly Report on Form 10-Q.
Additional claims could be filed by patients with these leads who were not class
members. Further, claims may be filed in the future relative to events
currently unknown to management. Management believes losses that might be
sustained from such actions would not have a material adverse effect on the
Company's liquidity or financial condition, but could potentially be material to
the net income of a particular future period if resolved unfavorably.
3 of 27
<PAGE>
PART I FINANCIAL INFORMATION (continued)
NOTE 4 - STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, EARNINGS PER
SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted for all financial
statements issued for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new requirements for
calculating basic earnings per share, the dilutive effect of stock options will
be excluded. The impact is expected to result in an increase in basic earnings
per share of $.01 per share for the year-to-date amounts for both years
presented and no change for the third quarter for both years presented.
NOTE 5 - STATEMENT OF FINANCIAL STANDARDS NO. 130,
REPORTING COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income, which is required to be adopted for all
financial statements issued for periods beginning after December 15, 1997. At
that time the Company will be required to separately report the amounts (and the
related tax effect) classified as Other Comprehensive Income. Items recorded as
a separate component of equity such as foreign currency translation gains/losses
and unrealized gains/losses on certain investments in debt and equity securities
are included in Other Comprehensive Income.
NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS
In January 1997, the SEC issued new rules related to disclosures about
derivative financial instruments. The new rules, effective for all financial
statements issued for periods ending after June 15, 1997, require enhanced
accounting policy disclosures regarding derivative financial instruments in the
financial statements and for periods ending after June 15, 1998, qualitative and
quantitative information about all financial instruments should be disclosed
outside the financial statements and related notes.
The Company has entered into readily marketable forward and option traded
contracts to manage its exposure to fluctuations in foreign currency exchange
rates. This hedging minimizes the impact of foreign exchange rate movements on
the Company's operating results. These contracts involve the exchange of
foreign currencies for U.S. dollars at specified rates at future dates. The
changes in market value of such contracts have a high correlation to the price
changes in the currency of the related hedged transaction. These contracts are
recorded at fair value and gains or losses are included in other income
(expense).
NOTE 7 - SPECIAL CHARGE UPDATE
The Company's special charge accruals of $47,808 and $30,645 recorded in the
fourth quarter of 1996 and the second quarter of 1997 have decreased by $37,639
and $12,026, respectively, for cash payments since the date recorded.
4 of 27
<PAGE>
PART I FINANCIAL INFORMATION (continued)
ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $233,189 $212,456 $745,035 $644,783
Cost of sales 88,766 69,464 272,114 213,063
-------- -------- -------- --------
Gross profit 144,423 142,992 472,921 431,720
Selling, general & administrative 88,365 72,321 282,778 225,503
Research & development 26,304 25,970 84,189 77,801
Purchased research & development - - - 5,000
Special charges - - 30,645 -
-------- -------- -------- --------
Operating profit 29,754 44,701 75,309 123,416
Other income (expense) (1,103) 1,209 2,210 13,489
-------- -------- -------- --------
Income before taxes 28,651 45,910 77,519 136,905
Income tax provision 10,099 15,731 27,325 46,748
-------- -------- -------- --------
Net income $ 18,552 $ 30,179 $ 50,194 $ 90,157
======== ======== ======== ========
Earnings per share:
Primary $.20 $.33 $.54 $.98
======== ======== ======== ========
Fully diluted $.20 $.33 $.54 $.98
======== ======== ======== ========
Shares outstanding
Primary 93,251 92,421 92,856 92,200
Fully diluted 93,251 92,814 93,053 92,331
</TABLE>
See notes to condensed consolidated financial statements.
5 of 27
<PAGE>
PART I FINANCIAL INFORMATION (continued)
ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30 DECEMBER 31
1997 1996
(Unaudited) (See Note)
ASSETS ----------- ----------
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 22,311 $ 49,388
Marketable securities 149,601 186,007
Accounts receivable, less allowance
(1997 - $7,776; 1996 - $8,160) 247,654 216,813
Inventories
Finished goods 139,207 119,736
Work in process 39,053 30,227
Raw materials 61,797 67,698
------------- -------------
Total inventories 240,057 217,661
Other current assets 71,033 78,015
------------- -------------
Total current assets 730,656 747,884
Property, plant and equipment 455,446 397,674
Less accumulated depreciation (142,621) (108,400)
------------- -------------
Net property, plant and equipment 312,825 289,274
Other assets 423,155 435,336
------------- -------------
TOTAL ASSETS $1,466,636 $1,472,494
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
----------------------------------
Accounts payable and accrued expenses $ 257,812 $ 320,933
Long-term debt 229,500 229,500
Contingencies
Shareholders' equity:
Preferred stock, par value $1.00 per share -
25,000,000 shares authorized; no shares issued
Common stock, par value $.10 per share -
250,000,000 shares authorized; issued and outstanding 1997 -
91,823,047 shares; 1996 - 91,404,961 shares
9,182 9,140
Additional paid-in capital 241,131 228,111
Retained earnings 743,086 692,892
Cumulative translation adjustment (26,125) 386
Unrealized gain/(loss) on available-for-sale securities 12,050 (8,028)
Receivable - stock issued - (440)
------------- -------------
Total shareholders' equity 979,324 922,061
------------- -------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $1,466,636 $1,472,494
============= =============
</TABLE>
NOTE: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
6 of 27
<PAGE>
ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------
1997 1996
---- ----
Operating Activities:
<S> <C> <C>
Net income $ 50,194 $ 90,157
Depreciation and amortization 51,132 42,920
Purchased research and development - 5,000
Special charges 19,104 -
Gain on sale of business - (10,486)
Working capital change (189,324) (40,779)
-------------- ---------
Net cash provided (used) by operating activities (68,894) 86,812
-------------- ---------
Investment Activities:
Purchases of property, plant and equipment (65,818) (63,204)
Sales (purchases) of available-for-sale securities, net 73,595 (470)
Acquisitions, net of cash acquired - (7,430)
Proceeds from sale of business, net of cash disposed 24,626 24,204
Other investing activities (2,729) (5,127)
-------------- ---------
Net cash provided by (used in) investing activities 29,674 (52,027)
-------------- ---------
Financing Activities:
Proceeds from exercise of stock options 13,062 22,893
Repayment of long-term debt - (120,000)
Proceeds from issuance of convertible subordinated notes - 57,500
Proceeds from receivable for stock issued 440 -
-------------- ---------
Net cash used in financing activities 13,502 (39,607)
-------------- ---------
Effect of currency exchange rate changes on cash (1,359) (151)
-------------- ---------
Decrease in cash and cash equivalents (27,077) (4,973)
Cash and cash equivalents at beginning of year 49,388 62,638
-------------- ---------
Cash and cash equivalents at end of period $ 22,311 $ 57,665
============== =========
</TABLE>
See notes to condensed consolidated financial statements.
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