<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1994
REGISTRATION NO: 33-52751
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MEDTRONIC, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MINNESOTA 3845 41-0793183
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
</TABLE>
7000 CENTRAL AVENUE N.E.
MINNEAPOLIS, MINNESOTA 55432
(612) 574-4000
(Address, including ZIP code, and telephone number, including area code,
of registrant's principal executive offices)
MICHAEL D. ELLWEIN,
VICE PRESIDENT CORPORATE DEVELOPMENT
AND ASSOCIATE GENERAL COUNSEL
MEDTRONIC, INC.
7000 CENTRAL AVENUE N.E.
MINNEAPOLIS, MINNESOTA 55432
(612) 574-3203
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
DAVID C. GRORUD, Esq. DOUGLAS R. WRIGHT, Esq. ALBERT BRENMAN, Esq.
Fredrikson & Byron, P.A. Holme Roberts & Owen LLC Brenman Key & Bromberg, P.C.
1100 International Centre Suite 4100 1700 Lincoln Mellon Financial Center
900 Second Avenue South Denver, Colorado 80203 1775 Sherman Street, Suite 1001
Minneapolis, Minnesota 55402-3397 (303) 861-7000 Denver, Colorado 80203
(612) 347-7000 (303) 894-0234
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
UPON CONSUMMATION OF THE MERGER, AS DESCRIBED IN THIS REGISTRATION STATEMENT.
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MEDTRONIC, INC.
CROSS REFERENCE SHEET
REQUIRED BY ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
CAPTION CAPTION IN PROXY STATEMENT/PROSPECTUS
- ------------------------------------------------------------------------ --------------------------------------------------
<C> <C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................... Facing Page of Registration Statement; Front Cover
Page of Proxy Statement/ Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Available Information; Information Incorporated by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................ Front Cover Page of Proxy Statement/ Prospectus;
Summary
4. Terms of the Transaction.......................... Summary; The Merger; Description of Capital Stock;
Comparative Rights of Medtronic Shareholders and
Electromedics Shareholders
5. Pro Forma Financial Information................... Unaudited Pro Forma Condensed Combined Financial
Statements
6. Material Contacts with the Company Being
Acquired......................................... The Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters.... *
8. Interests of Named Experts and Counsel............ Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants....... Recent Developments
11. Incorporation of Certain Information by
Reference........................................ Information Incorporated by Reference
12. Information with Respect to S-2 or S-3
Registrants...................................... *
13. Incorporation of Certain Information by
Reference........................................ *
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants........................... *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies......... Information Regarding Electromedics; Information
Incorporated by Reference
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPTION CAPTION IN PROXY STATEMENT/PROSPECTUS
- ------------------------------------------------------------------------ --------------------------------------------------
<C> <C> <S> <C>
16. Information with Respect to S-2 or S-3
Registrants...................................... *
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies............................. *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Au-
thorizations Are to Be Solicited................. Information Incorporated by Reference; Notice of
Special Meeting; Summary; General Information;
The Merger
19. Information if Proxies, Consents or Au-
thorizations Are Not to Be Solicited or in an
Exchange Offer................................... *
<FN>
- ------------------------
*Omitted from Proxy Statement/Prospectus because item is inapplicable or answer
is in the negative.
</TABLE>
<PAGE>
March 24, 1994
Dear Electromedics Shareholder:
I am pleased to invite you to attend the Special Meeting of Shareholders of
Electromedics, Inc., which will be held on April 25, 1994, at 10:00 a.m., local
time, at the Denver Marriott City Center, 1701 California Street, Denver,
Colorado. At the meeting you will be asked to consider and vote upon a Plan of
Merger that provides for the merger of Electromedics with a wholly-owned
subsidiary of Medtronic, Inc.
Under the terms of the Plan of Merger, Electromedics shareholders will
receive, at each shareholder's election, either $6.875 in cash or $6.875 in
shares of Medtronic, Inc. Common Stock, or a combination of cash and such stock,
in exchange for each of their shares of Electromedics Common Stock.
The attached Proxy Statement/Prospectus is intended to provide you with the
information that you will need to make an informed decision regarding how you
should vote on the proposed merger. It also serves as a Prospectus for
Medtronic, describing the investment in Medtronic that you will be making if the
merger is approved and you elect to exchange your Electromedics' Common Stock
for Medtronic Common Stock. A copy of the Plan of Merger is attached to the
Proxy Statement/Prospectus as Appendix A. I urge you to read this information
carefully before voting on the proposed merger.
The Board of Directors believes that the proposed transaction is fair and in
the best interests of Electromedics and its shareholders and unanimously
recommends approval of the Plan of Merger. The Board believes that the merger
will, among other things, give Electromedics shareholders a significant premium
over the trading price of their Electromedics Common Stock preceding the
announcement of the retention of Dain Bosworth Incorporated to consider
alternatives to maximize Electromedics' shareholder value, and the opportunity
to continue their equity participation on a tax-free basis in a larger, more
diversified medical products enterprise.
The Board of Directors of Electromedics retained the investment banking firm
of Dain Bosworth Incorporated to advise it with respect to the consideration to
be received in the merger. Dain Bosworth Incorporated has advised the Board
that, in its opinion, the consideration to be received by the Electromedics
shareholders pursuant to the Plan of Merger is fair from a financial point of
view. A copy of the opinion is attached to the Proxy Statement/Prospectus as
Appendix C.
The Plan of Merger must be approved by the holders of a majority of the
outstanding shares of Electromedics Common Stock. Your vote on this matter is
very important. We urge you to carefully review the enclosed material and to
return your proxy promptly.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY
RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY.
In a separate mailing, you will receive an Election Form by which you may
indicate the number of shares you wish to have converted into Medtronic stock
and the number you wish to have converted into cash. The deadline for returning
Election Forms, together with your stock certificate(s) or a proper guaranty of
delivery, is April 22, 1994. IF YOUR ELECTROMEDICS SHARES ARE HELD IN THE NAME
OF YOUR BANK, BROKER OR OTHER NOMINEE HOLDER, YOU SHOULD CONTACT YOUR NOMINEE
HOLDER TO ASSURE THAT AN ELECTION FORM IS SUBMITTED ON YOUR BEHALF. If you or
your nominee holder need copies of the Election Form or have any questions or
need assistance in completing and submitting an Election Form, contact Chemical
Bank at the address or telephone number listed on the cover of the Proxy
Statement/ Prospectus.
Sincerely,
F. James Lynch
CHAIRMAN OF THE BOARD AND PRESIDENT
<PAGE>
ELECTROMEDICS, INC.
18501 EAST PLAZA DRIVE
PARKER, COLORADO 80134
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 1994
------------------
To the Shareholders of Electromedics, Inc.:
A Special Meeting of the Shareholders of Electromedics, Inc.
("Electromedics") will be held at the Denver Marriott City Center, 1701
California Street, Denver, Colorado, on April 25, 1994, at 10:00 a.m., local
time, to consider and act upon a proposal to approve a Plan of Merger, a copy of
which is included as Appendix A to the Proxy Statement/Prospectus accompanying
this Notice. Pursuant to the Plan of Merger, (a) Electromedics will be merged
(the "Merger") with and into MDT Acquisition Corp. ("Merger Subsidiary"), with
Merger Subsidiary to be the surviving corporation and remain a wholly-owned
subsidiary of Medtronic, Inc. ("Medtronic"), and (b) holders of Electromedics
common stock, par value $.05 per share ("Electromedics Common Stock"), will be
entitled to receive, at each holder's election, either cash or shares of
Medtronic common stock, par value $.10 per share ("Medtronic Common Stock"), or
a combination of cash and such stock, based upon a conversion ratio described in
the Proxy Statement/Prospectus accompanying this Notice.
With respect to the proposal to approve the Plan of Merger, Electromedics
shareholders have a right to dissent and obtain payment for their shares by
complying with the terms and procedures of Sections 7-4-123 and 7-4-124 of the
Colorado Corporation Code, copies of which are included as Appendix B to the
Proxy Statement/Prospectus accompanying this Notice.
Only shareholders of record as shown on the books of Electromedics at the
close of business on March 10, 1994 are entitled to notice of and to vote at the
Special Meeting or any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Dennis J. Cross
SECRETARY
March 24, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN, AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED PROXY RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES
SHAREHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THE PROXY CARD
STOCK CERTIFICATES (OR A GUARANTY OF DELIVERY) SHOULD INSTEAD BE
RETURNED WITH THE ELECTION FORM BEING MAILED TO SHAREHOLDERS SEPARATELY
ON THE SAME DATE AS THIS PROXY STATEMENT/PROSPECTUS
<PAGE>
PROXY STATEMENT/PROSPECTUS
<TABLE>
<S> <C>
Electromedics, Inc. Medtronic, Inc.
18501 East Plaza Drive 7000 Central Avenue N.E.
Parker, Colorado 80134 Minneapolis, Minnesota 55432
Telephone: (303) 840-4000 Telephone: (612) 574-4000
</TABLE>
------------------------
SPECIAL MEETING OF SHAREHOLDERS OF ELECTROMEDICS, INC.
TO BE HELD ON APRIL 25, 1994
------------------------
This Proxy Statement/Prospectus is being furnished to the shareholders of
Electromedics, Inc. ("Electromedics") in connection with the special meeting of
shareholders (the "Meeting") of Electromedics to be held at the Denver Marriott
City Center, 1701 California Street, Denver, Colorado, on April 25, 1994, at
10:00 a.m. At the Meeting, Electromedics shareholders will be asked to consider
and act upon a proposal to approve the Plan of Merger attached hereto as
Appendix A (the "Plan of Merger"), pursuant to which (a) Electromedics will be
merged (the "Merger") with and into MDT Acquisition Corp. ("Merger Subsidiary"),
a wholly-owned subsidiary of Medtronic, Inc. ("Medtronic") and the surviving
corporation in the Merger, and (b) each share of Electromedics common stock, par
value $.05 per share ("Electromedics Common Stock"), will be converted, at the
option of the holder, into either $6.875 cash or a portion of a share of
Medtronic common stock, par value $.10 per share ("Medtronic Common Stock"), or
a combination of such cash and stock, as described in this Proxy
Statement/Prospectus. This Proxy Statement/Prospectus also constitutes the
Prospectus of Medtronic with respect to the shares of Medtronic Common Stock to
be issued in the Merger. Medtronic has filed a Registration Statement on Form
S-4 with the Securities and Exchange Commission (the "Commission") covering up
to 1,458,808 shares of Medtronic Common Stock for possible issuance in
connection with the Merger. This Proxy Statement/Prospectus is first being
mailed to Electromedics shareholders on or about March 24, 1994.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus, and, if given
or made, such information or representation must not be relied on as having been
authorized. This Proxy Statement/Prospectus does not constitute an offer to sell
or the solicitation of an offer to buy the securities offered by this Proxy
Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction in
which, or to any person to whom, it is unlawful to make such an offer or
solicitation. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of the securities made hereunder shall, under any circumstances,
create any implication that there has been no change in the information set
forth herein or in the affairs of Medtronic, Electromedics or Merger Subsidiary
since the date of this Proxy Statement/Prospectus.
Additional copies of this Proxy Statement/Prospectus, the Proxy card to be
returned for the Meeting and the Election Form to be used to elect to receive
cash, Medtronic stock, or a combination of cash and stock in the Merger, can be
obtained from Chemical Bank, Proxy Solicitation Area, 450 West 33rd Street, 15th
Floor, New York, New York 10001, telephone 800-279-1259 (toll free) or Banks and
Brokers call (212) 613-7618. QUESTIONS OR REQUESTS FOR ASSISTANCE IN COMPLETING
AND SUBMITTING PROXY CARDS AND ELECTION FORMS MAY ALSO BE DIRECTED TO CHEMICAL
BANK.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MARCH 21, 1994.
<PAGE>
AVAILABLE INFORMATION
This Proxy Statement/Prospectus is a prospectus of Medtronic delivered in
compliance with the Securities Act of 1933, as amended (the "Act"). Medtronic
has filed a Registration Statement on Form S-4 (the "Registration Statement")
under the Act with the Commission with respect to the shares of Medtronic Common
Stock to be issued in connection with the Merger. As permitted by the rules and
regulations of the Commission, this Proxy Statement/Prospectus omits certain
information contained in the Registration Statement on file with the Commission.
For further information pertaining to the securities offered hereby, reference
is made to the Registration Statement, including the exhibits filed as a part
thereof.
Medtronic and Electromedics are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, each files reports, proxy and information statements, and
other information with the Commission. The Registration Statement, as well as
reports, proxy and information statements, and other information filed by each
of Medtronic and Electromedics pursuant to the Exchange Act, can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
are also available for inspection and copying at the regional offices of the
Commission located in Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661, and 7 World Trade Center, New York, New York
10048; and, with respect to Medtronic, are available for inspection at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005. Copies of such documents can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549.
INFORMATION INCORPORATED BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. MEDTRONIC AND ELECTROMEDICS WILL
PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A
COPY OF THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL
REQUEST, COPIES OF ANY AND ALL SUCH DOCUMENTS (OTHER THAN THE EXHIBITS THERETO,
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION THAT THIS PROXY STATEMENT/PROSPECTUS INCORPORATES) OF MEDTRONIC OR
ELECTROMEDICS, AS THE CASE MAY BE, THAT ARE INCORPORATED BY REFERENCE HEREIN.
REQUESTS SHOULD BE DIRECTED TO MEDTRONIC, INC., 7000 CENTRAL AVENUE N.E.,
MINNEAPOLIS, MINNESOTA 55432, ATTENTION: SHAREHOLDER RELATIONS, TELEPHONE (612)
574-3030 OR TO ELECTROMEDICS, INC., 18501 EAST PLAZA DRIVE, PARKER, COLORADO
80134, ATTENTION: INVESTOR RELATIONS DEPARTMENT, TELEPHONE (303) 840-4000. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE
MADE NO LATER THAN APRIL 18, 1994.
The following Electromedics documents are incorporated by reference herein:
1. Electromedics' Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
2. Electromedics' Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, as
amended.
3. Electromedics' Current Reports on Form 8-K dated December 6, 1993,
December 28, 1993 and March 10, 1994.
4. The description of Electromedics' Common Stock contained in its
Registration Statement on Form 10 filed under Section 12 of the Exchange
Act.
All documents filed by Electromedics with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof
and prior to the date of the Meeting shall be deemed to be incorporated by
reference herein and shall be a part hereof from the date of filing of such
documents.
2
<PAGE>
The following Medtronic documents are incorporated by reference herein:
1. Medtronic's Annual Report on Form 10-K for the fiscal year ended
April 30, 1993.
2. Medtronic's Quarterly Reports on Form 10-Q for the fiscal quarters
ended July 30, 1993, October 29, 1993 and January 28, 1994.
3. The description of Medtronic's Common Stock contained in Medtronic's
Registration Statement on Form 8-A filed under Section 12 of the Exchange
Act.
4. The description of Medtronic's Preferred Stock Purchase Rights
attached to its Common Stock contained in Medtronic's Registration Statement
on Form 8-A filed under Section 12 of the Exchange Act.
All documents filed by Medtronic with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior
to the date of the Meeting shall be deemed to be incorporated by reference
herein and shall be a part hereof from the date of filing of such documents.
Any statements contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein (or in any other subsequently filed document
that also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY............................................................................... 5
GENERAL INFORMATION................................................................... 15
THE MERGER............................................................................ 16
General............................................................................. 17
Effective Time of the Merger........................................................ 17
Background of the Merger............................................................ 17
Electromedics' Reasons for the Merger; Recommendation of the Electromedics Board of
Directors.......................................................................... 21
Medtronic's Reasons for the Merger.................................................. 21
Electromedics' Financial Advisor.................................................... 21
Vote Required....................................................................... 25
Conversion of Electromedics Common Stock in the Merger.............................. 26
Shareholder Rights Plan............................................................. 30
Treatment of Stock Options.......................................................... 30
Conduct of Business of Electromedics Pending the Merger............................. 30
Conflicts of Interest............................................................... 31
Conditions; Waiver.................................................................. 32
Amendment and Termination of the Merger Agreement................................... 33
Expenses and Fees................................................................... 33
Restrictions on Resale of Medtronic Common Stock.................................... 34
Deregistration of Electromedics Common Stock........................................ 34
Accounting Treatment of the Merger.................................................. 34
Certain Federal Income Tax Consequences............................................. 35
SJM Termination Fee................................................................. 37
Indemnification..................................................................... 37
Regulatory Requirements............................................................. 37
Rights of Dissenting Electromedics Shareholders..................................... 37
COMPARATIVE STOCK PRICES AND DIVIDENDS................................................ 40
RECENT DEVELOPMENTS................................................................... 41
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS........................... 42
COMPARATIVE RIGHTS OF MEDTRONIC SHAREHOLDERS AND ELECTROMEDICS SHAREHOLDERS........... 50
Classification, Removal and Election of Directors................................... 50
Preferred Stock..................................................................... 51
Special Meetings of Shareholders.................................................... 51
Voting Rights; Shareholder Approvals................................................ 52
Cumulative Voting................................................................... 52
Preemptive Rights................................................................... 52
Amendment of the Articles of Incorporation.......................................... 52
Business Combinations and Control Share Acquisitions................................ 52
Shareholder Rights Plan............................................................. 53
Related Person Business Transactions................................................ 53
INFORMATION REGARDING ELECTROMEDICS................................................... 54
General Information................................................................. 54
Certain Financial Projections....................................................... 55
LEGAL MATTERS......................................................................... 55
EXPERTS............................................................................... 56
APPENDIX A -- Plan of Merger.......................................................... A-1
APPENDIX B -- Sections 7-4-123 and 7-4-124 of Colorado Corporation Code............... B-1
APPENDIX C -- Opinion of Dain Bosworth Incorporated................................... C-1
</TABLE>
4
<PAGE>
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT/PROSPECTUS AND IN THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE
IN THIS PROXY STATEMENT/PROSPECTUS. REFERENCE IS MADE TO, AND THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS, THE APPENDICES HERETO, AND THE DOCUMENTS
INCORPORATED IN THIS PROXY STATEMENT/ PROSPECTUS BY REFERENCE.
PARTIES TO THE MERGER
<TABLE>
<S> <C>
Electromedics:............. Electromedics, Inc. ("Electromedics"), a Colorado corporation,
was incorporated in 1972. Electromedics designs, manufactures
and markets blood management and blood conservation equipment
and related disposable devices for use in cardiovascular,
orthopedic and other medium and high blood-loss surgeries.
Electromedics is a leader in the autotransfusion segment of the
blood processing industry and has the second largest share,
approximately one-third, of the United States autotransfusion
market. Autotransfusion involves the collection of a patient's
own blood before, during and after surgery for washing and
reinfusion to the patient, allowing the patient to serve as his
or her own blood donor. Electromedics' other medical equipment
and related disposable devices focus on blood management and
blood conservation, primarily in the areas of cardiovascular
and orthopedic surgery, and temperature monitoring. These
products include blood collection reservoirs, blood filters,
blood heating and cooling systems, suction lines and tubing,
temperature monitors and probes and tourniquet monitoring
systems.
Electromedics' principal offices and corporate headquarters are
located at 18501 East Plaza Drive, Parker, Colorado 80134,
telephone: (303) 840-4000. See "Information Incorporated by
Reference" and "Information Regarding Electromedics."
Medtronic:................. Medtronic, Inc. ("Medtronic"), a Minnesota corporation, was
incorporated in 1957. Medtronic is the world's leading
therapeutic medical device company, manufacturing biomedical
devices for improved cardiovascular and neurological health.
Primary products developed, manufactured and sold by Medtronic
include implantable pacemaker systems used for treatment of
bradycardia, implantable tachyarrhythmia management devices,
mechanical and tissue heart valves, perfusion systems including
blood oxygenators and centrifugal blood pumps, balloons and
guiding catheters used in angioplasty, and implantable
neurostimulation and drug delivery systems. More than half of
Medtronic's revenues are generated from the sale of implant-
able cardiac pacemaker systems for treatment of bradycardia,
consisting of implantable pulse generators and leads.
Medtronic's principal offices and corporate headquarters are
located at 7000 Central Avenue N.E., Minneapolis, Minnesota
55432, telephone: (612) 574-4000. See "Information Incorporated
by Reference."
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
MDT Acquisition
Corporation:.............. MDT Acquisition Corporation ("Merger Subsidiary"), a Minnesota
corporation, is a corporation recently organized by Medtronic
for the purpose of effecting the Merger. It has no material
assets and has not engaged in any activities except in
connection with the proposed Merger.
</TABLE>
ELECTROMEDICS SHAREHOLDERS' MEETING
<TABLE>
<S> <C>
Time, Date, and Place of
Meeting:.................. A special meeting of shareholders of Electromedics will be held
on April 25, 1994, at 10:00 a.m., local time, at the Denver
Marriott City Center, 1701 California Street, Denver, Colorado
(the "Meeting").
Purpose of the Meeting:.... The purpose of the Meeting is to consider and vote upon a
proposal to approve the Plan of Merger attached hereto as
Appendix A, providing for the merger (the "Merger") of
Electromedics with and into Merger Subsidiary as a result of
which Electromedics will become a wholly-owned subsidiary of
Medtronic. Other terms and provisions related to the Merger are
set forth in an Agreement and Plan of Merger dated as of
December 23, 1993 (the "Merger Agreement"), among Medtronic,
Electromedics, and Merger Subsidiary, a copy of which can be
obtained from Electromedics upon request and which is
summarized in this Proxy Statement/Prospectus.
Record Date:............... Only holders of record of Electromedics Common Stock at the
close of business on March 10, 1994, will be entitled to notice
of and to vote at the Meeting or any adjournment or
adjournments thereof.
Vote Required:............. The affirmative vote by the holders of a majority of the
outstanding shares of Electromedics Common Stock is required to
approve the Plan of Merger. As of the record date, 14,056,800
shares of Electromedics Common Stock were outstanding and
entitled to vote. Of such shares, 714,405 shares (approximately
5.1% of the shares entitled to vote at the Meeting) are held by
directors and executive officers of Electromedics and 346,359
shares (approximately 2.5%) are held by Medtronic.
Electromedics' directors and executive officers have executed
Agreements to Facilitate Merger under which such persons agreed
to vote the shares of Electromedics Common Stock held by them
in favor of the Merger. Medtronic intends to vote all of the
shares of Electromedics Common Stock held by it in favor of the
Merger.
Approval of the Plan of Merger by Medtronic shareholders is not
required under Minnesota law and, accordingly, will not be
sought. See "The Merger -- Vote Required."
Dissenters' Rights:........ Under Colorado law, holders of Electromedics Common Stock who
give proper notice to Electromedics and who do not vote in
favor of the Merger have the right to receive in cash the "fair
value" of their Electromedics shares in lieu of cash and/or
Medtronic Common Stock pursuant to the Merger. See "The Merger
-- Rights of Dissenting Electromedics Shareholders" and
Sections 7-4-123 and 7-4-124 of the Colorado Corporation Code,
copies of which are attached hereto as Appendix B. Holders of
Medtronic Common Stock do not have dissenters' rights in
connection with the Merger.
</TABLE>
6
<PAGE>
DESCRIPTION OF THE MERGER
<TABLE>
<S> <C>
General:................... Upon consummation of the Merger, Electromedics will be merged
with and into Merger Subsidiary and Electromedics will become a
wholly-owned subsidiary of Medtronic. Each share of
Electromedics Common Stock outstanding immediately prior to the
Merger (excluding the 346,359 shares held by Medtronic and any
shares as to which dissenters' rights have been perfected in
the manner described in this Proxy Statement/Prospectus) will
be converted into the right to receive, at the election of the
holder, either (i) $6.875 in cash; or (ii) the portion of a
share (the "Conversion Ratio") of Medtronic Common Stock equal
to $6.875 divided by the average of the daily closing sale
prices of Medtronic Common Stock as reported on the New York
Stock Exchange ("NYSE") Composite Tape (the "Average Market
Price") for the ten consecutive NYSE trading days ending on the
third trading day immediately preceding the Effective Time of
the Merger, but not less than $68.00 per share nor more than
$98.00 per share. Shareholders will have the right to elect to
receive all cash, all stock, or a combination of cash and
stock, subject to the election and allocation procedures
described below.
The Conversion Ratio is subject to appropriate adjustment in
the event of a stock split, combination, dividend, or other
distribution of shares of the Medtronic Common Stock prior to
the Effective Time of the Merger. See "The Merger."
Each share of Medtronic Common Stock received in the Merger
will also represent one Preferred Stock Purchase Right under
Medtronic's Shareholder Rights Plan. See "The Merger --
Shareholder Rights Plan."
Persons entitled to fractional shares of Medtronic Common Stock
upon such conversion shall receive a cash payment in lieu
thereof. See "The Merger -- Conversion of Electromedics Common
Stock in the Merger -- Fractional Shares."
Election and Allocation
Procedures:............... Subject to the election and allocation procedures described
herein, each holder of Electromedics Common Stock may submit an
Election Form specifying the number of shares of Electromedics
Common Stock that such holder wishes to have converted into
cash and the number of shares that such holder wishes to have
converted into Medtronic Common Stock. See "The Merger --
Conversion of Electromedics Common Stock in the Merger."
Election Forms are being sent to Electromedics shareholders in
a separate mailing on the same date as this Proxy
Statement/Prospectus. REQUESTS FOR ADDITIONAL ELECTION FORMS,
AND QUESTIONS OR REQUESTS FOR ASSISTANCE IN COMPLETING AND
SUBMITTING ELECTION FORMS, MAY BE DIRECTED TO CHEMICAL BANK AT
THE ADDRESS OR TELEPHONE NUMBER LISTED ON THE COVER OF THIS
PROXY STATEMENT/PROSPECTUS.
In order to permit Electromedics shareholders to receive
Medtronic Common Stock in the Merger on a "tax-free" basis, the
Merger Agreement requires that no more than 50% of the
aggregate amounts payable to Electromedics shareholders in the
Merger be paid in cash.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
As a result, holders of Electromedics Common Stock cannot be
guaranteed that all shares of Electromedics Common Stock
covered by an Election to receive cash will be converted into
cash in the Merger. Consequently, a holder of Electromedics
Common Stock may receive cash, shares of Medtronic Common Stock
or a combination thereof that does not reflect the exact
Election made by such holder of Electromedics Common Stock.
No Election will be effective unless a properly executed
Election Form, along with the stock certificates covered
thereby, or a guaranty of delivery of such certificates, is
received by Norwest Bank Minnesota, N.A. (the "Exchange Agent")
by 5:00 p.m., Central time, on April 22, 1994 (the "Election
Deadline").
Any record holder of shares of Electromedics Common Stock may
change his or her Election by written notice received by the
Exchange Agent at or prior to the Election Deadline,
accompanied by a properly completed, revised Election Form
(clearly indicating that it is revising a previously submitted
Election Form), or may revoke his or her Election by written
notice received by the Exchange Agent at or prior to the
Election Deadline by withdrawing prior to the Election Dead-
line his or her certificates for shares of Electromedics Common
Stock (or the guaranty of delivery of such certificates)
previously deposited with the Exchange Agent. If an Election
Form was submitted jointly by two or more holders of
Electromedics Common Stock, all such holders must jointly
change, revoke or withdraw such Election Form.
Electromedics shareholders who do not make an effective
Election will receive shares of Medtronic Common Stock pursuant
to the Merger (plus cash in lieu of fractional shares). See
"The Merger -- Conversion of Electromedics Common Stock in the
Merger."
Effective Time of the
Merger:................... It is expected that the Merger will become effective as
promptly as practicable following approval of the Plan of
Merger by the requisite vote of the Electromedics shareholders
and the satisfaction or waiver of the other conditions to the
Merger. See "The Merger -- Effective Time" and "-- Conditions;
Waiver."
Background of the Merger:.. The terms of the Merger Agreement are the result of
arm's-length negotiations between representatives of Medtronic
and Electromedics. The following is a brief discussion of the
background of these negotiations, negotiations with St. Jude
Medical, Inc. ("SJM"), the Merger and related transactions.
On July 29, 1993, representatives of Medtronic met with
officers of Electromedics and delivered a letter to
Electromedics in which Medtronic proposed an acquisition of
Electromedics by means of a merger of Electromedics and a
Medtronic subsidiary in which Electromedics shareholders would
receive $5.50 in cash or $5.50 in shares of Medtronic Common
Stock for each share of Electromedics Common Stock. On August
4, 1993, the Electromedics Board of Directors held a special
meeting at which it unanimously rejected the Medtronic proposal
and so advised Medtronic by letter on that date. Electromedics
agreed to furnish due diligence information to Medtronic,
however, as it had done for SJM.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
From August through October 1993, members of Medtronic's man-
agement held various discussions and meetings with members of
Electromedics' management regarding Electromedics' business and
operations, and Medtronic conducted a due diligence
investigation of Electromedics. See "Information Regarding
Electromedics." Members of SJM's management had similar
discussions and meetings with Electromedics' management during
this time. On November 1, 1993, Dain Bosworth Incorporated
("DBI") was retained by Electromedics as its financial advisor.
Thereafter, DBI conducted an evaluation of Electromedics and
contacted 14 companies (including Medtronic and SJM) regarding
their interest in making an acquisition proposal to
Electromedics.
By letter to Electromedics dated November 12, 1993, Medtronic
proposed a merger of Electromedics and a Medtronic subsidiary
in which Electromedics shareholders would receive $6.125 in
cash or $6.125 in shares of Medtronic Common Stock for each
share of Electromedics Common Stock. The Electromedics Board of
Directors met and, based on its review of valuation analyses
prepared by DBI and discussions with DBI and counsel, concluded
that the Medtronic offer was not adequate, that DBI should
discuss with Medtronic its flexibility as to the price and
other terms of the transaction and that DBI should continue its
discussions with other companies. DBI, on behalf of Elec-
tromedics, continued its discussions with Medtronic and SJM and
other companies that had expressed an interest in discussing a
potential acquisition of Electromedics.
On November 30, 1993, SJM delivered a draft letter of intent
regarding an acquisition proposal for Electromedics to merge
with a subsidiary of SJM for a combination of $6.25 in cash or
$6.25 in shares of SJM Common Stock for each share of
Electromedics Common Stock. On December 1, 1993, SJM increased
its proposal to $6.375 per share of Electromedics Common Stock
following discussions regarding the adequacy of the $6.25
offer. Negotiations continued with SJM, and on December 6,
1993, the Board of Directors of Electromedics held a special
meeting at which it approved a merger agreement with SJM at the
$6.375 price, and the agreement was executed.
By letter to Electromedics dated December 9, 1993, Medtronic
proposed a merger of Electromedics and a Medtronic subsidiary
in which Electromedics shareholders would receive $6.75 in cash
or $6.75 in shares of Medtronic Common Stock for each share of
Electromedics Common Stock. On December 21, 1993, a member of
SJM's management advised DBI that SJM was considering a
proposal to permit Electromedics to pay a cash dividend to its
shareholders immediately prior to a merger with SJM such that
the aggregate consideration received by Electromedics
shareholders would equal $6.75 per share of Electromedics
Common Stock, although no such proposal was submitted by SJM.
Later on December 21, 1993, Medtronic increased its proposal to
$6.875 per share of Electromedics Common Stock.
On December 22, 1993, the Electromedics Board of Directors,
based upon the factors described below under "The Merger --
Electromedics' Reasons for the Merger; Recommendation of the
Electromedics Board of Directors," unanimously approved the
Merger
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Agreement with Medtronic, and the Merger Agreement was signed
on December 23, 1993. The SJM merger agreement permitted the
Electromedics Board of Directors to terminate the agreement
under certain circumstances, and on December 23, 1993
Electromedics notified SJM that it had done so. See "The Merger
-- Electromedics' Reasons for the Merger; Recommendation of the
Electromedics Board of Directors," "-- Medtronic's Reasons for
the Merger," "-- Electromedics' Financial Advisor" and "-- SJM
Termination Fee."
Reasons for the Merger:.... In reaching its conclusions to approve the Merger Agreement and
Plan of Merger and to recommend the approval of the Plan of
Merger by the Electromedics shareholders, the Electromedics
Board of Directors considered the significant premium offered
by Medtronic over the trading price of the Electromedics Common
Stock during the period preceding the announcement of the
retention of DBI to consider alternatives to maximize
Electromedics' shareholder value; the opportunity for
Electromedics shareholders to elect to maintain a participation
in Electromedics' future on a tax-free basis; the opportunity
for Electromedics shareholders to continue their equity partic-
ipation in a larger, more diversified medical products
enterprise; the opportunity for Electromedics shareholders to
receive cash dividends on their stock; the compatibility of
certain products of Electromedics and Medtronic; and the
increasingly competitive environment for Electromedics' major
products. In addition, the Electromedics Board of Directors
considered the business, financial condition, results of
operations and prospects of Electromedics and Medtronic, on
both a historical and prospective basis, and the current and
historical market prices of Electromedics and Medtronic Common
Stock. The Electromedics Board of Directors also considered the
opinion of DBI that the consideration to be received by the
Electromedics shareholders in the Merger is fair to the
Electromedics shareholders from a financial point of view.
THE BOARD OF DIRECTORS OF ELECTROMEDICS HAS UNANIMOUSLY
APPROVED THE MERGER, AND THE BOARD RECOMMENDS THAT THE
SHAREHOLDERS OF ELECTROMEDICS VOTE IN FAVOR OF THE PROPOSAL
SUBMITTED FOR CONSIDERATION AT THE MEETING.
See "The Merger -- Electromedics' Reasons for the Merger;
Recommendation of the Electromedics Board of Directors," "--
Medtronic's Reasons for the Merger," "-- Electromedics'
Financial Advisor," and "-- Comparative Stock Prices and
Dividends." For information on the interests of certain persons
in the Merger, see "The Merger -- Conflicts of Interest."
Electromedics' Financial
Advisor:.................. Dain Bosworth Incorporated ("DBI") was retained by
Electromedics to advise it with respect to the consideration to
be received by Electromedics shareholders in the Merger. DBI
has issued its written opinion to the effect that the
consideration to be received in the Merger by Electromedics
shareholders is fair to the Electromedics shareholders from a
financial point of view. The full text of the opinion of DBI,
which contains information as to the assumptions made, matters
considered and the scope and limitations on the review un-
dertaken, is set forth as Appendix C to this Proxy
Statement/Prospectus and should be read in its entirety. See
"The Merger -- Electromedics' Financial Advisor."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Fluctuation in Market
Price:.................... The number of shares of Medtronic Common Stock received in the
Merger by Electromedics' shareholders who elect stock will
depend on the market value of Medtronic Common Stock, which is
subject to fluctuation. There can be no assurance that the
recent market prices of Medtronic Common Stock will be
maintained until or after the consummation of the Merger. See
"Comparative Stock Prices and Dividends."
Under the Merger Agreement, the Conversion Ratio will not
reflect an Average Market Price of less than $68.00 or greater
than $98.00 per share. Therefore, the Conversion Ratio may not
fully reflect the price of Medtronic Common Stock as of the
Effective Time of the Merger. See "The Merger -- Conversion of
Electromedics Common Stock in the Merger."
Certain Federal Income Tax
Consequences:............. The Merger will be treated as a tax-free reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code").
Medtronic, Electromedics and Merger Subsidiary will each be a
"party to the reorganization" within the meaning of Section
368(b) of the Code.
No gain or loss will be recognized by the shareholders of Elec-
tromedics upon their receipt of Medtronic Common Stock in
exchange for their Electromedics Common Stock. An Electromedics
shareholder receiving cash, however, will be required to
recognize gain, if any, realized in the transaction but not in
excess of the cash received by such shareholder. As to each
shareholder who receives cash, the character of the resulting
gain will be either capital gain or ordinary dividend,
depending on the nature of such shareholder's investment in the
Electromedics Common Stock. See "The Merger -- Certain Federal
Income Tax Consequences."
Accounting Treatment:...... As required by generally accepted accounting principles, the
purchase method of accounting will be used by Medtronic to
account for the Merger. See "The Merger -- Accounting Treatment
of the Merger."
Treatment of Stock
Options:.................. Pursuant to the Merger Agreement, all outstanding options to
purchase Electromedics Common Stock will become immediately
exercisable in full and holders of such options will be given
the right to exercise the options prior to the Merger. If not
exercised, the options will terminate at the Effective Time of
the Merger. Electromedics will provide separate written notice
to holders of options which will explain the procedure and
deadline for exercising such options and filing an Election
Form with respect to the shares of Electromedics Common Stock
acquired upon exercise. Holders of shares of Electromedics
Common Stock acquired upon any such exercise of options will be
entitled to elect to receive in the Merger cash, shares of
Medtronic Common Stock, or a combination of cash and such
shares, as described in this Proxy Statement/Prospectus. See
"The Merger -- Treatment of Stock Options."
Conflicts of Interest:..... Under previously existing retirement agreements between Elec-
tromedics and F. James Lynch, Chairman of the Board and Chief
Executive Officer, Howard Prosky, Vice President, Manufacturing
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
and a director, and Richard B. Carlock, Vice President and
Chief Financial Officer of Electromedics, if such executives do
not remain employed by Electromedics for at least one year
after a change of control of Electromedics, Electromedics will
make certain cash payments to the executive. The Merger will
constitute a change in control of Electromedics and the key
executives will cease employment with Electromedics and receive
payments under the retirement agreements. In addition, these
executives of Electromedics have executed consulting agreements
with Electromedics that will provide for payments to such
executives for two years following the Merger in return for
their consulting services to Electromedics. The Merger will
also cause all outstanding options to purchase Electromedics
Common Stock, including options held by these executives, to
become immediately exercisable in full and remain exercisable
in accordance with the terms of the options until the exercise
deadline specified in the notice from Electromedics. As a
result of the foregoing, Messrs. Lynch, Prosky and Carlock have
a conflict of interest in connection with the Merger. See "The
Merger -- Conflicts of Interest" and "The Merger -- Treatment
of Stock Options."
Regulatory Approval:....... The only federal or state regulatory approval needed to effect
the Merger was the expiration of the waiting period under the
HSR Act, which period expired on February 13, 1994. See "The
Merger -- Regulatory Requirements."
</TABLE>
COMPARISON OF RIGHTS OF MEDTRONIC SHAREHOLDERS AND ELECTROMEDICS SHAREHOLDERS
Medtronic and Electromedics are incorporated under the laws of the States of
Minnesota and Colorado, respectively. The rights of Electromedics shareholders
are currently governed by the Restated Articles of Incorporation and Bylaws, as
amended, of Electromedics. Upon consummation of the Merger, Electromedics
Shareholders will become shareholders of Medtronic and their rights as such will
be governed by the Restated Articles of Incorporation and Bylaws, as amended, of
Medtronic. See "The Merger -- Comparative Rights of Medtronic Shareholders and
Electromedics Shareholders."
RECENT PRICES OF MEDTRONIC AND ELECTROMEDICS COMMON STOCK
On November 18, 1993, the day preceding public announcement of Medtronic's
initial $6.125 merger proposal, the reported closing sale price of Medtronic
Common Stock on the NYSE was $75.75 per share. On that day, the reported closing
sale price of Electromedics Common Stock on the NASDAQ National Market was
$5.625 per share. On an equivalent per share basis, the reported closing sale
price of Electromedics Common Stock on November 18, 1993 (calculated by
multiplying the closing sale price of Medtronic Common Stock by .0859) would
have been $6.51. Solely for illustrative purposes of presenting equivalent share
calculations, the portion of a Medtronic share into which one Electromedics
share would be converted in the Merger is estimated by using $80.00 (the
reported closing sale price of Medtronic Common Stock on March 15, 1994) as the
Average Market Price of Medtronic Common Stock. The reported closing sale price
for shares of Electromedics Common Stock as reported by NASDAQ on that day was
$6.50 per share, or $6.87 on an equivalent per share basis as calculated above.
See "Comparative Stock Prices and Dividends."
Pursuant to the Merger, the actual portion of a Medtronic share into which
one Electromedics share will be converted will be equal to $6.875 divided by the
Average Market Price of Medtronic Common Stock for the ten consecutive NYSE
trading days ending on the third trading day immediately preceding the Effective
Time of the Merger, but not less than $68.00 nor more than $98.00 per Medtronic
share. See "The Merger -- Conversion of Electromedics Common Stock in the
Merger."
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data for
Medtronic for each of the five consecutive fiscal years ended April 30, 1993 and
the nine months ended January 28, 1994 and January 29, 1993, and for
Electromedics for each of the five consecutive fiscal years ended December 31,
1993. Such data should be read in conjunction with the consolidated financial
statements and the unaudited condensed consolidated interim financial statements
of Medtronic and Electromedics, all of which are incorporated by reference
herein. Selected unaudited financial data for Medtronic for the nine months
ended January 28, 1994 and January 29, 1993 include all adjustments (consisting
only of normal recurring accruals) that Medtronic considers necessary for a fair
presentation of the consolidated operating results for such interim periods.
Results for the interim periods are not necessarily indicative of results for
the full years. See "Information Incorporated by Reference."
MEDTRONIC, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------- YEAR ENDED APRIL 30,
JANUARY 28, JANUARY 29, --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------------- --------------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 997,964 $ 969,924 $1,328,208 $1,176,912 $1,021,423 $ 865,918 $ 765,783
Net earnings before cumulative 165,613 153,604 211,584 161,541 133,372 112,874 100,285
effect of accounting
changes*.....................
Net earnings.................. 165,613 139,248 197,228 161,541 133,372 112,874 100,285
Earnings per share from 2.88 2.58 3.56 2.71 2.25 1.92 1.73
continuing operations........
Earnings per share............ 2.88 2.34 3.32 2.71 2.25 1.92 1.73
Total assets.................. 1,314,939 1,286,450 1,286,450 1,163,456 1,024,141 885,285 783,000
Long-term debt................ 19,676 17,140 10,851 8,618 7,918 7,996 8,225
Cash dividends per share...... 0.51 0.42 0.56 0.48 0.41 0.35 0.30
</TABLE>
ELECTROMEDICS, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales....................................................... $ 37,474 $ 39,057 $ 34,811 $ 28,912 $ 25,397
Net earnings before extraordinary items and cumulative effect of 405 2,063 1,291 365 341
accounting changes**...........................................
Net earnings.................................................... 405 3,568 1,939 467 583
Earnings per share from continuing operations................... 0.03 0.17 0.13 0.04 0.04
Earnings per share.............................................. 0.03 0.29 0.20 0.05 0.07
Total assets.................................................... 43,460 42,367 37,115 26,458 25,030
Long-term debt.................................................. 5,000 5,147 13,350 15,392 13,112
Cash dividends per share........................................ 0 0 0 0 0
<FN>
- ------------------------------
* In the first quarter of fiscal year 1993, Medtronic reported the cumulative
effect of accounting changes related to the adoption of new accounting
standards for post-retirement benefits and income taxes which, net of taxes,
totaled $14,356,000. Income from litigation settlements and certain
non-recurring costs are included as a component of operating income.
** In fiscal year 1992, Electromedics reported the cumulative effect of
accounting changes related to the adoption of a new accounting standard for
income taxes totalling $1,569,000. In 1992, 1991, and 1990, Electromedics
reported extraordinary losses of $64,000, $72,000, and $82,000, respectively,
relating to the early extinguishment of debt. Tax benefits resulting from net
operating loss carry forwards totalling $720,000, $184,000, $242,000, and
$377,000 were recognized as extraordinary income in 1991, 1990, 1989, and
1988, respectively.
</TABLE>
13
<PAGE>
COMPARATIVE PER SHARE DATA
The following summary presents Medtronic's and Electromedics' historical per
share data at the respective dates and for the respective periods indicated, the
unaudited Medtronic and DLP pro forma combined data, and the unaudited
Medtronic, DLP and Electromedics pro forma combined data per Medtronic share and
per Electromedics equivalent share. The pro forma combined data for Medtronic
and DLP reflect Medtronic's acquisition of DLP, Inc. and its affiliated entities
in March 1994. See "Unaudited Pro Forma Condensed Combined Financial
Statements." The unaudited Medtronic, DLP and Electromedics pro forma combined
data reflect consummation of the Merger as of the dates and for the periods
shown and assume, solely for illustrative purposes of this presentation, that
holders of Electromedics Common Stock elect to receive only shares of Medtronic
Common Stock in the Merger and no cash and that the Average Market Price for
Medtronic Common Stock is $80.00 (the reported closing sale price of Medtronic
Common Stock on March 15, 1994). The actual Average Market Price that will be
used in the Merger will be the Average Market Price of Medtronic Common Stock
for the ten consecutive NYSE trading days ending on the third trading day
immediately preceding the Effective Time of the Merger, but not less than $68.00
nor more than $98.00 per Medtronic share. The pro forma data are provided for
comparative purposes only and do not purport to be indicative of actual or
future operating results or financial position that would have occurred or will
occur upon consummation of the Merger. The information presented below should be
read in conjunction with the separate historical consolidated financial
statements of Medtronic and of Electromedics, including the notes thereto,
incorporated by reference in this Proxy Statement/Prospectus. See "Information
Incorporated by Reference."
<TABLE>
<CAPTION>
EARNINGS FROM
BOOK VALUE CONTINUING OPERATIONS CASH DIVIDENDS
----------- ----------------------- -----------------
<S> <C> <C> <C>
MEDTRONIC HISTORICAL DATA:
Per Medtronic share at and for the nine months ended $ 16.05 $ 2.88 $ 0.51
January 28, 1994.........................................
Per Medtronic share at and for the fiscal year ended April 14.55 3.56 0.56
30, 1993.................................................
MEDTRONIC AND DLP PRO FORMA COMBINED DATA:
Per Medtronic share at and for the nine months ended $ 16.05 $ 2.88 $ 0.51
January 28, 1994 (1).....................................
Per Medtronic share at and for the fiscal year ended April 14.55 3.56 0.56
30, 1993 (2).............................................
ELECTROMEDICS HISTORICAL DATA:
Per Electromedics share at and for the fiscal year ended $ 2.34 $ 0.03 $ 0.00
December 31, 1993........................................
Per Electromedics share at and for the twelve months ended 2.36 0.14 0.00
March 31, 1993...........................................
Per Electromedics share at and for the nine months ended 2.34 0.01 0.00
December 31, 1993........................................
MEDTRONIC, DLP AND ELECTROMEDICS PRO FORMA COMBINED DATA:
Per Medtronic share at and for the nine months ended $ 17.34 $ 2.80 $ 0.51
January 28, 1994 (1).....................................
Per Electromedics share equivalent (3) at and for the nine 1.49 0.24 0.04
months ended January 28, 1994 (1)........................
Per Medtronic share at and for the fiscal year ended April 15.89 3.49 0.56
30, 1993 (2).............................................
Per Electromedics share equivalent (3) at and for the 1.36 0.30 0.05
fiscal year ended April 30, 1993 (2).....................
<FN>
- ------------------------------
(1) The combined pro forma data combine the financial information of Medtronic
at and for the nine-month period ended January 28, 1994 with the financial
information of Electromedics and/or DLP at and for the nine-month period
ended December 31, 1993.
(2) The combined pro forma data combine the financial information of Medtronic
at and for the year ended April 30, 1993 with the financial information of
DLP at and for the year ended April 30, 1993 and of Electromedics at and
for the year ended March 31, 1993.
(3) The "Per Electromedics share equivalent" amounts reflect the pro forma
"Per Medtronic share" amounts multiplied by the conversion ratio that
results from assuming, for illustrative purposes of this presentation,
that the Average Market Price for Medtronic Common Stock is as noted above
in the introduction to this table.
</TABLE>
14
<PAGE>
GENERAL INFORMATION
This Proxy Statement/Prospectus is being furnished to the shareholders of
Electromedics in connection with the solicitation by the Board of Directors of
Electromedics of proxies to be voted at the Meeting to be held on April 25,
1994.
At the Meeting, Electromedics shareholders will be asked to consider and
vote upon the approval of the Plan of Merger, providing for the Merger of
Electromedics with and into Merger Subsidiary, a wholly-owned subsidiary of
Medtronic, as a result of which Electromedics will become a wholly-owned
subsidiary of Medtronic. A copy of the Plan of Merger is attached as Appendix A
to this Proxy Statement/Prospectus. Other terms and provisions related to the
Merger are set forth in an Agreement and Plan of Merger dated as of December 23,
1993 (the "Merger Agreement"), among Medtronic, Electromedics, and Merger
Subsidiary, as described herein and incorporated herein by reference. A copy of
the Merger Agreement may be obtained from Electromedics upon request. See
"Information Incorporated by Reference."
The Board of Directors of Electromedics has unanimously approved the Merger.
The Board of Directors of Medtronic has approved the Merger and the issuance of
shares of Medtronic Common Stock in the Merger. See "The Merger -- Background of
the Merger." Applicable Minnesota law does not require that Medtronic
shareholders approve the Merger, and no such approval is being sought.
Medtronic, as the sole shareholder of Merger Subsidiary, has approved the
Merger.
Pursuant to the Plan of Merger, upon effectiveness of the Merger, each
outstanding share of Electromedics Common Stock, except for 346,359 shares of
Electromedics Common Stock owned by Medtronic and except for shares of
Electromedics Common Stock held by shareholders who perfect dissenters' rights
under Colorado law (see "The Merger -- Rights of Dissenting Electromedics
Shareholders"), will be converted into the right to receive, at the election of
the holder, either (i) $6.875 in cash; or (ii) a portion of a share of Medtronic
Common Stock. Electromedics shareholders will have the right to elect to receive
all cash, all stock, or a combination of cash and stock, subject to the election
and allocation procedures described below. See "The Merger -- General" and "The
Merger -- Conversion of Electromedics Common Stock in the Merger."
The close of business on March 10, 1994 (the "Record Date") has been fixed
as the record date for determination of the holders of Electromedics Common
Stock who are entitled to notice of and to vote at the Meeting or at any
adjournment thereof. Electromedics has only one class of capital stock
outstanding, Common Stock, $.05 par value per share. As of the Record Date,
there were 14,056,800 shares of Electromedics Common Stock outstanding held by
approximately 11,167 holders of record. The holders of record on the Record Date
of shares of Electromedics Common Stock are entitled to one vote per share at
the Meeting. The presence at the Meeting in person or by proxy of the holders of
one-third of the outstanding shares of Electromedics common stock entitled to
vote shall constitute a quorum for the transaction of business. The affirmative
vote of the holders of a majority of the outstanding shares of Electromedics
Common Stock is required for approval of the Merger. Medtronic intends to vote
its Electromedics shares in favor of the Merger, and the directors and executive
officers of Electromedics have agreed to vote their Electromedics shares in
favor of the Merger. See "The Merger -- Vote Required."
Representatives of Deloitte & Touche, Electromedics' independent
accountants, are expected to be present at the Meeting. Such representatives
will have the opportunity to make a statement if they so desire and are expected
to be available to respond to appropriate questions.
A proxy card is enclosed for use by Electromedics shareholders. Such
shareholders are solicited on behalf of the Board of Directors of Electromedics
to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. No postage is
required if mailed within the United States. An Election Form, for use in
electing to receive cash, stock, or a combination of cash and stock, in exchange
for Electromedics Common Stock, is being sent to Electromedics shareholders in a
separate mailing on the same date as this Proxy Statement/Prospectus. See "The
Merger -- Conversion of
15
<PAGE>
Electromedics Common Stock in the Merger" for directions and the deadline for
submitting the Election Forms. QUESTIONS OR REQUESTS FOR ASSISTANCE IN
COMPLETING AND SUBMITTING PROXY CARDS AND ELECTION FORMS MAY BE DIRECTED TO
CHEMICAL BANK AT THE ADDRESS OR TELEPHONE NUMBER LISTED ON THE COVER OF THIS
PROXY STATEMENT/PROSPECTUS.
All properly executed proxies not revoked will be voted at the Meeting in
accordance with the instructions contained therein. Proxies containing no
instructions will be voted in favor of approval of the Plan of Merger. A
shareholder who has executed and returned a proxy may revoke it at any time
before it is voted, but only by executing and returning a proxy bearing a later
date, by giving written notice of revocation to an officer of Electromedics, or
by attending the Meeting and voting in person. Abstentions will be treated as
shares present for purposes of determining a quorum for the Meeting but will
have the same effect as a vote against approval of the Plan of Merger. If a
broker or other record holder or nominee indicates on a proxy that it does not
have direction or authority as to certain shares to vote on the Plan of Merger,
those certain shares will not be considered as present at the Meeting with
respect to the vote on the Plan of Merger.
If any other matters are properly presented for consideration at the
Meeting, the persons named in the enclosed form of proxy and acting thereunder
will have discretion to vote on such matters in accordance with their best
judgment.
THE BOARD OF DIRECTORS OF ELECTROMEDICS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE PLAN OF MERGER. See "The Merger -- Conflicts of
Interest" for a discussion of conflicts of interest that certain directors and
members of management have in connection with the Merger.
SHAREHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES WITH THEIR PROXY
CARDS. INSTEAD, STOCK CERTIFICATES (OR A GUARANTY OF DELIVERY) SHOULD BE
RETURNED WITH THE ELECTION FORMS BEING SENT IN A SEPARATE MAILING TO
SHAREHOLDERS.
In addition to the solicitation of proxies by use of mail, the directors,
officers or regular employees of Electromedics may, but without compensation
other than their regular compensation, solicit proxies personally or by
telephone or telegraph. In addition, Chemical Bank, a firm that provides
professional proxy soliciting services, has been engaged to assist in the
solicitation of proxies from brokers, bank nominees, institutional holders and
other Electromedics shareholders and to serve as information agent in connection
with the Merger. Chemical Bank will receive reasonable and customary
compensation for such services and reimbursement of reasonable out-of-pocket
expenses. Electromedics intends to reimburse brokerage houses and other
custodians, nominees, and fiduciaries for reasonable out-of-pocket expenses
incurred in forwarding copies of solicitation material to beneficial owners of
Electromedics Common Stock held of record by such persons. Electromedics and
Medtronic have agreed to share equally all expenses relating to the printing and
mailing of this Proxy Statement/ Prospectus and the filing of it with the
Commission and the costs and fees of the Exchange Agent and Chemical Bank.
All information in this Proxy Statement/Prospectus with respect to Medtronic
has been furnished by Medtronic and all information with respect to
Electromedics has been furnished by Electromedics.
The mailing of this Proxy Statement/Prospectus to shareholders of
Electromedics is expected to commence on or about March 24, 1994.
THE MERGER
SET FORTH BELOW IS A BRIEF DESCRIPTION OF CERTAIN TERMS OF THE MERGER
AGREEMENT AND RELATED MATTERS. THIS DESCRIPTION DOES NOT PURPORT TO BE COMPLETE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF MERGER, WHICH IS
ATTACHED HERETO AS APPENDIX A, AND TO THE MERGER AGREEMENT, WHICH IS
INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT MAY BE OBTAINED
FROM ELECTROMEDICS UPON REQUEST. SEE "INFORMATION INCORPORATED BY REFERENCE."
16
<PAGE>
GENERAL
Medtronic, Merger Subsidiary, and Electromedics have entered into the Merger
Agreement, which provides that Electromedics will be merged with and into Merger
Subsidiary, with Merger Subsidiary remaining a wholly-owned subsidiary of
Medtronic. In the Merger, Merger Subsidiary will change its name to
"Electromedics, Inc." Each outstanding share of Electromedics Common Stock,
other than the 346,359 shares owned by Medtronic and shares held by
Electromedics shareholders who perfect dissenters' rights under Colorado law,
will be converted at the Effective Time (as defined below) into the right to
receive, at the election of each shareholder, either (i) $6.875 in cash; or (ii)
the portion of a share of Medtronic Common Stock equal to $6.875 divided by the
Average Market Price (determined as described below) of Medtronic Common Stock
for the Determination Period (as defined below), but not less than $68.00 per
share or more than $98.00 per share. Subject to the election and allocation
procedures described below, each Electromedics shareholder will be able to
receive all cash, all Medtronic Common Stock, or a combination of cash and
Medtronic Common Stock, in exchange for the holder's shares of Electromedics
Common Stock. See "The Merger -- Conversion of Electromedics Common Stock in the
Merger."
EFFECTIVE TIME OF THE MERGER
As soon as practicable after the conditions to consummation of the Merger
described below have been satisfied or waived, and unless the Merger Agreement
has been terminated as provided below, articles of merger will be filed with the
Secretaries of State of the States of Colorado and Minnesota, at which time the
Merger will become effective (the "Effective Time"). It is presently
contemplated that the Effective Time will be as soon as practicable after
approval of the Plan of Merger at the Meeting.
BACKGROUND OF THE MERGER
The terms of the Merger Agreement are the result of arm's-length
negotiations between representatives of Medtronic and Electromedics. The
following is a brief discussion of the background of these negotiations,
negotiations with St. Jude Medical, Inc. ("SJM"), the Merger and related
transactions.
Medtronic first considered a possible acquisition of Electromedics in 1989,
and again in 1991, as part of its ongoing, systematic process of reviewing
potential acquisition candidates in the medical device business that appear to
offer products complementary to those of Medtronic. Its consideration of
Electromedics was part of a larger search by Medtronic for appropriate
acquisitions and business combinations. Medtronic began evaluating Electromedics
more seriously beginning in early 1993, as a result of the price of
Electromedics stock at that time and a view that Electromedics' business could
fit well with that of Medtronic. Prior to July 1993, however, Medtronic had not
received from Electromedics any indication of interest in a possible business
combination.
SJM first approached Electromedics regarding a possible acquisition at an
industry meeting in April 1993. Electromedics expressed no interest in an
acquisition at that time. Electromedics furnished certain due diligence
information regarding Electromedics to SJM on a confidential basis in June 1993.
In July 1993, Willard H. Lewis, Vice President and President, Cardiac
Surgery Business, of Medtronic and F. James Lynch, Electromedics' Chief
Executive Officer, discussed informally whether Electromedics might be willing
to consider an acquisition proposal from Medtronic. These discussions were
informal and no formal offer was solicited by Electromedics or made by
Medtronic. On July 29, 1993, Mr. Lewis and Michael D. Ellwein, Vice President,
Corporate Development and Associate General Counsel of Medtronic met with Mr.
Lynch and delivered a letter to Electromedics in which Medtronic proposed an
acquisition of Electromedics by means of a merger of Electromedics and a
Medtronic subsidiary in which Electromedics shareholders would receive $5.50 in
cash or $5.50 in shares of Medtronic Common Stock for each share of
Electromedics Common Stock. Medtronic's initial offer of $5.50 in cash or in
shares of Medtronic Common Stock was determined based upon its review of the
values produced from a financial modeling of projected revenues and profits for
Electromedics and a general review of stock trading prices and revenue multiples
for other publicly-held
17
<PAGE>
medical device companies, all of which was done internally by Medtronic.
Medtronic also believed that the choice of cash, stock, or a combination of cash
and stock would offer flexibility and be attractive to Electromedics'
shareholders. The parties to the meeting on July 29, 1993 discussed the price
and other terms of the Medtronic offer as contained in the proposal letter. Mr.
Lynch also indicated at the meeting that SJM had expressed an interest in the
possible acquisition of Electromedics, and he offered to send to Medtronic a
package of due diligence information. On August 4, 1993, the Electromedics Board
of Directors held a special meeting at which it unanimously rejected the
Medtronic proposal and so advised Medtronic by letter on that date.
At about the same time that Medtronic received the Electromedics letter
rejecting its proposal, Medtronic was sent due diligence information on
Electromedics on a confidential basis. At a regular meeting held on August 26,
1993, the Electromedics Board of Directors discussed Medtronic's continued
interest in Electromedics and authorized management to investigate the retention
of a financial advisor in the event that another acquisition proposal was made
by any party. On September 1, 1993, Mr. Lewis, Mr. Ellwein, Mr. Lynch and
Richard B. Carlock, Vice President and Chief Financial Officer of Electromedics,
met to continue discussions about Electromedics' business in connection with a
possible acquisition. This was followed by a few informal telephonic discussions
among these individuals and Dian E. Rosenhamer, Vice President, Finance, Cardiac
Surgery Business, of Medtronic to discuss various aspects of Electromedics'
business and arrange an on-site due diligence meeting. On September 16 and 17,
1993, Ms. Rosenhamer, Dean E. Rustad, Manager, Financial Analysis, Corporate
Development of Medtronic and Thomas M. Tefft, Assistant Controller of Medtronic,
met with Mr. Lynch, Mr. Carlock, and Howard Prosky, Vice President,
Manufacturing of Electromedics, to conduct business and financial due diligence.
See "Information Regarding Electromedics." Electromedics provided Medtronic with
additional follow-up information periodically from September 18, 1993 through
October 21, 1993, when another due diligence meeting was held between Ms.
Rosenhamer and Mr. Carlock.
In early September 1993, a member of SJM's management contacted Mr. Lynch to
express an interest in continuing informal discussions with Electromedics
regarding a possible acquisition of Electromedics. On September 20 and 21, 1993,
members of SJM's management held a due diligence meeting with Mr. Lynch, Mr.
Carlock and Mr. Prosky. Similar informal discussions occurred telephonically
between members of SJM's management and Messrs. Lynch and Carlock sporadically
from September 21, 1993 through the commencement of formal negotiations with SJM
in late November 1993, as discussed below.
Electromedics' management engaged in the informal discussions with Medtronic
and SJM following rejection of Medtronic's July 29 offer because it believed
that it was in the best interests of shareholders to do so, both from the
perspective of a potential acquisition of Electromedics at a premium over
then-existing market prices for Electromedics Common Stock and because Medtronic
and SJM could be valuable partners in strategic alliances to develop
Electromedics products.
After the meeting on October 21, 1993 between Ms. Rosenhamer and Mr.
Carlock, Electromedics' management concluded that a financial advisor should be
engaged in light of the apparent level of interest of both SJM and Medtronic.
During the week of October 25, 1993, Mr. Lewis and Mr. Lynch had a telephone
conversation to arrange a meeting to continue discussions about a possible
acquisition of Electromedics by Medtronic. On October 28, 1993, Mr. Lynch and
Mr. Carlock met with representatives of Dain Bosworth Incorporated ("DBI")
regarding the retention of DBI as financial advisor to Electromedics. Messrs.
Lynch and Carlock negotiated an advisory agreement with DBI on October 29 and
November 1, 1993. Electromedics' Board of Directors approved the retention of
DBI at a meeting on November 1, 1993, and the advisory agreement between
Electromedics and DBI was executed on that date. Other than the July 29, 1993
offer by Medtronic discussed above, no firm offer was made by Medtronic or SJM
prior to the retention of DBI by Electromedics on November 1. See "The Merger --
Electromedics' Financial Advisor."
18
<PAGE>
DBI was engaged to analyze the business, operations, financial condition and
prospects of Electromedics, to assist Electromedics in its analysis and
implementation of methods to increase and maximize shareholder value, to assist
Electromedics by identifying potential purchasers and determining the extent of
any interest of potential purchasers, to advise Electromedics regarding any
proposed transaction and to render a fairness opinion if requested by
Electromedics. In connection with its engagement, DBI conducted a financial
evaluation of Electromedics as described below under "The Merger --
Electromedics' Financial Advisor." In addition, DBI contacted 14 companies
(including Medtronic and SJM) regarding their interest in making an acquisition
proposal to Electromedics. Through DBI, Electromedics provided nine companies
other than Medtronic and SJM who expressed an interest in Electromedics with a
package of confidential information about Electromedics after receiving signed
confidentiality agreements.
On November 3, 1993, Mr. Lewis and Mr. Ellwein of Medtronic met with Mr.
Lynch and Mr. Carlock to discuss Medtronic's interest in acquiring
Electromedics, and the Medtronic representatives stated a purchase price of
$6.125 per share but made no formal offer. By letter to Electromedics dated
November 12, 1993, Medtronic proposed a merger of Electromedics and a Medtronic
subsidiary in which Electromedics shareholders would receive $6.125 in cash or
$6.125 in shares of Medtronic Common Stock for each share of Electromedics
Common Stock. Medtronic's increased offer of $6.125 in cash or in shares of
Medtronic Common Stock was determined by it as within the range of prices
supported by Medtronic's earlier financial projections and was adjusted based on
Medtronic's desire to present an offer that would be competitive with offers
that Electromedics might receive from other potential acquirors of
Electromedics.
At a regular meeting held November 18, 1993, the Electromedics Board of
Directors met to consider the valuation analyses of Electromedics prepared by
DBI and to consider the Medtronic offer. The DBI valuation analyses are
summarized below under "The Merger -- Electromedics' Financial Advisor." Based
on its review of the DBI analyses and discussions with DBI and counsel, the
Board of Directors concluded that the Medtronic offer was not adequate, that DBI
should discuss with Medtronic its flexibility as to the price and other terms of
the transaction and that DBI should continue its discussions with other
companies. The Electromedics Board of Directors believed that Electromedics
should not be sold at the price offered by Medtronic.
After the November 18 Board meeting, DBI, on behalf of Electromedics, had a
meeting on November 22, 1993 and other discussions with Medtronic in accordance
with the Board's directive and a meeting on November 22, 1993 and other
discussions with SJM to determine SJM's interest in making an acquisition
proposal to Electromedics. In addition, DBI inquired of the other companies that
had received confidential information regarding Electromedics as to whether they
had an interest in making an acquisition proposal. DBI reported the results of
these discussions to Electromedics' management on November 23, 1993. In
addition, a member of SJM's management telephoned Mr. Lynch on November 23, 1993
to express SJM's interest in making an acquisition proposal to Electromedics.
The Electromedics Board of Directors held a special meeting on November 24, 1993
to review the discussions held by DBI with Medtronic and SJM following the
November 18 Board meeting and authorized management to commence negotiations
with SJM regarding a specific acquisition proposal from SJM. Based on DBI's
discussions with SJM, Electromedics' Board of Directors believed that SJM might
be interested in making an offer to acquire Electromedics at a price higher than
the Medtronic offer. In addition, DBI continued discussions with Medtronic
regarding its flexibility as to price and other terms and continued discussions
with other companies as to their interest in Electromedics in order to maximize
the potential value that might be received by Electromedics shareholders.
On November 29, 1993, SJM advised Electromedics orally of its interest in
making an acquisition proposal for Electromedics to merge with a subsidiary of
SJM for a combination of $6.25 in cash or
19
<PAGE>
$6.25 in shares of SJM Common Stock for each share of Electromedics Common
Stock. On November 30, 1993, SJM delivered a draft letter of intent regarding
this acquisition proposal, and on December 1, 1993, SJM increased its proposal
to $6.375 per share of Electromedics Common Stock following discussions with DBI
regarding the adequacy of the $6.25 offer.
The Electromedics Board of Directors held a special meeting on December 2,
1993 to consider the SJM proposal. At the meeting, DBI summarized the SJM
proposal and negotiations by DBI with SJM and its financial advisor that led to
the proposal and discussed SJM, its business and stock valuation. DBI also
presented an updated valuation analysis of Electromedics that was based on
revised estimates prepared by Electromedics management. See "The Merger --
Electromedics' Financial Advisor." In addition, DBI reported that SJM, Medtronic
and one other company were the remaining interested companies, that the other
companies contacted had concluded not to pursue discussions further and that the
other interested company had deferred its due diligence visit in light of the
SJM offer. This company subsequently did not pursue its investigation of
Electromedics or make any acquisition proposal to Electromedics. After
discussion of the SJM proposal, including an oral opinion from DBI that the
proposed merger consideration to be paid by SJM was fair to the Electromedics
shareholders from a financial point of view, the Board of Directors authorized
management of Electromedics to enter into a letter of intent to merge with SJM
subject to completion of negotiations regarding a proposed termination fee.
These negotiations continued during the evening of December 2, 1993 without
resolution of certain issues, including the terms of the proposed termination
fee. On December 3, 1993, Electromedics' Board of Directors held a special
meeting to review the status of these negotiations and authorized continued
negotiations toward a definitive merger agreement with SJM. These negotiations
occurred on December 4 and 5, 1993. On December 6, 1993, the Electromedics Board
of Directors held a special meeting at which it approved a merger agreement with
SJM at the $6.375 price, and the agreement was executed. The factors underlying
the Board's decision to approve the merger agreement with SJM are the same as
those that led the Board subsequently to approve the merger with Medtronic at a
higher price. See "The Merger -- Electromedics' Reasons for the Merger."
By letter to Electromedics dated December 9, 1993, Medtronic proposed a
merger of Electromedics and a Medtronic subsidiary in which Electromedics
shareholders would receive $6.75 in cash or $6.75 in shares of Medtronic Common
Stock for each share of Electromedics Common Stock. Thereafter, Mr. Lynch, Mr.
Carlock and DBI discussed the Medtronic proposal with members of Medtronic's
management (principally Mr. Lewis and Mr. Ellwein) and with members of SJM's
management. The discussions with Medtronic covered negotiation of the terms of a
definitive agreement with Medtronic. The discussions with SJM concerned SJM's
interest in amending its agreement with Electromedics to increase the
acquisition price. In addition, Medtronic and SJM conducted additional due
diligence regarding Electromedics. An agreement and plan of merger was
negotiated by representatives of Electromedics and Medtronic. On December 21,
1993, a member of SJM's management advised DBI that SJM was considering a
proposal to permit Electromedics to pay a cash dividend to its shareholders
immediately prior to a merger with SJM such that the aggregate consideration
received by Electromedics shareholders would equal $6.75 per share of
Electromedics Common Stock, although no such proposal was submitted by SJM.
Later on December 21, 1993, Medtronic increased its proposal to $6.875 per share
of Electromedics Common Stock.
On December 22, 1993, the Electromedics Board of Directors, based upon the
factors described below under "Electromedics' Reasons for the Merger;
Recommendation of the Electromedics Board of Directors," unanimously approved
the Merger Agreement with Medtronic. Negotiations regarding the Merger Agreement
were completed by representatives of Medtronic and Electromedics on December 23,
1993, and the Merger Agreement was signed on that day. The SJM merger agreement
permitted the Electromedics Board of Directors to terminate the agreement under
certain circumstances, and on December 23, 1993 Electromedics notified SJM that
it had done so. See "The
20
<PAGE>
Merger -- Electromedics' Reasons for the Merger; Recommendation of the
Electromedics Board of Directors," "-- Medtronic's Reasons for the Merger," "--
Electromedics' Financial Advisor" and "-- SJM Termination Fee."
ELECTROMEDICS' REASONS FOR THE MERGER; RECOMMENDATION OF THE ELECTROMEDICS BOARD
OF DIRECTORS
The Electromedics Board of Directors believes that the Merger is in the best
interests of Electromedics shareholders and unanimously recommends to its
shareholders that they vote FOR approval of the Plan of Merger. See "The Merger
- -- Conflicts of Interest" for a discussion of conflicts of interest that certain
directors and members of management have in connection with the Merger. In
reaching these conclusions, the Electromedics Board of Directors considered the
following factors. The Electromedics Board of Directors recognized that the
Merger consideration offered a significant premium over the trading price of the
Electromedics Common Stock during the period preceding the announcement of the
engagement of DBI to consider alternatives to maximizing shareholder value and
also provided the opportunity for Electromedics shareholders to maintain a
participation in Electromedics' future on a tax-free basis through the election
of Medtronic Common Stock. Medtronic Common Stock represents an opportunity for
Electromedics shareholders to continue equity participation in a larger, more
diversified medical products enterprise as well as a method to receive cash
dividends on their shareholdings. Medtronic, which reported net sales of
approximately $1.3 billion for the fiscal year ended April 30, 1993, produces a
greater number and variety of products than Electromedics and has less
dependence on any single product. Electromedics has never declared a cash
dividend on Electromedics Common Stock. Electromedics intended to retain
earnings to finance the growth of its business and did not anticipate that any
cash dividends would be paid in the foreseeable future.
The Electromedics Board of Directors has recognized that certain products
sold by Electromedics and Medtronic are compatible. Competition in
Electromedics' core business has increased significantly, and Electromedics'
principal competitor has more financial resources than Electromedics. The
environment for Electromedics' major products will become increasingly
competitive in the near future. Accordingly, the Electromedics Board of
Directors believes that combination with a larger, more diversified medical
products company will result in higher value to be derived from Electromedics'
core business than if Electromedics remains independent.
In addition, the Electromedics Board of Directors considered the business,
financial condition, results of operations and prospects of Electromedics and
Medtronic, on both a historical and prospective basis, and the current and
historical market prices of Electromedics and Medtronic Common Stock. These
factors led the Electromedics Board of Directors to conclude that combination
with Medtronic at this time would result in greater shareholder value than if
Electromedics remained independent. The Electromedics Board of Directors also
considered the opinion of DBI that the consideration to be received by the
Electromedics shareholders in the Merger is fair to the Electromedics
shareholders from a financial point of view. See "The Merger -- Electromedics'
Financial Advisor" and "Comparative Stock Prices and Dividends."
MEDTRONIC'S REASONS FOR THE MERGER
Medtronic believes that the acquisition of Electromedics will enhance
Medtronic's product offerings and will complement Medtronic's leadership in
technologies for blood-handling and monitoring during major surgery. Medtronic
believes that, amid rising costs of donor blood and rising concern about
blood-borne diseases, technologies like those developed and manufactured by
Electromedics that enable use of the patient's blood for reinfusion during
surgery present an increasingly attractive alternative.
ELECTROMEDICS' FINANCIAL ADVISOR
Electromedics has retained Dain Bosworth Incorporated ("DBI") to act as its
exclusive financial advisor in connection with the Merger. See "The Merger --
Background of the Merger." DBI has advised Electromedics with respect to the
respective merger proposals by SJM and Medtronic and the consideration to be
received by Electromedics shareholders in the Merger. DBI was selected by
21
<PAGE>
Electromedics' Executive Committee based upon its view of DBI's qualifications,
expertise and reputation. In addition, DBI has provided certain investment
banking services to Electromedics from time to time, including acting as
managing underwriter of a public offering of Electromedics Common Stock in
November 1990. The selection of DBI was ratified and approved by Electromedics'
Board of Directors. The amount of the consideration to be received by
Electromedics shareholders was determined through negotiations between
Electromedics and Medtronic and not by DBI, although DBI did assist the
Electromedics Board of Directors in certain of these negotiations.
DBI has rendered to the Electromedics Board of Directors an opinion that the
per share consideration to be received by holders of Electromedics Common Stock
in the Merger is fair to such shareholders from a financial point of view. A
copy of the opinion of DBI, reaffirmed in writing as of the date hereof, is
attached as Appendix C to this Proxy Statement/Prospectus. No limitations were
imposed on DBI with respect to the scope of its investigation. As set forth in
its opinion, DBI relied on, and did not independently verify, the accuracy,
completeness and fairness of the financial and other information furnished to it
by Electromedics and Medtronic, and publicly available information concerning
Electromedics and Medtronic. DBI did not make an independent evaluation or
appraisal of the assets and liabilities of Electromedics and Medtronic, and
expressed no opinion regarding the liquidation value of any entity. Holders of
Electromedics Common Stock are urged to read DBI's opinion in its entirety for a
description of the procedures followed, the factors considered and the
assumptions made by DBI in rendering its opinion.
For purposes of its opinion, DBI reviewed and analyzed certain publicly
available information relating to Electromedics, as well as various other
information provided by Electromedics including certain financial forecasts and
internal management reports. DBI analyzed the historical reported market prices
and trading activity of Electromedics, as well as earnings, rates of return,
capitalization, dividends, and other relevant factors associated with
Electromedics. DBI visited the headquarters and primary manufacturing facility
of Electromedics. DBI also held discussions with members of the senior
management of Electromedics regarding its past and current business operations,
financial condition and future prospects. DBI used the foregoing information to
educate itself about Electromedics and the market for Electromedics' Common
Stock.
In conducting the review and in performing the analyses described below, DBI
did not attribute any particular weight to any information or analysis
considered by it, but rather made qualitative judgments as to the significance
and relevance of each factor and analysis. Accordingly, DBI believes that the
information reviewed and the analysis conducted must be considered as a whole
and that considering any portion of such information or analyses, without
considering all of such information and analyses, could create a misleading or
incomplete view of the process underlying the opinion.
DISCOUNTED CASH FLOW ANALYSIS. DBI assessed the present value of the future
cash flows that business segments of Electromedics could be expected to generate
over a defined time period and the residual value of these business segments at
the end of the time period (the "DCF Analysis"). In preparing its DCF Analysis,
DBI worked with management of Electromedics to develop operating projections for
five business segments: (i) the historical domestic business (the "Core
Business"); (ii) Electromedics' German operations ("ELMD Germany"); (iii)
Electromedics' French operations ("ELMD France"); (iv) a new application of
Electromedics' technology for platelet gel ("Platelet Gel"); and (v) a new
technology that Electromedics is developing for an intravenous membrane
oxygenator ("IMO"). To develop the projections used in the DCF Analysis,
Electromedics provided to DBI preliminary five-year projections for
Electromedics. DBI and Electromedics organized these projections into the five
business segments. DBI then reviewed Electromedics' preliminary projections with
Electromedics' management to refine the assumptions and develop a set of
projections that were mutually agreed upon by DBI and Electromedics' management.
22
<PAGE>
Each of the five business segments was then valued individually, combining
the projections for the business with assumptions regarding discount rates and
multiples of operating statistics in the final year of the projections. The
analysis yielded the following results:
(i) CORE BUSINESS -- DBI analyzed the five-year projections developed
for this business segment using discount rates ranging from 14.0% to 17.0%.
DBI applied operating cash flow multiples ranging from 8.0 to 9.5 to
determine the residual value of the business in the final year of the
projections. DBI determined that the most appropriate discount rates were
15.0% and 16.0% and that the most appropriate operating cash flow multiples
were 8.5 and 9.0. The combination of these discount rates and operating cash
flow multiples yielded values for this segment ranging from $56.9 to $62.3
million.
(ii) ELMD GERMANY -- DBI analyzed the five-year projections developed
for this business segment using discount rates ranging from 22.5% to 30.0%.
DBI applied operating cash flow multiples ranging from 8.0 to 9.5 to
determine the residual value of the business in the final year of the
projections. DBI determined that the most appropriate discount rates were
25.0% and 27.5% and that the most appropriate operating cash flow multiples
were 8.5 and 9.0. The combination of these discount rates and operating cash
flow multiples yielded values for this segment ranging from $3.3 to $3.8
million.
(iii) ELMD FRANCE -- DBI analyzed the five-year projections developed for
this business segment using discount rates ranging from 22.5% to 30.0%. DBI
applied operating cash flow multiples ranging from 8.0 to 9.5 to determine
the residual value of the business in the final year of the projections. DBI
determined that the most appropriate discount rates were 25.0% and 27.5% and
that the most appropriate operating cash flow multiples were 8.5 and 9.0.
The combination of these discount rates and operating cash flow multiples
yielded values for this segment ranging from $0.7 to $0.9 million. DBI and
Electromedics determined that the projections for ELMD France were
uncertain. To account for the uncertainty, DBI applied a range of value to
ELMD France of between ($0.5) and $0.9 million.
(iv) PLATELET GEL -- DBI analyzed the five-year projections developed for
this business segment using discount rates ranging from 22.5% to 30.0%. DBI
applied revenue multiples ranging from 1.2 to 1.8 to determine the residual
value of the business in the final year of the projections. DBI determined
that the most appropriate discount rates were 25.0% and 27.50% and that the
most appropriate revenue multiples were 1.4 and 1.6. The combination of
these discount rates and revenue multiples yielded values for this segment
ranging from $9.2 to $11.5 million.
(v) IMO -- The IMO analysis was based on ten-year projections as
revenues were not expected until 1998. DBI analyzed the ten-year projections
developed for this business segment using discount rates ranging from 37.5%
to 45.0%. DBI applied revenue multiples ranging from 1.5 to 2.25 to
determine the residual value of the business in the final year of the
projections. DBI determined that the most appropriate discount rates were
40.0% and 42.50% and that the most appropriate revenue multiples were 1.75
and 2.0. The combination of these discount rates and revenue multiples
yielded values for this segment ranging from $8.5 to $12.2 million.
The results of these individual analyses were combined to yield a total
value for Electromedics of between $77.4 and $90.8 million. This range of values
was then adjusted for such balance sheet statistics as cash and equivalents and
debt and other financial information including proceeds from options that would
be exercised and the present value of net operating losses and tax carryforwards
(the "Adjustments"). After including the Adjustments, it was determined that the
equity value of Electromedics was between $87.7 and $101.1 million. This range
of equity values is equal to approximately $5.93 to $6.84 per fully diluted
share of Electromedics Common Stock.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. DBI compared financial and
stock market information of Electromedics to similar information for certain
publicly traded companies operating in the medical device industry. Companies
reviewed by DBI included American Medical Products;
23
<PAGE>
Conmed Corporation; Gish Biomedical; Haemonetics Corporation; Minntech
Corporation; and Protocol Systems, Inc. (the "Comparable Companies"). Of the
companies that operate in the medical device industry, the Comparable Companies
are those determined by DBI to be most comparable to Electromedics based on a
number of criteria, including: the similarity of product offerings with
particular focus on products that are used in blood management and products that
have disposable components; the size of the companies as measured by revenues;
and the relative profitability as measured by operating income as a percent of
revenues. For purposes of comparing each of these companies with Electromedics,
DBI calculated financial ratios and compared these ratios with comparable ratios
for Electromedics. The financial ratios used consisted of (i) total market value
of capitalization to last-twelve-month's revenues (the "Revenue Multiple"), (ii)
total market value of capitalization to last-twelve-month's operating cash flow
(the "OCF Multiple"), and (iii) total market value of capitalization to
last-twelve-month's operating income (the "Operating Income Multiple"). After
reviewing the financial results of the Comparable Companies, DBI used Revenue
Multiples ranging from 1.7 to 2.2, OCF Multiples ranging from 10.0 to 13.2, and
Operating Income Multiples ranging from 12.0 to 16.0. Applying these ranges to
Electromedics operating results for the twelve months ending September 30, 1993
yielded valuation ranges for the total capitalization of Electromedics of
between $22.6 and $83.7 million. Based on this ratio analysis of Electromedics'
operating statistics and the Adjustments, it was determined that the total
equity value for Electromedics was between $50.3 million and $60.3 million. This
range of equity values is equal to approximately $3.40 to $4.08 per fully
diluted share.
ANALYSIS OF SELECTED MERGER AND ACQUISITION TRANSACTIONS. DBI reviewed and
summarized the terms of 16 selected acquisitions in the medical device industry.
The following table lists the transactions that DBI analyzed (the "Comparable
Acquisitions").
<TABLE>
<CAPTION>
EFFECTIVE
DATE OF
TRANSACTION ACQUIRING COMPANY ACQUIRED COMPANY
- ----------- ------------------------------ --------------------------------
<C> <S> <C>
09/21/93 Mallinkrodt Medical DAR SpA
09/08/93 Corning, Inc. Costar Corp.
07/28/93 Sunrise Medical, Inc. DiVilbiss Health Care
07/12/93 Conmed Corp. Andover Medical, Inc.
04/30/93 Union Carbide Chemicals Vitaphore Corp.
02/11/93 Mallinkrodt Medical Shiley Respiratory
09/25/92 Mallinkrodt Medical HemoCue Intressenter
04/16/92 Vital Signs, Inc. Biomedical Dynamics Corp.
07/29/92 Cabot Medical Surgitek
02/28/92 Sorin Biomedica SpA Shiley, Inc.
02/24/92 Eli Lilly & Co. Origin Medsystems, Inc.
12/31/91 Birtcher Medical Systems Solos Endoscopy
10/01/91 Thermo Electron Corp. International Technidyne
09/21/90 Medtronic, Inc. Bio-Medicus, Inc.
06/29/90 Bristol-Myers Squibb Concept, Inc.
06/19/90 Gambro AB COBE Laboratories
</TABLE>
The Comparable Acquisitions were selected based on the comparability of the
acquired company to Electromedics based on a number of criteria including:
primary line of business in the medical device industry; the similarity of
product offerings; and the size of the companies as measured by revenues. In
addition, DBI focused on transactions that have occurred since June 1990. For
purposes of determining valuation parameters for Electromedics, DBI computed
financial ratios for each of these transactions, where the information was
available, and applied these ratios to Electromedics' operating statistics. As
in the analysis of the Comparable Companies, the financial ratios used consisted
of the Revenue Multiple, the OCF Multiple, and the Operating Income Multiple.
After reviewing the financial results of the Comparable Acquisitions, DBI used
Revenue Multiples ranging from 1.5 to 2.5, OCF Multiple ranging from 10.0 to
15.0, and Operating Income Multiples ranging
24
<PAGE>
from 13.0 to 18.0. Applying these ranges to Electromedics operating results for
the twelve months ending September 30, 1993 yielded valuation ranges for the
total capitalization of Electromedics of between $24.5 and $95.2 million. Based
on this ratio analysis of Electromedics' operating statistics and the
Adjustments, it was determined that the total equity value for Electromedics was
between $60.3 million and $70.3 million. This range of equity values is equal to
approximately $4.08 to $4.76 per fully diluted share.
DBI did not assign any particular weight to the individual analyses
described above, which represent a summary of the material analyses performed by
DBI. DBI's determination regarding the fairness of the transaction is not based
on a mathematical model but rather upon the consideration of the body of
information obtained from such analysis and qualitative factors.
Electromedics has paid DBI a fixed engagement fee of $35,000 for certain
services as Electromedics' financial advisor, including DBI's analysis of the
business, operations, financial condition and future prospects of Electromedics
and analysis and implementation of methods to increase and maximize shareholder
value. For DBI's analysis of the Merger consideration and preparation of a
written opinion to the Electromedics Board of Directors, Electromedics has paid
DBI a fixed fee of $150,000. Electromedics has also agreed to pay DBI an
additional fee of approximately $1,016,000 (against which the $150,000 will be
credited), which represents one percent (1.0%) of the consideration to be
received by Electromedics' shareholders in connection with the Merger, for
assisting Electromedics in the negotiations with Medtronic relating to the
consideration to be received by Electromedics' shareholders. Such additional fee
is payable at the time of, and contingent upon, the consummation of the Merger
or other acquisition transaction involving Electromedics consummated pursuant to
an agreement or commitment entered into prior to November 1, 1995. Electromedics
has also agreed to reimburse DBI for its out-of-pocket expenses, including
reasonable fees and disbursements of counsel, not to exceed $35,000 without
prior approval of Electromedics. Electromedics has also agreed to indemnify DBI
against certain liabilities, including those arising under securities laws.
DBI is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. DBI makes a market in Electromedics Common Stock.
In the course of its market making and other trading activities, DBI may, from
time to time, have a long or short position in, and buy and sell securities of,
Electromedics and Medtronic. DBI also periodically publishes research reports
regarding medical device industry companies, including Electromedics and
Medtronic. The board of directors of DBI's parent company, Inter-Regional
Financial Group, Inc., elected two new directors at its meeting on February 1,
1994, including Robert L. Ryan, Senior Vice President and Chief Financial
Officer of Medtronic.
VOTE REQUIRED
Approval of the Merger requires the affirmative vote of the holders of a
majority of the outstanding shares of Electromedics Common Stock. Each holder of
Electromedics Common Stock outstanding as of the Record Date is entitled to one
vote for each share held. On the Record Date, there were 14,056,800 shares of
Electromedics Common Stock outstanding. Of such shares, 714,405 shares
(approximately 5.1% of the outstanding shares of Electromedics Common Stock) are
held by directors and executive officers of Electromedics and 346,359 shares
(approximately 2.5% of the outstanding shares of Electromedics Common Stock) are
held by Medtronic. Electromedics' directors and executive officers have executed
Agreements to Facilitate Merger under which such persons have agreed to vote the
shares of Electromedics Common Stock held by them in favor of the Merger.
Medtronic intends to vote all of the shares of Electromedics Common Stock held
by it in favor of the Merger.
Medtronic, as the sole shareholder of Merger Subsidiary, has approved the
Merger Agreement. Approval of the Merger Agreement by Medtronic's shareholders
is not required under Minnesota law and is not being sought.
25
<PAGE>
CONVERSION OF ELECTROMEDICS COMMON STOCK IN THE MERGER
At the Effective Time, each share of Electromedics Common Stock issued and
outstanding immediately prior thereto, excluding 346,359 shares of Electromedics
Common Stock held by Medtronic and excluding any shares of Electromedics Common
Stock held by holders who have perfected their dissenters' rights under Colorado
law (see "The Merger -- Rights of Dissenting Electromedics Shareholders"), will
be automatically converted into the right to receive, at the election of each
shareholder, either (i) $6.875 in cash; or (ii) the portion of a share (the
"Conversion Ratio") of Medtronic Common Stock equal to $6.875 divided by the
average of the daily closing sale prices of Medtronic Common Stock as reported
on the New York Stock Exchange ("NYSE") Composite Tape (the "Average Market
Price") for the ten consecutive trading days ending on the third trading day
immediately preceding the Effective Time (the "Determination Period"), but not
less than $68.00 per share nor more than $98.00 per share. Subject to the
election and allocation procedures described below, each Electromedics
shareholder will have the right to elect to receive cash, Medtronic Common Stock
or a combination of cash and Medtronic Common Stock, in exchange for the
holder's Electromedics Common Stock.
The $6.875 amount per share of Electromedics Common Stock, payable in cash
or shares of Medtronic Common Stock as provided above, shall be reduced
proportionately if the sum of the number of shares of Electromedics Common Stock
outstanding at the Effective Time plus the number of shares subject to
outstanding options at the Effective Time exceeds 14,801,250 (the sum of
Electromedics shares outstanding and shares underlying options outstanding on
the date the Merger Agreement was signed). Electromedics does not anticipate
that such number will be exceeded at the Effective Time.
If, prior to the Effective Time, Medtronic splits or combines the Medtronic
Common Stock or pays a stock dividend or other stock distribution in shares of
Medtronic Common Stock, then the Conversion Ratio will be appropriately
adjusted.
Based on the number of shares of Electromedics Common Stock outstanding on
the Record Date (excluding 346,359 shares of Electromedics Common Stock held by
Medtronic and assuming a Conversion Ratio of .0859, or one Medtronic share for
every 11.64 Electromedics shares, calculated by using the March 15, 1994
Medtronic closing sale price of $80.00 as the assumed Average Market Price
solely for illustrative purposes of this paragraph), an estimated maximum
1,239,446 shares of Medtronic Common Stock may be issued in exchange for
Electromedics Common Stock upon consummation of the Merger, assuming that all of
the outstanding shares of Electromedics Common Stock are converted into
Medtronic Common Stock. Such shares would represent approximately 2.1% of the
approximately 58,594,332 shares of Medtronic Common Stock that would be
outstanding after consummation of the Merger. The actual number of Medtronic
shares that will be issued as a result of the Merger will also depend on the
number of Electromedics shares that holders elect to convert into cash rather
than Medtronic Common Stock.
Electromedics shareholders should understand that shareholders receiving
Medtronic Common Stock in the Merger will receive a number of Medtronic shares
determined pursuant to the Conversion Ratio, as defined at the beginning of this
section. Because the Conversion Ratio does not take into account an Average
Market Price of Medtronic Common Stock of less than $68.00 per share or more
than $98.00 per share, and because the market price of Medtronic Common Stock is
subject to fluctuation, the market value of the Medtronic shares that
Electromedics shareholders receive in the Merger (whether measured at the
Election Deadline, as defined below, or at the Effective Time of the Merger or
another date), may be less than or greater than the Average Market Price used
for purposes of determining the Conversion Ratio. In addition, because of such
fluctuations in the value of Medtronic shares, the market value of the Medtronic
Common Stock that Electromedics shareholders receive in the Merger may increase
or decrease following the Merger. See "Comparative Stock Prices and Dividends"
for information regarding the historical market prices of Medtronic Common
Stock.
26
<PAGE>
Subject to the election and allocation procedures described below, each
holder of Electromedics Common Stock may, by properly delivering an Election
Form to the Exchange Agent, indicate a preference as to the number of shares of
Electromedics Common Stock that such holder desires to have converted into cash
and the number of shares of Electromedics Common Stock that such holder desires
to have converted into Medtronic Common Stock. PROPERLY EXECUTED ELECTION FORMS,
ALONG WITH THE STOCK CERTIFICATES COVERED THEREBY (OR A GUARANTY OF DELIVERY OF
SUCH CERTIFICATES), MUST BE RECEIVED BY THE EXCHANGE AGENT BY 5:00 P.M., CENTRAL
TIME, ON APRIL 22, 1994 (THE "ELECTION DEADLINE"), WHICH IS THE LAST BUSINESS
DAY PRIOR TO THE DATE OF THE MEETING. Election Forms are being mailed separately
to holders of Electromedics Common Stock on the same date that this Proxy
Statement/ Prospectus is mailed. Holders of Electromedics Common Stock who do
not execute and deliver properly completed Election Forms by the Election
Deadline will receive, without regard to their preferences, Medtronic Common
Stock. See "Procedure for Submitting Election Forms" below.
RIGHT OF ELECTION BY HOLDERS OF ELECTROMEDICS COMMON STOCK
The Merger Agreement provides that each holder of Electromedics Common Stock
may, by properly completing and delivering to Norwest Bank Minnesota, N.A., as
the Exchange Agent, an Election Form as described below under "-- Procedure for
Submitting Election Forms," indicate the number of shares of Electromedics
Common Stock owned by such holder that such holder desires to have converted
into the right to receive cash in the Merger (a "Cash Election") and the number
of such shares that the holder desires to have converted into the right to
receive Medtronic Common Stock in the Merger (a "Stock Election").
Except as provided in the following sentence, each Electromedics shareholder
must submit only one Election Form for all shares of Electromedics Common Stock
held by such shareholder, indicating both the Cash Election and the Stock
Election for such holder (and the number of shares covered by each such
Election). Different Election Forms may be submitted for different portions of a
holder's shares only if each such Election Form covers all shares of
Electromedics Common Stock held on behalf of a particular beneficial owner.
Holders of record of shares of Electromedics Common Stock who act as nominees,
trustees, or in other representative capacities must certify that each such
Election Form submitted by them covers all the shares of Electromedics Common
Stock that they hold for a particular beneficial owner.
Two or more holders of shares of Electromedics Common Stock, either of whom
may be deemed constructively to own the other's shares of Electromedics Common
Stock by reason of the ownership attribution rules of Section 318 of the
Internal Revenue Code of 1986, as amended (the "Code"), may submit a combined
Election Form containing a single Election as to their shares of Electromedics
Common Stock. Any combined Election Form and change in or revocation of such
combined Election Form must be signed by or on behalf of all holders of the
Electromedics Common Stock covered thereby. All shares of Electromedics Common
Stock covered by a single combined Election Form held by holders of
Electromedics Common Stock submitting such combined Election Form will be
treated as being held by a single holder.
If Cash Elections are received for a number of shares of Electromedics
Common Stock that is more than the Cash Conversion Number (as hereinafter
defined), such Elections will be subject to the allocation procedures described
below under "-- Cash Elections; Allocation and Proration."
The "Cash Conversion Number" means the number of shares of Electromedics
Common Stock to be converted into the right to receive cash in the Merger
pursuant to the Merger Agreement, which, assuming exercise of all outstanding
Electromedics options, shall be not greater than 6,939,291 shares minus the
aggregate number of shares of Electromedics Common Stock, if any, as to which
the holders of such shares have properly exercised dissenters' rights pursuant
to Colorado law.
27
<PAGE>
CASH ELECTIONS; ALLOCATION AND PRORATION
If Cash Elections are received for a number of shares of Electromedics
Common Stock which is not, in the aggregate, more than the Cash Conversion
Number, then each share of Electromedics Common Stock covered by a Cash Election
will be converted into the right to receive cash in the Merger.
If Cash Elections are received for a number of shares of Electromedics
Common Stock which is more than the Cash Conversion Number, then the shares of
Electromedics Common Stock for which Cash Elections have been received will be
converted into the right to receive cash and Medtronic Common Stock in the
Merger as follows:
(i) A cash proration factor (the "Cash Proration Factor") will be
determined by dividing the Cash Conversion Number by the total number of
shares of Electromedics Common Stock with respect to which effective Cash
Elections were made.
(ii) The number of shares of Electromedics Common Stock covered by each
Cash Election to be converted into the right to receive cash shall be
determined by multiplying the Cash Proration Factor by the total number of
shares covered by such Election, rounded to the next lowest whole number.
(iii) Shares of Electromedics Common Stock covered by a Cash Election and
not converted into a right to receive cash in the Merger as set forth above,
and shares of Electromedics Common Stock not covered by a Cash Election,
will be converted into Medtronic Common Stock in the Merger.
NON-ELECTING SHARES
Any outstanding shares of Electromedics Common Stock (other than shares
owned by Medtronic and other than shares held by Electromedics shareholders who
have perfected their dissenters' rights under Colorado law) as to which an
Election is not in effect at the Election Deadline, including any shares of
Electromedics Common Stock with respect to which Medtronic and Electromedics
determine for any reason that an Election was not properly made, will be called
"Non-Electing Shares." Each Non-Electing Share will be converted into Medtronic
Common Stock in the Merger.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Medtronic Common
Stock will be issued, and no Medtronic dividend, stock split or interest will
relate to any fractional share. No fractional share interests will entitle the
owner thereof to vote or to any rights of a shareholder of Medtronic. In lieu of
any such fractional shares, each holder of Electromedics Common Stock who
otherwise would be entitled to receive a fractional share of Medtronic Common
Stock in the Merger will receive an amount of cash (without interest) determined
by multiplying (i) the Average Market Price by (ii) the fractional share
interest to which such holder would otherwise be entitled.
PROCEDURE FOR SUBMITTING ELECTION FORMS
No Election will be effective unless a properly completed and signed
Election Form, ACCOMPANIED BY CERTIFICATES for the shares of Electromedics
Common Stock to which such Election Form relates OR BY A GUARANTY OF DELIVERY OF
SUCH CERTIFICATES in the form set forth in the Election Form by a member of any
national securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States,
provided that such certificates are in fact delivered by the time set forth in
such guaranty of delivery, has been received by the Exchange Agent by April 22,
1994, the Election Deadline. Failure to deliver shares covered by such a
guaranty of delivery within five business days after the Election Deadline will
invalidate any otherwise properly made Election. REQUESTS FOR ADDITIONAL
ELECTION FORMS, AND QUESTIONS OR REQUESTS FOR ASSISTANCE IN COMPLETING AND
SUBMITTING ELECTION FORMS, MAY BE DIRECTED TO CHEMICAL BANK AT THE ADDRESS OR
TELEPHONE NUMBER LISTED ON THE COVER OF THIS PROXY STATEMENT/PROSPECTUS.
28
<PAGE>
An Election relating to shares of Electromedics Common Stock shall be deemed
to have been automatically revoked as of the Election Deadline if the holder of
such shares has filed and not withdrawn as of the Effective Time of the Merger a
valid claim for dissenters' rights under Colorado law with respect to such
shares. See "The Merger -- Rights of Dissenting Electromedics Shareholders."
Any holder of Electromedics Common Stock may at any time prior to the
Election Deadline change his or her Election Form by written notice received by
the Exchange Agent at or prior to the Election Deadline accompanied by a
properly completed, revised Election Form (clearly indicating that it is
revising a previously submitted Election Form). Any holder of Electromedics
Common Stock also may at any time prior to the Election Deadline revoke his or
her Election Form by written notice received by the Exchange Agent at or prior
to the Election Deadline or by withdrawal prior to the Election Deadline of his
or her certificates representing Electromedics Common Stock or the guaranty of
delivery of such certificates previously deposited with the Exchange Agent. In
the event that a single Election Form is submitted for shares held by more than
one holder of Electromedics Common Stock, any change, revision or revocation of
such Election Form must be signed by or on behalf of all such shareholders who
signed such Election Form.
OTHER RULES
Medtronic and Electromedics have the right to make additional rules not
inconsistent with the Merger Agreement governing the validity of the Election
Forms, the manner and extent to which Elections are to be taken into account in
selecting the shares of Electromedics Common Stock to be converted either into
the right to receive cash, Medtronic Common Stock or a combination thereof, the
issuance and delivery of certificates for shares of Medtronic Common Stock into
which shares of Electromedics Common Stock are converted in the Merger, and the
payment for shares of Electromedics Stock converted into the right to receive
cash in the Merger. All such rules and determinations will be final and binding
on all holders of Electromedics Common Stock.
PAYMENT OF CASH AND EXCHANGE OF SHARES OF ELECTROMEDICS COMMON STOCK
As soon as practicable after the Effective Time, the Exchange Agent will
furnish a letter of transmittal to holders of a certificate or certificates that
prior to the Effective Time represented shares of Electromedics Common Stock,
but only if and to the extent that such certificates were not previously
submitted to the Exchange Agent with an Election Form (or pursuant to a duly
executed guaranty of delivery). The letter of transmittal will include
instructions regarding the surrender of certificates representing shares of
Electromedics Common Stock in exchange for certificates representing shares of
Medtronic Common Stock. Electromedics shareholders who filed an effective
Election Form prior to the Election Deadline, and who surrendered their
certificates at that time or later pursuant to a guaranty of delivery, will not
receive a letter of transmittal.
As soon as practicable after the Effective Time, the Exchange Agent will
distribute to holders of shares of Electromedics Common Stock, upon surrender to
the Exchange Agent (unless previously surrendered with an Election Form or
pursuant to a guaranty of delivery) of one or more certificates for such shares
of Electromedics Common Stock for cancellation, (i) a bank check in the amount
of cash into which the shares represented by the certificate(s) have been
converted (including cash in lieu of fractional shares) and/or (ii) one or more
certificates representing the number of whole shares of Medtronic Common Stock
into which the shares represented by the certificate(s) have been converted.
Holders of Electromedics Common Stock will not be entitled to receive interest
on any cash to be received in the Merger.
After the Effective Time, certificates representing shares of Electromedics
Common Stock converted into Medtronic Common Stock in the Merger will be deemed
for all purposes to evidence ownership of the shares of Medtronic Common Stock
into which they were converted. Holders of Electromedics Common Stock will be
entitled to any dividends that become payable to persons who are holders of
record of Medtronic Common Stock as of a record date that follows the Effective
Time, but only after they have surrendered their certificates representing
shares of Electromedics Common
29
<PAGE>
Stock for exchange. Any such dividends will be remitted to each Electromedics
shareholder entitled thereto, without interest, at the time that such
certificates representing shares of Electromedics Common Stock are surrendered
for exchange, subject to any applicable abandoned property, escheat or similar
law. Holders of Electromedics Common Stock will not be entitled, however, to
dividends that become payable after the Effective Time to persons who were
holders of record of Medtronic Common Stock as of a record date prior to the
Effective Time.
SHAREHOLDER RIGHTS PLAN
Each Electromedics shareholder entitled to receive shares of Medtronic
Common Stock pursuant to the Merger will receive, together with each share of
Medtronic Common Stock, one Medtronic Preferred Stock Purchase Right pursuant to
the Medtronic Shareholder Rights Plan. Such Right will be represented by the
certificate representing such share of Medtronic Common Stock. See "Comparative
Rights of Medtronic Shareholders and Electromedics Shareholders -- Shareholder
Rights Plan."
TREATMENT OF STOCK OPTIONS
Under the terms of the Merger Agreement, Electromedics will cause each
outstanding option to purchase shares of Electromedics Common Stock to be vested
prior to the Effective Time. Electromedics will provide 30 days' prior written
notice of cancellation of such options to the holders of each of the options,
contingent on the occurrence of the Merger. As provided in such notice, the
holders of such options may, prior to the Effective Time of the Merger, exercise
such options, in whole or in part, and purchase the shares of Electromedics
Common Stock subject to such options. The holders of any options so exercised
will have the same rights as other shareholders of Electromedics Common Stock to
elect to receive cash or Medtronic Common Stock, or a combination of the two,
pursuant to the Merger as described in this Proxy Statement/Prospectus. If any
options are not so exercised prior to the Effective Time, they will terminate at
the Effective Time, and the holders will have no further rights to purchase
stock pursuant to such options.
CONDUCT OF BUSINESS OF ELECTROMEDICS PENDING THE MERGER
Electromedics has agreed that, prior to consummation of the Merger, unless
Medtronic agrees otherwise, it will conduct its business only in the ordinary
course, it will use its best efforts to preserve intact its business
organization and relationships with third parties, and it will not: declare or
pay any dividends or other distributions; amend or alter any material term of
its securities; incur, assume or guarantee any indebtedness other than in the
ordinary course of business; create, assume or incur any lien on any material
asset; issue or repurchase any securities (other than issuances of securities
upon the exercise of stock options previously granted); alter its accounting
principles; increase the compensation or benefits of any of its directors,
officers or other employees (except under existing agreements and except for
certain consulting agreements, severance agreements, and key employee retirement
agreements); amend its Articles of Incorporation or Bylaws; sell any property,
pay any liabilities or waive any claims, except in the ordinary course of
business; make capital investments in any other company; purchase fixed assets
exceeding a specified aggregate purchase price; distribute mass communications
to any group without allowing Medtronic to comment on them; subject to the
fiduciary duties of the Electromedics Board of Directors, merge or consolidate
with any person, acquire the stock or assets of any business, liquidate,
dissolve or reorganize, take or fail to take any action that would cause its
representations and warranties in the Merger Agreement to be inaccurate, or
enter into or make any material change in any material agreements, except in the
ordinary course and consistent with past practice; or agree or commit to do any
of the foregoing.
Electromedics has agreed that (except as is required by the fiduciary duties
of Electromedics' directors and officers as so advised by independent counsel)
neither Electromedics nor any of its representatives or affiliates will,
directly or indirectly, solicit, initiate or encourage any acquisition proposal,
or engage in any negotiations with, or provide any information to, any person,
entity or group (other than Medtronic) that has made or may make an acquisition
proposal with respect to Electromedics or any subsidiary. For these purposes, an
"acquisition proposal" would include a proposal involving a merger or
consolidation, a purchase or lease of 10% or more of the assets, an
30
<PAGE>
acquisition (however effected) of 10% or more of the voting power, or a
disposition (except in the ordinary course) of all or part of the intellectual
property rights or technology of Electromedics or any subsidiary. Electromedics
has agreed that it will notify Medtronic promptly regarding the terms of any
such proposal that Electromedics may receive, and that it will not enter into an
agreement with respect to any such proposal for at least three days after
Medtronic receives such notice.
Pursuant to the Merger Agreement and a confidentiality agreement between
Medtronic and Electromedics, Electromedics has agreed to give Medtronic and its
representatives access to Electromedics' offices, properties, books and records,
and to furnish to Medtronic and its representatives such financial and operating
data and other information as Medtronic may reasonably request, and will have
its employees and representatives cooperate with Medtronic in Medtronic's
investigation of the business of Electromedics.
CONFLICTS OF INTEREST
Except for 346,359 shares of Electromedics Common Stock owned by Medtronic,
neither Medtronic nor any of its executive officers or directors owns or has
agreed to purchase any shares of Electromedics Common Stock. Electromedics'
executive officers and directors collectively hold 714,405 shares of
Electromedics Common Stock and also hold outstanding options to purchase 505,000
shares of Electromedics Common Stock, which will be exercised at or before the
Effective Time, and are entitled to receive for all shares owned at the
Effective Time the amounts payable to other Electromedics shareholders pursuant
to the Merger.
Three of Electromedics' executive officers, F. James Lynch, Chairman of the
Board, President and Chief Executive Officer, Richard B. Carlock, Vice President
and Chief Financial Officer, and Howard S. Prosky, Vice President, Manufacturing
and a director, have previously existing Key Employee Retirement Agreements with
Electromedics that are affected by the Merger. The agreements entitle such
employees to begin to receive immediately the full amount of retirement benefits
due under the agreement upon the occurrence of an "unapproved change of
control," provided that they terminate their employment with Electromedics
within one year after the unapproved change of control and do not become
employed by a competitor of Electromedics within a specified period thereafter.
The agreements define the execution of a definitive merger agreement by
Electromedics, among other events, as an unapproved change of control.
Commencing on the first day of the month following the Effective Time of the
Merger, each of these employees will receive payments in an annual amount equal
to 55% of the average annual total cash compensation received by the employee
for the five full calendar years of employment preceding the Merger (or such
lesser period, if applicable, that the employee has actually been employed by
Electromedics). Payments under the agreements continue until the earlier of the
death of the employee and the employee's surviving spouse, if any, or until ten
years after the Merger. Electromedics has estimated that the amount of the
payments that Messrs. Lynch, Carlock and Prosky will receive under the Key
Employee Retirement Agreements will be $871,000, $631,000, and $634,000,
respectively. Messrs. Lynch, Carlock and Prosky will receive payments pursuant
to the Key Employee Retirement Agreements irrespective of the Consulting
Agreements that each has entered into, as described below. Electromedics has
also entered into Severance Agreements with two other executive officers of
Electromedics which entitle the employee to a severance payment equal to 50% of
the employee's monthly base salary at termination multiplied by the number of
years the employee has been employed by Electromedics.
Electromedics has entered into Consulting Agreements under which Merger
Subsidiary will retain the services of Messrs. Carlock, Lynch and Prosky for a
period of two years, beginning on the effective date of the Merger. During the
term of the Consulting Agreement, Messrs. Carlock, Lynch and Prosky will receive
compensation equal to their base salary in effect for the 12-month period ended
November 1993. These persons may also participate in company benefit programs.
Electromedics has agreed to reimburse Mr. Carlock the amount of excise tax
liability that he will incur as a result of the Merger under Section 280G of the
Internal Revenue Code of 1986. In addition,
31
<PAGE>
Electromedics will reimburse Mr. Carlock the amount of any income tax liability
incurred as a result of the reimbursement of excise tax liability. In no event
will the payments described in this paragraph exceed $200,000.
Medtronic has agreed to cause Merger Subsidiary to provide to the directors
and officers of Electromedics indemnification equivalent to that provided by the
Articles of Incorporation and Bylaws of Electromedics with respect to matters
occurring prior to the Effective Time. Medtronic has also agreed to cause Merger
Subsidiary to provide, for a period of six years, officers' and directors'
liability insurance with respect to acts occurring prior to the Effective Time.
Specifically, Medtronic has agreed to cause Merger Subsidiary to indemnify the
directors and officers of Electromedics for a period of six years with respect
to acts or omissions occurring prior to the Effective Time and any damage,
liability, payment or expense incurred by such officers or directors in
connection with a claim by SJM or any affiliate of SJM relating to the Merger,
the SJM merger agreement with Electromedics, or claims that SJM is entitled to
payment under the SJM merger agreement. Medtronic has deposited the sum of
$3,000,000 into an escrow account to secure such indemnity. Medtronic has
further agreed to release any claim it may have against any officer, director,
employee or agent of Electromedics in connection with Electromedics entering
into the SJM merger agreement. See "The Merger -- SJM Termination Fee" and "--
Indemnification."
As a result of the foregoing, Messrs. Lynch, Carlock and Prosky have a
conflict of interest in connection with the Merger. Each of these persons
participated in the discussions and deliberations of the Electromedics Board of
Directors in connection with the Merger, and Messrs. Lynch and Prosky voted in
favor of the Merger. Mr. Carlock is not a Board member.
CONDITIONS; WAIVER
The respective obligations of Medtronic, Merger Subsidiary and Electromedics
to effect the Merger are subject to the satisfaction at or prior to the
consummation of the Merger of certain conditions, including, among others: (a)
the approval by the Electromedics shareholders of the Merger; (b) the
effectiveness of the Registration Statement; (c) the expiration or termination
of the waiting period applicable to the consummation of the Merger under the HSR
Act; (d) the shares of Medtronic Common Stock issuable in the Merger having been
duly authorized for listing by the NYSE, subject to official notice of issuance;
and (e) the absence of an order, decree or injunction by any federal or state
court or other governmental body, agency or official that would prohibit or
materially delay consummation of the Merger (except for any proceedings brought
by SJM or its affiliates in connection with the SJM merger agreement). See "The
Merger -- SJM Termination Fee."
In addition, the obligations of Electromedics to effect the Merger are
subject to the satisfaction at or prior to the Closing of the conditions that:
(a) Medtronic and Merger Subsidiary have performed in all material respects
their obligations under the Merger Agreement required to be performed by them;
(b) each representation and warranty of Medtronic and Merger Subsidiary
contained in the Merger Agreement shall be true in all material respects as of
the Effective Time; (c) Electromedics shall have received an opinion that the
Merger is fair from a financial point of view to the Electromedics shareholders;
(d) Electromedics shall have received an opinion of Deloitte & Touche, its tax
advisors, substantially to the effect that the Merger will constitute a
"tax-free" reorganization for federal income tax purposes; and (e) no events
shall have occurred that have caused a material adverse change in the business
or condition of Medtronic. See "The Merger -- Certain Federal Income Tax
Consequences."
In addition, the obligations of Medtronic and Merger Subsidiary to effect
the Merger are subject to the satisfaction at or prior to the Closing of the
conditions that: (a) Electromedics shall have performed in all material respects
its obligations under the Merger Agreement required to be performed by it; (b)
each representation and warranty of Electromedics contained in the Merger
Agreement shall be true in all material respects as of the Effective Time; (c)
all necessary consents shall have been received; (d) Medtronic shall have
received written resignations from each of the directors
32
<PAGE>
and officers of Electromedics effective immediately following the Effective
Time; and (e) no events shall have occurred that have caused a material adverse
change in the business or condition of Electromedics.
AMENDMENT AND TERMINATION OF THE MERGER AGREEMENT
Any of the provisions of the Merger Agreement may be amended by written
agreement of the respective parties at any time before or after approval of the
Plan of Merger by the Electromedics shareholders; provided, however, that after
such approval no amendment may be made to the Plan of Merger attached hereto as
Appendix A without shareholder approval.
The Merger Agreement may be amended and the Merger abandoned at any time
prior to the Effective Time, whether before or after approval of the Plan of
Merger by the Electromedics shareholders, only as follows:
(a) By mutual consent of the Board of Directors of each of Medtronic and
Electromedics;
(b) By either Medtronic or Electromedics if the Merger has not been
effected by May 31, 1994, except that a party cannot terminate the Merger
Agreement if its own willful failure to perform under the Merger Agreement
is the primary cause of the Merger not being effected by such date;
(c) By either Medtronic or Electromedics if a court or other
governmental authority has issued a final, nonappealable order, decree or
ruling that permanently enjoins or prohibits the Merger;
(d) By either Medtronic or Electromedics if the Electromedics
shareholders do not vote to approve the Plan of Merger, except that a party
cannot terminate the Merger Agreement if its own willful failure to perform
under the Merger Agreement is the primary cause of the failure of the
Electromedics shareholders to approve the Merger;
(e) By Medtronic if it is not in material breach of its obligations
under the Merger Agreement and Electromedics has solicited or entertained a
competing offer to acquire Electromedics, or negotiated the terms of any
such offer, or recommended, approved, or entered into a definitive agreement
regarding any such offer, or withdrawn or modified (in a manner adverse to
Medtronic) its recommendation of the Merger;
(f) By Electromedics if it is not in material breach of its obligations
under the Merger Agreement and its Board of Directors has accepted a
competing offer by a party other than Medtronic to acquire Electromedics,
and has paid to Medtronic the termination fee described below; or
(g) By either Medtronic or Electromedics if there occurs a material
breach of any representation, warranty or obligation under the Merger
Agreement on the part of the other that cannot be cured within 30 days.
Electromedics has agreed to pay Medtronic $2,000,000 if the Merger Agreement
is terminated as described in paragraph (e) or (f) above or if each of the
following occurs: (i) a third party either makes an acquisition proposal or in
fact acquires 10% or more of the outstanding Electromedics Common Stock prior to
the Meeting, (ii) the Electromedics shareholders do not approve the Merger,
(iii) the Merger Agreement is terminated, and (iv) by December 23, 1994, either
Electromedics enters into an agreement relating to an acquisition proposal or an
acquisition proposal is in fact consummated.
EXPENSES AND FEES
Whether or not the Merger is consummated, all out-of-pocket expenses
incurred in connection with the Merger (including but not limited to accounting
and legal fees) and the transactions contemplated thereby will be paid by the
party incurring such costs and expenses, except that Medtronic and
33
<PAGE>
Electromedics will share equally all expenses related to printing and mailing
the Registration Statement and this Proxy Statement/Prospectus, all SEC
registration fees and Blue Sky registration fees applicable to the Merger, the
filing fees required under the HSR Act and the costs and fees charged by the
Exchange Agent and the Proxy Solicitor/Information Agent.
RESTRICTIONS ON RESALE OF MEDTRONIC COMMON STOCK
The Medtronic Common Stock issuable in connection with the Merger has been
registered under the Act, but this registration does not cover resales by
shareholders of Electromedics who may be deemed to control or be under common
control with Electromedics at the time of the Meeting ("Affiliates"). Affiliates
may not sell their shares of Medtronic Common Stock acquired in connection with
the Merger except pursuant to an effective registration statement under the Act
covering such shares, or in compliance with Rule 145 promulgated under the Act
or another applicable exemption from the registration requirements of the Act.
Prior to the Effective Time, Electromedics will deliver to Medtronic a list
identifying all persons who, in Electromedics' opinion, upon advice of counsel,
are Affiliates of Electromedics for purposes of Rule 145. Electromedics has
agreed to use its best efforts to cause each person who is identified as an
Affiliate to deliver to Medtronic, at or prior to the Effective Time, an
agreement satisfactory to the parties that such persons (i) will not offer to
sell, sell, or otherwise dispose of any shares of Medtronic Common Stock
received in the Merger in violation of the Act and (ii) have no present
intention to sell, transfer or otherwise dispose of any of the Medtronic Common
Stock received in the Merger. It is expected that Affiliates will be able to
sell such shares without registration and in accordance with the volume, manner
of sale, and other applicable limitations of the Act and the rules and
regulations of the Commission thereunder.
It is estimated that Affiliates of Electromedics will receive a maximum of
approximately 104,747 shares of Medtronic Common Stock upon consummation of the
Merger (assuming full exercise of all outstanding Electromedics options held by
such Affiliates, assuming a Conversion Ratio of .0859 and assuming that all such
Affiliates elect to receive solely Medtronic Common Stock in the Merger). Such
shares would constitute less than approximately 0.2% of the total number of
shares of Medtronic Common Stock anticipated to be outstanding immediately after
the Effective Time after giving effect to the shares issued pursuant to the
Merger. Solely for illustrative purposes of the foregoing estimate, the
Conversion Ratio was calculated by using the March 15, 1994 Medtronic closing
sale price of $80.00 as the assumed Average Market Price. See "The Merger --
Conversion of Electromedics Common Stock in the Merger."
DEREGISTRATION OF ELECTROMEDICS COMMON STOCK
If the Merger is consummated, the Electromedics Common Stock will cease to
be quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market and Medtronic will apply to the Commission
for the deregistration of Electromedics Common Stock under the Exchange Act.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a purchase of Electromedics by Medtronic
in accordance with generally accepted accounting principles. Accordingly,
Electromedics' results of operations will be included in Medtronic's
consolidated results of operations from and after the Effective Time. For
purposes of preparing Medtronic's consolidated financial statements, Medtronic
will establish a new accounting basis for Electromedics' assets and liabilities
based upon the fair values thereof and Medtronic's purchase price, including the
costs of the acquisition. A final determination of required purchase accounting
adjustments and of the fair value of the assets and liabilities of Electromedics
has not yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the comparative pro forma per share financial
information appearing elsewhere in the Summary of this Proxy
Statement/Prospectus are preliminary and subject to change.
34
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general description of the federal income tax consequences of
the Merger does not take into account the facts and circumstances of any
particular shareholder of Electromedics. Each Electromedics shareholder should
consult his or her advisor about the specific tax consequences to him or her of
the proposed transactions, including the application and effect of state, local,
foreign, and other tax laws. Neither Medtronic nor Electromedics has sought a
ruling from the Internal Revenue Service with respect to the income tax
consequences of the Merger and related transactions, and there can be no
assurance that the Internal Revenue Service will not take a different view of
the transaction.
Deloitte & Touche, tax advisor to Electromedics, has advised Electromedics
concerning the federal income tax consequences of the proposed Merger. In the
opinion of Deloitte & Touche, the federal income tax consequences of the
proposed Merger will be:
(a) The Merger will be treated as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
(b) Medtronic, Electromedics, and Merger Subsidiary will each be "a
party to a reorganization" within the meaning of Section 368(b) of the Code.
(c) No gain or loss will be recognized to the Electromedics shareholders
upon their receipt of Medtronic Common Stock in exchange for their
Electromedics Common Stock. If an Electromedics shareholder receives cash,
however, he or she will be required to recognize the gain, if any, that he
or she realizes in the transaction, but not in excess of the cash received
by such shareholder. The gain realized by each shareholder is equal to the
excess of the fair market value of the Medtronic Common Stock and the cash
received by such shareholder over the shareholder's basis in his or her
Electromedics Common Stock. As to each shareholder, the recognized portion
of the realized gain will be treated (i) as capital gain or, (ii) if the
exchange has the effect of the distribution of a dividend under the tests
set forth in Sections 356 and 302 of the Code, then as a dividend to the
extent of the shareholder's share of Electromedics' accumulated earnings and
profits, with the remainder of the gain, if any, treated as capital gain. In
applying the dividend tests under Section 302 of the Code to a particular
Electromedics shareholder, stock of Electromedics or Medtronic that is held
by a person related to the Electromedics shareholder may be deemed to be
owned by such shareholder, in accordance with the rules under Section 318 of
the Code.
Under Section 302, a redemption will be treated as a sale or exchange of
stock (and not as a dividend) if it is a "complete redemption" of a
shareholder's interest, if it is "substantially disproportionate" with
respect to a shareholder, or if it is "not essentially equivalent to a
dividend." The constructive ownership rules of Section 318 are applicable
for purposes of Section 302.
The Supreme Court has taken the position that, in determining whether an
exchange has the effect of the distribution of a dividend, the application
of Section 302 of the Code is determined as if the gain is recognized as a
result of a post-reorganization redemption of the acquiring corporation's
stock. Thus, each shareholder will be treated as having received solely
Medtronic Common Stock for the shareholder's Electromedics Common Stock, a
portion of which Medtronic stock will then be treated as redeemed by
Medtronic for an amount equal in value to the cash that such shareholder
will actually receive. The determination as to whether an exchange has the
effect of the distribution of a dividend is made on a
shareholder-by-shareholder basis.
If an Electromedics shareholder terminates his or her interest in a
complete redemption of such shareholder's stock by electing to receive only
cash, he or she should receive capital gain or loss treatment. However, to
the extent that persons related to such Electromedics shareholder continue
to hold stock in Medtronic after the Merger, the rules of Section 318 may
require dividend treatment.
35
<PAGE>
A distribution will be "substantially disproportionate" with respect to
a particular shareholder if that shareholder's actual and constructive
proportionate interest in Medtronic after his or her shares are treated as
redeemed is less than 80% of that shareholder's actual and constructive
proportionate interest in Medtronic immediately prior to such redemption
and, after such redemption, the shareholder owns, actually and
constructively, less than 50% of the total combined voting power of all
stock entitled to vote. The rules of Section 318 are also applicable to the
discussion in this paragraph.
Even if a shareholder fails to meet the "80% test" described above, an
exemption from dividend treatment may nevertheless be available depending
upon the individual shareholder's facts and circumstances. For example,
under the facts of a published ruling of the Internal Revenue Service, the
receipt of cash by a shareholder whose relative stock interest was minimal
(approximately .0001%) and who exercised no control over the affairs of the
issuing corporation was treated as "not essentially equivalent to a
dividend." Electromedics shareholders should consult their own personal tax
advisors as to the possible application of the effect of the ruling to their
own situation. The constructive ownership rules of Section 318 described
above are also applicable to the discussion in this paragraph.
(d) The aggregate basis of the Medtronic Common Stock to be received by
an Electromedics shareholder will be the same as the aggregate basis of the
Electromedics Common Stock surrendered in exchange therefor, decreased by
the amount of cash received, and increased by the amount that was treated as
a dividend, if any, and the amount of gain recognized on the exchange (not
including any portion of such gain that was treated as a dividend).
(e) The holding period of the Medtronic Common Stock to be received by
an Electromedics shareholder will include the holding period of the
Electromedics Common Stock surrendered in exchange therefor, provided that
the Electromedics Common Stock was held as a capital asset on the date of
the exchange.
(f) An Electromedics shareholder who receives solely cash for his or her
Electromedics Common Stock pursuant to the exercise of dissenters' rights,
or pursuant to a Cash Election, will be obligated to report either (i)
capital gain or loss equal to the difference between the cash received and
the shareholder's basis in his or her Electromedics Common Stock, if such
Electromedics Common Stock is held as a capital asset on the date of the
Merger, or (ii) dividend income, depending on whether the redemption
qualifies for sale or exchange treatment under the tests set forth in
Section 302(b) of the Code, as described in greater detail above. Most such
shareholders should receive capital gain or loss treatment, if the deemed
redemption of their Electromedics Common Stock constitutes a complete
termination of their interest in Electromedics (and Medtronic, after the
Merger). To the extent that persons related to any such shareholder continue
to hold stock in Medtronic after the Merger, however, the rules of Section
318 of the Code may require dividend treatment unless Section 302 permits
those rules to be waived in a particular instance.
(g) An Electromedics shareholder who receives cash in lieu of a
fractional share of Medtronic Common Stock will generally be obligated to
report capital gain or loss equal to the difference between the cash
received and the shareholder's basis in his or her Electromedics Common
Stock for which the fractional share would otherwise be received.
In describing its conclusions as to the tax consequences of the transaction,
Deloitte & Touche is relying on certain representations of Medtronic and
Electromedics.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS, ALL OF WHICH ARE SUBJECT TO CHANGE. ANY SUCH CHANGE, WHICH MAY
OR MAY NOT BE RETROACTIVE, COULD ALTER THE TAX CONSEQUENCES TO ELECTROMEDICS OR
ITS SHAREHOLDERS DESCRIBED ABOVE. THE FOREGOING DISCUSSION DOES NOT ADDRESS THE
TAX CONSEQUENCES, IF ANY, OF THE MERGER
36
<PAGE>
UNDER APPLICABLE STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. ELECTROMEDICS
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS,
THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER APPLICABLE TAX
LAWS AND THE POSSIBLE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
SJM TERMINATION FEE
The merger agreement dated December 6, 1993 between Electromedics and SJM
included a "termination fee" of $3,000,000 to be paid by Electromedics to SJM
under certain circumstances set forth in the agreement, including termination by
Electromedics of the agreement with SJM. By letter dated December 23, 1993,
Electromedics terminated its agreement with SJM in connection with the
acceptance of the proposal by Medtronic to enter into the Merger Agreement with
Medtronic. On January 3, 1994, SJM filed suit against Medtronic and
Electromedics in the Hennepin County District Court, State of Minnesota, seeking
to recover the $3,000,000 termination fee plus attorneys' fees.
In connection with its Merger Agreement with Electromedics, Medtronic has
agreed to indemnify Electromedics and its directors, officers, employees and
agents, with certain exceptions, from any liability incurred by Electromedics
and such persons in connection with the SJM litigation. To partially secure this
indemnity, Medtronic has deposited $3,000,000 into an escrow account. See "The
Merger -- Background of the Merger."
INDEMNIFICATION
Under the Merger Agreement, Medtronic has agreed to cause Merger Subsidiary,
as the surviving corporation in the Merger, to indemnify the present and former
officers and directors of Electromedics for a period of six years following the
Merger with respect to (i) acts or omissions occurring prior to the Effective
Time, to the extent that they were indemnified under Electromedics' Articles of
Incorporation and Bylaws as of the date of the Merger Agreement, and (ii)
certain claims by SJM or any of its affiliates in connection with Electromedics'
merger agreement with SJM that arise by reason of the negotiation, execution or
performance of the Merger Agreement. See "The Merger -- SJM Termination Fee."
Medtronic also agreed to maintain officers' and directors' liability insurance
substantially comparable to that previously maintained by Electromedics.
In addition, under the Merger Agreement, regardless of whether the Merger
occurs (unless a breach of the Merger Agreement by Electromedics causes the
Merger not to occur), Medtronic has agreed to indemnify Electromedics and each
director, officer, employee or agent of Electromedics with respect to certain
claims by SJM or any of its affiliates in connection with Electromedics' merger
agreement with SJM that arise by reason of the negotiation, execution or
performance of the Merger Agreement.
REGULATORY REQUIREMENTS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), certain acquisition transactions, including the Merger, cannot be
consummated unless certain information has been furnished to the Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and certain waiting period
requirements have been satisfied. Medtronic and Electromedics each furnished
such information and the requisite waiting period expired on February 13, 1994.
See "The Merger -- Conditions; Waiver."
RIGHTS OF DISSENTING ELECTROMEDICS SHAREHOLDERS
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the Colorado Corporation Code (the "Colorado
Statute") and is qualified in its entirety by reference to the full text of
Section 7-4-123 and 7-4-124 of the Colorado Statute attached to this Proxy
Statement/Prospectus as Appendix B. Any shareholder of Electromedics who wishes
to exercise such dissenters' rights or who wishes to preserve his or her right
to do so should review the following discussion and Appendix B carefully,
because failure to timely and properly comply with the procedures specified will
result in the loss of dissenters' rights under the Colorado Statute. Medtronic
shareholders are not entitled to dissenters' rights in connection with the
Merger.
37
<PAGE>
PROCEDURE TO PRESERVE DISSENTERS' RIGHTS. Under Colorado law, any
Electromedics shareholder who follows the procedures set forth in Section
7-4-124 of the Colorado Statute will be entitled to receive payment in cash of
the "fair value" of such shareholder's shares.
Under Section 7-4-124 of the Colorado Statute, if a corporation calls a
shareholders' meeting at which a plan of merger to which such corporation is a
party is to be voted upon, the notice of the meeting must inform each
shareholder of the right to dissent and must include a copy of sections 7-4-123
and 7-4-124 of the Colorado Statute and a brief description of the procedure to
be followed under such sections. This Proxy Statement/Prospectus constitutes
such notice to the shareholders of Electromedics and the applicable statutory
provisions of the Colorado Statute are attached to this Proxy
Statement/Prospectus as Appendix B. An Electromedics shareholder who fails to
follow this procedure will not be entitled to receive dissenters' rights.
The Merger must be approved by the holders of a majority of the outstanding
shares of Electromedics Common Stock. A shareholder who wishes to exercise
dissenters' rights must file with the corporation before the vote on the Merger
a written notice of intent to demand the fair value of the shares owned by such
shareholder and must not vote his or her shares in favor of the Merger.
As used in this section regarding dissenters' rights, the "fair value" of
dissenting shares means the value of the shares of the corporation immediately
before the effective date of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger.
After the proposed Merger has been approved by the board and the
shareholders of Electromedics, Electromedics must send a written notice to all
shareholders who have not voted their shares in favor of the Merger and have
filed with Electromedics before the vote on the Merger a written notice of
intent to demand the fair value of the shares owned by such shareholder. The
notice from Electromedics must contain:
(1) The address to which a demand for payment and the place to which
stock certificates must be sent in order to obtain payment and the date by
which they must be received;
(2) A form to be used for demanding payment which will certify the date
on which the shareholder, or the beneficial owner on whose behalf the
shareholder dissents, acquired the shares or an interest in them; and
(3) A copy of sections 7-4-123 and 7-4-124 and a brief description of
the procedures to be followed under such sections.
In order to receive the fair value of the dissenting shares, a dissenting
shareholder must demand payment and deposit his or her stock certificates within
30 days after the notice was given, but the dissenter retains all other rights
of a shareholder until the Merger takes effect.
A shareholder may not assert dissenters' rights as to fewer than all of the
shares of Electromedics registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are beneficially owned
by another person but registered in the name of the shareholder and discloses
the name and address of each beneficial owner on whose behalf the shareholder
dissents. In that event, the rights of the dissenter will be determined as if
the shares as to which the shareholder has dissented and the other shares were
registered in the names of different shareholders.
A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of such beneficial
owner, and will be treated as a dissenting shareholder under the terms of
sections 7-4-123 and 7-4-124, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder holding such beneficial owners' shares.
PROCEDURES FOLLOWING AN ASSERTION OF DISSENTERS' RIGHTS. After the Merger
takes effect, or after Electromedics receives a valid demand for payment,
whichever is later, Electromedics must remit to each dissenting shareholder who
has not voted his or her shares in favor of the proposed Merger and
38
<PAGE>
has filed with Electromedics before the vote on the proposed Merger a written
notice of intent to demand the fair value of the shares owned by such
shareholder, the amount Electromedics estimates to be the fair value of the
shares, plus interest ("interest" commences five days after the effective date
of the Merger up to and including the date of payment, calculated at a rate
provided under Colorado law for interest on verdicts and judgments), accompanied
by:
(1) Electromedics' balance sheet and statement of income for a fiscal
year ending not more than 16 months before the effective date of the
remittance, together with the latest available interim financial statements;
(2) An estimate by Electromedics of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) A copy of sections 7-4-123 and 7-4-124, and a brief description of
the procedure to be followed in demanding supplemental payment.
Electromedics may withhold the above-described remittance from a person who
was not a shareholder on the date the Merger Agreement was first announced to
the public or who is dissenting on behalf of a person who was not a beneficial
owner on that date. If the dissenter has not voted his or her shares in favor of
the proposed Merger and has filed with Electromedics before the vote on the
proposed Merger a written notice of intent to demand the fair value of the
shares owned by such shareholder, Electromedics must forward to the dissenter
the materials described in the preceding paragraph, a statement of reasons for
withholding the remittance, and an offer to pay to the dissenter the amount
listed in the materials if the dissenter agrees to accept that amount in full
satisfaction. The dissenter may decline the offer and demand payment of the
dissenter's own estimate of the fair value of the shares, plus interest, by
written notice to Electromedics within 30 days after the date of mailing of
Electromedics' offer. Failure to do so entitles the dissenter only to the amount
offered. If the dissenter makes demand, the procedures, costs, fees and expenses
described below for petitioning the court shall apply.
If Electromedics fails to remit payment within 60 days of the deposit of
certificates, it must return all deposited certificates. However, Electromedics
may require deposit of the certificates at a later time and again give notice
that contains:
(1) The address to which a demand for payment and the place to which
stock certificates must be sent in order to obtain payment and the date by
which they must be received;
(2) A form to be used for demanding payment which will certify the date
on which the shareholder, or the beneficial owner on whose behalf the
shareholder dissents, acquired the shares or an interest in them; and
(3) A copy of sections 7-4-123 and 7-4-124 and a brief description of
the procedures to be followed under such sections.
If a dissenter believes that the amount remitted by Electromedics is less
than the fair value of the shares plus interest, the dissenter may give written
notice to Electromedics of the dissenter's own estimate of the fair value of
shares, plus interest, within 30 days after the corporation mails the
remittance, and demand payment of the difference (a "Demand"). Otherwise, a
dissenter is entitled only to the amount remitted by the corporation.
If Electromedics receives a Demand, it must, within 60 days after receiving
the Demand, either pay to the dissenter the amount demanded or agreed to by the
dissenter after discussion with Electromedics or file in court a petition
requesting that the court determine the fair value of the shares, plus interest.
The petition must be filed in Douglas County, Colorado. The petition must name
as parties all dissenters who made a Demand for payment and who have not reached
agreement with Electromedics. The jurisdiction of the court is plenary and
exclusive. The court may appoint appraisers, with such power and authority as
the court deems proper, to receive evidence on and recommend the amount of the
fair value of the shares. The court must determine whether the shareholder or
the
39
<PAGE>
shareholders in question have fully complied with the requirements of section
7-4-124, and must determine the fair value of the shares, taking into account
any and all factors the court finds relevant, computed by any method or
combination of methods that the court, in its discretion, sees fit to use,
whether or not used by Electromedics or by a dissenter. The fair value of the
shares as determined by the court is binding on all shareholders, wherever
located. A dissenter is entitled to judgment for the amount by which the fair
value of the shares as determined by the court, plus interest, exceeds the
amount, if any, remitted by Electromedics, but shall not be liable to
Electromedics for the amount, if any, by which the amount, if any, remitted to
the dissenter exceeds the fair value of the shares as determined by the court,
plus interest.
The court must determine the costs and expenses of any appraisers in a
proceeding under the preceding paragraph, including the reasonable expenses and
compensation of any appraisers appointed by the court, and must assess those
costs and expenses against Electromedics, except that the court may assess part
or all of those costs and expenses against a dissenter whose Demand is found to
be arbitrary, vexatious, or not in good faith.
If the court finds that Electromedics has failed to comply substantially
with section 7-4-124, the court may assess against Electromedics all fees and
expenses of any experts or attorneys as the court deems equitable. These fees
and expenses may also be assessed against a dissenter who has acted arbitrarily,
vexatiously, or not in good faith in bringing the proceeding, and may be awarded
to a party injured by those actions.
The court may award, in its discretion, fees and expenses to any attorney
for the dissenters out of the amount awarded to the dissenters, if any.
COMPARATIVE STOCK PRICES AND DIVIDENDS
Medtronic Common Stock is listed and traded on the New York Stock Exchange
(symbol: MDT), and it is a condition to all parties' obligations to consummate
the Merger that the Medtronic Common Stock to be issued in the Merger be
approved for such listing. Electromedics Common Stock is traded on the NASDAQ
National Market (symbol: ELMD).
The following table sets forth, for the quarters indicated, the high and low
sales prices per share of Medtronic Common Stock on the NYSE and the cash
dividends paid per share of Medtronic Common Stock. Also set forth, for the
calendar period indicated, are the high and low sales prices per share of
Electromedics Common Stock as reported by NASDAQ.
<TABLE>
<CAPTION>
Electromedics Common
Medtronic Common Stock Stock
--------------------------------- --------------------
High Low Dividends High Low
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
CALENDAR 1992
First Quarter.................................... $ 98.75 $ 73.25 $ .12 $ 9.75 $ 6.25
Second Quarter................................... $ 82.50 $ 63.25 $ .12 $ 6.62 $ 4.62
Third Quarter.................................... $ 101.00 $ 72.00 $ .14 $ 6.38 $ 4.00
Fourth Quarter................................... $ 104.50 $ 89.625 $ .14 $ 7.12 $ 5.12
CALENDAR 1993
First Quarter.................................... $ 95.50 $ 67.75 $ .14 $ 7.38 $ 4.81
Second Quarter................................... $ 75.75 $ 51.625 $ .14 $ 5.38 $ 3.75
Third Quarter.................................... $ 69.00 $ 57.50 $ .17 $ 4.38 $ 3.25
Fourth Quarter................................... $ 85.37 $ 67.625 $ .17 $ 6.94 $ 3.75
CALENDAR 1994
First Quarter
(through March 15, 1994)........................ $ 87.50 $ 77.75 $ .17 $ 6.75 $ 6.375
</TABLE>
40
<PAGE>
Electromedics has never paid cash dividends. Under the Merger Agreement,
Electromedics has agreed not to pay any dividends on Electromedics Common Stock
prior to the Merger. Medtronic has paid regular quarterly cash dividends on
Medtronic Common Stock since 1978. It is expected that the Board of Directors of
Medtronic will continue the practice of declaring cash dividends on a quarterly
basis; however, no assurance can be given as to the amount of future dividends,
which will necessarily be dependent on future earnings, financial requirements
of Medtronic and its subsidiaries, and other factors.
On November 18, 1993, the day preceding public announcement of Medtronic's
initial $6.125 merger proposal, the reported closing sale price of Medtronic
Common Stock on the NYSE was $75.75 per share. On that day, the reported closing
sale price of Electromedics Common Stock on the NASDAQ National Market was
$5.625 per share. On an equivalent per share basis, the reported closing sale
price of Electromedics Common Stock on November 18, 1993 (calculated by
multiplying the closing sale price of Medtronic Common Stock by .0859) would
have been $6.51. Solely for illustrative purposes of presenting equivalent share
calculations, the portion of a Medtronic share into which one Electromedics
share would be converted in the Merger is estimated by using $80.00 (the
reported closing sale price of Medtronic Common Stock on March 15, 1994) as the
Average Market Price of Medtronic Common Stock. The reported closing sale price
for shares of Electromedics Common Stock as reported by NASDAQ on that day was
$6.50 per share, or $6.87 on an equivalent per share basis as calculated above.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS.
As of March 10, 1994, there were approximately 13,305 registered holders of
Medtronic Common Stock and approximately 11,167 registered holders of
Electromedics Common Stock.
RECENT DEVELOPMENTS
In March 1994, Medtronic acquired substantially all of the assets and
assumed substantially all of the liabilities of DLP, Inc. and its affiliated
entities (collectively, "DLP") for a cash purchase price of approximately $128.3
million. The acquisition is being accounted for as a purchase in accordance with
generally accepted accounting principles and is not considered material in size
with respect to Medtronic. The pro forma financial information set forth herein
reflects this recent acquisition of DLP and additional information concerning
the DLP acquisition is set forth below in the Notes to Unaudited Pro Forma
Condensed Combined Financial Statements.
41
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the acquisition by Medtronic of all the outstanding shares of
Electromedics pursuant to the Merger and are based on the estimates and
assumptions set forth herein and in the notes to such financial statements. This
pro forma information has been prepared utilizing audited historical
consolidated financial statements and unaudited condensed consolidated interim
financial statements of Electromedics and Medtronic, and the unaudited pro forma
condensed combined financial statements reflecting the recent acquisition by
Medtronic of DLP, Inc. and its affiliated entities (described in Note (a) of the
accompanying Notes to Unaudited Pro forma Condensed Combined Financial
Statements), and should be read in conjunction with those financial statements
and notes thereto which are incorporated by reference in this Proxy
Statement/Prospectus. The pro forma financial data is provided for comparative
purposes only and does not purport to be indicative of the results which
actually would have been obtained if the Merger had been effected on the date
indicated or of those results which may be obtained in the future.
The pro forma financial information is based on the purchase method of
accounting for the proposed Merger. The pro forma adjustments are described in
the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements. The unaudited pro forma condensed combined statements of earnings
assume that the acquisition of Electromedics occurred on May 1, 1992 (combining
Medtronic and DLP pro forma results for the fiscal year ended April 30, 1993,
and Electromedics results for the twelve-month period ended March 31, 1993, and
combining Medtronic and DLP pro forma results for the nine-month period ended
January 28, 1994, and Electromedics results for the nine-month period ended
December 31, 1993). The unaudited pro forma condensed combined balance sheet
assumes that the acquisition of Electromedics occurred on January 28, 1994
(combining the pro forma balance sheet for Medtronic and DLP as of January 28,
1994 and the balance sheet for Electromedics as of December 31, 1993).
For purposes of this presentation, it is assumed that holders of
Electromedics Common Stock elect to receive only shares of Medtronic Common
Stock in the Merger and no cash and that the Average Market Price for Medtronic
Common Stock is $80.00 (the reported closing sale price of Medtronic Common
Stock on March 15, 1994), resulting in a conversion ratio of .0859, or one
Medtronic share for every 11.64 Electromedics shares. The assumed conversion
ratio of .0859 has been used to calculate the pro forma weighted average shares
outstanding, and the Electromedics shares outstanding have been adjusted to
eliminate Electromedics shares held by Medtronic. The final conversion ratio is
subject to change, as it is based on the Average Market Price of Medtronic
Common Stock for the ten consecutive NYSE trading days ending on the third
trading day immediately preceding the Effective Time of the Merger, but not less
than $68.00 nor more than $98.00 per Medtronic share. See "The Merger --
Conversion of Electromedics Common Stock in the Merger."
42
<PAGE>
This page left blank intentionally.
43
<PAGE>
MEDTRONIC, INC. AND ELECTROMEDICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Medtronic,
DLP, and
Medtronic and Electromedics
Medtronic DLP Pro Forma Electromedics Pro Forma
Year ended April 30, 1993 Historical Combined(a) Historical(b) Adjustments Combined
- ---------------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales..................................... $ 1,328,208 $ 1,361,458 $ 38,856 $ 1,400,314
Costs and expenses:
Cost of products sold....................... 420,132 431,700 21,183 452,883
Research and development expense............ 132,955 133,865 2,077 135,942
Selling, general, and administrative
expense.................................... 480,006 500,486 12,620 3,054(c) 516,160
Interest expense............................ 10,448 11,208 916 12,124
Interest income............................. (8,791) (8,791) (892) (9,683)
Litigation settlement....................... (50,000) (50,000) (50,000)
Other expenses.............................. 30,000 30,005 5 30,010
------------- ------------- ------------- ------------- -------------
Total costs and expenses.................... 1,014,750 1,048,473 35,909 3,054 1,087,436
------------- ------------- ------------- ------------- -------------
Earnings before income taxes, accounting
changes and extraordinary item............... 313,458 312,985 2,947 (3,054) 312,878
Provision for income taxes.................... 101,874 101,720 1,169 (1,204)(d) 101,685
------------- ------------- ------------- ------------- -------------
Earnings from continuing operations........... $ 211,584 $ 211,265 $ 1,778 $ (1,850) $ 211,193
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average shares outstanding........... 59,416 59,416 13,105 60,553
Net earnings per share from continuing
operations................................... $3.56 $3.56 $0.14 $3.49
----- ----- ----- -----
----- ----- ----- -----
Primary weighted average shares outstanding... 60,105 60,105 61,242
Primary earnings per share from continuing
operations................................... $3.52 $3.51 $3.45
----- ----- -----
----- ----- -----
Fully diluted weighted average shares
outstanding.................................. 60,186 60,186 61,323
Fully diluted earnings per share from
continuing operations........................ $3.52 $3.51 $3.44
----- ----- -----
----- ----- -----
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
44
<PAGE>
MEDTRONIC, INC. AND ELECTROMEDICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Medtronic,
DLP, and
Medtronic and Electromedics
Medtronic DLP Pro Forma Electromedics Pro Forma
Nine months ended January 28, 1994 Historical Combined(a) Historical(e) Adjustments Combined
- ------------------------------------------------ ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 997,964 $ 1,025,864 $ 28,000 $ 1,053,864
Costs and expenses:
Cost of products sold......................... 309,067 319,612 15,772 335,384
Research and development expense.............. 112,964 113,650 1,637 115,287
Selling, general, and administrative
expense...................................... 342,851 359,712 9,999 2,291(c) 372,002
Interest expense.............................. 6,189 6,752 319 7,071
Interest income............................... (6,332) (6,332) (512) (6,844)
Other (income) expense........................ (13,962) (13,975) 37 (13,938)
----------- ------------- ------------- ------------- -------------
Total costs and expenses...................... 750,777 779,419 27,252 2,291 808,962
----------- ------------- ------------- ------------- -------------
Earnings before income taxes.................... 247,187 246,445 748 (2,291) 244,902
Provision for income taxes...................... 81,574 81,327 627 (1,136)(d) 80,818
----------- ------------- ------------- ------------- -------------
Net earnings.................................... $ 165,613 $ 165,118 $ 121 $ (1,155) $ 164,084
----------- ------------- ------------- ------------- -------------
----------- ------------- ------------- ------------- -------------
Weighted average shares outstanding............. 57,405 57,405 14,096 58,631
Net earnings per share.......................... $2.88 $2.88 $0.01 $2.80
----- ----- ----- -----
----- ----- ----- -----
Primary weighted average shares outstanding 57,856 57,856 59,082
Primary earnings per share...................... $2.86 $2.85 $2.78
----- ----- -----
----- ----- -----
Fully diluted weighted average shares
outstanding.................................... 58,088 58,088 59,314
Fully diluted earnings per share................ $2.85 $2.84 $2.77
----- ----- -----
----- ----- -----
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
45
<PAGE>
MEDTRONIC, INC. AND ELECTROMEDICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JANUARY 28, 1994
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
Medtronic,
Medtronic and DLP, and
Medtronic DLP Combined Electromedics Electromedics
January 28, January 28, December 31, Pro Forma
1994 1994 (a) 1993 Adjustments Combined
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................... $ 118,986 $ 31,321 $ 454 $ 31,775
Short-term investments...................... 87,721 87,721 10,249 97,970
Accounts receivable......................... 345,091 350,801 6,554 357,355
Allowance for doubtful accounts............. (26,229) (26,229) (132) (26,361)
------------- ------------- ------------- ------------- -------------
Net accounts receivable..................... 318,862 324,572 6,422 330,994
Inventories:
Finished goods............................ 85,548 90,313 6,083 921(f) 97,317
Work in process........................... 40,911 41,628 1,678 1,145(f) 44,451
Raw materials............................. 60,935 63,111 4,109 67,220
------------- ------------- ------------- ------------- -------------
Total inventories......................... 187,394 195,052 11,870 2,066 208,988
Prepaid expenses and other current assets... 81,307 81,580 984 82,564
Current portion of sales type leases........ 723 723
------------- ------------- ------------- ------------- -------------
Total current assets........................ 794,270 720,246 30,702 2,066 753,014
Property, plant and equipment................. 562,446 579,205 12,265 591,470
Less accumulated depreciation............... (295,615) (302,175) (2,717) (304,892)
------------- ------------- ------------- ------------- -------------
Net property, plant and equipment........... 266,831 277,030 9,548 286,578
Net investment in sales type leases........... -- 1,282 1,282
Goodwill and other intangible assets.......... 174,913 290,864 2,085 76,350(c) 369,299
Less accumulated amortization of intangible
assets..................................... (35,173) (35,206) (659) (35,865)
------------- ------------- ------------- ------------- -------------
Net goodwill and other intangible assets.... 139,740 255,658 1,426 76,350 333,434
Other assets.................................. 114,098 114,455 502 (1,775)(g) 113,182
------------- ------------- ------------- ------------- -------------
Total assets $ 1,314,939 $ 1,367,389 $ 43,460 $ 76,641 $ 1,487,490
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma condensed Combined Financial
Statements.
46
<PAGE>
MEDTRONIC, INC. AND ELECTROMEDICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
JANUARY 28, 1994
(IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Medtronic,
Medtronic and DLP, and
Medtronic DLP Combined Electromedics Electromedics
January 28, January 28, December 31, Pro Forma
1994 1994 (a) 1993 Adjustments Combined
------------- ------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Short-term borrowings................... $ 27,685 $ 70,789 $ 70,789
Accounts and notes payable.............. 65,581 66,655 $ 2,705 69,360
Accrued expenses and other current
liabilities............................ 190,194 192,472 1,849 194,321
------------- ------------- ------------- -------- -------------
Total current liabilities............... 283,460 329,916 4,554 334,470
Long-term liabilities..................... 111,180 117,174 6,007 14,350(h) 137,531
Shareholders' equity:
Common stock............................ 5,734 5,734 723 (601)(i) 5,856
61,008 (c)(f
Retained earnings....................... 969,347 969,347 34,399 (g)(h)(i)(j) 1,064,754
Treasury shares......................... (1,884) 1,884(j) 0
Cumulative translation adjustment....... (21,232) (21,232) (339) (21,571)
------------- ------------- ------------- -------- -------------
953,849 953,849 32,899 62,291 1,049,039
Receivable from employee stock ownership
plan..................................... (33,550) (33,550) (33,550)
------------- ------------- ------------- -------- -------------
Total shareholders' equity.............. 920,299 920,299 32,899 62,291 1,015,489
------------- ------------- ------------- -------- -------------
Total liabilities and shareholders'
equity................................. $ 1,314,939 $ 1,367,389 $ 43,460 $ 76,641 $ 1,487,490
------------- ------------- ------------- -------- -------------
------------- ------------- ------------- -------- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
47
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) On March 17, 1994, Medtronic acquired substantially all of the assets and
assumed substantially all of the liabilities of DLP, Inc., a Michigan
corporation, and its affiliated entities (DLP Sterilization, Inc. d/b/a
Sterile Systems, Inc., DLP-Holland, Inc., DLP-Deutschland, Inc., IOMED,
Inc., and FFS Incorporated) (collectively, "DLP"). DLP develops,
manufactures and markets cannulae devices used in cardiopulmonary by-pass
surgery, fine needle aspiration kits for biopsies, and radiographic needles
and kits for interventional radiology.
The Medtronic and DLP pro forma condensed combined financial statements
presented herein were derived from Medtronic and DLP historical audited
financial statements, Medtronic unaudited condensed quarterly financial
statements, and DLP unaudited monthly financial statements. DLP was not
subject to the reporting requirements of the Commission.
The Medtronic and DLP pro forma condensed combined balance sheet reflects:
pro forma adjustments reducing cash by approximately $88.3 million and
increasing short term borrowings by approximately $40.0 million relating to
the funding of the acquisition; adjustments to record DLP assets at
estimated fair market value; and an increase in goodwill and other
intangible assets of approximately $115.5 million relating to the fair value
of acquired patents, technology, licensing agreements, and goodwill.
The pro forma condensed combined statements of earnings for the year ended
April 30, 1993 and the nine months ended January 28, 1994 reflect pro forma
adjustments of approximately $6.3 million and $4.7 million, respectively,
relating to incremental costs associated with the amortization of goodwill
and other intangible assets over periods of 8 to 25 years.
(b) Electromedics data is for the twelve-month period ended March 31, 1993. This
data was derived from Electromedics' audited financial statements for the
year ended December 31, 1992 and the unaudited financial statements for the
quarters ended March 31, 1993 and 1992.
(c) Adjustment to reflect goodwill and intangible assets recorded in conjunction
with the acquisition of Electromedics by Medtronic assumed to be amortized
over 25 years.
(d) Reflects income tax effect of pro forma adjustments and adjustment of
Electromedics' income tax expense. The tax benefit for losses on foreign
operations which were not reflected by Electromedics are assumed to be
utilized by Medtronic; Medtronic's effective tax rate therefore remains
unchanged.
(e) Electromedics data is for the nine-month period ended December 31, 1993.
This data was derived from Electromedics' audited financial statements for
the year ended December 31, 1993 and the unaudited financial statements for
the quarter ended March 31, 1993.
(f) Adjustment required to restate Electromedics' assets to estimated fair
market value.
(g) Adjustment required to eliminate Electromedics shares held by Medtronic
prior to the acquisition.
(h) Adjustment to reflect deferred taxes on nondeductible intangible assets
resulting from the Merger.
(i) Adjustment required to reflect the actual shares outstanding as if the
Merger had taken place on May 1, 1992. For purposes of determining this
adjustment, an assumed conversion ratio of .0859 of a Medtronic share for
each outstanding Electromedics share, or one Medtronic share for each 11.64
Electromedics shares, has been used to calculate the pro forma shares
outstanding, and the Electromedics shares outstanding have been adjusted to
eliminate shares held by Medtronic.
(j) Adjustment required to eliminate treasury shares not reportable by a
Minnesota corporation.
Certain historical financial statement amounts of Electromedics have been
reclassified to conform to Medtronic's presentation.
48
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
The unaudited pro forma condensed combined financial information is not
necessarily indicative of the results of operations that would have occurred had
the companies actually been combined during the periods presented or of future
results of operations of the combined companies.
The unaudited pro forma condensed balance sheet reflects the restatement of
Electromedics' inventory to estimated fair market value (see Note (f) above).
The adjustment related to inventory is a non-recurring charge which is expected
to be reflected in the income statement within twelve months subsequent to the
acquisition and, consequently, the impact of this adjustment is not reflected in
the pro forma statements of earnings.
49
<PAGE>
COMPARATIVE RIGHTS OF MEDTRONIC SHAREHOLDERS
AND ELECTROMEDICS SHAREHOLDERS
Upon consummation of the Merger, shareholders of Electromedics will become
shareholders of Medtronic. Medtronic and Electromedics are incorporated under
the laws of the states of Minnesota and Colorado, respectively. The rights of
Medtronic shareholders under Medtronic's Restated Articles of Incorporation as
amended ("Medtronic's Articles"), Medtronic's Bylaws, and the Minnesota Business
Corporation Act (the "MBCA") differ in certain respects from the rights of
Electromedics shareholders under Electromedics' Restated Articles of
Incorporation as amended ("Electromedics' Articles"), Electromedics' Amended
Bylaws, and the Colorado Corporation Code (the "CCC"). Certain significant
differences between the rights of Medtronic shareholders and Electromedics
shareholders are summarized below. This summary does not, however, purport to be
a complete description of all of the differences between the rights of
shareholders of Electromedics and the rights of shareholders of Medtronic.
CLASSIFICATION, REMOVAL AND ELECTION OF DIRECTORS
CLASSIFICATION. Medtronic's Articles provide for a classified Board of
Directors, under which directors are elected to three-year terms, with one-third
of the directors being elected each year. Electromedics' Articles do not
similarly classify its Board of Directors, and directors are elected each year
for a one-year term. Both Medtronic's Articles and Electromedics' Bylaws provide
for vacancies on the Board to be filled by a majority of the remaining Board
members.
REMOVAL. Medtronic's Articles provide that directors may be removed, with
or without cause, only by the vote of not less than 75% of the voting power of
all then outstanding voting shares. Neither Electromedics' Articles nor its
Bylaws specifically provide that directors may be removed except upon reaching
age 70 or failing to attend a specified number of Board meetings. Under Colorado
law, a director may be removed by the vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
NOMINATION AND ELECTION. Medtronic's Articles provide that nominations for
the election of directors may be made by or at the direction of the Medtronic
Board of Directors or by any shareholder entitled to vote in the election of
directors generally. Nominations by shareholders must be made pursuant to timely
notice in writing to the Secretary of Medtronic. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of Medtronic not less than 50 days nor more than 90 days prior to the
meeting; provided, however, that if less than 60 days' notice or prior public
disclosure of the date of the meeting is given or made to the shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. The notice
must set forth certain information concerning such shareholder and his or her
nominee(s), including their names and addresses, the principal occupation or
employment of the nominee(s), the class and number of shares of capital stock of
Medtronic that are beneficially owned by such persons, such other information as
would be required to be included in a proxy statement soliciting proxies for the
election of the nominees of such shareholder, and the consent of each nominee to
serve as a director of Medtronic if so elected. Electromedics' Articles and
Bylaws do not address the issue of nomination of directors.
AMENDMENT OF PROVISIONS. Medtronic's Articles require the affirmative vote
of not less than 75% of the voting power of all then outstanding voting shares
to amend, repeal or adopt any provisions inconsistent with these provisions
regarding classification, removal and nomination of directors. Electromedics'
Bylaws require only the affirmative vote of a majority of the directors to amend
or modify such provisions.
The above-described provisions of Medtronic's Articles regarding directors
will be subject to the terms of the certificate of designation or other
instrument creating any class or series of preferred stock giving the holders of
such class or series of preferred stock the right, voting separately as a class,
50
<PAGE>
to elect one or more directors (such as is often required by the terms of
preferred stock in the event that dividend payments are in arrears for a period
of time). See "Comparative Rights of Medtronic Shareholders and Electromedics
Shareholders -- Preferred Stock."
These provisions regarding classification, removal and nomination of
directors afford some assurance of stability in the composition of the Medtronic
Board of Directors, but may discourage or deter attempts by individuals or
entities to take control of Medtronic by electing their own slate of directors.
To the extent that potential acquirers of Medtronic stock are deterred by the
classified Board, such provision also may deter certain mergers, tender offers,
or other future takeover attempts which some or a majority of holders of
Medtronic Common Stock may deem to be in their best interests. In addition, the
classified Medtronic Board would delay shareholders who do not favor the
policies of Medtronic's Board of Directors from removing a majority of the
Medtronic Board of Directors for two years, unless they can obtain the requisite
vote.
LIABILITY OF DIRECTORS. Both Medtronic's Articles and Electromedics'
Articles exempt directors from personal liability to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director to
the full extent permitted by Minnesota and Colorado law, respectively.
PREFERRED STOCK
Medtronic has 2,500,000 authorized but unissued shares of Preferred Stock,
par value $1 per share. Medtronic's Articles provide that whenever the holders
of a class or series of Preferred Stock have the right to elect any directors,
the election, term and other features of such directorships shall be governed by
the terms set forth in the resolution of the Medtronic Board of Directors
designating the rights and preferences of such class or series of Preferred
Stock, and any directors elected by the holders of Preferred Stock shall not be
divided into classes unless provision is expressly made for such classification
by the terms of such Preferred Stock. Shares of Medtronic Preferred Stock could
be issued that would have the right to elect directors, either separately or
together with the Medtronic Common Stock, with such directors either divided or
not divided into classes.
Under certain circumstances such Medtronic Preferred Stock could be used to
create voting impediments or to deter persons seeking to effect a takeover or
otherwise gain control of Medtronic in a transaction which holders of some or a
majority of the Medtronic Common Stock may deem to be in their best interests.
Such shares of Medtronic Preferred stock could be sold in public or private
transactions to purchasers who might support the Medtronic Board of Directors in
opposing a takeover bid that the Medtronic Board of Directors determines not to
be in the best interests of Medtronic and its shareholders. In addition, the
Medtronic Board of Directors could authorize holders of a class or series of
Preferred Stock to vote, either separately as a class or together with the
holders of Medtronic Common Stock, on any merger, sale, or exchange of assets by
Medtronic or any other extraordinary corporate transaction. The ability to issue
such Medtronic Preferred Stock might have the effect of discouraging an attempt
by another person or entity, through the acquisition of a substantial number of
shares of Medtronic Common Stock, to acquire control of Medtronic with a view to
imposing a merger, sale of all or any part of the assets or a similar
transaction, because the issuance of new shares could be used to dilute the
stock ownership of such person or entity. See "Comparative Rights of Medtronic
Shareholders and Electromedics Shareholders -- Shareholder Rights Plan."
Electromedics has no authorized stock other than Common Stock.
SPECIAL MEETINGS OF SHAREHOLDERS
Under Minnesota law, a special meeting of shareholders may be called by
certain officers, two or more directors, a person authorized to do so in the
articles or bylaws, or shareholders holding at least 10% of the voting power of
all shares entitled to vote, except that a special meeting for the purpose of
considering an action to effect, directly or indirectly, a business combination
must be called by shareholders holding at least 25% of the voting power of all
shares entitled to vote.
51
<PAGE>
Under Colorado law, a special meeting of shareholders may be called by the
president, the board of directors, shareholders holding at least 10% of the
voting power of all shares entitled to vote, or such other officers or persons
authorized to do so in the articles or bylaws. Electromedics' Articles and
Bylaws do not so authorize any other officers or persons.
VOTING RIGHTS; SHAREHOLDER APPROVALS
Under both Medtronic's Articles and Electromedics' Articles, holders of
Medtronic Common Stock and Electromedics Common Stock, respectively, are
entitled to one vote per share on all matters submitted to a vote of the
shareholders. Medtronic's Bylaws provide that, except as specifically required
otherwise under Medtronic's Articles, Bylaws or Minnesota law, all matters
submitted to the shareholders are decided by a majority vote of the shares
entitled to vote and represented at a meeting at which there is a quorum.
Under Colorado law, all matters submitted to the shareholders are decided by
a majority vote of the shares entitled to vote and represented at a meeting at
which there is a quorum, unless the CCC or a corporation's articles of
incorporation require a different number; if the CCC requires a two-thirds
majority, the articles can reduce that but not below a majority. Electromedics'
Articles provide that the affirmative vote of the holders of two-thirds of the
stock of Electromedics then issued and outstanding and having voting power is
required to approve an action by the Electromedics Board of Directors to sell,
lease, exchange and/or convey all of Electromedics' property and assets. The
Merger does not constitute such an action.
CUMULATIVE VOTING
Neither Medtronic's Articles nor Electromedics' Articles provide for
cumulative voting with regard to the Medtronic Common Stock or the Electromedics
Common Stock, respectively.
PREEMPTIVE RIGHTS
Under both Medtronic's Articles and Electromedics Articles, holders of
Medtronic stock and Electromedics stock, respectively, are expressly denied
preemptive rights.
AMENDMENT OF THE ARTICLES OF INCORPORATION
Under Minnesota law, an amendment to the articles of incorporation requires
the affirmative vote of the holders of a majority of the shares present and
entitled to vote unless a larger affirmative vote is required by the
corporation's articles. Except as specifically described otherwise in this
"Comparative Rights of Medtronic Shareholders and Electromedics Shareholders,"
Medtronic's Articles do not contain any provisions that require a larger
affirmative vote in order to amend Medtronic's Articles.
Under Colorado law, an amendment to the articles of incorporation requires
the affirmative vote of the holders of two-thirds of the shares entitled to vote
thereon, unless the corporation's articles require a greater or lesser (but not
less than a majority) number for approval. Electromedics' Articles do not
contain any provision requiring a different number for approval.
BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS
Medtronic is governed by Sections 302A.671 and 302A.673 of the MBCA. In
general, Section 302A.671 provides that the shares of a corporation acquired in
a "control share acquisition" have no voting rights unless voting rights are
approved in a prescribed manner. A "control share acquisition" is an
acquisition, directly or indirectly, of beneficial ownership of shares that
would, when added to all other shares beneficially owned by the acquiring
person, entitle the acquiring person to have voting power of 20% or more in the
election of directors. In general, Section 302A.673 prohibits a public Minnesota
corporation from engaging in a "business combination" with an "interested
shareholder" for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. "Business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
the interested shareholder. An "interested shareholder" is a person who is the
beneficial owner, directly or indirectly, of 10% or more of the corporation's
voting stock or who is an affiliate or associate of the
52
<PAGE>
corporation and at any time within four years prior to the date in question was
the beneficial owner, directly or indirectly, of 10% or more of the
corporation's voting stock. Such provisions of Minnesota law could have the
effect of delaying, deferring or preventing a change in control of Medtronic.
Colorado law does not contain any similar provisions regarding business
combinations or control share acquisitions.
SHAREHOLDER RIGHTS PLAN
Medtronic adopted a Shareholder Rights Plan in 1991, which replaced the
Shareholder Rights Plan that it adopted in 1986, and has entered into a Rights
Agreement with Norwest Bank Minnesota, National Association, as Rights Agent.
Pursuant to its Rights Plan, Medtronic declared and paid a dividend of one
preferred stock purchase right (a "Right") on each outstanding share of
Medtronic Common Stock. As a result of Medtronic's 2-for-1 stock split effective
August 30, 1991, the Right associated with each outstanding share of Medtronic
Common Stock now entitles a holder, until July 10, 2001, to buy 1/200th of a
Series A Junior Participating Preferred Share (the "Series A Preferred Shares")
of Medtronic at a price of $300 per 1/200th of a Series A Preferred Share,
subject to adjustment. The Rights are not currently exercisable or transferable
apart from the Medtronic Common Stock.
The Rights will not be exercisable until the 15th day after a third party
acquires beneficial ownership of 15% or more of the outstanding Medtronic Common
Stock (and thereby becomes an "Acquiring Person") or announces a tender offer or
exchange offer that would increase the Acquiring Person's beneficial ownership
to 15% or more of the outstanding Medtronic Common Stock. In the event that any
person becomes an Acquiring Person, then each Right, other than Rights held by
an Acquiring Person, will entitle the holder to receive, upon exercise thereof
at the then current exercise price, Medtronic Common Stock that has a value of
two times the exercise price of the Right. In the event that Medtronic is
acquired in a merger or other business combination transaction, or 50% or more
of its assets or earning power is sold, each Right will entitle the holder to
receive, upon exercise thereof at the then current exercise price, Common Stock
of the acquiring entity that has a value of two times the exercise price of the
Right.
In certain events the Medtronic Board of Directors may exchange Rights for
Medtronic Common Stock or equivalent securities having a market price equal to
the exercise price of the Rights. Each Right is redeemable by Medtronic at $.005
any time before a person or group triggers the 15% threshold to become an
Acquiring Person.
The Rights issued under the Medtronic Shareholder Rights Plan may make any
merger not approved by Medtronic's Board of Directors prohibitively expensive,
because the Rights allow Medtronic shareholders to purchase the voting
securities of a potential acquirer at one-half of its fair market value.
Electromedics does not have a shareholders rights plan.
RELATED PERSON BUSINESS TRANSACTIONS
Medtronic's Articles provide that, in certain circumstances, an affirmative
vote of two-thirds (66.7%) of the voting power of all then outstanding voting
shares is required for the approval or authorization of any "related person
business transaction." Such two-thirds (66.7%) approval is not required,
however, if (i) a majority vote of "continuing directors" (as defined below)
expressly approves the related person business transaction, or (ii) the related
person business transaction is a merger, consolidation, exchange of shares or
sale of all or substantially all of the assets of Medtronic, and the cash or
fair market value of the property received by the Medtronic shareholders is
equal to a defined minimum purchase price. For purposes of this provision, a
"continuing director" means, generally, those directors who were directors
before the "related person" (as defined below) became a related person.
53
<PAGE>
Generally, a related person business transaction includes (i) any merger or
consolidation of Medtronic with or into a related person, (ii) any exchange of
shares of Medtronic (or a subsidiary) for shares of a related person which would
have required an affirmative vote of at least a majority of the voting power of
the outstanding shares entitled to vote, (iii) any sale, lease, exchange,
transfer, or other disposition (in one transaction or a series of transactions),
including without limitation a mortgage or any other security device, of all or
any substantial part of the assets of Medtronic (or a subsidiary) to or with a
related person, (iv) any sale, lease, transfer, or other disposition (in one
transaction or a series of transactions) of all or any substantial part of the
assets of a related person to or with Medtronic (or a subsidiary), (v) the
issuance, sale, transfer or other disposition to a related person of any
securities of Medtronic (except pursuant to stock dividends, stock splits, or
similar transactions that would not have the effect of increasing the proportion
of voting power of a related person) or of a subsidiary (except pursuant to a
pro rata distribution to all holders of Medtronic Common Stock), (vi) any
recapitalization or reclassification that would have the effect of increasing
the proportionate voting power of a related person, and (vii) any agreement,
contract, arrangement or understanding providing for any of the transactions
described above.
Generally, for purposes of a related person business transaction, the term
"related person" is broadly defined to include a wide range of potential
persons, including any person or entity that, together with affiliates and
associates, beneficially owns 15% or more of the outstanding voting stock of
Medtronic.
Such a provision could have the effect of impeding a potential acquirer of
Medtronic by requiring a larger than normal majority of Medtronic shareholders
to approve a transaction. There is no similar "related person business
transaction" provision in Electromedics' Articles.
INFORMATION REGARDING ELECTROMEDICS
GENERAL INFORMATION
Electromedics designs, manufactures and markets blood management and blood
conservation equipment and related disposable devices for use in cardiovascular,
orthopedic and other medium and high blood-loss surgeries. Electromedics is a
leader in the autotransfusion segment of the blood processing industry and has
the second largest share, approximately one-third, of the United States
autotransfusion market. Autotransfusion involves the collection of a patient's
own blood before, during and after surgery for washing and reinfusion to the
patient, allowing the patient to serve as his or her own blood donor.
Electromedics' autotransfusion systems improve the safety, quality and cost
of blood transfusions by (i) reducing the incidence of transmission of
blood-borne diseases such as AIDS and hepatitis, (ii) eliminating adverse
transfusion reactions, (iii) mitigating the global shortage of donor blood and
(iv) providing significant cost savings over homologous (third-party donor)
blood. Electromedics anticipates increased market acceptance of autotransfusion
products as the safety benefits and cost savings of autotransfusion become more
widely recognized. Electromedics' autotransfusion equipment and related
disposable devices accounted for approximately 57% of its net sales for the year
ended December 31, 1993.
Electromedics' other medical equipment and related disposable devices focus
on blood management and blood conservation, primarily in the areas of
cardiovascular and orthopedic surgery, and temperature monitoring. These
products include blood collection reservoirs, blood filters, blood heating and
cooling systems, suction lines and tubing, temperature monitors and probes and
tourniquet monitoring systems.
Until December 1993, Electromedics operated from nine buildings located on a
14-acre site that Electromedics owned in the Denver, Colorado metropolitan area.
In January 1993, Electromedics purchased for $4,000,000 fifteen acres of land
and a 137,000 square foot building in Parker, Colorado, a suburb of Denver. The
purchase was financed with cash and a $2.6 million bridge loan, subsequently
54
<PAGE>
replaced by a $5,000,000, 7-year loan secured by a note and deed of trust on the
property. Electromedics has constructed clean rooms and administrative offices
and has made substantial improvements to the building to house its entire work
force under one roof. Management believes that, in addition to certain tax
savings, Electromedics will achieve efficiencies through consolidating its
operations which could not be attained in its former nine-building structure. In
addition, the newly acquired building provides a greater potential for expansion
needs. The new facilities will be sufficient to accommodate its operations for
the foreseeable future. Construction was completed by late 1993 and
Electromedics completed its move by December 1993. Electromedics has ceased
payments on the $5,116,000 nonrecourse loan on its former facilities.
CERTAIN FINANCIAL PROJECTIONS
Electromedics does not, as a matter of course, make public forecasts as to
future sales or earnings. Certain projections were, however, made available to
Medtronic on a confidential basis during the course of the discussions regarding
the Merger. See "The Merger -- Background of the Merger." The information
summarized below was included in the information provided to Medtronic.
The financial projections below were not prepared with a view to public
disclosure or to compliance with published guidelines of the Commission or the
American Institute of Certified Public Accountants. The projections were based
upon the assumptions indicated below and were also based on other estimates and
assumptions that are inherently uncertain. Technological, economic, regulatory
and competitive uncertainties and contingencies, many of which are beyond
Electromedics' control, may render any or all of these assumptions inaccurate.
In addition, the projected results do not take into account costs and expenses
to Electromedics resulting from the negotiation and consummation of the Merger.
Accordingly, there can be no assurance that the projected results will be
realized or that actual results will not be significantly higher or lower than
projected. These uncertainties increase in the case of projections for later
years. Neither Price Waterhouse nor Deloitte & Touche compiled or examined the
projected financial information.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
--------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales....................................... $ 46,017 $ 58,631 $ 72,391 $ 90,891 $ 105,645
Gross profit................................ 20,733 26,303 32,104 40,218 47,331
Income from operations...................... 2,835 4,982 6,452 9,024 18,797
</TABLE>
The principal assumptions employed in the creation of the above projections
include the following: (a) unit growth of autotransfusion products averages 10%
for disposable products and 7.5% for autotransfusion machines; (b) international
sales grow at an average rate of 28%; (c) the percentage of domestic sales sold
directly by Electromedics increases from 14% in 1993 to 40% in 1998; (d)
excluding the effect of the shift toward direct sales, gross profit margins are
held relatively constant at 44%; (e) selling general and administrative expenses
decline from 34% of revenues in 1993 to 23% of revenues in 1998; and (f)
research and development expenses as a percentage of revenues increase from 5%
in 1993 to 10% in 1997 as a result of significant development costs relating to
a new product, and research and development expenses as a percentage of revenues
decline to 4% in 1998 upon completion of the new product.
LEGAL MATTERS
The validity of the Medtronic Common Stock to be issued in connection with
the Merger will be passed upon for Medtronic by Fredrikson & Byron, P.A.,
Minneapolis, Minnesota. Members of such firm own, in the aggregate,
approximately 12,000 shares of Medtronic Common Stock.
Certain legal matters for Electromedics in connection with the Merger were
passed upon by Holme Roberts & Owen LLC, Denver, Colorado, and Brenman Key &
Bromberg, P.C., Denver, Colorado. Members of Brenman Key & Bromberg, P.C. own,
in the aggregate, approximately 11,000 shares of Electromedics Common Stock.
55
<PAGE>
EXPERTS
The consolidated financial statements and schedules incorporated in this
Proxy Statement/ Prospectus by reference to the Annual Report on Form 10-K of
Medtronic, Inc. for the fiscal year ended April 30, 1993 have been so
incorporated in reliance on the reports of Price Waterhouse, independent
accountants, and given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements and the related financial statement
schedules incorporated in this Proxy Statement/Prospectus by reference from the
Annual Report on Form 10-K of Electromedics, Inc. for the year ended December
31, 1992, and from the Current Report on Form 8-K of Electromedics, Inc. dated
March 10, 1994, have been audited by Deloitte & Touche, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm, given upon their
authority as experts in accounting and auditing.
The description of certain tax matters in this Proxy Statement/Prospectus
has been included herein in reliance upon the tax opinion of Deloitte & Touche,
independent accountants, given on the authority of said firm as experts in tax
matters.
56
<PAGE>
APPENDIX A
PLAN OF MERGER
ARTICLE 1
NAMES OF CONSTITUENT CORPORATIONS
AND SURVIVING CORPORATION
The names of the Constituent Corporations are MDT Acquisition Corp., a
Minnesota corporation ("Merger Subsidiary"), and Electromedics, Inc., a Colorado
corporation ("Electromedics"). Merger Subsidiary is a wholly-owned subsidiary of
Medtronic, Inc., a Minnesota corporation ("Medtronic"). The Constituent
Corporations shall be combined by the merger of Electromedics into Merger
Subsidiary as the Surviving Corporation (the "Merger"), pursuant to the
applicable provisions of the Colorado Corporation Code ("CCC") and the Minnesota
Business Corporation Act ("MBCA").
ARTICLE 2
MEANS OF EFFECTING REORGANIZATION AND
MERGER AND CONVERTING STOCK
2.1 THE MERGER. The Merger shall be effective upon the filing of this Plan
together with the Articles of Merger and such other documents as are required by
the CCC and the MBCA to be filed with the Secretaries of State of the States of
Colorado and Minnesota (the time of such filing being the "Effective Time"). At
the Effective Time the separate existence of Electromedics shall cease and
Merger Subsidiary shall alone continue in existence. All transactions after the
Effective Time shall be deemed transactions of and for the account of Merger
Subsidiary as the Surviving Corporation.
2.2 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of any share of capital stock
of Electromedics or Merger Subsidiary:
2.2.1 Subject to the provisions of Sections 2.3 and 2.4 hereof, each
share of common stock of Electromedics, par value $.05 per share (the
"Electromedics Common Stock"), issued and outstanding immediately prior
thereto (except for Dissenting Shares (as defined in Section 2.6 hereof) and
except for shares referred to in Section 2.2.2 hereof) shall be converted
into the right to receive, at the election of the holder, either:
2.2.1.1 the number of shares (the "Conversion Ratio") of common
stock of Medtronic, par value $.10 per share ("Medtronic Common Stock"),
equal to $6.875 divided by the Average Market Price. Each such share of
Medtronic Common Stock shall be fully paid and nonassessable. The
"Average Market Price" shall be equal to the average of the daily closing
sale prices of Medtronic Common Stock as reported on the New York Stock
Exchange ("NYSE") Composite Tape, as reported in the Wall Street Journal,
for the ten consecutive NYSE trading days ending on and including the
third trading day immediately preceding the Effective Time, but not less
than $68 per share or more than $98 per share; or
2.2.1.2 $6.875 in cash (without interest).
The $6.875 amount per share of Electromedics Common Stock, payable in cash
or shares of Medtronic Common Stock as provided above, shall be reduced if
the sum of the number of shares of Electromedics Common Stock outstanding at
the Effective Time plus the number of shares subject to outstanding options
at the Effective Time exceeds 14,801,264 such shares. In such event, the
amount per share shall be equal to (a) $101,758,690 minus the aggregate
exercise price of all options outstanding as of the date of the Agreement
and Plan of Merger dated December 23, 1993 (the "Merger Agreement"), among
Medtronic, Merger Subsidiary and Electromedics, plus the aggregate exercise
price of all options outstanding at the Effective Time, divided by (b) such
sum of the number of shares of Electromedics Common Stock outstanding at the
Effective Time
A-1
<PAGE>
plus the number of shares subject to options then outstanding. An
appropriate and proportionate adjustment shall similarly be made in the
event that, prior to the Effective Time, the outstanding shares of
Electromedics Common Stock, without new consideration, are changed into or
exchanged for a different kind of shares or securities through a
reorganization, reclassification, stock dividend or other like change in
Electromedics' capitalization.
2.2.2 Each share of Electromedics Common Stock that is held in the
treasury of Electromedics or which is then owned beneficially or of record
by Medtronic, Merger Subsidiary or any direct or indirect subsidiary of
Medtronic or Electromedics shall be cancelled without payment of any
consideration therefor and without any conversion thereof.
2.2.3 Each share of any other class of capital stock of Electromedics
(other than Electromedics Common Stock) shall be cancelled without payment
of any consideration therefor and without any conversion thereof.
2.2.4 Each share of common stock of Merger Subsidiary (the "Merger
Subsidiary Common Stock"), issued and outstanding immediately prior thereto
shall remain outstanding. From and after the Effective Time, each
outstanding certificate theretofore representing shares of Merger Subsidiary
Common Stock shall be deemed for all purposes to evidence ownership of and
to represent the same number of shares of common stock of the Surviving
Corporation.
2.3 ELECTION PROCEDURES. Prior to the Effective Time, each holder of
Electromedics Common Stock (other than holders of shares of Electromedics Common
Stock to be cancelled as set forth in Section 2.2.2) shall have the right to
submit a request, in accordance with the following procedures, specifying the
number of shares of Electromedics Common Stock that such holder desires to have
converted into the right to receive Medtronic Common Stock in the Merger and the
number of shares of Electromedics Common Stock that such holder desires to have
converted into the right to receive cash in the Merger.
2.3.1 Each holder of Electromedics Common Stock shall have the right to
specify in a request made in accordance with the provisions of this Section
2.3 (herein called an "Election"):
2.3.1.1 the number of shares of Electromedics Common Stock owned by
such holder that such holder desires to have converted into a right to
receive cash in the Merger ("Cash Election"); and
2.3.1.2 the number of shares of Electromedics Common Stock owned by
such holder that such holder desires to have converted into Medtronic
Common Stock in the Merger ("Stock Election").
2.3.2 Medtronic shall authorize one or more persons to receive
Elections and to act as Exchange Agent hereunder (the "Exchange Agent")
pursuant to an agreement or agreements satisfactory to Medtronic and
Electromedics.
2.3.3 Holders of Electromedics Common Stock shall receive a form (the
"Election Form") pursuant to which each such holder shall have the right to
make an Election. The "Election Deadline" means 5:00 p.m. local time in the
city in which the Exchange Agent is located, on the last business day prior
to the date of the Electromedics Shareholders Meeting (as defined in the
Merger Agreement); except that, if the Electromedics Shareholders Meeting
shall be postponed or adjourned without adoption of the Merger Agreement and
approval of the Merger, the "Election Deadline" shall mean 5:00 p.m. local
time in the city in which the Exchange Agent is located, on the last
business day prior to the date of the postponed or adjourned meeting at
which the Merger Agreement was adopted and the Merger was approved. To be
effective, an Election Form shall be properly completed, signed (with the
signature thereon guaranteed if required by the Election Form), and
submitted to the Exchange Agent, along with the certificates representing
the Electromedics Common Stock as to which the holder made the election (or
a guaranty of delivery of such certificates in the form customarily used in
transactions of this nature from a member of any
A-2
<PAGE>
national securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States,
provided that such certificates were in fact delivered by the time set forth
in such guaranty of delivery), no later than the Election Deadline. Failure
to deliver shares covered by such a guaranty of delivery within five
business days after the Election Deadline shall be deemed to invalidate any
otherwise properly made Election. Any Election relating to shares of
Electromedics Common Stock with respect to which the holder thereof has
filed and not withdrawn as of the Effective Time a written demand for
payment of the fair value of Electromedics Common Stock in accordance with
the provisions of Section 2.6 hereof shall be deemed to have been
automatically revoked as of the Election Deadline.
2.3.3.1 Notwithstanding anything herein to the contrary, a combined
Election Form containing a single Election (a "Combined Election Form")
may be submitted by two or more holders of shares of Electromedics Common
Stock either of whom may be deemed constructively to own the other's
shares of Electromedics Common Stock by reason of the ownership
attribution rules of Section 318 of the Code. Any Combined Election Form
and any change or revocation in such Combined Election Form shall be
signed by or on behalf of all holders of the Electromedics Common Stock
covered thereby. For purposes of this Article 2, all shares of
Electromedics Common Stock covered by a single Combined Election Form
held by holders of Electromedics Common Stock submitting such Combined
Election Form shall be treated as being held by a single holder.
2.3.3.2 Any holder of Electromedics Common Stock may at any time on
or before the Election Deadline change such holder's Election by written
notice received by the Exchange Agent on or before the Election Deadline
accompanied by a properly completed, revised Election Form.
2.3.3.3 Any holder of Electromedics Common Stock may at any time on
or before the Election Deadline revoke such holder's Election by written
notice received by the Exchange Agent on or before the Election Deadline
or by withdrawal on or before the Election Deadline of such holder's
certificates for Electromedics Common Stock or of the guaranty of
delivery of such certificates, previously deposited with the Exchange
Agent. Within five business days after receipt of the revocation, the
Exchange Agent shall mail to the holder the certificates previously
deposited with the Exchange Agent.
2.3.3.4 As used in this Plan of Merger, "holders" of Electromedics
Common Stock shall mean record holders of shares of Electromedics Common
Stock. Record holders who hold such shares only as nominees, trustees or
in other representative capacities ("Representatives") may submit a
separate Election Form for each beneficial owner for whom any such record
holder is a nominee; PROVIDED, HOWEVER, that, at the request of
Medtronic, such Representative shall certify to the satisfaction of
Medtronic that such record holder holds such shares as nominee, trustee
or in another representative capacity for the beneficial owner thereof
and that each such Election Form covers all the shares of Electromedics
Common Stock held by such Representative for a particular beneficial
owner. For purposes of this Plan of Merger, each beneficial owner for
which an Election Form is submitted shall be treated as a separate holder
of shares.
2.3.3.5 Medtronic and Electromedics shall have the right (which
right may be delegated to the Exchange Agent in whole or in part) jointly
to make rules not inconsistent with the terms of this Plan of Merger
governing the validity of the Election Forms, the manner and extent to
which Elections are to be taken into account in making the determinations
prescribed by Section 2.4, the issuance and delivery of certificates for
Medtronic Common Stock into which Electromedics Common Stock is converted
in the Merger, and the payment for shares of Electromedics Common Stock
converted into the right to receive cash in the Merger. All such rules
and determinations thereunder shall be final and binding on all holders
of shares of Electromedics Common Stock.
A-3
<PAGE>
2.4 SELECTION OF ELECTROMEDICS COMMON STOCK. The manner in which each
share of Electromedics Common Stock (other than shares of Electromedics Common
Stock to be cancelled as set forth in Section 2.2.2 and other than Dissenting
Shares) shall be converted at the Effective Time into either cash or Medtronic
Common Stock shall be as set forth below in this Section 2.4.
2.4.1 As more fully set forth below, the aggregate number of shares of
Electromedics Common Stock to be converted into the right to receive cash in
the Merger (the "Cash Conversion Number") shall be not greater than (i) 50%
of the number of shares of Electromedics Common Stock outstanding
immediately prior to the Effective Time minus (ii) the sum of (A) any shares
of Electromedics Common Stock owned by Medtronic or any subsidiary of
Medtronic, (B) the number of shares of Electromedics Common Stock redeemed
by Electromedics after January 1, 1993 and prior to the Effective Time, and
(C) the aggregate number of shares of Electromedics Common Stock, if any, as
to which the holders of such shares have filed and not withdrawn a written
demand for payment of the fair value of Electromedics Common Stock pursuant
to the provisions of Section 2.6 hereof or otherwise withdrawn or lost their
rights to appraisal before the Effective Time.
2.4.2 If Cash Elections are received for a number of shares of
Electromedics Common Stock which is equal to or less than the Cash
Conversion Number, then each share of Electromedics Common Stock for which a
Cash Election has been made shall be converted into a right to receive cash
in the Merger.
2.4.3 If Cash Elections are received for a number of shares of
Electromedics Common Stock which is more than the Cash Conversion Number,
then the shares of Electromedics Common Stock for which a holder has made a
Cash Election shall be converted into a right to receive cash and Medtronic
Common Stock in the following manner:
2.4.3.1 A cash proration factor (the "Cash Proration Factor") shall
be determined by dividing the Cash Conversion Number by the total number
of shares of Electromedics Common Stock with respect to which effective
Cash Elections were made.
2.4.3.2 The number of shares of Electromedics Common Stock covered
by each Cash Election to be converted into the right to receive cash
shall be determined by multiplying the Cash Proration Factor by the total
number of shares of Electromedics Common Stock covered by such Cash
Election, rounded to the next lowest whole number.
2.4.3.3 Shares of Electromedics Common Stock covered by a Cash
Election and not converted into a right to receive cash as set forth
above shall be converted into Medtronic Common Stock in the Merger.
2.4.3.4 The cash proration method provided in Section 2.4.3.1 and
2.4.3.2 may be modified by Electromedics if a different method would
facilitate one or more of the Electromedics' shareholders qualifying for
capital gain treatment with respect to the cash received in the Merger.
2.4.4 Each share of Electromedics Common Stock for which a Stock
Election has been made shall be converted into the right to receive
Medtronic Common Stock in the Merger.
2.4.5 Outstanding shares of Electromedics Common Stock (other than
shares of Electromedics Common Stock to be cancelled as set forth in Section
2.2.2 and other than Dissenting Shares) as to which an Election is not in
effect on the Election Deadline shall be called "Non-Electing Electromedics
Shares." If Medtronic and Electromedics determine for any reason that any
Election was not properly made (or timely received by the Exchange Agent)
with respect to shares of Electromedics Common Stock, as set forth in
Section 2.3 hereof or otherwise, such Election shall be deemed to be not in
effect and shares of Electromedics Common Stock covered
A-4
<PAGE>
by such election shall, for purposes hereof, be deemed to be Non-Electing
Electromedics Shares. Each Non-Electing Electromedics Share shall be
converted into the right to receive Medtronic Common Stock in the Merger.
2.5 EXCHANGE OF ELECTROMEDICS COMMON STOCK.
2.5.1 Promptly after completion of the election and allocation
procedures set forth in Sections 2.3 and 2.4, Medtronic shall deposit or
cause to be deposited with the Exchange Agent the amount of cash and
certificates representing the shares of Medtronic Common Stock payable to
the holders of Electromedics Common Stock pursuant to Section 2.2 (as
modified by Sections 2.3 and 2.4), based on the number of shares of
Electromedics Common Stock (A) covered by a Cash Election and converted into
cash pursuant to Sections 2.4.2 or 2.4.3.2, (B) covered by a Cash Election
and converted into Medtronic Common Stock pursuant to Section 2.4.3.3, (C)
covered by a Stock Election and converted into Medtronic Common Stock
pursuant to Section 2.4.4, (D) deemed to be Non-Electing Electromedics
Shares and converted into Medtronic Common Stock pursuant to Section 2.4.5,
and (E) converted into fractional shares of Medtronic Common Stock and paid
in cash pursuant to Section 2.5.7. The Exchange Agent may invest portions of
the cash deposited with it, provided that such investments shall be in
obligations of or guaranteed by the United States of America, in commercial
paper, obligations receiving the highest rating from either Moody's
Investors Service, Inc. or Standard & Poors Corporation, or in certificates
of deposit, bank repurchase agreements or banker's acceptances of commercial
banks with capital exceeding $250,000,000 or in money market funds that are
invested substantially in any such investments. Any net profit resulting
from, or interest or income produced by, such investments shall be payable
to Medtronic.
2.5.2 As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record (other than Medtronic, Merger
Subsidiary, Electromedics or any subsidiary of Medtronic or Electromedics,
and other than holders of Dissenting Shares, as defined in Section 2.6
below) of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Electromedics Common Stock
(the "Certificates"), to the extent not previously surrendered with an
Election Form or pursuant to a guaranty of delivery, a form letter of
transmittal (which shall specify that delivery shall be effective, and risk
of loss and title to the Certificate(s) shall pass, only upon delivery of
the Certificate(s) to the Exchange Agent) and instructions for such holder's
use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Medtronic Common Stock.
2.5.3 As soon as practicable after the Effective Time, the Exchange
Agent shall distribute to holders of shares of Electromedics Common Stock,
upon surrender to the Exchange Agent (to the extent not previously
surrendered with an Election Form or pursuant to a guaranty of delivery) of
one or more Certificates for cancellation, together with a duly-executed
letter of transmittal, if applicable pursuant to Section 2.5.2, (i) a bank
check in the amount of cash into which the shares represented by the
Certificate(s) shall have been converted pursuant to Sections 2.4.2,
2.4.3.2, and 2.5.7, and (ii) one or more certificates representing the
number of whole shares of Medtronic Common Stock into which the shares
represented by the Certificate(s) shall have been converted pursuant to
Sections 2.4.3.3, 2.4.4, and 2.4.5, and the Certificate(s) so surrendered
shall be cancelled. In no event shall the holder of any such surrendered
Certificates be entitled to receive interest on any of the funds received in
the Merger. In the event of a transfer of ownership of Electromedics Common
Stock that is not registered in the transfer records of Electromedics, it
shall be a condition to the payment of cash and/or issuance of shares of
Medtronic Common Stock pursuant to the above-described Sections that the
Certificate so surrendered shall be properly endorsed or be otherwise in
proper form for transfer and that such transferee shall (i) pay to the
Exchange Agent any transfer or other taxes required, or (ii) establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
A-5
<PAGE>
2.5.4 No dividends or other distributions declared after the Effective
Time with respect to Medtronic Common Stock and payable to the holders of
record thereof after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Medtronic Common
Stock represented thereby until the holder of record shall surrender such
Certificate. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of a Certificate, the holder thereof shall
be entitled to receive any such dividends or other distributions, without
any interest thereon, that previously became payable with respect to shares
of Medtronic Common Stock represented by such Certificate.
2.5.5 All cash paid and shares of Medtronic Common Stock issued upon
the surrender for exchange of Electromedics Common Stock in accordance with
the terms hereof (including any cash paid for fractional shares pursuant to
Section 2.5.7 hereof) shall be deemed to have been paid or issued, as
applicable, in full satisfaction of all rights pertaining to such shares of
Electromedics Common Stock.
2.5.6 After the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Electromedics Common Stock that were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates
representing such shares are presented to the Surviving Corporation, they
shall be deemed to be Electromedics Non-Electing Shares as provided in
Section 2.4.5 and shall be cancelled and exchanged as provided in this
Article 2. As of the Effective Time, the holders of Certificates
representing shares of Electromedics Common Stock shall cease to have any
rights as shareholders of Electromedics, except such rights, if any, as they
may have pursuant to Colorado law. Except as provided above, until such
certificates are surrendered for exchange, each such Certificate shall,
after the Effective Time, represent for all purposes only the right to
receive the number of whole shares of Medtronic Common Stock into which the
shares of Electromedics Common Stock shall have been converted by the Merger
as provided in Sections 2.2.1 and 2.4.5 hereof and the right to receive the
cash value of any fraction of a share of Medtronic Common Stock as provided
in Section 2.5.7 hereof.
2.5.7 No fractional shares of Medtronic Common Stock and no
certificates or scrip therefor, or other evidence of ownership thereof,
shall be issued upon the surrender for exchange of Certificates, no dividend
or distribution of Medtronic shall relate to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or to
any rights of a shareholder of Medtronic. All fractional shares of Medtronic
Common Stock to which a holder of Electromedics Common Stock immediately
prior to the Effective Time would otherwise be entitled, at the Effective
Time, shall be aggregated. If a fractional share results from such
aggregation, then (in lieu of such fractional share) the Exchange Agent
shall pay to each holder of shares of Electromedics Common Stock who
otherwise would be entitled to receive such fractional share of Medtronic
Common Stock an amount of cash (without interest) determined by multiplying
(i) the Average Market Price by (ii) the fractional share of Medtronic
Common Stock to which such holder would otherwise be entitled. Medtronic
will make available to the Exchange Agent, without regard to any other cash
being provided to the Exchange Agent, any cash necessary for this purpose.
2.5.8 In the event any Certificates shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed Certificate, upon the making of an affidavit of that fact by
the holder thereof, such shares of Medtronic Common Stock and/or cash as may
be required pursuant to this Article 2; PROVIDED, HOWEVER, that Medtronic
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as it may direct as indemnity against any claim that may be
made against Medtronic or the Exchange Agent with respect to the Certificate
alleged to have been lost, stolen or destroyed; and PROVIDED, FURTHER, that
the shares represented by such
A-6
<PAGE>
Certificates shall be deemed to be Electromedics Non-Electing Shares unless
the holder thereof shall have made such affidavit and properly submitted a
Form of Election, in accordance with the provisions of Section 2.3.3, on or
before the Election Deadline.
2.5.9 Each person entitled to receive shares of Medtronic Common Stock
pursuant to this Article 2 shall receive together with such shares the
number of Medtronic Preferred Stock Purchase Rights (pursuant to the Rights
Agreement dated as of June 27, 1991, between Medtronic and Norwest Bank
Minnesota, N.A.) per share of Medtronic Common Stock equal to the number of
Medtronic Preferred Stock Purchase Rights associated with one share of
Medtronic Common Stock at the Effective Time.
2.6 DISSENTING SHARES.
2.6.1 Notwithstanding any provision hereof to the contrary, each
outstanding share of Electromedics Common Stock, the holder of which has
demanded and perfected his or her right for appraisal of such shares in
accordance with Colorado law (the "Appraisal Laws") and, as of the Effective
Time, has not effectively withdrawn or lost such right to appraisal
("Dissenting Shares"), shall not be converted into or represent a right to
receive the Medtronic Common Stock or cash into which Electromedics shares
are converted pursuant to Section 2.2, but the holder thereof shall only be
entitled to such rights as are granted by the Appraisal Laws.
2.6.2 Notwithstanding the provisions of Section 2.4.1, if any holder of
shares of Electromedics Common Stock who demands appraisal of such shares
under the Appraisal Laws shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her right to appraisal, at or prior to the
Election Deadline, then the shares of Electromedics Common Stock of such
holder shall be converted into a right to receive Medtronic Common Stock or
cash in accordance with the applicable provisions hereof, including Section
2.3. If such holder shall effectively withdraw or lose (through failure to
perfect or otherwise) his or her right to such payment after the Election
Deadline, each share of Electromedics Common Stock of such holder shall be
treated in the same manner as Non-Electing Electromedics Shares under
Section 2.4.5 hereof.
2.6.3 Electromedics shall give Medtronic (i) prompt written notice of
any notice of intent to demand fair value for any shares of Electromedics
Common Stock, withdrawals of such notices and any other instruments served
pursuant to the Appraisal Laws or any other provisions of Colorado law and
received by Electromedics and (ii) the opportunity to conduct jointly all
negotiations and proceedings with respect to demands for fair value for
shares of Electromedics Common Stock under the Appraisal Laws. Electromedics
shall not, except with the prior written consent of Medtronic, voluntarily
make any payment with respect to any demands for fair value for shares of
Electromedics Common Stock or offer to settle or settle any such demands.
2.7 ADJUSTMENTS. In the event that, between December 23, 1993 and the
Effective Time, the outstanding shares of Medtronic Common Stock shall have been
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities and such increase, decrease, change or exchange shall
have been effected through a stock dividend, stock split, reverse stock split,
exchange or similar action, then an appropriate and proportionate adjustment
shall be made in the manner in which the Conversion Ratio and all per share
price amounts are calculated hereunder.
2.8 STOCK OPTIONS.
2.8.1 Electromedics shall cause each outstanding option (the "Options")
under the Stock Option Plans (as defined in Section 3.6 of the Merger
Agreement) to vest at such time prior to the Effective Time as Electromedics
deems appropriate. Electromedics may make any acceleration of Options and
any exercise of Options accelerated under this Section 2.8 subject to
consummation of the Merger, and any holder of an Option may make any
exercise of the Option subject to consummation of the Merger by so
specifying to Electromedics in writing upon exercise of such Option.
Electromedics shall cause any such option not so exercised to terminate at
or before the Effective Time, in accordance with the terms of the Stock
Option Plans.
A-7
<PAGE>
2.8.2 Electromedics may make interest-free loans or similar financial
assistance to enable holders of the Electromedics Options to exercise such
Options prior to the Effective Time. Any such loan or similar financial
assistance may be made by Electromedics only within the 30-day period prior
to the Effective Time and shall be repaid to Electromedics by an optionee
receiving such assistance from the cash received by such optionee in the
Merger. Any Stock Election submitted by such optionee shall be decreased,
and such optionee's Cash Election correspondingly increased, to provide
sufficient cash from the Merger to repay such loan.
ARTICLE 3
ORGANIZATION OF THE SURVIVING CORPORATION
3.1 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The Articles
of Incorporation of Merger Subsidiary, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law;
provided, however, that section 1.1 of Article 1 of the Articles of
Incorporation of the Surviving Corporation shall be amended in its entirety to
read as follows:
"1.1) The name of the corporation shall be Electromedics, Inc."
3.2 BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of Merger Subsidiary,
as in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
3.3 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors of
Merger Subsidiary and the officers of Merger Subsidiary immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation until their respective successors shall be duly elected
and qualified.
ARTICLE 4
GENERAL PROVISIONS
At the Effective Time, Merger Subsidiary shall succeed to and possess all
the rights, privileges, powers, franchises and immunities of a public as well as
of a private nature, and be subject to all liabilities, restrictions,
disabilities and duties of Electromedics; and all and singular, the rights,
privileges, powers, franchises and immunities of both of the Constituent
Corporations and all property, assets, rights, privileges, powers, franchises,
immunities and all and every other interest shall be thereafter as effectively
the property of Merger Subsidiary as they were or would be of the Constituent
Corporations or either of them; and title to any real estate or any interest
therein vested by deed or otherwise in either of the Constituent Corporations
shall not revert or be in any way impaired by any reason of this merger;
provided, however, that all rights of creditors and all liens upon any property
of either of the Constituent Corporations shall be preserved unimpaired, limited
in lien to the property affected by such liens at the Effective Time, and all
debts, liabilities and duties of either of the Constituent Corporations shall
thenceforth become those of Merger Subsidiary and may be enforced against it to
the same extent as if such debts, liabilities and duties had been incurred or
contracted by it.
A-8
<PAGE>
APPENDIX B
COLORADO CORPORATION CODE
7-4-123 RIGHT OF SHAREHOLDERS TO DISSENT AND OBTAIN PAYMENT FOR SHARES. --
(1) Any shareholder of a corporation shall have the right to dissent from,
and to obtain payment for his shares in the event of, any of the following
corporate actions:
(a) Except as provided in subsection (3) of this section, any plan of
merger or consolidation to which the corporation is a party or any plan of
exchange pursuant to section 7-7-102.5 as to which the corporation is a
party other than the acquiring corporation; or
(b) Any sale, lease, exchange, or other disposition of all or
substantially all of the property and assets of the corporation not made in
the usual or regular course of its business, including a sale in dissolution
but not including a sale pursuant to an order of a court having jurisdiction
in the premises or a sale for cash on terms requiring that all or
substantially all of the net proceeds of sale be distributed to the
shareholders in accordance with their respective interests within one year
after the date of sale.
(2) (a) A shareholder may assert dissenters' rights as to less than all of
the shares registered in his name only if he dissents with respect to all the
shares beneficially owned by any one person and discloses the name and address
of the person or persons on whose behalf he dissents. In that event, his rights
shall be determined as if the shares as to which he has dissented and his other
shares were registered in the names of different shareholders.
(b) A beneficial owner of shares who is not the record holder may assert
dissenters' rights with respect to shares held on his behalf and shall be
treated as a dissenting shareholder under the terms of this section and
section 7-4-124 if he submits a written consent of the shareholder to the
corporation at the time of or before the assertion of those rights.
(3) The right to obtain payment under this section shall not apply to the
shareholders of the surviving corporation in a merger if a vote of the
shareholders of such corporation is not necessary to authorize such merger;
except that this subsection (3) shall not apply if the merger is pursuant to
section 7-7-106, all of the stock of the subsidiary corporation was not owned by
the parent corporation immediately prior to the merger, and the subsidiary
corporation is the surviving corporation.
(4) A shareholder who has a right under this code to obtain payment for his
shares shall have no right at law or in equity to attack the validity of the
corporate action which gives rise to his right to obtain payment nor to have the
action set aside or rescinded, except when the corporate action is illegal or
fraudulent with regard to the complaining shareholder or the corporation.
7-4-124 PROCEDURES FOR PROTECTION OF DISSENTERS' RIGHTS. --
(1) As used in this section:
(a) "Corporation" means the issuer of the shares held by the dissenter
before the corporate action or the successor by merger or consolidation of
that issuer.
(b) "Dissenter" means a shareholder or beneficial owner who is entitled
to and does assert dissenters' rights under section 7-4-123 and who has
performed every act required up to the time involved for the assertion of
such rights.
(c) "Fair value" means the value of shares immediately before the
effectuation of the corporate action to which the dissenter objects,
excluding any appreciation or depreciation in anticipation of such corporate
action, unless such exclusion would be inequitable.
(d) "Interest" means interest from the effective date of the corporate
action until the date of payment calculated at the average rate currently
paid by the corporation on its principal bank loans or, if none, at such
rate as is fair and equitable under all the circumstances.
B-1
<PAGE>
(2) If a proposed corporate action which would give rise to dissenters'
rights under section 7-4-123 is submitted to a vote at a meeting of
shareholders, the notice of meeting shall notify all shareholders that they have
or may have a right to dissent and obtain payment for their shares by complying
with the terms of this section, and the notice shall be accompanied by a copy of
section 7-4-123 and this section.
(3) If the proposed corporate action is submitted to a vote at a meeting of
shareholders, any shareholder who wishes to dissent and obtain payment for his
shares shall file with the corporation, prior to the vote, a written notice of
intention to demand that he be paid fair compensation for his shares if the
proposed action is effectuated and shall refrain from voting his shares in
approval of such action. A shareholder who fails in either respect shall not
acquire a right to payment for his shares under this section or section 7-4-123.
(4) If the proposed corporate action is approved by the required vote at a
meeting of shareholders, the corporation shall mail a notice to all shareholders
who gave due notice of intention to demand payment and who refrained from voting
in favor of the proposed action. If the proposed corporate action is to be taken
without a vote of shareholders, the corporation shall send to all shareholders
who are entitled to dissent and demand payment for their shares a notice of the
adoption of the plan of corporate action. The notice shall state where and when
a demand for payment shall be sent and certificates shall be deposited in order
to obtain payment, shall supply a form for demanding payment which includes a
request for certification of the date on which the shareholder or the person on
whose behalf the shareholder dissents acquired beneficial ownership of the
shares, and shall be accompanied by a copy of section 7-4-123 and this section.
The time set for the demand and deposit shall be not less than thirty days from
the mailing of the notice.
(5) A shareholder who fails to demand payment or fails to deposit
certificates, as required by a notice mailed to such shareholder pursuant to
subsection (4) of this section, shall have no right under this section or
section 7-4-123 to receive payment for his shares. The dissenter shall retain
all other rights of a shareholder until those rights are modified by
effectuation of the proposed corporate action.
(6) (a) If the corporation has not effectuated the proposed corporate action
and remitted payment for shares pursuant to paragraph (c) of this subsection (6)
within sixty days after the date set for demanding payment and depositing
certificates, it shall return any certificates that have been deposited.
(b) If deposited certificates have been returned, the corporation may,
at any later time, send a new notice conforming to the requirements of
subsection (4) of this section.
(c) Immediately upon effectuation of the proposed corporate action or
upon receipt of demand for payment, if the corporate action has already been
effectuated, the corporation shall remit to a dissenter who has made demand
and who has deposited his certificates the amount which the corporation
estimates to be the fair value of the shares, with interest if any has
accrued. The remittance shall be accompanied by:
(I) The corporation's closing balance sheet and statement of income
for a fiscal year ending not more than sixteen months before the date of
remittance, together with the latest available interim financial
statements;
(II) A statement of the corporation's estimate of fair value of the
shares; and
(III) A notice of the dissenter's right to demand supplemental
payment, accompanied by a copy of section 7-4-123 and this section.
(7) If the corporation fails to remit payment for his shares as required by
subsection (6) of this section or if the dissenter believes that the amount
remitted is less than the fair value of his shares or that the interest is not
correctly determined, he may, within thirty days after the date of mailing of
the
B-2
<PAGE>
corporation's remittance, mail to the corporation his own estimate of the value
of the shares or of the interest to the corporation and demand payment of the
deficiency. If he fails to do so, he shall be entitled to no more than the
amount remitted.
(8) (a) Within sixty days after receiving a demand for payment pursuant to
subsection (7) of this section, if any such demand for payment remains
unsettled, the corporation shall file in an appropriate court a petition
requesting that the fair value of the shares and interest thereon be determined
by the court.
(b) An appropriate court is a court of competent jurisdiction in the
county of this state where the registered office of the corporation is
located. If the corporation is a foreign corporation without a registered
office in this state, the petition shall be filed in the county where the
registered office of the foreign corporation was last located.
(c) All dissenters, wherever residing, whose demands have not been
settled shall be made parties to the proceeding as in an action against
their shares. A copy of the petition shall be served on each such dissenter;
except that, if a dissenter is a nonresident, the copy may be served on him
by registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the court shall be plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
to recommend a decision on the question of fair value. The appraisers shall
have the power and authority specified in the order of their appointment or
in any amendment thereof. The dissenters are entitled to discovery in the
same manner as parties in other civil suits.
(e) All dissenters who are made parties are entitled to judgment for the
amount by which the fair value of their shares is found to exceed the amount
previously remitted, with interest.
(f) If the corporation fails to file a petition as provided in paragraph
(a) of this subsection (8), each dissenter who has made a demand and who has
not already settled his claim against the corporation shall be paid by the
corporation the amount demanded by him with interest and may sue therefor in
an appropriate court.
(9) (a) The costs and expenses of any proceeding under subsection (8) of
this section, including the reasonable compensation and expenses of appraisers
appointed by the court, shall be determined by the court and assessed against
the corporation; except that any part of the costs and expenses may be
apportioned and assessed as the court may deem equitable against all or some of
the dissenters who are parties and whose action in demanding supplemental
payment the court finds to be arbitrary, vexatious, or not in good faith.
(b) Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems equitable against the corporation
and in favor of any or all dissenters if the corporation fails to comply
substantially with the requirements of this section and may be assessed
against either the corporation or a dissenter, in favor of any other party,
if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith in respect to
the rights provided by this section and section 7-4-123.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated and
should not be assessed against the corporation, it may award to the counsel
reasonable fees to be paid out of the amounts awarded to the dissenters who
were benefited.
(10) (a) Notwithstanding any other provisions of this section, the
corporation may elect to withhold the remittance required by subsection (6) of
this section from any dissenter with respect to shares of which the dissenter or
the person on whose behalf the dissenter acts was not the beneficial owner on
the date of the first announcement to news media or to shareholders of the terms
of the proposed corporate action. With respect to such shares, the corporation
shall, upon effectuating the corporate
B-3
<PAGE>
action, state to each dissenter its estimate of the fair market value of the
shares, state the rate of interest to be used (explaining the basis thereof),
and offer to pay the resulting amounts on receiving the dissenter's agreement to
accept them in full satisfaction.
(b) If the dissenter believes that the amount offered under paragraph
(a) of this subsection (10) is less than the fair value of the shares and
interest determined according to this section, he may, within thirty days
after the date of mailing of the corporation's offer, mail to the
corporation his own estimate of fair value and interest and demand payment
of that amount. If he fails to do so, he shall be entitled to no more than
the corporation's offer.
(c) If the dissenter makes a demand as provided in paragraph (b) of this
subsection (10), the provisions of subsections (8) and (9) of this section
shall apply to further proceedings on the dissenter's demand.
B-4
<PAGE>
APPENDIX C
OPINION OF DAIN BOSWORTH INCORPORATED
March 21, 1994
Board of Directors
Electromedics, Inc.
Gentlemen:
We understand that Electromedics, Inc. ("Electromedics"), Medtronic, Inc.
("Medtronic"), and MDT Acquisition Corp. ("Merger Subsidiary"), a wholly-owned
subsidiary of Medtronic, have entered into an Agreement and Plan of Merger dated
December 23, 1993 (the "Merger Agreement") pursuant to which (a) Electromedics
will be merged with and into Merger Subsidiary with Merger Subsidiary being the
surviving corporation in the Merger, and (b) each share of Electromedics common
stock, par value $.05 per share ("Electromedics Common Stock"), will be
converted, at the option of its holder, into either $6.875 in cash or a portion
of a share of Medtronic common stock, par value $.01 per share ("Medtronic
Common Stock"), or a combination of cash and Medtronic Common Stock, based upon
a conversion ratio described in the Merger Agreement. Together the cash and
Medtronic Common Stock to be received pursuant to the Merger are referred to
herein as the "Consideration."
You have asked our opinion as to whether the Consideration is fair to the
holders of shares of Electromedics Common Stock from a financial point of view.
You have supplied us with a copy of the Proxy Statement/Prospectus substantially
in the form to be distributed to shareholders of Electromedics (the "Proxy
Statement/Prospectus"). The terms of the Merger are more fully described in the
Proxy Statement/Prospectus, which includes the Plan of Merger.
Dain Bosworth Incorporated ("DBI"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements, and valuations for estate, corporate and other purposes.
DBI is acting as financial advisor to Electromedics in connection with the
transactions contemplated by the Merger Agreement and has received and will
receive fees for various services in connection therewith. In addition, your
attention is directed to the disclosure regarding DBI set forth in the Proxy
Statement/Prospectus describing DBI's various involvements during the extended
course of the Merger. DBI has previously rendered investment banking services to
Electromedics for which it has received customary compensation, including acting
as managing underwriter of a public offering of Electromedics Common Stock in
November 1990. In addition, in the ordinary course of its business, DBI actively
trades the securities of Electromedics and Medtronic for its own account and for
the accounts of customers and accordingly, at any time may hold a long or short
position in such securities.
In the course of our review of the Merger, we have (i) reviewed the Proxy
Statement/Prospectus, the Merger Agreement and the exhibits to the Merger
Agreement; (ii) analyzed financial and other information that is publicly
available relating to Electromedics and Medtronic; (iii) analyzed certain other
operating data of Electromedics and Medtronic and their respective operating
units that have been made available to us in our role as financial advisor to
Electromedics; (iv) discussed with management of Electromedics and Medtronic the
business, properties and prospects of Electromedics and Medtronic and their
respective operating units; (v) analyzed the financial performance of certain
other companies in the medical device and healthcare industry that we deemed
comparable; (vi) analyzed the financial terms of certain other similar
transactions that have recently been effected; (vii) taken into account our
general experience in similar transactions and our knowledge derived from our
role as financial advisor to Electromedics, including our efforts to secure
other merger proposals for Electromedics; and (viii) undertaken such other
reviews, analyses and inquiries relating to Electromedics as we deemed relevant
under the circumstances.
C-1
<PAGE>
In rendering our opinion, we have relied without independent verification on
the accuracy, completeness and fair presentation of all financial and other
information that was provided to us by Electromedics or was publicly available,
and this opinion is conditioned upon such information being complete and
accurate in all material respects. We have not made an independent evaluation or
appraisal of the assets of Electromedics or Medtronic, nor have we been
furnished with any such appraisals. Further, our opinion is based on economic,
monetary and market conditions existing as of the date of this opinion.
Based upon and subject to the foregoing, including the various assumptions
and limitation set forth herein, it is our opinion that, as of the date hereof,
the consideration to be received by the stockholders of Electromedics pursuant
to the Merger Agreement is fair to the shareholders of Electromedics from a
financial point of view.
Very truly yours,
By: /s/ Dain Bosworth Incorporated
- --------------------------------------
DAIN BOSWORTH INCORPORATED
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Minnesota Statutes Section 302A.521 provides that a Minnesota business
corporation shall indemnify any director, officer, employee or agent of the
corporation made or threatened to be made a party to a proceeding, by reason of
the former or present official capacity (as defined) of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in a connection with the proceeding if certain statutory standards are
met. "Proceeding" means a threatened, pending or completed civil, criminal
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
such right of indemnification and reference is made thereto for a complete
statement of such indemnification rights.
Section 4.1 of Medtronic Bylaws provides that directors, officers and
employees shall be indemnified by Medtronic to the fullest extent permitted by
Section 302A. 521 of the Minnesota Statutes.
Medtronic has purchased directors' and officers liability insurance,
including a company reimbursement policy. Subject to the stated conditions, the
policy insures the directors and officers of Medtronic against liability arising
out of actions taken in their official capacities. To the extent that such
actions entitle a director or officer to indemnification by Medtronic, the
policy provides that the insurer will reimburse Medtronic for any amounts paid.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C> <C> <C>
(a) Exhibits
2* Agreement and Plan of Merger, dated December 23, 1993, by and among Medtronic,
Inc., Electromedics, Inc., and MDT Acquisition Corp. Upon the request of the
Commission, Medtronic agrees to furnish supplementally to the Commission a copy of
any exhibits or schedules to the Agreement and Plan of Merger described as
follows:
Exhibit 6.5 -- Escrow Agreement
Exhibit 10.1 -- Agreement to Facilitate Merger
Schedule 3.1 -- Subsidiaries
Schedule 3.4 -- Contract Consents
Schedule 3.6 -- Stock option plans
Schedule 3.8.9 -- Financings
Schedule 3.8.10 -- Liens
Schedule 3.8.11 -- Employee/consulting agreements
Schedule 3.9 -- Liens
Schedule 3.10 -- Litigation
Schedule 3.11 -- Tax matters
Schedule 3.12 -- Employee plan matters
Schedule 3.14 -- Finders
Schedule 3.15 -- Intellectual property matters
Schedule 3.16 -- Environmental matters; OSHA
Schedule 3.17 -- Contracts
Schedule 3.18 -- Real estate
</TABLE>
- ------------------------
* Filed with the Registration Statement to which this Pre-Effective Amendment
relates.
** Filed herewith.
II-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
Schedule 3.19 -- Obligations
Schedule 3.23 -- Supplier/customer matters
Schedule 3.25 -- Insurance
Schedule 3.26 -- Conflicts
Schedule 3.27 -- Bank accounts
Schedule 5.1 -- Conduct of business
Schedule 10.3 -- Employee listing
5* Opinion and Consent of Fredrikson & Byron, P.A. regarding validity of shares.
8* Opinion and Consent of Deloitte & Touche regarding certain tax matters.
23.1* Consent of Fredrikson & Byron, P.A. (included in Exhibit 5).
23.2* Consent of Deloitte & Touche regarding certain tax matters (included in Exhibit
8).
23.3* Consent of Price Waterhouse, independent certified public accountants for
Medtronic, Inc.
23.4* Consent of Deloitte & Touche, independent certified public accountants for
Electromedics, Inc.
23.5* Consent of Dain Bosworth Incorporated.
24* Power of Attorney.
99.1** Form of Proxy to be used by Electromedics, Inc. shareholders.
99.2** Election Form to be used by Electromedics, Inc. shareholders.
(b) Financial Statement Schedules.
Not applicable.
(c) Reports, Opinions and Appraisals Materially Related to the Transaction.
Opinion of Dain Bosworth Incorporated is furnished as Appendix C to the Proxy
Statement/Prospectus forming a part of this Registration Statement.
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) (i) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
- ------------------------
* Filed with the Registration Statement to which this Pre-Effective Amendment
relates.
** Filed herewith.
II-2
<PAGE>
(ii) The registrant undertakes that every prospectus [a] that is filed
pursuant to paragraph (b)(i) immediately preceding, or [b] that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Minneapolis, State of Minnesota, on March 21, 1994.
MEDTRONIC, INC.
By /s/ William W. George
--------------------------------------------------------------------
William W. George
PRESIDENT AND CHIEF EXECUTIVE OFFICER
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed on
March 21, 1994 by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------ ------------------------------------
<C> <S> <C>
-------------------------------- Chairman of the Board and Director
Winston R. Wallin*
President, Chief Executive Officer
-------------------------------- and Director (principal executive
William W. George* officer)
-------------------------------- Vice Chairman and Director
Glen D. Nelson, M.D.*
Senior Vice President and Chief
-------------------------------- Financial Officer (principal
Robert L. Ryan* financial officer)
Vice President and Corporate
-------------------------------- Controller (principal accounting
John T. Lemley* officer)
-------------------------------- Director
Earl E. Bakken*
-------------------------------- Director
F. Caleb Blodgett*
*By /s/ Ronald E. Lund
------------------------------
-------------------------------- Director Ronald E. Lund
Antonio M. Gotto Jr., M.D.* ATTORNEY-IN-FACT
-------------------------------- Director Date: March 21, 1994
Bernadine P. Healy, M.D.*
-------------------------------- Director
Vernon H. Heath*
-------------------------------- Director
Thomas E. Holloran*
-------------------------------- Director
Edith W. Martin, Ph.D.*
-------------------------------- Director
Richard L. Schall*
-------------------------------- Director
Jack W. Schuler*
-------------------------------- Director
Gerald W. Simonson*
-------------------------------- Director
Gordon M. Sprenger*
-------------------------------- Director
Richard A. Swalin, Ph.D.*
</TABLE>
II-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBIT INDEX
TO
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
---------------
MEDTRONIC, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER
IN SEQUENTIAL
NUMBERING OF
ALL PAGES,
EXHIBIT INCLUDING EXHIBITS
- ----------- -------------------
<C> <S> <C>
2 Agreement and Plan of Merger, dated December 23, 1993, by and among Medtronic, Inc.,
Electromedics, Inc., and MDT Acquisition Corp........................................ *
5 Opinion and Consent of Fredrikson & Byron, P.A. regarding validity of shares.......... *
8 Opinion and Consent of Deloitte & Touche regarding certain tax
matters.............................................................................. *
23.1 Consent of Fredrikson & Byron, P.A. (included in Exhibit 5)........................... *
23.2 Consent of Deloitte & Touche regarding certain tax matters (included in Exhibit 8).... *
23.3 Consent of Price Waterhouse, independent certified public accountants for Medtronic,
Inc.................................................................................. *
23.4 Consent of Deloitte & Touche, independent certified public accountants for
Electromedics, Inc................................................................... *
23.5 Consent of Dain Bosworth Incorporated................................................. *
24 Power of Attorney..................................................................... *
99.1 Form of Proxy to be used by Electromedics, Inc. shareholders..........................
99.2 Form of Election to be used by Electromedics, Inc. shareholders.......................
<FN>
- ------------------------
* Previously filed.
</TABLE>
<PAGE>
EXHIBIT 99.1
ELECTROMEDICS, INC.
SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder hereby appoints F. JAMES LYNCH and RICHARD B.
CARLOCK and each of them as proxies, each with full power of substitution, to
vote as designated below all shares of common stock of Electromedics, Inc. held
of record as of March 10, 1994, which the undersigned would be entitled to vote
if personally present at the Special Meeting of Shareholders to be held on April
25, 1994, at 10:00 a.m., local time, at the Denver Marriott City Center, 1701
California Street, Denver, Colorado, and at any adjournment or adjournments
thereof, upon the following matters:
Proposal to approve the Plan of Merger providing for the merger of
Electromedics, Inc. with and into MDT Acquisition Corp., with MDT Acquisition
Corp. to be the surviving corporation and a wholly-owned subsidiary of
Medtronic, Inc., a copy of which Plan of Merger is attached as Appendix A to the
Proxy Statement/Prospectus for the Special Meeting.
/ / FOR / / AGAINST / / ABSTAIN
This proxy will be voted as specified by the shareholder, but if no choice
is specified, this proxy will be voted FOR approval of the Plan of Merger.
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
<PAGE>
IMPORTANT: Please sign exactly as name or names appear on this Proxy. Joint
owners should each sign personally. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such. When
signing as a corporation or a partnership, please sign in the name of the entity
by an authorized person.
Dated: _____________________
_______________________________
(Please sign name exactly as it
appears hereon)
__________________________________
(Signature of joint owner, if any)
PLEASE MARK, DATE, SIGN AND RETURN
THIS PROXY IN THE ENCLOSED PROXY
RETURN ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED
STATES. IF AN ENVELOPE IS NOT
ENCLOSED OR HAS BEEN MISPLACED,
PLEASE RETURN THIS COMPLETED PROXY
TO NORWEST BANK MINNESOTA, N.A.,
STOCK TRANSFER DEPARTMENT, P.O.
BOX 119, SOUTH SAINT PAUL,
MINNESOTA 55075-9988.
<PAGE>
EXHIBIT 99.2
ELECTION FORM
TO ACCOMPANY CERTIFICATES REPRESENTING SHARES OF COMMON STOCK OF
ELECTROMEDICS, INC.
Please read and follow carefully the Instructions set forth below, which set
forth the requirements that need to be complied with in order to make an
effective election. Nominees, trustees or other persons who hold shares of
Electromedics, Inc. ("Electromedics") common stock, par value $.05 per share
("Electromedics Common Stock"), in a representative capacity are directed to
Instruction F(5).
TO BE EFFECTIVE, THIS ELECTION FORM, PROPERLY COMPLETED AND SIGNED IN
ACCORDANCE WITH THE ACCOMPANYING INSTRUCTIONS, TOGETHER WITH CERTIFICATES FOR
THE ELECTROMEDICS COMMON STOCK COVERED HEREBY (UNLESS DELIVERY IS GUARANTEED IN
BOX F BELOW IN ACCORDANCE WITH INSTRUCTION A), MUST BE RECEIVED BY THE EXCHANGE
AGENT NAMED BELOW, AT THE APPROPRIATE ADDRESS SET FORTH BELOW, NO LATER THAN THE
ELECTION DEADLINE. DELIVERIES MADE TO ADDRESSES OTHER THAN THE ADDRESSES FOR THE
EXCHANGE AGENT SET FORTH BELOW DO NOT CONSTITUTE VALID DELIVERIES AND THE
EXCHANGE AGENT WILL NOT BE RESPONSIBLE THEREFOR.
THE ELECTION DEADLINE IS APRIL 22, 1994
/ / Check this box if you are submitting this Election Form to revise an
Election Form that you previously sent to the Exchange Agent.
If you require additional information (such as how to fill out the Election
Form, whether the Exchange Agent has received your Election Form, mechanics of
the Merger, etc.), please call or write to the Information Agent:
Chemical Bank
Proxy Solicitation Area
450 West 33rd Street, 15th Floor
New York, NY 10001
1-800-279-1259 (Toll Free)
Banks and Brokers call (212) 613-7618
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
TO: NORWEST BANK MINNESOTA, N.A., Exchange Agent
<TABLE>
<S> <C> <C>
IF BY MAIL: OR IF BY HAND OR BY COURIER
(Mon.-Fri. 9:00 A.M.-5:00 P.M. Local Time):
Stock Transfer Department Stock Transfer Department c/o Norwest Trust Company
P.O. Box 418 161 North Concord Exchange or Three New York Plaza, 15th Floor
South St. Paul, MN 55075-0418 South St. Paul, MN 55075 New York, NY 10005
(612) 450-4027
</TABLE>
<PAGE>
<TABLE>
<S> <C>
All Electromedics Shareholders must complete Boxes A,
Ladies and Gentlemen: B, C, and E and enclose their stock certificates
(unless delivery of their stock certificates is
guaranteed in Box D).
</TABLE>
This Election Form is being delivered in connection with the merger (the
"Merger") of Electromedics with and into MDT Acquisition Corp., a subsidiary of
Medtronic, Inc. ("Medtronic"), pursuant to the Agreement and Plan of Merger,
dated as of December 23, 1993 (the "Merger Agreement"). THE PURPOSE OF THIS
ELECTION FORM IS TO ALLOW YOU TO ELECT TO RECEIVE CASH OR MEDTRONIC COMMON
STOCK, OR A COMBINATION OF BOTH, IN EXCHANGE FOR YOUR ELECTROMEDICS SHARES.
(PLEASE READ CAREFULLY THE GENERAL INSTRUCTIONS CONTAINED ELSEWHERE HEREIN)
BOX A
ELECTION
The undersigned, subject to the Election and Allocation Procedures (as
defined below) and the other terms and conditions set forth in this Election
Form, including the documents incorporated herein by reference, hereby (a)
surrenders the certificate(s) (the "Certificates") representing the shares of
Electromedics Common Stock listed in Box B below and (b) elects (an
"Election"), as indicated below, upon consummation of the Merger to have each
of the shares of Electromedics Common Stock represented by the Certificates
converted as follows:
CASH ELECTION: __________ ELECTROMEDICS SHARES, exchanged for $6.875 per
share in cash, without interest; and
STOCK ELECTION: __________ ELECTROMEDICS SHARES, exchanged for shares of
common stock, par value $.10 per share, of
Medtronic ("Medtronic Shares").
__________ TOTAL SHARES ELECTED (MUST equal total shares
enclosed in order to be an effective
Election)
(WRITE ABOVE, NEXT TO THE TWO TYPES OF ELECTIONS, THE NUMBER OF WHOLE
SHARES FOR WHICH YOU ARE MAKING A CASH ELECTION AND THE NUMBER OF WHOLE
SHARES FOR WHICH YOU ARE MAKING A STOCK ELECTION; THE TOTAL MUST EQUAL THE
TOTAL SHARES (POST-SPLIT) SHOWN ON THE LABEL IN BOX B BELOW. IF YOU DO NOT
INDICATE THE NUMBER OF SHARES FOR WHICH YOU ARE MAKING EACH ELECTION, YOU
WILL BE TREATED AS MAKING A STOCK ELECTION FOR ALL OF YOUR SHARES.)
IMPORTANT NOTE: IF YOUR CERTIFICATES ARE DATED OCTOBER 16, 1987 OR BEFORE,
PLEASE READ THIS NOTE. Electromedics effected a 1-for-5 reverse stock split
effective October 19, 1987. The label in Box B below reflects a pre-split and a
post-split share amount. The PRE-SPLIT number is the number of shares shown on
your certificates. The POST-SPLIT number is the actual number of shares you own
now. YOU MUST USE THE POST-SPLIT TOTAL SHARES IN MAKING YOUR ELECTION IN BOX A.
REMEMBER THAT YOUR ELECTION MUST BE FOR WHOLE SHARES ONLY.
If the Exchange Agent has not received your properly completed Election
Form, accompanied by your stock certificates, by the Election Deadline (as
defined in Instruction A) (unless Box F (Guaranty of Delivery) has been properly
completed and such certificates are received by the Exchange Agent by the
Guaranteed Delivery Deadline), you will be deemed to have made a Non-Election,
which has the same effect as making a Stock Election for all of your shares. THE
EXCHANGE AGENT WILL HAVE NO OBLIGATION TO NOTIFY YOU IF THE EXCHANGE AGENT DOES
NOT TIMELY RECEIVE YOUR PROPERLY COMPLETED ELECTION FORM OR IF YOUR ELECTION
FORM IS DEFECTIVE IN ANY WAY.
<PAGE>
FOR USE BY THE EXCHANGE AGENT ONLY
Debit shares _____ Partial _____ SIBL/LT _____ Alt Payee _____ Spec Del ____
Legend ________ Approved ________ Input _______ Audit _______ Mailed _______
The undersigned hereby certifies: that this Election covers all of the
shares of Electromedics Common Stock registered in the name of the undersigned
and either (i) beneficially owned by the undersigned, or (ii) owned by the
undersigned in a representative or fiduciary capacity for a particular
beneficial owner or for one or more beneficial owners, except as otherwise
permitted pursuant to Instruction F(5).
BOX B
<TABLE>
<CAPTION>
CERTIFICATE INFORMATION
List below the certificates to which this Election Form relates.
(Attach additional sheets if necessary.)
<S> <C> <C>
NUMBER OF
SHARES
NAME AND ADDRESS OF REGISTERED HOLDER(S) SHOWN ON
AS SHOWN ON THE SHARE RECORDS CERTIFICATE EACH
(PLEASE FILL IN, IF BLANK) NUMBER CERTIFICATE
---------------
---------------
---------------
---------------
TOTAL SHARES:
</TABLE>
/ / I have lost my certificate(s) for ________ shares and require assistance
with respect to replacing the shares.
(See Instruction G(8).)
IMPORTANT NOTE: IF YOUR CERTIFICATES ARE DATED OCTOBER 16, 1987 OR BEFORE,
PLEASE READ THIS NOTE. Electromedics effected a 1-for-5 reverse stock split
effective October 19, 1987. If the label in Box B reflects a pre-split and a
post-split share amount, the PRE-SPLIT number is the number of shares shown on
your certificates and is the number of shares that you should list in Box B
above. (Note that this is different from Box A, where you listed POST-SPLIT
share amounts. The POST-SPLIT number is the actual number of shares you own
now.)
This Election is subject to the terms and conditions set forth in the Proxy
Statement/Prospectus, dated March 21, 1994 (the "Proxy Statement/Prospectus"),
including the Plan of Merger attached as Appendix A thereto, furnished to
shareholders of Electromedics in connection with the Merger, which are
incorporated herein by reference. Receipt of the Proxy Statement/ Prospectus and
the Plan of Merger is hereby acknowledged. Copies of the Proxy
Statement/Prospectus are available from Chemical Bank upon request (see
Instruction G(10)).
It is understood that because pursuant to the Plan of Merger the number of
shares of Electromedics Common Stock to be converted into the right to receive
cash in the Merger are subject to limitations, no assurance can be given that an
Election by any given stockholder, including this Election by the undersigned,
can be accommodated. Rather, the Election by each holder of Electromedics Common
Stock, including the Election by the undersigned, will be subject to the results
of the election and allocation procedures set forth in the Merger Agreement and
described in the Proxy Statement/Prospectus under "The Merger-- Conversion of
Electromedics Common Stock in the Merger" (the "Election and Allocation
Procedures").
<PAGE>
CERTIFICATE HOLDER(S) SIGN IN BOX C BELOW
The undersigned hereby represents and warrants that the undersigned has full
power and authority to complete and deliver this Election Form and to deliver
for surrender and cancellation the above-described Certificate(s) delivered
herewith and that the rights represented by the Certificate(s) are free and
clear of all liens, restrictions, charges and encumbrances and are not subject
to any adverse claim. The undersigned will, upon request, execute any additional
documents necessary or desirable to complete the surrender of the Certificate(s)
surrendered herewith. All authority herein conferred shall survive the death or
incapacity of the undersigned and all obligations of the undersigned hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned. Delivery of the Certificate(s) for surrender and
cancellation may be revoked only in accordance with Instruction F(2). By signing
below, if the undersigned holds shares as a nominee, trustee, or in any other
representative capacity for a beneficial owner, the undersigned hereby certifies
that this Election Form covers all the shares of Electromedics Common Stock held
in such capacity for such beneficial owner.
<TABLE>
<S> <C>
BOX C BOX D
SIGN HERE
(To be completed by all person(s) surrendering
certificates and executing this Election Form)
Complete ONLY if required by Instruction G(5).
--------------------------------------------------- SIGNATURE GUARANTY
--------------------------------------------------- Your signature must be MEDALLION GUARANTEED
(Signature(s) of holder(s)) by an eligible financial institution.
Dated: ----------------------------------------- NOTE: A notarization by a notary public
Name(s): ----------------------------------------- is not acceptable.
----------------------------------------- FOR USE BY FINANCIAL INSTITUTION ONLY.
----------------------------------------- PLACE MEDALLION GUARANTY
Address: ----------------------------------------- IN SPACE BELOW.
-----------------------------------------
-----------------------------------------
(including zip code)
/ / Check box if change of address
Daytime Phone: ----------------------------------
(So the Exchange Agent can contact you in case of
questions, although the Exchange Agent is under
no obligation to do so.)
Must be signed by registered holder(s) exactly as
name(s) appear(s) on stock certificate(s) or by
person(s) authorized to become registered holders by
documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or in any
other fiduciary or representative capacity, please
set forth full title. (See Instruction G(6)).
Title: -----------------------------------------
(Other than signature(s), please print or type)
</TABLE>
IMPORTANT TAX INFORMATION
PLEASE PROVIDE YOUR SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER ON
THIS SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT SUBJECT TO BACKUP
WITHHOLDING. FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE MERGER.
BOX E
<TABLE>
<S> <C> <C>
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING OR --------------------------
DEPARTMENT OF THE TREASURY BELOW. Employer Identification Number
INTERNAL REVENUE SERVICE See Instruction G(9).
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
PART II--Awaiting TIN / / PART III--Exempt Payee / /
CERTIFICATION. Under penalties of perjury, I certify that:
(1) 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
(2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest
or dividends, or the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been notified by the IRS that you
are subject to backup withholding because of underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2).
SIGNATURE: DATE:
</TABLE>
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART II OF
SUBSTITUTE FORM W-9
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 (a) 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
(b) I intend to mail or deliver an application in the near future. I
understand that, notwithstanding that I have checked the box in Part II (and
have completed this Certificate of Awaiting Taxpayer Identification Number),
31% of all reportable payments made to me will be withheld until I provide a
properly certified taxpayer identification number to the Exchange Agent.
------------------------------------------------------------------------------
Signature Date
BOX F
GUARANTY OF DELIVERY
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED HEREWITH)
(SEE INSTRUCTION A)
The undersigned (check appropriate boxes below) guarantees to deliver to the
Exchange Agent at the appropriate address set forth above the certificates for
shares of Electromedics Common Stock submitted with this Election Form no
later than 5:00 p.m., Central Time, on the fifth business day after the
Election Deadline (as defined in Instruction A).
<TABLE>
<S> <C>
/ / a member of a registered national securities --------------------------------------------------
exchange (Firm -- Please print)
/ / a member of the National Association of Securities --------------------------------------------------------
Dealers, Inc. (Authorized Signature)
/ / a commercial bank or trust company in the --------------------------------------------------------
United States --------------------------------------------------------
(Address)
--------------------------------------------------------
(Area Code and Telephone Number)
NOTE TO BANKS AND BROKERS: This Guaranty of Delivery may be faxed to the Exchange Agent at (612) 450-4050.
</TABLE>
SPECIAL PAYMENT AND MAILING INSTRUCTIONS
The undersigned understands that the Medtronic Shares to be issued, the check
issued as payment in cash, or the cash in lieu of fractional shares check (such
checks being referred to herein as "Payment Checks") with respect to the
Electromedics Common Stock surrendered will be issued in the same name(s) as the
certificate(s) surrendered and will be mailed to the address of the registered
holder(s) indicated above, unless otherwise indicated in Box G or Box H below.
IF BOX G IS COMPLETED, THE SIGNATURE OF THE UNDERSIGNED MUST BE MEDALLION
GUARANTEED AS SET FORTH IN INSTRUCTION G(5).
<TABLE>
<S> <C>
BOX G BOX H
SPECIAL PAYMENT INSTRUCTIONS SPECIAL MAILING INSTRUCTIONS
(See Instruction G(5)) (See Instruction G(7))
TO BE COMPLETED ONLY if the certificate or Payment TO BE COMPLETED ONLY if the certificate or Payment
Check(s) is (are) to be issued in the name(s) of Check(s) is (are) to be delivered to the registered
someone other than the registered holder(s) set holder(s) or someone other than the registered
forth above. holder(s) at an address other than that shown above.
ISSUE TO: MAIL TO:
Name: ----------------------------------------- Name: ----------------------------------------
Address: ----------------------------------------- Address: ----------------------------------------
(street and number) (street and number)
--------------------------------------------------- ----------------------------------------------------
(city, state and zip code) (city, state and zip code)
(You must complete Box E, Form W-9, and Box D,
Signature Guaranty, if you complete this Box G)
(Please print or type) (Please print or type)
</TABLE>
<PAGE>
INSTRUCTIONS
This Election Form (or a facsimile thereof) should be properly filled in,
dated and signed, and should be delivered, together with all stock certificates
representing Electromedics Common Stock currently held by you (unless delivery
is guaranteed in Box F in accordance with Instruction A), to the Exchange Agent
at the appropriate address set forth on the front of this Election Form. Please
read and follow carefully the instructions regarding completion of this Election
Form set forth below. If you have any questions concerning this Election Form or
require any information or assistance, see Instruction G(10).
A. TIME IN WHICH TO ELECT
IN ORDER FOR AN ELECTION TO BE EFFECTIVE, THE EXCHANGE AGENT MUST RECEIVE A
PROPERLY COMPLETED ELECTION FORM, ACCOMPANIED BY ALL STOCK CERTIFICATES
REPRESENTING ELECTROMEDICS COMMON STOCK CURRENTLY HELD BY YOU (OR A PROPER
GUARANTY OF DELIVERY, AS DESCRIBED BELOW), NO LATER THAN 5:00 P.M., CENTRAL
TIME, ON APRIL 22, 1994 (THE "ELECTION DEADLINE"). If all other conditions set
forth in the Plan of Merger have been met or, if permissible, waived, the
effective time of the Merger (the "Effective Time") could occur on the same day
approval of the Merger by shareholders of Electromedics is obtained. Persons
whose stock certificates are not immediately available may also make an Election
by completing this Election Form (or a facsimile thereof) and having Box F
(Guaranty of Delivery) properly completed and duly executed by a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States (subject to the condition that the
certificates, the delivery of which is thereby guaranteed, are in fact delivered
to the Exchange Agent no later than 5:00 p.m., Central Time, on the fifth
business day after the Election Deadline (the "Guaranteed Delivery Deadline")).
IF THE EXCHANGE AGENT HAS NOT RECEIVED YOUR PROPERLY COMPLETED ELECTION
FORM, ACCOMPANIED BY YOUR STOCK CERTIFICATES, BY THE ELECTION DEADLINE (UNLESS
BOX F (GUARANTY OF DELIVERY) HAS BEEN PROPERLY COMPLETED AND SUCH CERTIFICATES
ARE RECEIVED BY THE EXCHANGE AGENT BY THE GUARANTEED DELIVERY DEADLINE), YOU
WILL BE DEEMED TO HAVE MADE A NON-ELECTION.
For instructions regarding changes or revocations of Elections and the time
in which such changes or revocations can be made, see Instructions F(1) and F(2)
below.
B. ELECTIONS.
This Election Form provides for your Election, subject to the Election and
Allocation Procedures and the other terms and conditions set forth hereunder and
in the documents incorporated herein by reference, upon consummation of the
Merger to have each of the shares of Electromedics Common Stock covered by this
Election Form converted into the right:
- to receive $6.875 in cash without interest (a Cash Election); or
- to receive Medtronic Shares (a Stock Election); or
- to receive a combination thereof.
You should understand that your Election is subject to certain terms and
conditions that are set forth in the Plan of Merger and described in the Proxy
Statement/Prospectus. The Plan of Merger is included as Appendix A to the Proxy
Statement/ Prospectus. Copies of the Proxy Statement/Prospectus may be requested
from the Information Agent, Chemical Bank, at the address or phone number set
forth in Instruction G(10). The delivery of this Election Form to the Exchange
Agent constitutes acknowledgement of the receipt of the Proxy
Statement/Prospectus.
EACH HOLDER OF ELECTROMEDICS COMMON STOCK IS STRONGLY ENCOURAGED TO READ THE
PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY AND TO DISCUSS THE CONTENTS THEREOF,
THE MERGER AND THIS ELECTION FORM WITH HIS OR HER PERSONAL FINANCIAL AND TAX
ADVISORS PRIOR TO DECIDING WHAT ELECTION(S) TO MAKE. THE TAX CONSEQUENCES TO A
HOLDER OF ELECTROMEDICS COMMON STOCK WILL VARY DEPENDING UPON A NUMBER OF
FACTORS. FOR CERTAIN INFORMATION REGARDING THE FEDERAL INCOME TAX CONSEQUENCES
OF AN ELECTION, SEE "THE MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES" IN THE
PROXY STATEMENT/PROSPECTUS. EXCEPT FOR THE INFORMATION STATED IN THE PROXY
STATEMENT/PROSPECTUS, THE EXCHANGE AGENT AND THE INFORMATION AGENT WILL NOT BE
AUTHORIZED TO PROVIDE TAX INFORMATION TO YOU, INCLUDING ANY INFORMATION AS TO
COST BASIS, TAX TREATMENT, AND TAX CALCULATIONS.
C. CASH ELECTION
If you elect, subject to the Election and Allocation Procedures and the
other terms and conditions set forth in this Election Form, including the
documents incorporated herein by reference, to receive cash for all or a portion
of the shares of Electromedics Common Stock covered by this Election Form, you
should indicate the number of whole shares of Electromedics Common Stock for
which the election is made on the "Cash Election" line in Box A on the first
page of this Election Form.
D. STOCK ELECTION
If you elect, subject to the Election and Allocation Procedures and the
other terms and conditions set forth in this Election Form, including the
documents incorporated herein by reference, to receive Medtronic Shares for all
or any portion of the shares of Electromedics Common Stock covered by this
Election Form, you should indicate the number of whole shares of Electromedics
Common Stock for which the election is made on the "Stock Election" line in Box
A on the first page of this Election Form.
Medtronic will not issue any fractional Medtronic Shares in connection with
the Merger; shareholders will instead receive cash in an amount equal to (i) the
average of the per share closing price on the New York Stock Exchange (the
"NYSE") of Medtronic Shares on the 10 consecutive trading days ending on the
third trading day prior to the date of the Effective Time multiplied by (ii) the
fractional share amount such shareholders would otherwise have received, without
interest, rounded to the nearest cent.
<PAGE>
E. NON-ELECTION
If you do not indicate a preference for either cash or Medtronic Shares, or
a combination of cash and Medtronic Shares, you will be treated as making a
"Non-Election," which has the same effect as making a Stock Election for all
shares of Electromedics Common Stock covered by the Election Form.
If you have failed to make an effective Cash Election, Stock Election, or
combination of the two for ALL of the shares of Electromedics Common Stock
required to be covered by this Election Form, or if your Election is deemed by
the Exchange Agent or Medtronic to be defective in any way, or if your Election
Form is not accompanied by your certificates (unless Box F (Guaranty of
Delivery) has been properly completed and such certificates are received by the
Exchange Agent by the Guaranteed Delivery Deadline), you will be considered to
have made a Non-Election for ALL of such shares, which (again) has the same
effect as making a Stock Election for all such shares.
F. SPECIAL CONDITIONS
(1) CHANGE OF ELECTION. An effective Election may be changed by the person
or persons making such Election by a written notice signed and dated by such
person or persons received by the Exchange Agent prior to the Election Deadline,
identifying the name of the registered holder of Electromedics Common Stock
subject to such Election and the serial numbers shown on the certificates
representing such Electromedics Common Stock. ANY SUCH NOTICE MUST BE
ACCOMPANIED BY A PROPERLY COMPLETED, REVISED ELECTION FORM THAT CLEARLY
INDICATES, BY MARKING THE BOX ON THE FRONT OF THIS ELECTION FORM FOR REVISED
ELECTIONS, THAT IT IS A REVISED ELECTION FORM.
(2) REVOCATION OF ELECTION. An election may be revoked by the person or
person making such election by a written notice signed and dated by such person
or persons and received by the Exchange Agent prior to the Election Deadline,
identifying the name of the registered holder of the Electromedics Common Stock
subject to such Election and the serial numbers shown on the certificates
representing such Electromedics Common Stock. Any person or persons who have
effectively revoked an Election may, by a signed and dated written notice to the
Exchange Agent, request the return of the stock certificates submitted to the
Exchange Agent and such certificates will be returned to such person or persons
(at the shareholder's risk) within five business days after receipt of such
request.
(3) NULLIFICATION OF ELECTION. All Election Forms will be void and of no
effect if the Merger is not consummated, and certificates submitted therewith
shall be promptly returned to the person submitting the same.
(4) ELECTIONS SUBJECT TO ALLOCATION. All Elections are subject to the
Election and Allocation Procedures set forth in the Plan of Merger and described
in the Proxy Statement/Prospectus under the Caption "The Merger--Conversion of
Electromedics Common Stock in the Merger" and to the other terms and conditions
set forth thereunder and hereunder, including the documents incorporated herein
by reference.
(5) SHARES HELD BY NOMINEES, TRUSTEES OR OTHER REPRESENTATIVES. Holders of
record of shares of Electromedics Common Stock who hold such shares as nominees,
trustees or in other representative or fiduciary capacities (a "Representative")
may submit one or more Election Forms covering the aggregate number of shares of
Electromedics Common Stock held by such Representative for the beneficial owners
for whom the Representative is making an Election or a Non-Election; provided,
that such Representative certifies that each such Form of Election covers all
the shares of Electromedics Common Stock held by such Representative for a
particular beneficial owner. Any Representative who makes an Election or a
Non-Election may be required to provide the Exchange Agent with such documents
and/or additional certificates, if requested, in order to satisfy the Exchange
Agent that such Representative holds such shares of Electromedics Common Stock
for a particular beneficial owner of such shares. If any shares held by a
Representative are not covered by an effective Election Form, they will be
deemed to be covered by a Non-Election, which has the same effect as making a
Stock Election. See Instruction E.
G. GENERAL
(1) EXECUTION AND DELIVERY. In order to make an effective Election, you
must correctly fill out this Election Form, or a facsimile thereof. After dating
and signing it, you are responsible for its delivery TO THE EXCHANGE AGENT AT
THE ADDRESS SET FORTH ON THE FRONT OF THIS ELECTION FORM BY THE ELECTION
DEADLINE, accompanied by all stock certificates representing Electromedics
Common Stock currently held by you or a proper Guaranty of Delivery of such
stock certificates pursuant to Instruction A. YOU MAY CHOOSE ANY METHOD TO
DELIVER THIS ELECTION FORM; HOWEVER, YOU ASSUME ALL RISK OF NON-DELIVERY. IF YOU
CHOOSE TO USE THE MAIL, WE RECOMMEND THAT YOU USE EITHER OVERNIGHT COURIER OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND THAT YOU PROPERLY INSURE ALL
STOCK CERTIFICATES. DELIVERY OF STOCK CERTIFICATES WILL BE DEEMED EFFECTIVE AND
RISK OF LOSS WITH RESPECT TO SUCH CERTIFICATES SHALL PASS ONLY WHEN SUCH
CERTIFICATES ARE ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
(2) SIGNATURES. Except as otherwise permitted below, you must sign this
Election Form exactly the way your name appears on the face of your
certificates. If the shares are owned by two or more persons, each must sign
exactly as his or her name appears on the face of the certificates. If shares of
Electromedics Common Stock have been assigned by the registered owner, this
Election Form should be signed in exactly the same way as the name of the
assignee appearing on the certificates or transfer documents. See Instructions
G(5)(a) and G(5)(b).
(3) NOTICE OF DEFECTS; RESOLUTION OF DISPUTES. None of Electromedics,
Medtronic and the Exchange Agent will be under any obligation to notify you or
anyone else that the Exchange Agent has not received a properly completed
Election Form or that any Election Form submitted is defective in any way.
Any and all disputes with respect to Election Forms or to Elections made in
respect to Electromedics Common Stock (including but not limited to matters
relating to the Election Deadline, time limits, defects or irregularities in the
surrender of any stock certificate, effectiveness of any Elections and
computations of allocations) will be resolved by Medtronic, and its decision
will be conclusive and binding on all concerned. Medtronic may delegate this
function to the Exchange Agent in whole or in part.
<PAGE>
Medtronic or the Exchange Agent shall have the absolute right in its sole
discretion to reject any and all Election Forms and surrenders of stock
certificates that are deemed by either of them to be not in proper form or to
waive any immaterial irregularities in any Election Form or in the surrender of
any stock certificate. Surrenders of stock certificates will not be deemed to
have been made until all defects or irregularities that have not been waived
have been cured. In order to allow sufficient time to correct any possible
defects in Elections prior to the Election Deadline, you are encouraged to
return your Election Form promptly after receipt.
(4) ISSUANCE OF PAYMENT CHECK(S) AND NEW CERTIFICATE. If the certificate
representing Medtronic Shares and/or the Payment Check(s) are to be issued in
the name of the registered holder(s) as inscribed on the surrendered
certificate(s), the surrendered certificate(s) need not be endorsed and no
guaranty of the signature on the Election Form is required. For corrections in
name and change in name not involving changes in ownership, see Instruction
G(5)(c).
(5) ISSUANCE OF PAYMENT CHECK(S) AND NEW CERTIFICATE IN DIFFERENT NAMES. If
the certificate representing Medtronic Shares and/or the Payment Check(s) are to
be issued in the name of someone other than the registered holder(s) of the
surrendered certificate(s), you must follow the guidelines below. Note that in
each circumstance listed below, shareholder(s) must have signature(s) Medallion
guaranteed in Box D and complete Box G and Box H.
(a) ENDORSEMENT AND GUARANTY. The certificate(s) surrendered must be
properly endorsed (or accompanied by stock powers properly executed) by the
registered holder(s) of such certificates(s) to the person who is to receive
the Medtronic Shares and/or the Payment Check(s). The signature(s) of the
registered holder(s) on the endorsement or stock powers must correspond with
the name(s) written upon the face of the certificate(s) in every particular
and must be Medallion guaranteed by an eligible guarantor institution as
defined below.
DEFINITION OF ELIGIBLE GUARANTOR INSTITUTION
Generally an eligible guarantor institution, as defined in Rule
17Ad-15 of the regulations of the Securities and Exchange Commission,
means:
(i) Banks (as that term is defined in Section 3(a) of the
Federal Deposit Insurance Act);
(ii) Brokers, dealers, municipal securities dealers, municipal
securities brokers, government securities dealers, and government
securities brokers, as those terms are defined under the Securities
Exchange Act of 1934; and
(iii) Credit unions (as that term is defined in Section
19(b)(1)(A) of the Federal Reserve Act);
(iv) National securities exchanges, registered securities
associations, clearing agencies, as those terms are used under the
Securities Exchange Act of 1934; and
(v) Savings associations (as that term is defined in Section
3(b) of the Federal Deposit Insurance Act).
(b) TRANSFEREE'S SIGNATURE. The Election Form must be signed by the
transferee or assignee or his or her agent, and should not be signed by the
transferor or assignor. See Box C entitled "Sign Here." The signature of
such transferee or assignee must be Medallion guaranteed by an eligible
guarantor institution as provided in Instruction G(5)(a).
(c) CORRECTION OF OR CHANGE IN NAME. For a correction of name or for a
change in name that does not involve a change in ownership, proceed as
follows: For a change in name by marriage, etc., the Election Form should be
signed, E.G., "Mary Doe, now by marriage Mary Jones." For a correction in
name, the Election Form should be signed, E.G., "James E. Brown, incorrectly
inscribed as J.E. Brown." The signature in each case should be Medallion
guaranteed in the manner described in Instruction G(5)(a) above and Box G
should be completed.
You should consult your own tax advisor as to any possible tax
consequences resulting from the issuance of the Medtronic Shares certificate
and/or Payment Check(s) in a name different from that of the registered
holder(s) of the surrendered certificate(s).
(6) SUPPORTING EVIDENCE. In case any Election Form, certificate
endorsement or stock power is executed by an agent, attorney, administrator,
executor, guardian, trustee or any person in any other fiduciary or
representative capacity, or by an officer of a corporation on behalf of the
corporation, there must be submitted (with the Election Form, surrendered
certificate(s), and/or stock powers) documentary evidence of appointment and
authority to act in such capacity (including court orders and corporate
resolutions when necessary), as well as evidence of the authority of the person
making such execution to assign, sell or transfer the certificate(s). Such
documentary evidence of authority must be in form satisfactory to the Exchange
Agent.
(7) SPECIAL INSTRUCTIONS FOR DELIVERY BY THE EXCHANGE AGENT. The
certificate representing Medtronic Shares and/or the Payment Check(s) will be
mailed to the address of the registered holder(s) as indicated under Box B
entitled "Certificates Enclosed," unless instructions to the contrary are given
in Box H entitled "Special Mailing Instructions."
(8) LOST CERTIFICATES. If you are not able to locate your certificates
representing Electromedics Common Stock, you should check the box located below
Box B and indicate the number of shares lost, then complete and send in the
Election Form with the certificates that you do have in your possession. In such
event, the Exchange Agent may forward additional documentation that the
shareholder must complete in order to effectively surrender such lost or
destroyed certificate(s). There may be a fee to replace lost certificates. If
the required paperwork and fee (where required) have not been received by the
Exchange Agent by the Election Deadline, the certificate(s) in question will not
be included in your election and the shares of Electromedics Common Stock
representated by the certificates will be deemed to be covered by a
Non-Election.
<PAGE>
(9) FEDERAL INCOME TAX WITHHOLDING. Under federal income tax law, the
Exchange Agent is required to file a report with the Internal Revenue Service
disclosing any payments of cash being made to each holder of certificates
formerly representing shares of Electromedics Common Stock pursuant to the Plan
of Merger. In order to avoid "backup withholding" of federal income tax on any
cash received upon the surrender of certificate(s), a holder thereof must,
unless an exemption applies, provide the Exchange Agent with his or her correct
taxpayer identification number ("TIN") on Substitute Form W-9, which is part of
this Election Form (Box E), and certify, under penalties of perjury, that such
number is correct and that such holder is not otherwise subject to backup
withholding. The TIN for an individual is his or her social security number. If
the correct TIN and certifications are not provided, a $50 penalty may be
imposed by the Internal Revenue Service and payments made for surrender of
certificate(s) may be subject to backup withholding of 31%. In addition, if a
holder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for making such a statement, a
$500 penalty may also be imposed by the Internal Revenue Service.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
reduced by the amount of such tax withheld. If backup withholding results in an
overpayment of income taxes, a refund may be obtained from the Internal Revenue
Service.
The TIN that must be provided on the Substitute Form W-9 is that of the
registered holder(s) of the certificate(s) at the Effective Time of the Merger
(or the special payment recipient shown in Box G). The box in Part II of the
Substitute Form W-9 may be checked if the person surrendering the certificates
has not been issued a TIN and has applied for a TIN or intends to apply for a
TIN in the near future. If the box in Part II has been checked, the person
surrendering the certificate(s) must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part II is checked (and the Certificate of
Awaiting Taxpayer Identification Number is completed), the Exchange Agent will
withhold 31% on all cash payments with respect to surrendered certificate(s)
made prior to the time it is provided with a properly certified TIN.
The IRS notifies certain taxpayers that they have underreported interest or
dividend payments or that they have failed to file a return with the IRS
reporting such payments. The certification as to backup withholding in Item (2)
of the Certification on Substitute Form W-9 should be crossed out if the person
who is obligated to provide a TIN pursuant to this Instruction has been so
notified and has not received notice from the IRS that he or she is no longer
subject to backup withholding. If the IRS has not provided such notice of
underreported interest or dividend payments, the certification as to backup
withholding should not be crossed out.
Exempt persons (including, among others, corporations) are not subject to
backup withholding and should indicate their exempt status on Substitute Form
W-9 by entering their correct TIN, marking the box in Part III and signing and
dating in the space provided. A foreign individual may qualify as an exempt
person by submitting Form W-8 or a substitute Form W-8, signed under penalties
of perjury, certifying to such person's exempt status. A form of such statement
can be obtained from the Information Agent, Chemical Bank. A certificate holder
should consult his or her tax advisor as to such holder's qualification for an
exemption from backup withholding and the procedure for obtaining such
exemption.
The signature and the date provided on the Substitute Form W-9 will serve to
certify that the TIN and withholding information provided in this Election Form
are true, correct and complete. Please consult your accountant or tax advisor
for further guidance in completing the Substitute Form W-9.
(10) QUESTIONS AND REQUESTS FOR INFORMATION OR ASSISTANCE. If you have any
questions or need assistance to complete this Election Form, or would like to
obtain additional copies of this Election Form, please contact the Information
Agent, Chemical Bank, at 1-800-279-1259 (Toll Free) or Banks and Brokers call
(212) 613-7618. Copies of the Proxy Statement/Prospectus are also available from
Chemical Bank.
H. DELIVERY OF MEDTRONIC SHARES AND PAYMENT CHECKS
As soon as practicable after the Effective Time of the Merger, the Exchange
Agent will make the allocations of cash and Medtronic Shares to be received by
holders of Electromedics Common Stock or their designees in accordance with the
Election and Allocation Procedures. The Exchange Agent will thereafter issue and
mail to you a check for any cash and/or any certificate or certificates for the
Medtronic Shares to which you are entitled (and, if applicable, a check in lieu
of a fractional share), PROVIDED you have delivered the required certificates
for your Electromedics Common Stock in accordance with the terms and conditions
hereof, including the documents incorporated herein by reference.
If you do not submit an effective Election Form, the Exchange Agent will
forward to you, as soon as practicable after the Merger becomes effective, a
Letter of Transmittal for you to use to send in your stock certificates for
shares of Electromedics Common Stock, containing appropriate instructions for
surrendering such certificates at that time. After the Exchange Agent receives
your stock certificates with a properly completed Letter of Transmittal, it will
issue and mail to you any certificate or certificates for Medtronic Shares to
which you are entitled (and, if applicable, a check in lieu of a fractional
share), PROVIDED you have delivered the required certificates for your
Electromedics Common Stock in accordance with the terms and conditions of the
Letter of Transmittal, including the documents incorporated therein by
reference.
DO NOT ENCLOSE YOUR PROXY CARD RELATING TO THE SPECIAL MEETING WITH THIS
ELECTION FORM. YOUR PROXY CARD SHOULD BE RETURNED IN THE POSTAGE-PAID
ENVELOPE ENCLOSED WITH THE PROXY STATEMENT/PROSPECTUS FOR THAT PURPOSE.
