AGA makes its regulatory status
forecasts, including determining expected dates of filings with, or submissions to, relevant authorities, based on the information
currently available to it. The actual timing for any of these regulatory steps may vary, and AGA may revise any such forecasts
as new information becomes available.
Moreover, most new or enhanced products or new applications for
AGA’s existing products require that their safety and efficacy be proven by clinical trials before they receive regulatory
approval. AGA’s clinical trials may not prove the safety and efficacy of its products, and in such circumstances its products
would not receive regulatory approval. In addition, these clinical trials typically last several years, and during that time competing
products, procedures or therapies may be introduced that are less expensive and/or more effective than AGA’s products and
thus render AGA’s products obsolete. If AGA does not continue to expand its product portfolio on a timely basis or if those
products and applications do not receive regulatory and market acceptance or become obsolete, AGA will not grow its business as
it currently expects.
Acceptance of AGA’s products depends, in large part, on AGA’s
ability to (1) educate the medical community as to the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness
of its products compared to alternative products, procedures and therapies and (2) train physicians in the proper use and implementation
of its devices. Certain of the structural heart defects and vascular diseases that can be treated by AGA’s devices can also
be treated by surgery, drugs or other medical devices, some of which have a longer history of use and are more widely used by the
medical community. Physicians may be reluctant to change their medical treatment practices for a number of reasons, including:
• perceived liability risks generally associated
with the use of new products and procedures;
• lack of availability of adequate reimbursement
within healthcare payment systems; and
• costs associated with the purchase of new products
and equipment.
Convincing physicians to dedicate the time and energy necessary
to properly train to use new devices is challenging, and AGA may not be successful in these efforts. If physicians are not properly
trained, they may misuse or ineffectively use AGA’s products. Such misuse or ineffective use may result in unsatisfactory
patient outcomes, patient injury, negative publicity or lawsuits against AGA. Accordingly, even if AGA’s devices are superior
to alternative treatments, AGA’s success will depend on its ability to gain and maintain market acceptance for its devices.
If AGA fails to do so, its sales will not grow and its business, financial condition and results of operations will be adversely
affected.
A
number of AGA products are in the early stages of development. In the United States, before AGA can market a new medical
device, or a new application of, claim for, or significant modification to, an existing device, it must first receive either
approval of a Premarket Approval, or PMA, application from the Food and Drug Administration (the “FDA”) or clearance
under section 510(k) of the U.S. Federal Food, Drug, and Cosmetic Act, or 510(k) clearance, unless an exemption applies.
Clinical trials are always required to support a PMA application approval and may be required to support a 510(k)
clearance. Currently, AGA has four studies underway designed to evaluate the safety and efficacy of its
AMPLATZER
PFO
Occluder to treat migraine or recurrent stroke, as applicable, in patients with PFOs, as well as a number of post-approval
studies.
AGA’s current or future clinical trials contemplated in support
of its PMA or 510(k) applications may not commence or conclude in a timely fashion, or at all, or may not produce the desired results.
For example, several of AGA’s products under development do not yet have agreed-upon protocols or approved Investigational
Device Exemptions, or IDEs. Agreeing on clinical trial designs and protocols may be time consuming and requires interaction with
and advance approval from regulatory authorities. We cannot assure you that AGA will be able to agree on appropriate trial designs
and protocols with the FDA and thus commence clinical trials or, if commenced, that its PMA applications will be approved or its
510(k) clearances will be granted, in a timely fashion or at all. If AGA’s trials for any reason do not commence, do not
produce the intended results or are delayed or halted due to the occurrence of adverse events, or if AGA does not otherwise obtain
FDA or other regulatory agency approval with respect to its products in a timely fashion, AGA’s future growth may be significantly
hampered. AGA’s failure to comply with the regulations relating to the PMA approval and 510(k) clearance processes could
also lead to the issuance of warning letters, injunctions, consent decrees, manufacturing suspensions, loss of regulatory approvals,
product recalls, and termination of distribution arrangements or product seizures. In the most egregious cases, criminal sanctions
or closure of AGA’s manufacturing facilities could be imposed.
Moreover, sales of AGA’s products outside the United States
are subject to foreign regulatory requirements that vary widely from country to country. Because a significant portion of AGA’s
product sales are made in international markets, any failure to comply with directives and regulatory requirements imposed in foreign
jurisdictions could also have a material adverse effect on AGA’s business, financial condition and results of operations.
Further, AGA continually evaluates the potential financial benefits
and costs of its clinical trials and the products being evaluated in them. If AGA determines that the costs associated with attaining
regulatory approval of a product exceed the potential financial benefits of that product or if the projected development timeline
is inconsistent with its investment strategy, AGA may choose to stop a clinical trial or the development of a particular product,
enhancement or application, which could have a material adverse effect on the growth of its business and could result in a charge
to its earnings.
AGA depends on clinical investigators and clinical sites to
enroll patients in its clinical trials and on other third-party contract research organizations to manage its clinical trials and
to perform related data collection and analysis, and as a result, AGA may face significant costs and delays that are outside its
control.
AGA relies on clinical investigators and clinical sites to enroll
patients in its clinical trials and other third-party contract research organizations to manage its clinical trials and to perform
related data collection and analysis. AGA’s agreements with clinical investigators, clinical sites and other third parties
for clinical testing place substantial responsibilities on these parties. If clinical investigators, clinical sites or other third
parties do not carry out their contractual duties or fail to meet expected deadlines or if the quality or accuracy of the clinical
data they obtain is compromised due to their failure to adhere to AGA’s clinical protocols or the FDA’s good clinical
practice regulations, AGA’s clinical trials may be extended, delayed or terminated, AGA may face significant costs and it
may be unable to obtain regulatory approval or clearance for, or successfully commercialize, new products, enhancements or applications,
in a timely manner, or at all.
AGA also competes with other manufacturers of medical devices for
investigators and clinical sites to conduct clinical trials. If AGA is unable to identify investigators and clinical sites on a
timely and cost-effective basis, its ability to conduct trials of its products and, therefore, its ability to obtain required regulatory
approval or clearance would be adversely affected.
AGA may be subject to compliance action, penalties or injunctions
if it is determined to be promoting the use of its products for unapproved, or off-label, uses.
AGA products are currently approved for the treatment of certain
structural heart defects and vascular diseases. Pursuant to FDA regulations, AGA can only market its products in the United States
for approved uses. Physicians may use AGA’s products for indications other than those cleared or approved by the FDA, even
though AGA does not promote its products for such off-label uses. If the FDA, however, determines that AGA’s promotional
materials or training constitutes promotion of an unapproved use, the FDA could request that AGA modify its training or promotional
materials or could subject AGA to regulatory enforcement actions, including the issuance of warning letters, injunctions, consent
decrees, seizures, civil fines or criminal penalties. Other federal, state or foreign enforcement authorities might also take action
if they consider AGA’s promotional or training materials to constitute promotion of an unapproved use, which could result
in significant fines or penalties from other statutory authorities.
AGA operates in a very competitive environment.
The medical device industry is characterized by strong competition.
AGA has several competitors, including Boston Scientific Corporation, NMT Medical, Inc., W. L. Gore & Associates, Inc., Cook,
Inc., Occlutech GmbH, Cardia, Inc. and Atritech, Inc. Certain of AGA’s competitors have substantially greater capital resources,
larger customer bases, broader product lines, larger sales forces, greater marketing and management resources, larger research
and development staffs and larger facilities than AGA and have more established reputations with AGA’s target customers,
as well as global distribution channels that may be more effective than those of AGA.
S-9
AGA’s competitors may develop and offer technologies and products
that are safer or more effective, have better features, are easier to use, less expensive or more readily accepted by the marketplace
than AGA’s. Competitors’ products could make AGA’s technology and products obsolete or noncompetitive. AGA’s
competitors may also be able to achieve more efficient manufacturing and distribution operations than AGA may be able to achieve
and may offer lower prices than AGA could offer profitably. AGA may decide to alter or discontinue aspects of its business and
may adopt different strategies due to business or competitive factors or factors currently unforeseen, such as the introduction
by AGA’s competitors of new products or new medical technologies that would make AGA’s products obsolete or uncompetitive.
In addition, consolidation in the medical device industry could
make the competitive environment more difficult. The industry has recently experienced some consolidation, and there is a risk
that larger companies will enter AGA’s markets.
AGA depends on third-party distributors to market and sell
its products internationally in a number of markets. AGA’s business, financial condition and results of operations may be
adversely affected by both its distributors’ performance and its ability to maintain these relationships on terms that are
favorable to it.
AGA depends, in part, on third-party distributors to sell its medical
devices outside the United States. In 2009, AGA’s net sales through third-party distributors was 19.3% of its total net sales.
AGA’s international distributors operate independently of it, and AGA has limited control over their operations, which exposes
AGA to significant risks. Distributors may not commit the necessary resources to market and sell AGA’s products and may also
market and sell competitive products. In addition, AGA’s distributors may not comply with the laws and regulatory requirements
in their local jurisdictions, which may limit their ability to market or sell AGA’s products. If current or future distributors
do not perform adequately, or if AGA is unable to locate competent distributors in particular countries and secure their services
on favorable terms, or at all, AGA may be unable to increase or maintain its level of net sales in these markets or enter new markets,
and AGA may not realize its expected international growth.
The terms and effects of AGA’s Deferred Prosecution
Agreement with the U.S. Department of Justice relating to potential violations of the U.S. Foreign Corrupt Practices Act may negatively
affect its business, financial condition and results of operations.
On June 2, 2008, AGA entered into a Deferred Prosecution Agreement,
or DPA, with the Department of Justice concerning alleged improper payments that were made by AGA’s former independent distributor
in China to (1) physicians in Chinese public hospitals in connection with the sale of AGA’s products and (2) an official
in the Chinese patent office in connection with the approval of AGA’s patent applications, in each case, in potential violation
of the Foreign Corrupt Practices Act, or the FCPA. The FCPA makes it unlawful for, among other persons, a U.S. company, acting
directly or through an agent, to offer or to make improper payments to any “foreign official” in order to obtain or
retain business or to induce such “foreign official” to use his or her influence with a foreign government or instrumentality
thereof for such purpose.
As part of the DPA, AGA consented to the Department of Justice filing
a two-count criminal statement of information against it in the U.S. District Court, District of Minnesota, which was filed on
June 3, 2008. The two counts include a conspiracy to violate the FCPA and a substantive violation of the anti-bribery provisions
of the FCPA related to the above-described activities in China. Although AGA did not plead guilty to the statement of information,
AGA accepted responsibility for the acts of its employees and agents as set forth in the DPA, and AGA faces prosecution under that
information, and possibly other charges as well, if it fails to comply with the terms of the DPA. Those terms require AGA to, for
approximately three years, (1) continue to cooperate fully with the Department of Justice on any investigation relating to violations
of the FCPA and any and all other matters relating to improper payments, (2) continue to implement a compliance and ethics program
designed to detect and prevent violations of the FCPA and other applicable anti-corruption laws, (3) review existing, and if necessary,
adopt new controls, policies and procedures designed to ensure that AGA makes and keeps fair and accurate books, records and accounts
and maintain a rigorous anti-corruption compliance code designed to detect and deter violations of the FCPA and other applicable
anti-corruption laws, and (4) retain and pay for an independent monitor to assess and oversee AGA’s compliance and ethics
program with respect to the FCPA and other applicable anti-corruption laws. The DPA also required AGA to pay a monetary penalty
of $2.0 million. In the fourth quarter of 2007, AGA recorded a financial charge of $2.0 million for this expected settlement, which
was paid in June 2008. The terms of the DPA will remain binding on any successor or merger partner as long as the agreement is
in effect.
S-10
The effects that compliance with any of the terms of the DPA will
have on AGA are unknown and they may have a material impact on AGA’s business, financial condition and results of operations.
The activities of the government-approved independent monitor, as well as the continued implementation of a compliance and ethics
program and the adoption of internal controls, policies and procedures to detect and prevent future violations of the FCPA and
other applicable anti-corruption laws, may result in increased costs to AGA and change the way in which it operates, the outcome
of which AGA is unable to predict. For example, implementing and monitoring such compliance procedures in the large number of foreign
jurisdictions where AGA operates can be expensive and time-consuming. As a result of AGA’s remediation measures, AGA may
also encounter difficulties conducting business in certain foreign countries and retaining and attracting additional business with
certain customers, and AGA cannot predict the extent of these difficulties.
In addition, entering into the DPA in the United States may adversely
affect AGA’s operations or result in legal claims against AGA, which may include claims of special, indirect, derivative
or consequential damages.
AGA’s failure to comply with the terms of the deferred
prosecution agreement with the Department of Justice would have a negative impact on its ongoing operations.
As described above, AGA is subject to a three-year DPA dated June
2, 2008 with the Department of Justice. If AGA complies with the DPA, the Department of Justice has agreed not to prosecute AGA
with respect to the above-described activities in China and, following the term of the DPA, to permanently dismiss the criminal
statement of information that is currently pending against it. Accordingly, the DPA could be substantially nullified, and AGA could
be subject to severe sanctions and resumed civil and criminal prosecution, as well as severe fines, penalties and other regulatory
sanctions, in the event of any additional violation of the FCPA or any other applicable anti-corruption laws by AGA or any of its
officers, other employees or agents in any jurisdiction or AGA’s failure to otherwise meet any of the terms of the DPA as
determined by the Department of Justice in its sole discretion. The claims alleged in the DPA with the Department of Justice only
relate to AGA’s actions in China as outlined above, and do not relate to any future violations or the discovery of past violations
not expressly covered by the DPA. Any breach of the terms of the DPA would also cause damage to AGA’s business and reputation,
as well as impair investor confidence in AGA and result in adverse consequences on AGA’s ability to obtain or continue financing
for current or future projects.
In addition, although AGA is not currently restricted by the U.S.
Department of Health and Human Services, Office of the Inspector General, from participating in federal healthcare programs, any
criminal conviction of AGA under the FCPA in the future would result in AGA’s mandatory exclusion from such programs, and
it may lead to debarment from U.S. and foreign government contracts. Any such exclusion or debarment would have a material adverse
effect on AGA’s business, financial condition and results of operations.
AGA’s ability to comply with the terms of the DPA is dependent,
among other things, on the success of its ongoing compliance and ethics program, including its ability to continue to manage its
distributors and agents and supervise, train and retain competent employees, as well as the efforts of its employees to adhere
to its compliance and ethics program and the FCPA and other applicable anti-corruption laws. It is possible that, despite its best
efforts, additional FCPA issues, or issues under anti-corruption laws of other jurisdictions, could arise in the future. Any failure
by AGA to adopt appropriate compliance and ethics procedures, to ensure that its officers, other employees and agents comply with
the FCPA and other applicable anti-corruption laws and regulations in all jurisdictions in which it operates or to otherwise comply
with any term of the DPA would have a material adverse effect on AGA’s business, financial condition and results of operations.
S-11
AGA’s ability to operate its company effectively could
be impaired if it loses members of its senior management team or scientific personnel.
AGA depends on the continued service of key managerial, scientific
and technical personnel, as well as its ability to continue to attract and retain highly qualified personnel. AGA competes for
such personnel with other companies, academic institutions, government entities and other organizations. Any loss or interruption
of the services of AGA’s key personnel could significantly reduce its ability to effectively manage its operations and meet
its strategic objectives, because AGA may be unable to find an appropriate replacement, if necessary. For example, Dr. Amplatz
plays a key role in the early stages of AGA’s research and development programs, which are crucial to expanding its product
portfolio. AGA has a ten-year research and development contract with Dr. Amplatz that expires in December 2015, and AGA may not
be able to renew this contract. The loss of Dr. Amplatz’s services may negatively affect AGA’s ability to expand its
product portfolio beyond its current pipeline. In addition, after termination of AGA’s contract with Dr. Amplatz, Dr. Amplatz
is not allowed to compete with AGA for 18 months in the United States. Any competition from Dr. Amplatz after that period or outside
the United States may negatively affect AGA’s business.
Healthcare legislative or administrative changes resulting
in restrictive third-party payor reimbursement practices or preferences for alternate treatment may decrease the demand for, or
put downward pressure on the price of, AGA products.
AGA products are purchased principally by hospitals, which typically
receive reimbursement from various third-party payors, such as governmental programs (e.g., Medicare and Medicaid), private insurance
plans and managed care plans, for the healthcare services provided to their patients. The ability of AGA customers to obtain appropriate
reimbursement for their products and services from government and third-party payors is critical to AGA’s success. The availability
of reimbursement affects which products customers purchase and the prices they are willing to pay. Reimbursement varies from country
to country and can significantly impact the acceptance of new products. After AGA develops a promising new product, AGA may experience
limited demand for the product unless reimbursement approval is obtained from private and governmental third-party payors.
Major third-party payors for hospital services in the United States
and abroad continue to work to contain healthcare costs. The introduction of cost-containment incentives, combined with closer
scrutiny of healthcare expenditures by both private health insurers and employers, has resulted in increased discounts and contractual
adjustments to hospital charges for services performed. Initiatives to limit the growth of healthcare costs, including price regulation,
are also underway in several countries in which AGA does business. Implementation of new legislative and administrative changes
in the United States and in overseas markets, such as Germany and Japan, may limit the price of, or the level at which reimbursement
is provided for, AGA products and, as a result, may adversely affect both AGA pricing flexibility and demand for AGA’s products.
Hospitals or physicians may respond to such cost-containment pressures by substituting lower-cost products or other treatments
for AGA’s products.
Further legislative or administrative changes to the U.S. or international
reimbursement systems that significantly reduce reimbursement for procedures using AGA’s medical devices or deny coverage
for such procedures, or adverse decisions relating to AGA’s products by administrators of such systems in coverage or reimbursement
issues, would have an adverse impact on the number of products purchased by AGA customers and the prices its customers are willing
to pay for them. This, in turn, would adversely affect AGA’s business, financial condition and results of operations.
AGA’s business may be adversely affected if consolidation
in the healthcare industry leads to demand for price concessions or if AGA is excluded from being a supplier by a group purchasing
organization or similar entity.
Because healthcare costs have risen significantly over the past
decade, numerous initiatives and reforms have been launched by legislators, regulators and third-party payors to curb these costs.
As a result, there has been a consolidation trend in the healthcare industry to create larger companies, including hospitals, with
greater market power. As the healthcare industry consolidates, competition to provide products and services to industry participants
has become and will continue to become more intense. This has resulted and will likely continue to result in greater pricing pressures
and the exclusion of certain suppliers from important markets as group purchasing organizations, independent delivery networks
and large single accounts continue to use their market power to consolidate purchasing decisions. If a group purchasing organization
excludes AGA from being one of their suppliers, AGA’s net sales will be adversely impacted. AGA expects that market demand,
government regulation, third-party reimbursement policies and societal pressures will continue to change the worldwide healthcare
industry, which may exert further downward pressure on the prices of AGA products.
S-12
AGA conducts substantially all of its operations at its corporate
headquarters, and any fire, explosion, violent weather conditions or other unanticipated events affecting AGA’s corporate
headquarters could adversely affect AGA’s business, financial condition and results of operations.
AGA conducts all of its manufacturing and research and development
activities, as well as most of its sales, warehousing and administrative activities, at its corporate headquarters in Plymouth,
Minnesota. AGA’s corporate headquarters are subject to the risk of catastrophic loss due to unanticipated events, such as
fires, explosions or violent weather conditions. This facility and the manufacturing equipment that AGA uses to produce its products
would be difficult to replace or repair and could require substantial lead-time to do so. For example, if AGA were unable to utilize
its existing manufacturing facility, the use of any new facility would need to be approved by the FDA, which would result in significant
production delays. AGA may also in the future experience plant shutdowns or periods of reduced production as a result of regulatory
issues, equipment failure or delays in deliveries. Any disruption or other unanticipated events affecting AGA’s corporate
headquarters and therefore AGA’s sales, manufacturing, warehousing, research and development and administrative activities
would adversely affect AGA’s business, financial condition and results of operations. AGA currently carries $80.0 million
of insurance coverage for damage to its property and the disruption of its business. Such insurance coverage, however, may not
be sufficient to cover all of AGA’s potential losses and may not continue to be available to AGA on acceptable terms, or
at all.
AGA relies on a single supplier for nitinol, the key raw material
in all of its products, which makes AGA susceptible to supply shortages of this material.
AGA relies on a single supplier for nitinol, the key raw material
in all of its products, and has no written agreement with this supplier. If AGA is unable to obtain nitinol from this supplier,
AGA may be unable to obtain nitinol through other sources, on acceptable terms, within a reasonable amount of time or at all. Further,
even if AGA is able to find an alternative source for nitinol, AGA may not be able to prevent an interruption of production of
AGA products. AGA’s business would be adversely affected if such interruption was prolonged. For example, if a raw material
or component is a critical element, an element that can have a significant effect on performance and safety of the related device,
such as nitinol with respect to AGA devices, FDA and foreign regulations may require additional testing and prior approval of such
raw material or component from new suppliers prior to AGA’s use of these materials or components. As a result, if AGA needs
to establish additional or replacement suppliers for nitinol or any other critical component, AGA’s access to these components
may be delayed while AGA qualifies such suppliers and obtains any necessary FDA and foreign regulatory approvals.
Any disruption in the ongoing shipment of nitinol could interrupt
production of AGA’s products, which could result in a decrease in net sales, or could cause an increase in cost of sales
if AGA has to pay another supplier a higher price for nitinol.
Any failure of AGA’s management information systems
could harm its business and results of operations.
AGA’s rapid growth may continue to place a significant strain
on its managerial, operational and financial resources and systems. AGA depends on its recently implemented management information
systems to actively manage its controlled regulatory and manufacturing documents. AGA also depends on its enterprise resource planning
system to actively manage its invoicing, production and inventory planning, clinical trial information and quality compliance.
AGA must continually assess the necessity for any upgrades to its information systems. The inability of its management information
systems to operate as AGA anticipates could damage AGA’s reputation with its customers, disrupt its business or result in,
among other things, decreased net sales and increased overhead costs. As a result, any such failure could harm AGA’s business,
financial condition and results of operations.
S-13
AGA’s business will be harmed if AGA fails to obtain
necessary clearances or approvals to market AGA’s medical devices.
AGA’s products are classified as medical devices and are subject
to extensive regulation in the United States by the FDA and other federal, state and local authorities. Similar regulatory review
and approval processes also exist in foreign countries in which AGA products are marketed. These regulations relate to product
design, development, testing, manufacturing, labeling, sale, promotion, distribution, import, export and shipping.
Before AGA can market a new medical device, or a new use of, claim
for, or significant modification to, an existing product in the United States, AGA must first receive either PMA approval or 510(k)
clearance from the FDA unless an exemption applies. The PMA approval process, commonly used for riskier devices such as those which
support or sustain life or are used invasively in the body, requires an applicant to demonstrate the safety and efficacy of the
device based, in part, on data obtained in clinical trials. The PMA approval process and clinical trials can be expensive and lengthy
and entail significant user fees. In the 510(k) clearance process, the FDA must determine that the proposed device is “substantially
equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology
and safety and efficacy, in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial
equivalence. The PMA approval pathway is much more costly and uncertain than the 510(k) clearance process. It generally takes from
one to three years, or even longer, from the time the PMA is submitted to the FDA until an approval is obtained. The 510(k) clearance
process usually takes from three to 12 months, but it can take longer.
In many of the foreign regions in which AGA markets its products,
such as Europe, AGA is subject to regulations substantially similar to those of the FDA, although these foreign regulatory requirements
may vary widely from country to country. In Europe, only medical devices which bear a CE Mark may be marketed. Japan has a regulatory
process that generally accepts clinical data from either the United States or Europe supplemented by a small study in Japan to
establish experience and confirm safety. In addition, as AGA selectively converts into direct sales forces in foreign regions,
AGA will be subject to additional regulations in these markets.
Any failure to receive desired marketing clearances or approvals
from the FDA or other federal, state or foreign regulatory authorities may adversely affect AGA’s ability to market its products
and may have a significant adverse effect on AGA’s overall business. Moreover, the value of existing clearances or approvals
can be eroded if safety or efficacy problems develop.
AGA may fail to comply with continuing post-market regulatory
requirements of the FDA and other federal, state or foreign authorities and become subject to substantial penalties, or AGA products
may subsequently prove to be unsafe, forcing it to recall or withdraw such products from the market.
Even after product clearance or approval, AGA and its contract manufacturers
must comply with continuing regulation by the FDA and other federal, state or foreign authorities, including the FDA’s Quality
System Regulation requirements, which obligate manufacturers, including third-party contract manufacturers, to adhere to stringent
design, testing, control, documentation and other quality assurance procedures during the design and manufacture of a device. AGA
is also subject to medical device reporting regulations in the United States and abroad. For example, AGA is required to report
to the FDA if its products may have caused or contributed to a death or serious injury or malfunction in a way that would likely
cause or contribute to a death or serious injury if the malfunction were to recur. AGA must report corrections and removals to
the FDA where the correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of
the U.S. Food, Drug, and Cosmetic Act caused by the device that may present a risk to health, and AGA must maintain records of
other corrections or removals. The FDA closely regulates promotion and advertising, and AGA’s promotional and advertising
activities may come under scrutiny. If any medical device reports AGA files with the FDA regarding death, serious injuries or malfunctions
indicate or suggest that one of its products presents an unacceptable risk to patients, including when used off-label by physicians,
AGA may be forced to recall its product or withdraw it from the market.
AGA has had several product recalls in the past. For example, in
October 2006, AGA recalled catheter and delivery systems after internal testing revealed the potential for a tear to develop in
the packaging under extreme shipping conditions. AGA immediately modified its shipping method and subsequently received approval
from the FDA and AMTAC in Europe to modify the packaging to prevent tears from developing. Approximately 15,871 devices were returned
and replaced by AGA. On February 28, 2007, AGA submitted a letter to the FDA formally requesting the recall to be closed, and on
October 9, 2008 the FDA confirmed that the recall has been completed. During the third quarter of 2005, AGA voluntarily recalled
80 of its
AMPLATZER
Vascular Plug devices over concerns that AGA operators failed to follow internal sterilization procedures.
Of the 80 devices, only two had left AGA’s possession. After testing the recalled products, none of them were found to be
non-sterile. AGA submitted a letter to the FDA formally requesting closure of the recall, and the recall has been closed. In September
2005, AGA recalled its
AMPLATZER
Duct Occluder device after discovering through in-process testing during manufacturing
that the device had the potential to rub against the catheter during the implant procedure. Approximately 2,800 devices were recalled,
92% of which had left AGA’s possession. AGA made the required changes to the
AMPLATZER
Duct Occluder, and these changes
have been approved both internationally and by the FDA. AGA submitted letters to the FDA formally requesting closure of the recall,
and the recall has been closed. Finally, on December 8, 2004, AGA initiated a voluntary recall of all catheters and delivery systems
in the field because of non-toxic contaminated tubing produced by one of its suppliers. AGA received several toxicology tests that
confirmed the level of contamination was negligible and posed no threat to patients. AGA submitted letters to the FDA formally
requesting closure of the recall, and the recall has been closed.
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AGA is currently conducting two post-approval studies that were
required as a condition of approval by the FDA of the
AMPLATZER
Septal Occluder and the
AMPLATZER
Muscular VSD Occluder.
The studies are designed to monitor, for a period of up to five years after the procedure, patients treated with a device in the
clinical studies that supported approval of the product. The objective is to collect and report to the FDA additional data on the
long-term safety and efficacy of the device. The majority of patients enrolled in these two studies were children at the time of
receiving their implants. In some cases, it has been challenging to follow these patients for up to five years as they and their
families move or otherwise stop seeing the physician who performed the treatment.
Any failure to comply with continuing regulation by the FDA or other
federal, state or foreign authorities could result in enforcement action that may include regulatory letters requesting compliance
action, suspension or withdrawal of regulatory clearances or approvals, product recall, modification or termination of product
marketing, entering into a consent decree, seizure and detention of products, paying significant fines and penalties, criminal
prosecution and similar actions that could limit product sales, delay product shipment and harm its profitability. Any of these
actions could materially harm AGA’s business, financial condition and results of operations.
Modifications to AGA’s products may require new regulatory
approvals or clearances or may require AGA to recall or cease marketing its modified products until approvals or clearances are
obtained.
Modifications to AGA products may require new approvals or clearances
in the United States and abroad, such as PMA approvals or 510(k) clearances in the United States and CE Marks in Europe. The FDA
requires device manufacturers to initially make a determination of whether or not a modification requires a new approval, supplement
or clearance. A manufacturer may determine that a modification does not significantly affect safety or efficacy or does not represent
a major change in its intended use, so that no new U.S. or foreign approval or clearance is necessary. AGA has made modifications
that it determined do not require approval or clearance. However, the FDA and foreign authorities can review a manufacturer’s
decision, including any of its decisions, and may disagree. If the FDA or other foreign authority disagrees and requires new approvals
or clearances for the modifications, AGA may be required to recall and to stop marketing its products as modified, which could
require AGA to redesign its products and harm its operating results. In these circumstances, it may also be subject to significant
enforcement actions.
If AGA determines that a modification to an FDA-approved or cleared
device could significantly affect its safety or efficacy, or would constitute a major change in its intended use, then AGA must
obtain a new PMA or PMA supplement approval or 510(k) clearance. Where AGA determines that modifications to its products require
a new PMA or PMA supplemental approval or 510(k) clearance, AGA may not be able to obtain those additional approvals or clearances
for the modifications or additional indications in a timely manner, or at all. For those products sold in Europe, AGA must notify
AMTAC, its European Union Notified Body, if significant changes are made to the products or if there are substantial changes to
its quality assurance systems affecting those products. Delays in obtaining required future approvals or clearances would adversely
affect AGA’s ability to introduce new or enhanced products in a timely manner, which in turn would harm AGA’s future
growth.
AGA has filed and may in the future file patent litigation
claims in the U.S. and foreign jurisdictions to protect its patent portfolio. If AGA is unsuccessful in these claims, its business,
financial condition and results of operations could be adversely affected.
AGA may initiate litigation to assert claims of infringement, enforce
its patents, protect its trade secrets or know-how, or determine the enforceability, scope and validity of the proprietary rights
of others. Any lawsuits that AGA initiates could be expensive, time consuming and divert management’s attention from other
business concerns. Furthermore, litigation may provoke third parties to assert claims against it and may put its patents at risk
of being invalidated or interpreted narrowly and its patent applications at risk of not being issued.
S-15
In August 2006, AGA brought a patent infringement action in Germany
against Occlutech GmbH, an European manufacturer of cardiac occlusion devices, and DRABO Medizintechnik, based on the German part
of one of its European patents, which was granted to AGA in October 2005 for intravascular occlusion devices and the method of
manufacturing such devices. On July 31, 2007, the District Court in Düsseldorf entered a judgment in AGA’s favor finding
that Occlutech and DRABO literally infringed the German part of AGA’s European patent. Under German practice, the court required
AGA to post a bond in the amount of €1.0 million to secure its ability to respond to damages claimed by Occlutech in the event
that the decision of the District Court is reversed on appeal or its patent is held invalid in related proceedings in the German
patent court. The bond amount is not a limitation on such damages. On August 6, 2007, Occlutech filed an appeal against the District
Court judgment before a German Court of Appeals contending that the District Court judgment was based on an overly broad interpretation
of its European patent, and in addition, it initiated invalidation proceedings against the patent with the German Federal Patent
Court in Munich. On December 22, 2008, the German Court of Appeals dismissed Occlutech’s appeal and entered a judgment in
AGA’s favor finding that Occlutech infringed its patent. On October 6, 2009, the German Federal Patent Court found that AGA’s
patent was valid in all respects and dismissed Occlutech’s invalidation proceedings. Occlutech has filed an appeal against
both decisions with the German Federal Court of Justice. A final decision on the appeals with the German Federal Court of Justice
is not expected to be reached until 2010 or later. In addition, Occlutech initiated proceedings against AGA’s corresponding
patents in Italy, the Netherlands, the United Kingdom, Spain and Sweden, seeking invalidity and non-infringement declarations.
On October 29, 2008, the Patent Court in the Netherlands ruled in favor of Occlutech in the non-infringement declaration. The court
did not rule on the invalidity claim. AGA has appealed the decision to the Dutch Court of Appeals and a decision is expected by
the end of 2010. On July 31, 2009, a United Kingdom patent court upheld the validity of its patent, but it ruled that the Occlutech
products do not infringe on its patent. AGA appealed and on June 22, 2010, the UK Court of Appeals affirmed the decision. AGA has
appealed to the UK Supreme Court for further review. Final decisions in all of these actions are also not expected to be reached
until the end of 2010 or later. AGA cannot assure you that the outcome in any of these proceedings will be favorable to it, and if it does
not prevail in one or more jurisdictions, its faces the risk of increased competition and significant damages being awarded against
it.
AGA has also been forced to defend its patent rights in China against
various entities, including Shanghai Shape Memory Alloy Company Ltd., a medical device manufacturer based in Shanghai, China, and
Beijing Starway Medical Devices Ltd., a medical device manufacturer based in Beijing, both of which in recent years have been manufacturing
and exporting medical devices that AGA believes infringe its patent rights. AGA did not prevail in its lawsuits in China against
these entities and two of its patents in China were invalidated as a result. Consequently, AGA is no longer able to assert rights
under these patents within China and will need to rely primarily on foreign patents to prevent the importation of products from
China into countries in which such importation would violate its local patent rights. In addition, these entities’ activities
have resulted in litigation in India and could result in future and potentially costly litigation in other countries in which AGA
has patent rights against importers and distributors of infringing products originating in China.
In addition, AGA may not prevail in lawsuits that it initiates,
and the damages or other remedies awarded, if any, may not be commercially valuable. The occurrence of any of these events may
have a material adverse effect on AGA’s business, financial condition and results of operations.
If AGA patents and other intellectual property rights do not
adequately protect its products, AGA may lose market share to its competitors and be unable to operate its business profitably.
Patents and other proprietary rights are essential to AGA’s
business, and AGA’s ability to compete effectively with other companies depends on the proprietary nature of its technologies.
AGA also relies upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop, maintain
and strengthen its competitive position. AGA seeks to protect these, in part, through confidentiality agreements with certain employees,
consultants and other parties. AGA pursues a policy of generally obtaining patent protection in both the United States and key
foreign countries for patentable subject matter in AGA’s proprietary devices and also attempt to review third-party patents
and patent applications to the extent publicly available to develop an effective patent strategy, avoid infringement of third-party
patents, identify licensing opportunities and monitor the patent claims of others. AGA’s patent portfolio includes approximately
199 issued patents, the first of which expires in the United States in 2014 and in Europe in 2015, and approximately 110 pending
patent applications. AGA cannot assure that any pending or future patent applications will result in issued patents, that any current
or future patents issued or licensed to it will not be challenged, invalidated or circumvented or that the rights granted thereunder
will provide a competitive advantage to AGA or prevent competitors from entering markets which AGA currently serves. Any required
license may not be available to AGA on acceptable terms, if at all. In addition, some licenses may be non-exclusive, and therefore
AGA’s competitors may have access to the same technologies as AGA does. Furthermore, AGA may have to take legal action in
the future to protect its trade secrets or know-how, or to defend them against claimed infringement of the rights of others. Any
legal action of that type could be costly and time-consuming to AGA, and we cannot assure you that such actions will be successful.
The invalidation of key patents or proprietary rights which AGA owns or unsuccessful outcomes in lawsuits to protect AGA’s
intellectual property may have a material adverse effect on AGA’s business, financial condition and results of operations.
S-16
The laws of foreign countries may not protect AGA’s intellectual
property rights to the same extent as the laws of the United States. For example, foreign countries generally do not allow patents
to cover methods for performing surgical procedures. If AGA cannot adequately protect its intellectual property rights in these
foreign countries, AGA’s competitors may be able to compete more directly with it, which could adversely affect AGA’s
competitive position and, as a result, its business, financial condition and results of operations.
Risks
Relating to the Combined Company
Uncertainties exist in integrating the business and operations
of St. Jude Medical and AGA.
There can be no assurance that St. Jude Medical will be able to
successfully integrate AGA’s operations with those of St. Jude Medical. There will be inherent challenges in integrating
our operations that could result in an interruption of, or a loss of momentum in, the activities of the combined
companies and could adversely affect our results of operations. In addition, the overall integration of the two companies may result
in unanticipated problems, delays, expenses, liabilities, competitive responses and loss of customer relationships, and may cause
St. Jude Medical’s stock price to decline. Issues that must be addressed in integrating the operations of the companies include,
among other things:
• conforming standards, controls, procedures and
policies, business cultures and compensation structures between St. Jude Medical and AGA;
• consolidating corporate and administrative infrastructures;
• consolidating sales and marketing operations;
• retaining existing customers and attracting new
customers;
• retaining key employees;
• identifying and eliminating redundant and underperforming
operations and assets;
• minimizing the diversion of management’s
attention from ongoing business concerns;
• compliance with AGA’s DPA;
• coordinating geographically dispersed organizations;
and
• managing tax costs or inefficiencies associated
with integrating the operations of the combined company.
In addition, even if the
businesses and operations of St. Jude Medical
and AGA are integrated successfully, we may not fully realize the expected benefits of the business combination,
including sales or growth opportunities that were anticipated, within the anticipated timeframe, or at all. Further, because the
businesses of St. Jude Medical and AGA differ, the results of operations of the combined companies and the market price of our
common stock may be affected by factors different from those existing prior to the
business combination and may suffer as a result of the business combination. Cross product sales, increased geographical sales
coverage and other synergies may not occur or develop to the extent envisioned for the future. As a result, we
cannot assure you that the integration of the businesses and operations of St. Jude Medical and AGA will result in the realization
of the full benefits anticipated from the business combination.
Failure to retain key employees could diminish the anticipated
benefits of the merger.
The success of the combined company will depend in part on the retention
of personnel critical to the business and operations of the combined company due to, for example, their technical skills or management
expertise. Employees and consultants may experience uncertainty about their future roles with St. Jude Medical and AGA until clear
strategies are announced or executed. St. Jude Medical and AGA, while similar, did not have the same corporate cultures, and some
employees or consultants may not want to work for the combined company. In addition, competitors may recruit employees during AGA’s
integration of St. Jude Medical, as is common in medical device mergers. If we are unable to retain personnel
that are critical to the successful integration and future operation of the companies, we could face disruptions
in our operations, loss of existing customers, key information, expertise or know-how, and unanticipated additional recruiting
and training costs. In addition, the loss of key personnel could diminish the benefits of the merger that we actually achieved.
The completion of the merger may cause customers or suppliers
to terminate their relationships with us.
Certain customers or suppliers of St. Jude Medical may be uncertain
about the combined company or may have prior experience with AGA that causes such customers or suppliers to be dissatisfied with
AGA. Likewise, certain customers or suppliers of AGA may be uncertain about the combined company or may have prior experience with
St. Jude Medical that causes such customer or supplier to be dissatisfied with St. Jude Medical. This uncertainty or dissatisfaction
may cause such customers or suppliers to terminate their existing relationships with or seek to change their existing agreements
with St. Jude Medical or AGA. These decisions could have an adverse affect on our business.
S-17
F
ORWARD-LOOKING
STATEMENTS
This
prospectus supplement and the documents incorporated by reference herein may
include forward-looking statements made within the meaning of Section 27A of
the Securities Act of 1933, as amended (the Securities Act), and Section 21E
of the Exchange Act. Such forward-looking statements may include, without
limitation, statements about our market opportunities, strategies, competition,
and expected activities and expenditures and at times may be identified by the
use of words such as may, could, should, would, project, believe,
anticipate, expect, plan, estimate, forecast, potential, intend,
continue and variations of these words or comparable words. Forward-looking
statements inherently involve risks and uncertainties. Accordingly, actual
results may differ materially from those expressed or implied by these
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, the risks described under the section
entitled Risk Factors included elsewhere in this prospectus supplement and
the accompanying prospectus and the various factors as described below. Factors
that could cause actual results to differ materially from those expressed or
implied in such forward-looking statements include, but are not limited to:
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Any
legislative or administrative reform to the U.S. Medicare or Medicaid systems
or international reimbursement systems that significantly reduces
reimbursement for procedures using our medical devices or denies coverage for
such procedures, as well as adverse decisions relating to our products by
administrators of such systems in coverage or reimbursement issues.
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Assertion,
acquisition or grant of key patents by or to others that have the effect of
excluding us from market segments or requiring us to pay royalties.
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Economic
factors, including inflation, contraction in capital markets, changes in
interest rates, changes in tax laws and changes in foreign currency exchange
rates.
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Product
introductions by competitors which have advanced technology, better features
or lower pricing.
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Price
increases by suppliers of key components, some of which are sole-sourced.
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A reduction
in the number of procedures using our devices caused by cost-containment
pressures or the development of or preferences for alternative therapies.
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Safety,
performance or efficacy concerns about our products, many of which are
expected to be implanted for many years, some of which may lead to recalls
and/or advisories with the attendant expenses and declining sales.
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Declining
industry-wide sales caused by product recalls or advisories by our
competitors that result in loss of physician and/or patient confidence in the
safety, performance or efficacy of sophisticated medical devices in general
and/or the types of medical devices recalled in particular.
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Changes in
laws, regulations or administrative practices affecting government regulation
of our products, such as FDA
regulations, including those that decrease the probability or increase the
time and/or expense of obtaining approval for products or impose additional
burdens on the manufacture and sale of medical devices.
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Regulatory
actions arising from concern over Bovine Spongiform Encephalopathy, sometimes
referred to as mad cow disease, that have the effect of limiting our
ability to market products using bovine collagen, such as Angio-Seal, or
products using bovine pericardial material, such as our Biocor®, Epic and
Trifecta tissue heart valves, or that impose added costs on the procurement
of bovine collagen or bovine pericardial material.
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The intent and
ability of our product liability insurers to meet their obligations to us,
including losses related to our Silzone® litigation, and our ability to fund
future product liability losses related to claims made subsequent to becoming
self-insured.
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Severe
weather or other natural disasters that cause damage to the facilities of our
critical suppliers or one or more of our facilities, such as an earthquake
affecting our facilities in California or a hurricane affecting our
facilities in Puerto Rico.
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Healthcare
industry changes leading to demands for price concessions and/or limitations
on, or the elimination of, our ability to sell in significant market
segments.
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Adverse
developments in investigations and governmental proceedings.
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Adverse
developments in litigation, including product liability litigation, patent or
other intellectual property litigation, qui tam litigation or shareholder
litigation.
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Inability to
successfully integrate the businesses that we have acquired in recent years
and that we plan to acquire.
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Failure to
successfully complete or unfavorable data from clinical trials for our
products or new indications for our products and/or failure to successfully
develop markets for such new indications.
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Changes in
accounting rules that adversely affect the characterization of our results of
operations, financial position or cash flows.
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S-18
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The
disruptions in the financial markets and the economic downturn that adversely
impact the availability and cost of credit and customer purchasing and
payment patterns.
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Conditions
imposed in resolving, or any inability to timely resolve, any regulatory
issues raised by the FDA, including Form 483 observations or warning letters,
as well as risks generally associated with our regulatory compliance and
quality systems.
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Governmental
legislation, including the recently enacted Patient Protection and Affordable
Care Act and the Health Care and Educational Reconciliation Act, and/or
regulation that significantly impacts the healthcare system in the United
States and that results in lower reimbursement for procedures using our
products, reduces medical procedure volumes or otherwise adversely affects
our business and results of operations, including the recently enacted
medical device excise tax.
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Forward-looking
statements speak only as of the date on which they are made. We undertake no
obligation to update or revise the forward-looking statements included in this
prospectus supplement, whether as a result of new information, future events or
otherwise, after the date of this prospectus supplement. Our actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements.
S-19
U
SE OF PROCEEDS
We
estimate that the net proceeds from this offering, after deducting
underwriters discounts and estimated offering expenses, will be approximately
$ . We intend to use the net proceeds from this offering for general corporate
purposes, which may include the repayment of certain of our existing indebtedness and
the repurchase of our outstanding common stock pursuant to our authorized share
repurchase program.
S-20
C
APITALIZATION
The
following table sets forth our cash and cash equivalents and our capitalization
as of October 2, 2010, and as adjusted to give effect to this offering and the
application of the proceeds (before giving effect to underwriters
discounts and commissions) of this offering as described under Use of
Proceeds. This table should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of Operations and
the consolidated financial statements and notes thereto included in our
Quarterly Report on Form 10-Q for the quarterly period ended October 2, 2010,
which is incorporated by reference into this prospectus supplement.
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As of
October 2, 2010
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Actual
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As
Adjusted
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(in
thousands)
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Cash and
cash equivalents
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$
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851,614
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$
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1,351,614
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Long-term
debt:
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Yen-denominated term loan due 2011
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77,658
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77,658
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1.58% Yen-denominated notes due 2017
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97,258
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97,258
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2.04% Yen-denominated notes due 2020
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152,371
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152,371
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2.20% Senior Notes due 2013
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467,380
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467,380
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3.75% Senior Notes due 2014
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699,195
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699,195
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4.875% Senior Notes due 2019
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494,404
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494,404
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Notes offered hereby
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500,000
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Total
long-term debt
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1,988,266
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2,488,266
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Shareholders
equity:
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Preferred stock ($1.00 par value;
25,000,000 shares authorized; none issued and outstanding)
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$
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$
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Common stock ($0.10 par value; 500,000,000
shares authorized; 328,768,791 shares issued and outstanding)
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32,877
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32,877
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Additional paid-in capital
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180,125
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180,125
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Retained earnings
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3,892,195
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3,892,195
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Accumulated other comprehensive income:
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Cumulative translation adjustment
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72,276
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72,276
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Unrealized gain on available-for-sale
securities
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13,163
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13,163
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Total
shareholders equity
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4,190,636
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4,190,636
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Total
capitalization
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$
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6,178,902
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$
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6,678,902
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S-21
DE
SCRIPTION OF
THE NOTES
The
following description of the particular terms of the notes offered by this
prospectus supplement adds information to the description of the general terms
and provisions of debt securities under the heading Description of Debt
Securities beginning on page 5 of the accompanying prospectus. As used under
Summary The Offering and under this heading, Description of the Notes,
all references to we, us, our, St. Jude Medical and the Company refer
to St. Jude Medical, Inc.
General
We
will issue the notes in an initial aggregate principal amount of $500,000,000
pursuant to an indenture dated as of July 28, 2009 between us and U.S. Bank
National Association, as trustee for the notes. We will issue the notes under a
supplement to such indenture to be dated as of the closing date of this
offering, setting forth the specific terms applicable to the notes. The notes
will mature on . We
will issue the notes only in book-entry form, in denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
The
notes will bear interest at the annual rates shown on the cover of this
prospectus supplement and will accrue interest from , 2010, or from the most
recent date to which interest has been paid (or provided for) to but not
including the next date upon which interest is required to be paid.
Commencing
, 2011, interest
will be payable semi-annually in arrears, on
and
, to the person in
whose name a note is registered at the close of business on the
or
that precedes the
date on which interest will be paid. Interest on the notes will be paid on the
basis of a 360-day year consisting of twelve 30-day months.
As
contemplated under Description of Debt Securities Satisfaction, Discharge
and Defeasance on page 11 of the accompanying prospectus, the satisfaction of
certain conditions will permit us to discharge some or all of our obligations
under the indenture with respect to the notes. In addition, we may discharge
our obligations with respect to certain covenants through covenant defeasance.
We refer you to the information under Description of Debt Securities
Satisfaction, Discharge and Defeasance in the accompanying prospectus for more
information.
Except
as described in this prospectus supplement or the accompanying prospectus, the
indenture for the notes does not contain any covenants or other provisions
designed to protect holders of the notes against a reduction in our
creditworthiness in the event of a highly leveraged transaction nor does the
indenture for the notes prohibit other transactions that might adversely affect
holders of the notes, including the incurrence of additional indebtedness.
Re-opening of the Notes
We
may from time to time, without the consent of the holders of the notes, create
and issue further notes of a series having the same terms and conditions in all
respects as the notes being offered hereby, except for the issue date, the
issue price and, in some cases, the first payment of interest thereon.
Additional notes issued in this manner will be consolidated with and will form
a single series with the notes being offered hereby.
Ranking
The
notes will be our senior unsecured obligations and will rank equally with all
our other senior unsecured indebtedness, including all other unsubordinated
notes issued under the indenture, from time to time outstanding. The indenture
provides for the issuance from time to time of senior unsecured indebtedness by
us in an unlimited amount.
Optional Redemption
The
notes will be redeemable as a whole or in part, at our option at any time or
from time to time, at a redemption price equal to the greater of (i) 100% of
the principal amount of the notes to be redeemed and (ii) the sum, as
determined by an Independent Investment Banker, of the present values of the
remaining scheduled payments of principal and interest on the notes to be
redeemed (exclusive of interest accrued to the date of redemption) discounted
to the redemption date on a semiannual basis at the Treasury Rate plus basis
points, plus in each case accrued and unpaid interest on the notes to be
redeemed to the date of redemption.
The
redemption price will be calculated assuming a 360-day year consisting of
twelve 30-day months.
Treasury
Rate
means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
applicable Comparable Treasury Issue, calculated on the third business day
preceding the redemption date, assuming a price for such Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the related
Comparable Treasury Price for such redemption date.
S-22
Comparable
Treasury Issue
means the United States Treasury
security or securities selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the notes to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of a
comparable maturity to the remaining term of the notes being redeemed.
Comparable
Treasury Price
means, with respect to any redemption
date,
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the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations,
or
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if the
Independent Investment Banker obtains fewer than four such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer
Quotations so received.
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Independent
Investment Banker
means one of the Reference Treasury
Dealers appointed by us to act as the Independent Investment Banker.
Reference
Treasury Dealer
means Merrill Lynch, Pierce, Fenner
& Smith Incorporated and a Primary Treasury Dealer (as defined herein)
selected by Wells Fargo Securities, LLC, their successors and two other
nationally recognized investment banking firms, each of which is a primary U.S.
Government securities dealer in New York City (a Primary Treasury Dealer)
specified from time to time by us; provided, however, that if any of the
foregoing shall cease to be a Primary Treasury Dealer, we shall substitute
therefor another nationally recognized investment banking firm that is a
Primary Treasury Dealer.
Reference
Treasury Dealer Quotations
means, with respect to
each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices
for the Comparable Treasury Issue for the notes (expressed in each case as a
percentage of its principal amount) quoted in writing to the Independent
Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City
time, on the third business day preceding that redemption date.
Notice
of any redemption will be mailed at least 30 days but not more than 60 days
before the redemption date to each holder of the notes to be redeemed. Unless a
default occurs in the payment of the redemption price, from and after any
redemption date, interest will cease to accrue on the notes or any portion
thereof called for redemption. On or before any redemption date, we shall
deposit with the trustee or with a paying agent money sufficient to pay the
redemption price of and accrued interest on the notes to be redeemed on such
date. If less than all the notes are to be redeemed, the notes to be redeemed
shall be selected by the trustee at our direction by such method as we and the
trustee shall deem fair and appropriate. The redemption price shall be
calculated by the Independent Investment Banker and we, the trustee and any
paying agent for the notes shall be entitled to rely on such calculation.
No Mandatory Redemption or Sinking Fund
No
mandatory redemption obligation will be applicable to the notes. The notes will
not be subject to, nor have the benefit of, a sinking fund.
Change of Control
If
a Change of Control Triggering Event occurs, unless we have exercised our
option to redeem the notes as described under Optional Redemption above,
each holder of the notes will have the right to require us to purchase all or a
portion (equal to $1,000 and any integral multiples of $1,000 in excess
thereof) of such holders notes pursuant to the offer described below (a
Change of Control Offer) at a purchase price equal to 101% of the aggregate
principal amount of the notes repurchased, plus accrued and unpaid interest, if
any, to the date of repurchase (the Change of Control Payment), subject to
the rights of holders of notes on the relevant record date to receive interest
due on the relevant interest payment date.
We
will be required to send a notice to each holder of the notes by first class
mail, with a copy to the trustee, within 30 days following the date upon which
any Change of Control Triggering Event occurred, or at our option, prior to any
Change of Control but after the public announcement of the pending Change of
Control. The notice will govern the terms of the Change of Control Offer and
will describe, among other things, the transaction that constitutes or may
constitute the Change of Control Triggering Event and the purchase date. The purchase
date will be at least 30 days but no more than 60 days from the date such
notice is mailed, other than as may be required by law (a Change of Control
Payment Date). If the notice is mailed prior to the date of consummation of
the Change of Control, the notice will state that the Change of Control Offer
is conditioned on the Change of Control being consummated on or prior to the
Change of Control Payment Date.
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On the
Change of Control Payment Date, we will, to the extent lawful:
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accept for
payment all properly tendered notes or portions of notes not validly
withdrawn;
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deposit with
the paying agent the required payment for all properly tendered notes or
portions of notes not validly withdrawn; and
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S-23
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deliver or
cause to be delivered to the trustee the repurchased notes, accompanied by an
officers certificate stating, among other things, the aggregate principal
amount of repurchased notes.
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We
will not be required to make a Change of Control Offer with respect to the
notes upon the occurrence of a Change of Control Triggering Event if a third
party makes such an offer in the manner, at the times and otherwise in
compliance with the requirements for such an offer made by us and the third
party purchases all such notes properly tendered and not withdrawn under its
offer. In addition, we will not repurchase any notes if there has occurred and
is continuing on the Change of Control Payment Date an Event of Default under
the indenture.
We
will comply with the requirements of Rule 14e-1 under the Exchange Act, and any
other securities laws and regulations thereunder, to the extent those laws and
regulations are applicable, in connection with the repurchase of notes as a
result of a Change of Control Triggering Event. To the extent that the
provisions of any such securities laws or regulations conflict with the Change
of Control Offer provisions of the notes, we will comply with those securities
laws and regulations and will not be deemed to have breached our obligations
under the Change of Control Offer provisions of the notes by virtue of any such
conflict.
The
definition of Change of Control includes a phrase relating to the direct or
indirect sale, lease, transfer, conveyance or other disposition of all or
substantially all of our properties or assets and those of our subsidiaries
taken as a whole. Although there is a limited body of case law interpreting the
phrase substantially all, there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a holder of notes to
require us to repurchase the notes of that series as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of our assets and
the assets of our subsidiaries, taken as a whole, to another person or group
may be uncertain.
For
purposes of the foregoing discussion, the following definitions apply:
Capital
Stock
means the capital stock of every class whether
now or hereafter authorized, regardless of whether such capital stock shall be
limited to a fixed sum or percentage with respect to the rights of the holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of such
corporation.
Change
of Control
means the occurrence of any of the
following:
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the direct
or indirect sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or more series of related
transactions, of all or substantially all of our assets and the assets of our
subsidiaries, taken as a whole, to any person (as that term is used in
Section 13(d)(3) of the Exchange Act), other than us or one of our
subsidiaries;
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the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any person (as that term is used
in Section 13(d)(3) of the Exchange Act), other than us or one of our
subsidiaries, becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of more than 50% of our then
outstanding Voting Stock or other Voting Stock into which our Voting Stock is
reclassified, consolidated, exchanged or changed, measured by voting power
rather than number of shares;
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the first
day on which a majority of the members of our board of directors are not
Continuing Directors; or
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the adoption
of a plan relating to our liquidation or dissolution.
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Notwithstanding
the foregoing, a transaction will not be considered to be a Change of Control
if (a) we become a direct or indirect wholly-owned subsidiary of a holding
company and (b)(x) immediately following that transaction, the direct or
indirect holders of the Voting Stock of the holding company are substantially
the same as the holders of our Voting Stock immediately prior to that
transaction or (y) immediately following that transaction, no person is the
beneficial owner, directly or indirectly, of more than 50% of the Voting Stock
of such holding company.
Change
of Control Triggering Event
means the occurrence of
both a Change of Control and a Rating Event.
Continuing
Directors
means, as of any date of determination, any
member of our board of directors who:
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was a member
of such board of directors on the first date that the notes were first
issued; or
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was
nominated for election, elected or appointed to such board of directors with
the approval of a majority of the Continuing Directors who were members of
such board of directors at the time of such nomination, election or
appointment (either by a specific vote or by approval of a proxy statement in
which such member was named as a nominee for election as a director).
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Under
a recent Delaware Chancery Court interpretation of the foregoing definition of
Continuing Directors, a board of directors may approve for purposes of such
definition, a slate of shareholder-nominated directors without endorsing them,
or while simultaneously recommending and endorsing its own slate instead. It is
unclear whether our board of directors, pursuant to Minnesota law, is similarly
capable of approving a slate of dissident director nominees while recommending
and endorsing its own slate. If such an action is possible under Minnesota law,
the foregoing interpretation would permit our board to approve a slate of
directors that included a majority of dissident directors nominated pursuant to
a proxy contest, and the ultimate election of such dissident slate would not
constitute a Change of Control Triggering Event that would trigger your right
to require us to repurchase your notes as described above.
S-24
Fitch
means Fitch, Inc. and its successors.
Investment
Grade
means a rating of Baa3 or better by Moodys (or
its equivalent under any successor rating categories of Moodys), a rating of
BBB- or better by S&P (or its equivalent under any successor rating
categories of S&P) and a rating of BBB- or better by Fitch (or its
equivalent under any successor rating categories of Fitch).
Moodys
means Moodys Investors Service, Inc., a subsidiary of
Moodys Corporation, and its successors.
Rating
Agencies
means:
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each of
Moodys, S&P and Fitch; and
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if any of
Moodys, S&P or Fitch ceases to rate the notes or fails to make a rating
of the notes publicly available for reasons outside of our control, a
nationally recognized statistical rating organization within the meaning of
Section 3(a)(62) of the Exchange Act that is selected by us (as
certified by a resolution of our board of directors) as a replacement agency
for Moodys, S&P or Fitch, or each of them, as the case may be.
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Rating
Event
means, with respect to the notes, the rating of
such notes is lowered below Investment Grade by any two of the three Rating
Agencies on any date during the period commencing 60 days prior to the public
notice of an arrangement that could result in a Change of Control until the end
of the 60-day period following public notice of the occurrence of the Change of
Control (which 60-day period shall be extended so long as the rating of the
notes is under publicly announced consideration for possible downgrade by any
of the Rating Agencies), provided that a Rating Event otherwise arising by
virtue of a particular reduction in, or termination of, any rating shall not be
deemed to have occurred with respect to a particular Change of Control (and
thus shall not be deemed a Rating Event for purposes of the definition of
Change of Control Triggering Event under the indenture) if the Rating Agency or
Rating Agencies ceasing to rate such notes or making the reduction in rating to
which this definition would otherwise apply do not announce or publicly confirm
or inform the trustee in writing at its request that the termination or
reduction was the result, in whole or in part, of any event or circumstance
comprised of or arising as a result of, or in respect of, the applicable Change
of Control (whether or not the applicable Change of Control shall have occurred
at the time of the Rating Event).
S&P
means Standard & Poors Ratings Services, a
division of The McGraw-Hill Companies, Inc., and its successors.
Voting
Stock
means, with respect to any specified person as
of any date, the Capital Stock of such person that is at the time entitled to
vote generally in the election of the board of directors of such person.
Events of Default
In
addition to the Events of Defaults as set forth under Description of Debt
Securities Defaults and Remedies in the accompanying prospectus, the term
Event of Default includes, with respect to the notes, the occurrence with
respect to any debt of the Company in an aggregate principal amount of
$75,000,000 or more of (i) an event of default that results in such debt
becoming due and payable prior to its scheduled maturity (after giving effect
to any applicable grace period) or (ii) the failure to make any payment when
due (including any applicable grace period), which results in the acceleration
of the maturity of such debt, in each case without such acceleration having
been rescinded, annulled or otherwise cured.
Book-Entry; Delivery and Form of Notes
The
certificates representing the notes will be issued in the form of one or more
fully registered global notes without coupons (the Global Note) and will be
deposited with, or on behalf of, DTC and registered in the name of Cede &
Co., as the nominee of DTC. Except in limited circumstances, the notes will not
be issuable in definitive form. Unless and until they are exchanged in whole or
in part for the individual notes represented thereby, any interests in the
Global Note may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any
nominee of DTC to a successor depository or any nominee of such successor. See
Description of Debt Securities Global Securities in the accompanying
prospectus.
DTC
has advised us that DTC is a limited-purpose trust company organized under the
New York Banking Law, a banking organization within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform Commercial Code, and a
clearing agency registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds securities that its participants (Direct
Participants) deposit with DTC. DTC also facilitates the post-trade settlement
among Direct Participants of sales and other securities transactions in
deposited securities, through electronic computerized book-entry transfers and
pledges between Direct Participants accounts. This eliminates the need for physical
movement of securities certificates. Direct Participants include both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly owned subsidiary
of The Depository Trust & Clearing Corporation (DTCC). DTCC is the
holding company for DTC, National Securities Clearing Corporation and Fixed
Income Clearing Corporation, all of which are registered clearing agencies.
DTCC is owned by the users of its regulated subsidiaries. Access to the DTC
system is also available to others such as both U.S. and non-U.S. securities
brokers and dealers, banks, trust companies and clearing corporations that
clear through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly. The rules applicable to DTC and its participants are on
file with the SEC.
S-25
The
information in this section concerning DTC and DTCs book-entry system has been
obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
Same-Day Funds Settlement and Payment
Settlement
for the notes will be made by the underwriters in immediately available funds.
All payments of principal and interest in respect of notes in book-entry form
will be made by us in immediately available funds to the accounts specified by
DTC.
Secondary
trading in long-term notes and debentures of corporate issuers is generally
settled in clearing houses or next-day funds. In contrast, the notes will trade
in DTCs Same-Day Funds Settlement System until maturity, or earlier redemption
or repayment, or until the notes are issued in certificated form, and secondary
market trading activity in the notes will therefore be required by DTC to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading
activity in the notes.
Applicable Law
The
notes and the indenture are governed by and construed in accordance with the
laws of the State of New York.
Concerning the Trustee
U.S.
Bank National Association is the trustee under the indenture. U.S. Bank
National Association is a lender to us under our syndicated credit facilities
and also provides other services to us from time to time in the normal course
of business.
S-26
CE
RTAIN UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS
General
The
following discussion is a summary of certain U.S. federal income tax
consequences of an investment in the notes. This discussion does not address
all aspects of U.S. federal income taxation that may be relevant to particular
taxpayers in light of their special circumstances or taxpayers subject to
special treatment under U.S. federal income tax laws (including dealers in
securities or currencies, financial institutions, cooperatives, regulated
investment companies, real estate investment trusts, tax-exempt organizations,
insurance companies, persons who hold notes as part of a hedging, integrated, straddle,
conversion or constructive sale transaction, persons subject to the alternative
minimum tax, U.S. Holders (as defined below) whose functional currency is not
the U.S. dollar, U.S. expatriates, controlled foreign corporations, or passive
foreign investment companies). This discussion does not address any aspect of
U.S. federal taxation other than U.S. federal income taxation or any aspect of
state, local or foreign taxation. In addition, this discussion deals only with
certain U.S. federal income tax consequences to a holder that acquires the
notes in the initial offering at their issue price and holds the notes as
capital assets. No ruling of the Internal Revenue Service has been or will be
sought regarding any matter discussed herein.
This
summary is based on the U.S. federal income tax law in effect as of the date of
this prospectus supplement, which is subject to differing interpretations or
change, possibly with retroactive effect.
EACH
PROSPECTIVE PURCHASER OF THE NOTES SHOULD CONSULT ITS TAX ADVISOR CONCERNING
THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN
THE NOTES.
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A U.S.
Holder is a beneficial owner of a note that is, for U.S. federal income tax
purposes:
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an
individual citizen or resident of the United States;
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a
corporation (or other entity treated as a corporation) created or organized
(or treated as created or organized) in or under the laws of the United
States or any State thereof (including the District of Columbia);
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an estate,
the income of which is subject to U.S. federal income taxation regardless of
its source; or
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a trust, (i)
the administration of which is subject to the primary supervision of a court
within the United States and for which one or more U.S. persons have the
authority to control all substantial decisions, or (ii) that has a valid
election in effect under applicable U.S. Treasury Regulations to be treated
as a U.S. person.
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A
Non-U.S. Holder is a beneficial owner of a note that is not a U.S. Holder or
a partnership. If a partnership holds a note, the U.S. federal income tax
treatment of a partner generally will depend upon the status of the partner and
the activities of the partnership. A partner of a partnership holding a note
should consult its tax advisor concerning the U.S. federal income and other tax
consequences of an investment in the notes.
It
is not expected that the notes will be issued with original issue discount
for U.S. federal income tax purposes. If the notes are issued with more than a
defined de minimis amount of original issue discount, U.S. federal income tax
consequences materially different than those described below would apply to
U.S. Holders.
Tax Consequences to U.S. Holders
Interest.
Interest on a note generally will be taxable to a U.S.
Holder as ordinary interest income in the taxable year in which it accrues or
is received, in accordance with the U.S. Holders regular method of tax
accounting.
Sale,
Exchange, Retirement or Other Disposition of a note.
A
U.S. Holder will generally recognize capital gain or loss upon the sale,
exchange, retirement or other taxable disposition of a note in an amount equal
to the difference between (i) the amount realized (except to the extent such
amount is attributable to accrued interest, which will be taxable as ordinary
interest income to the extent such interest has not been previously included in
income) and (ii) such U.S. Holders adjusted tax basis in the note. A U.S.
Holders adjusted tax basis in a note will generally equal the cost of the note
to such holder. Such capital gain or loss will be long-term capital gain or
loss if the note was held for more than one year at the time of disposition.
Long-term capital gains generally are subject to preferential rates of U.S.
federal income tax for certain non-corporate U.S. Holders (including
individuals) under current law. The deductibility of capital losses is subject
to significant limitations.
Tax Consequences to Non-U.S. Holders
Interest.
Subject to the discussion below concerning backup
withholding, no U.S. federal income or withholding tax generally will apply to
a payment of interest on a note to a Non-U.S. Holder, provided that
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(i)
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such
interest is not effectively connected with the conduct of a trade or business
in the United States by the Non-U.S. Holder;
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S-27
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(ii)
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such
Non-U.S. Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to vote;
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(iii)
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such
Non-U.S. Holder is not a controlled foreign corporation directly or
indirectly related to us through stock ownership;
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(iv)
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such
Non-U.S. Holder is not a bank whose receipt of interest on the notes is
described in Section 881(c)(3)(A) of the U.S. Internal Revenue Code;
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(v)
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either (A)
such Non-U.S. Holder provides its name and address, and certifies on IRS Form
W-8BEN (or a substantially similar form), under penalties of perjury, that it
is not a U.S. person or (B) a securities clearing organization or certain
other financial institutions holding the note on behalf of the Non-U.S.
Holder certifies on IRS Form W-8IMY, under penalties of perjury, that such
certification has been received by it and furnishes us or our paying agent
with a copy thereof; and
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(vi)
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we or our
paying agent do not have actual knowledge or reason to know that the
beneficial owner of the note is a U.S. person.
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If
all of the foregoing requirements are not met, payments of interest on a note
generally will be subject to U.S. federal withholding tax at a 30% rate (or a
lower applicable treaty rate, provided certain certification requirements are
met), subject to the discussion below concerning interest that is effectively
connected with a Non-U.S. Holders conduct of a trade or business in the United
States.
Sale,
Exchange, Retirement or Other Disposition of a note.
Subject
to the discussion below concerning backup withholding, a Non-U.S. Holder
generally will not be subject to U.S. federal income or withholding tax on the
receipt of payments of principal on a note, or on any gain recognized upon the
sale, exchange, retirement or other disposition of a note, unless in the case
of gain (i) such gain is effectively connected with the conduct by such
Non-U.S. Holder of a trade or business within the United States and, if a
treaty applies (and the holder complies with applicable certification and other
requirements to claim treaty benefits), is attributable to a permanent establishment
maintained by the Non-U.S. Holder within the United States or (ii) such
Non-U.S. Holder is an individual who is present in the United States for 183
days or more in the taxable year of disposition, and certain other conditions
are met.
United
States Trade or Business.
If a Non-U.S. Holder is
engaged in a trade or business in the United States, and if interest or gain on
a note is effectively connected with the conduct of such trade or business and,
if a treaty applies (and the holder complies with applicable certification and
other requirements to claim treaty benefits), is attributable to a permanent
establishment maintained by the Non-U.S. Holder within the United States, the
Non-U.S. Holder generally will be subject to U.S. federal income tax on the
receipt or accrual of such interest or the recognition of gain on the sale or
other taxable disposition of the note in the same manner as if such holder were
a U.S. person. Such interest or gain recognized by a corporate Non-U.S. Holder
may also be subject to an additional U.S. federal branch profits tax at a 30%
rate (or, if applicable, a lower treaty rate). In addition, any such gain will
not be subject to withholding tax and any such interest will not be subject to
withholding tax if the Non-U.S. Holder delivers to us a properly executed IRS
Form W-8ECI in order to claim an exemption from withholding tax. Non-U.S.
Holders should consult their tax advisors with respect to other U.S. tax
consequences of the ownership and disposition of notes.
Backup Withholding and Information Reporting
U.S.
Holders.
Payments of interest on, or the proceeds of
the sale or other disposition of, a note are generally subject to information
reporting unless the U.S. Holder is an exempt recipient (such as a corporation).
Such payments may also be subject to U.S. federal backup withholding tax
(imposed under current law at a rate of 28% through 2010 and a rate of 31%
thereafter) if the recipient of such payment fails to supply a taxpayer
identification number, certified under penalties of perjury, as well as certain
other information or otherwise fails to establish an exemption from backup
withholding. Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against that U.S. Holders U.S. federal income
tax liability provided the required information is furnished to the Internal
Revenue Service.
Non-U.S.
Holders.
A Non-U.S. Holder may be required to comply
with certain certification procedures to establish that the holder is not a
U.S. person in order to avoid information reporting and backup withholding tax
with respect to our payment of principal and interest on, or the proceeds of
the sale or other disposition of, a note. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against that Non-U.S.
Holders U.S. federal income tax liability provided the required information is
furnished to the Internal Revenue Service. In certain circumstances, the name
and address of the beneficial owner and the amount of interest paid on a note,
as well as the amount, if any, of tax withheld may be reported to the Internal
Revenue Service. Copies of these information returns may also be made available
under the provisions of a specific treaty or agreement to the tax authorities
of the country in which the Non-U.S. Holder resides.
S-28
UN
DERWRITING
Subject
to the terms and conditions contained in an underwriting agreement, we have
agreed to sell to the underwriters, for whom Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Mitsubishi UFJ Securities (USA), Inc. and Wells Fargo
Securities, LLC are acting as the representatives, and these underwriters
severally have agreed to purchase from us, the principal amount of the notes
listed opposite their names below:
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Underwriter
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Principal Amount
of Notes
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Merrill
Lynch, Pierce, Fenner & Smith Incorporated
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$
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Mitsubishi
UFJ Securities (USA), Inc.
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Wells Fargo
Securities, LLC
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Total
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$
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500,000,000
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The
underwriters have agreed, subject to the terms and conditions of the
underwriting agreement, to purchase all of the notes being sold if any of such
notes are purchased. If an underwriter defaults, the underwriting agreement
provides that the purchase commitments of the non-defaulting underwriters may
be increased or the underwriting agreement may be terminated.
We
have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the underwriters may be required to make in respect of those liabilities.
The
underwriters are offering the notes, subject to prior sale, when, as and if
issued to and accepted by them, subject to approval of legal matters by their
counsel, including the validity of the notes, and other conditions contained in
the underwriting agreement, such as the receipt by the underwriters of
officers certificates and legal opinions. The underwriters reserve the right
to withdraw, cancel or modify offers to the public and to reject orders in
whole or in part.
Commissions and Discounts
The
underwriters have advised us that they propose initially to offer the notes to
the public at the public offering prices set forth on the cover page of this
prospectus supplement, and to dealers at this price less a concession not in
excess of % of the principal amount per note. The underwriters may allow, and
the dealers may reallow, discounts not in excess of % of the principal amount
per note to other dealers. After the initial offering of the notes, the
public offering price, concessions and discounts may be changed.
The following
table summarizes the compensation to be paid by us to the underwriters.
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Per Note
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Total
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Underwriting
discount paid by us
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%
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$
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The
expenses of the offering, not including the underwriting discount, are
estimated to be $ and are payable by us.
The underwriters have agreed to reimburse us for certain expenses of the offering.
New Issue of Notes
The
notes are a new issue of securities with no established trading markets. We do
not intend to apply for listing of the notes on any national securities
exchange or for quotation of the notes on any automated dealer quotation
system. We have been advised by the underwriters that they presently intend to
make a market in the notes after completion of the offering. However, they are
under no obligation to do so and may discontinue any market-making activities
at any time without any notice. We cannot assure you that active trading
markets for the notes will develop, be maintained or be liquid. If active
trading markets for the notes do not develop, are not maintained or are not
liquid, the market prices of the notes may be adversely affected.
Price Stabilization and Short Positions
In
connection with the offering, the underwriters are permitted to engage in
transactions that stabilize the market prices of the notes. Such transactions
consist of bids or purchases to peg, fix or maintain the price of the notes. If
the underwriters create short positions in the notes in connection with the
offering, i.e., if they sell more notes than are on the cover page of this
prospectus supplement, the underwriters may reduce that short position by
purchasing notes in the open market. Purchases of a security to stabilize the
price or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases.
Neither
we nor any of the underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the prices of the notes. In addition, neither we nor any of the
underwriters make any representation that the underwriters will engage in these
transactions or that these transactions, once commenced, will not be
discontinued without notice.
Other Relationships
Certain underwriters and their affiliates have provided, are currently
providing and in the future may continue to provide investment banking, commercial banking and other financial services, including
the provision of credit facilities, to us in the ordinary course of business for which they have received and will receive customary
compensation.
In the ordinary course of business, certain of the underwriters
and their respective affiliates may participate in loans and actively trade our debt and equity securities for their own account
or for the account of customers and, accordingly, may at any time hold long or short positions in such securities.
S-29
LE
GAL MATTERS
Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York and Pamela S. Krop,
Vice President, General Counsel and Secretary of the Company, will pass upon the
validity of the notes offered hereby for St. Jude Medical, Inc. Certain legal
matters relating to the offering of the notes will be passed upon for the
underwriters by McDermott Will & Emery LLP, New York, New York.
EX
PERTS
The
consolidated financial statements of St. Jude Medical, Inc. incorporated by
reference into St. Jude Medical Inc.s Annual Report on Form 10-K for the
fiscal year ended January 2, 2010, including the schedule appearing therein,
and the effectiveness of St. Jude Medical Inc.s internal control over
financial reporting as of January 2, 2010, have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set forth in their
reports thereon and included or incorporated by reference therein,
respectively, and incorporated herein by reference. Such consolidated financial
statements and schedule are incorporated herein by reference in reliance upon
such reports given on the authority of such firm as experts in accounting and
auditing.
S-30
PROSPECTUS
Debt Securities
Preferred Stock
Common Stock
Warrants
Subscription Rights
Stock Purchase Contracts
Stock Purchase Units
St.
Jude Medical, Inc., from time to time, may offer, issue and sell (i) senior
debt securities which may be convertible or non-convertible, (ii) preferred
stock, (iii) common stock, (iv) warrants to purchase debt securities, preferred
stock, common stock or other securities, (v) subscription rights to purchase
debt securities, preferred stock, common stock or other securities, (vi) stock
purchase contracts obligating holders to purchase from or sell to us common
stock or preferred stock at a future date or dates, and (vii) stock purchase
units, each consisting of a stock purchase contract and any combination of debt
securities or debt obligations of third parties, including U.S. Treasury
securities, which would secure the holders obligation to purchase from or to
sell to us, as the case may be, preferred stock or common stock under the stock
purchase contract.
Our
common stock is listed on the New York Stock Exchange and trades under the symbol
STJ. If we decide to seek a listing of any securities offered by this
prospectus, the applicable prospectus supplement will disclose the exchange or
market on which such securities will be listed, if any, or where we have made
an application for listing, if any.
We
may offer and sell these securities to or through one or more underwriters,
dealers and agents, or directly to purchasers, on a continuous or delayed
basis.
This
prospectus describes some of the general terms that may apply to the offered
securities. The specific terms of any securities to be offered will be
described in supplements to this prospectus, which may also add, update or
change information contained in this prospectus. You should read this
prospectus and the applicable prospectus supplement carefully before you make
your investment decision.
Investing
in our securities involves a high degree of risk. You should carefully consider
the risk factors incorporated herein by reference and described under the
heading Risk Factors beginning on page 3.
This
prospectus may not be used to sell securities unless accompanied by a
prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
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The date of this prospectus is July 22, 2009.
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TABLE OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we filed with
the Securities and Exchange Commission (the SEC), using a shelf
registration process. Under this shelf process, we may, from time to time, sell
any combination of the securities described in this prospectus in one or more
offerings.
This
prospectus provides you with a general description of the securities that we
may offer. Each time we sell securities, we will provide a prospectus
supplement that contains specific information about the terms of that offering,
including the specific amounts, prices and terms of the securities offered. The
prospectus supplement may also add information to this prospectus or update or
change information in this prospectus. If there is any inconsistency between
the information in this prospectus and any prospectus supplement, you should
rely on the information in the prospectus supplement. You should read carefully
this prospectus and any prospectus supplement together with the additional
information described under the heading Where You Can Find More Information.
We have not authorized anyone to provide you with different or additional
information. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale of these securities is not permitted. You
should assume that the information in this prospectus or any prospectus
supplement, as well as the information incorporated by reference herein or
therein, is accurate only as of the date of the documents containing the
information. Our business, financial condition, results of operations and
prospects may have changed since those dates.
In
this prospectus, except as otherwise indicated, St. Jude Medical, St. Jude,
the Company, we, our, and us refer to St. Jude Medical, Inc. and its
subsidiaries.
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and current reports, proxy statements and other
information with the SEC. These reports, proxy statements and other information
can be read and copied at the SECs public reference room at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference room. The SEC maintains an internet site
at
http://www.sec.gov
that contains
reports, proxy and information statements and other information regarding
companies that file electronically with the SEC, including us. These reports,
proxy statements and other information can also be read at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005 or on our
internet site at
http://www.sjm.com
.
Information on our website is not incorporated into this prospectus and is not
a part of this prospectus.
The
SEC allows us to incorporate by reference information into this prospectus
and any accompanying prospectus supplement, which means that we can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this prospectus and any accompanying prospectus supplement, except
for any information superseded by information contained directly in this
prospectus, any accompanying prospectus supplement or any subsequently filed
document deemed incorporated by reference. This prospectus and any accompanying
prospectus supplement incorporates by reference the documents set forth below
that we have previously filed with the SEC (other than information deemed
furnished and not filed in accordance with SEC rules, including Items 2.02 and
7.01 of Form 8-K):
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Annual
Report on Form 10-K for the fiscal year ended January 3, 2009 (filed with the
SEC on February 27, 2009);
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Quarterly
Report on Form 10-Q for the fiscal quarter ended April 4, 2009 (filed with
the SEC on May 12, 2009);
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Current
Reports on Form 8-K filed with the SEC on April 21, 2009; May 11, 2009; July
2, 2009 and July 22, 2009;
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Definitive
Proxy Statement on Schedule 14A filed with the SEC on March 24, 2009; and
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The
description of our common stock contained in a registration statement on Form
8-A, filed with the SEC on November 8, 1996 under the Securities Exchange Act
of 1934 (the Exchange Act) and in any other registration statement or
report filed by us under the Exchange Act, including any amendment or report
filed for the purpose of updating such description.
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All
documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and any accompanying prospectus
supplement and before the termination of the offering shall also be deemed to
be incorporated herein by reference.
Our
Current Report on Form 8-K filed on July 22, 2009 in connection with our
adoption, effective as of January 4, 2009, of Financial Accounting Standard
Board Staff Position (FSP) APB No. 14-1,
Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
(FSP APB No. 14-1), updates
our historical financial statements and other financial information included in
our Annual Report on Form 10-K for the fiscal year ended January 3, 2009. The
information contained in the Current Report on Form 8-K filed on July 22, 2009
should be read in conjunction with our Annual Report on Form 10-K for the
fiscal year ended January 3, 2009.
1
We
will provide without charge upon written or oral request to each person,
including any beneficial owner, to whom a prospectus is delivered, a copy of
any or all of the documents which are incorporated by reference into the
prospectus but not delivered with the prospectus (other than exhibits to those
documents unless such exhibits are specifically incorporated by reference as an
exhibit in this prospectus). Requests should be directed to St. Jude Medical,
Inc., Attn: Investor Relations, One St. Jude Medical Drive, St. Paul, Minnesota
55117, or by calling (800) 328-9634.
FORWARD-LOOKING
STATEMENTS
This
prospectus and the documents incorporated by reference herein may include
forward-looking statements made within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities Act), and Section 21E of
the Exchange Act. Such forward-looking statements may include, without
limitation, statements about our market opportunities, strategies, competition,
and expected activities and expenditures and at times may be identified by the
use of words such as may, could, should, would, project, believe,
anticipate, expect, plan, estimate, forecast, potential, intend,
continue and variations of these words or comparable words. Forward-looking
statements inherently involve risks and uncertainties. Accordingly, actual
results may differ materially from those expressed or implied by these
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, the risks described under the
section entitled Risk Factors included elsewhere in this prospectus and the
various factors as described below.
Factors
that could cause actual results to differ materially from those expressed or
implied in such forward-looking statements include, but are not limited to:
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Any
legislative or administrative reform to the U.S. Medicare or Medicaid systems
or international reimbursement systems that significantly reduces
reimbursement for procedures using our medical devices or denies coverage for
such procedures, as well as adverse decisions relating to our products by
administrators of such systems in coverage or reimbursement issues.
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Assertion,
acquisition or grant of key patents by or to others that have the effect of
excluding us from market segments or requiring us to pay royalties.
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Economic
factors, including inflation, contraction in capital markets, changes in
interest rates and changes in foreign currency exchange rates.
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Product
introductions by competitors which have advanced technology, better features
or lower pricing.
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Price
increases by suppliers of key components, some of which are sole-sourced.
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A reduction
in the number of procedures using our devices caused by cost-containment
pressures or the development of or preferences for alternative therapies.
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Safety,
performance or efficacy concerns about our products, many of which are
expected to be implanted for many years, leading to recalls and/or advisories
with the attendant expenses and declining sales.
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Declining
industry-wide sales caused by product recalls or advisories by our
competitors that result in loss of physician and/or patient confidence in the
safety, performance or efficacy of sophisticated medical devices in general
and/or the types of medical devices recalled in particular.
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Changes in
laws, regulations or administrative practices affecting government regulation
of our products, such as Food and Drug Administration (the FDA) laws and
regulations, that increase the time and/or expense of obtaining approval for
products or impose additional burdens on the manufacture and sale of medical
devices.
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Regulatory
actions arising from concern over Bovine Spongiform Encephalopathy, sometimes
referred to as mad cow disease, that have the effect of limiting our
ability to market products using bovine collagen, such as Angio-Seal
,
or products using bovine pericardial material, such as Biocor
®
and
Epic
tissue heart valves, or that impose added costs on the
procurement of bovine collagen or bovine pericardial material.
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Difficulties
obtaining, or the inability to obtain, appropriate levels of product
liability insurance or the refusal of our insurance carriers to pay for
losses we incur.
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The ability
of our Silzone® product liability insurers to meet their obligation to us.
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Serious weather
or other natural disasters that cause damage to the facilities of our
critical suppliers or one or more of our facilities, such as an earthquake
affecting our facilities in California or a hurricane affecting our
facilities in Puerto Rico.
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Healthcare
industry consolidation leading to demands for price concessions and/or
limitations on, or the elimination of, our ability to sell in significant
market segments.
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Adverse
developments in investigations and governmental proceedings, including the
investigation of business practices in the cardiac rhythm management industry
by the U.S. Attorneys Office in Boston.
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Adverse
developments in litigation, including product liability litigation, patent or
other intellectual property litigation or shareholder litigation.
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Inability to
successfully integrate the businesses that we have acquired in recent years
and that we plan to acquire.
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Failure to
successfully complete clinical trials for new indications for our products and
failure to successfully develop markets for such new indications.
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Changes in
accounting rules that adversely affect the characterization of our results of
operations, financial position or cash flows.
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The
disruptions in the financial markets and the economic downturn that adversely
impact the availability and cost of credit and customer purchasing and
payment patterns.
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Conditions
imposed in resolving, or any inability to timely resolve, any regulatory
issues raised by the FDA, including 483 observations or warning letters, as
well as risks generally associated with our regulatory compliance and quality
systems.
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Forward-looking
statements speak only as of the date on which they are made. We undertake no
obligation to update or revise the forward-looking statements included in this
registration statement, whether as a result of new information, future events
or otherwise, after the date of this registration statement. Our actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements.
ST.
JUDE MEDICAL, INC.
Our
business is focused on the development, manufacture and distribution of
cardiovascular medical devices for the global cardiac rhythm management,
cardiovascular and atrial fibrillation therapy areas and implantable
neurostimulation devices for the management of chronic pain. Our four operating
segments are Cardiac Rhythm Management (CRM), Cardiovascular (CV), Atrial
Fibrillation (AF), and Neuromodulation (NMD). Each operating segment
focuses on developing and manufacturing products for its respective therapy
area. Our CV operating segment focuses on both the cardiology and cardiac
surgery therapy areas. Our principal products in each operating segment are as
follows: CRM tachycardia implantable cardioverter defibrillator systems and
bradycardia pacemaker systems (pacemakers); CV vascular closure devices,
heart valve replacement and repair products and pressure measurement
guidewires; AF electrophysiology introducers and catheters, advanced cardiac
mapping, navigation and recording systems, ablation systems and implantable
cardiac monitors; and NMD neurostimulation devices. We sell our products in
more than 100 countries around the world. The principal geographic markets for
our products are the United States, Europe, Japan and Asia Pacific.
Our
principal executive offices are located at One St. Jude Medical Drive, St.
Paul, Minnesota 55117. Our telephone number at that address is (651) 756-2000.
RISK
FACTORS
Investing
in our securities involves a high degree of risk. Before acquiring any offered
securities pursuant to this prospectus, you should carefully consider the
information contained or incorporated by reference in this prospectus or in any
accompanying prospectus supplement, including, without limitation, the risks
described in our Quarterly Report on Form 10-Q for the fiscal quarter ended
April 4, 2009, which is incorporated herein by reference, the risk factors
described under the caption Risk Factors in any applicable prospectus
supplement and any risk factors set forth in our other filings with the SEC,
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act before
making an investment decision. The occurrence of any of these risks might cause
you to lose all or a part of your investment in the offered securities. See
Where You Can Find More Information included elsewhere in this prospectus.
USE
OF PROCEEDS
Except
as may be otherwise set forth in the applicable prospectus supplement
accompanying this prospectus, the net proceeds from the sale of the securities
offered by this prospectus will be used for general corporate purposes.
3
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth our historical consolidated ratio of earnings to
fixed charges for the periods indicated. For purposes of computing the ratios
set forth below, earnings consist of consolidated earnings before income
taxes plus fixed changes. Fixed charges consist of gross interest expense and
the portion of interest expense on operating leases we believe to be
representative of the interest factor.
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Three
months
ended April 4,
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Fiscal
year
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2009
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2008
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2007
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2006
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2005
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2004
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(dollars in thousands)
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Earnings
before income taxes
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$
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274,960
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$
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580,768
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$
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710,276
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$
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706,063
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$
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621,046
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$
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537,192
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Plus fixed
charges:
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Interest expense(1)
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6,951
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72,554
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72,258
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48,461
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10,386
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4,810
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Rent interest
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factor(2)
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2,382
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9,527
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9,144
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8,190
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7,659
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5,778
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Total Fixed
Charges
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9,333
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82,081
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81,402
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56,651
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18,045
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10,588
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Earnings Before Income Taxes
and Fixed Charges
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$
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284,293
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$
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662,849
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$
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791,678
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$
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762,714
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$
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639,091
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$
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547,780
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Ratio of
Earnings to Fixed Charges
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30.5
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8.1
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9.7
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13.5
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35.4
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51.7
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(1)
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Interest expense consists of interest on indebtedness
and amortization of debt issuance costs. Includes the impact of the Company
adopting the FSP APB
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No. 14-1.
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(2)
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Approximately one-third of rental expense is deemed
representative of the interest factor.
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DESCRIPTION
OF SECURITIES
This
prospectus contains summary descriptions of the debt securities, common stock,
preferred stock, warrants, subscription rights, stock purchase contracts and
stock purchase units that we may sell from time to time. These summary
descriptions are not meant to be complete descriptions of each security. The
particular terms of any security will be described in the related prospectus
supplement.
4
D
ESCRIPTION OF DEBT
SECURITIE
S
We
may issue senior debt securities. We will issue the senior debt securities
under an indenture to be entered into between us and U.S. Bank National
Association, as trustee, which we refer to as the indenture. As used in this
prospectus, debt securities means our direct unsecured general obligations
and may include debentures, notes, bonds or other evidences of indebtedness
that we issue and the trustee authenticates and delivers under the applicable
base indenture. The prospectus supplement relating to any offering of debt
securities will describe more specific terms of the debt securities being
offered.
Debt
securities will be issued under a base indenture in one or more series
established pursuant to a supplemental indenture or a resolution duly adopted
by our board of directors or a duly authorized committee thereof. The base
indenture does not limit the aggregate principal amount of debt securities that
may be issued thereunder, or the amount of series that may be issued. We refer
to the base indenture (together with each applicable supplemental indenture or
resolution establishing the applicable series of debt securities) in this
prospectus as the indenture. The indenture will be subject to, and governed by,
the Trust Indenture Act of 1939.
The
summary set forth below does not purport to be complete and is subject to and
qualified in its entirety by reference to the base indenture and the
supplemental indenture or board resolution (including the form of debt
security) relating to the applicable series of debt securities, the form of
each of which is or will be filed or incorporated by reference as an exhibit to
the registration statement of which this prospectus is a part and incorporated
herein by reference.
General
The
debt securities will be our unsecured obligations and will rank equally with
all of our other unsecured and unsubordinated debt from time to time
outstanding. Our secured debt will be effectively senior to the debt securities
to the extent of the value of the assets securing such debt. Unless otherwise
indicated in a prospectus supplement, the debt securities will be exclusively
our obligations and not those of our subsidiaries and therefore the debt
securities will be structurally subordinate to the debt and liabilities of any
of our subsidiaries.
The
applicable prospectus supplement will describe the specific terms of each
series of debt securities being offered, including some or all of the
following:
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the title of
the debt securities;
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the price at
which the debt securities will be issued (including any issue discount);
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any limit on
the aggregate principal amount of the debt securities;
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the date or
dates (or manner of determining the same) on which the debt securities will
mature;
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the rate or
rates (which may be fixed or variable) per annum (or the method or methods by
which such rate or rates will be determined) at which the debt securities
will bear interest, if any, and the date or dates from which such interest
will accrue;
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the date or
dates on which such interest will be payable and the record dates for such
interest payment dates and the basis upon which interest shall be calculated
if other than that of a 360-day year of twelve 30-day months;
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if the
trustee in respect of the debt securities is other than U.S. Bank National
Association (or any successor thereto), the identity of the trustee;
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any
mandatory or optional sinking fund or purchase fund or analogous provision;
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whether the
debt securities are to be issued in individual certificates to each holder or
in the form of global securities held by a depositary on behalf of the
holders;
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any
provisions relating to the date after which, the circumstances under which,
and the price or prices at which the debt securities may, pursuant to any
optional or mandatory redemption provisions, be redeemed at our option or of
the holder thereof and certain other terms and provisions of such optional or
mandatory redemption;
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if the debt
securities are denominated in other than United States dollars, the currency
or currencies (including composite currencies) in which the debt securities
are denominated;
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if payments
of principal (and premium, if any) or interest, if any, in respect of the
debt securities are to be made in a currency other than United States dollars
or the amounts of such payments are to be determined with reference to an
index based on a currency or currencies other than that in which the debt
securities are denominated, the currency or currencies (including composite
currencies) or the manner in which such amounts are to be determined,
respectively;
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if other
than or in addition to the events of default described in the base indenture,
the events of default with respect to the debt securities of that series;
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any
provisions relating to the conversion of debt securities into debt securities
of another series or shares of our capital stock or any other equity
securities;
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any
provisions restricting defeasance of the debt securities;
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any
covenants or other restrictions on our operations;
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conditions
to any merger or consolidation; and
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any other
terms of the debt securities.
(Section
3.1)
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Unless
otherwise indicated in a prospectus supplement in respect of which this
prospectus is being delivered, principal of, premium, if any, and interest, if
any, on the debt securities (other than debt securities issued as global
securities) will be payable, and the debt securities (other than debt
securities issued as global securities) will be exchangeable and transfers
thereof will be registrable, at the office of the trustee with respect to such
series of debt securities and at any other office maintained at that time by us
for such purpose, provided that, at our option, payment of interest may be made
by check mailed to the address of the holder as it appears in the register of
the debt securities.
(Section 3.4)
Unless
otherwise indicated in a prospectus supplement relating thereto, the debt
securities will be issued only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000 thereafter.
(Section 3.2)
For certain information
about debt securities issued in global form, see Global Securities below.
No service charge shall be made for any registration of transfer or exchange of
the securities, but we may require payment of a sum sufficient to cover any
transfer tax or other governmental charge payable in connection therewith.
(Section 3.6)
Debt
securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate will be sold at a discount below
their stated principal amount. Special U.S. federal income tax considerations
applicable to any such discounted debt securities or to certain debt securities
issued at par which are treated as having been issued at a discount for U.S.
federal income tax purposes will be described in the prospectus supplement in
respect of which this prospectus is being delivered, if applicable.
Debt
securities may be issued, from time to time, with the principal amount payable
on the applicable principal payment date, or the amount of interest payable on
the applicable interest payment date, to be determined by reference to one or
more currency exchange rates, commodity prices, equity indices or other
factors. In such cases, holders of such debt securities may receive a principal
amount on any principal payment date, or a payment of interest on any interest
payment date, that is greater than or less than the amount of principal or
interest payable on such dates, depending upon the value on such dates of the
applicable currency, commodity, equity index or other factor. Information, if
any, as to the methods for determining the amount of principal or interest
payable on any date, the currencies, commodities, equity indices or the factors
to which the amount payable on such date is linked and certain additional tax
considerations applicable to the debt securities will be set forth in a
prospectus supplement in respect of which this prospectus is being delivered.
The
indenture provides that the trustee and the paying agent shall promptly pay to
us upon request any money held by them for the payment of principal (and
premium, if any) or interest that remains unclaimed for two years. In the event
the trustee or the paying agent returns money to us following such two-year
period, the holders of the debt securities thereafter shall be entitled to
payment only from us, subject to all applicable escheat, abandoned property and
similar laws.
(Section 11.7)
The
base indenture does not limit the amount of additional unsecured indebtedness
that we or any of our subsidiaries may incur. Unless otherwise specified in the
resolutions or in any supplemental indenture establishing the terms of the debt
securities, the terms of the debt securities do not afford holders of the debt
securities protection in the event of a highly leveraged or other similar
transaction involving us that may adversely affect the holders of the debt
securities. Debt securities of any particular series need not be issued at the
same time and, unless otherwise provided, a series may be re-opened, without
the consent of the holders of such debt securities, for issuances of additional
debt securities of that series, unless otherwise specified in the resolutions
or any supplemental indenture establishing the terms of the debt securities.
(Section 3.1)
Certain Covenants
The
following restrictive covenants will apply to each series of debt securities
issued under the indenture, unless otherwise specified in any supplemental
indenture or resolution establishing the terms of the debt securities of any
series. See Certain Definitions below for the definitions of certain of the
defined terms used herein.
6
Limitations on Liens
We
will not, nor will we permit any Restricted Subsidiary to, create, incur,
issue, assume or guarantee any Debt if such Debt is secured by a Lien upon any
Restricted Property or on the capital stock or Debt of any Restricted
Subsidiary, without, in any such case, effectively providing that the debt
securities will be secured equally and ratably by such Lien with such secured
Debt; provided, however, that this restriction will not apply to:
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Liens
existing on the date of the indenture or Liens existing on property, capital
stock or Debt of any Person at the time it becomes a Restricted Subsidiary;
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Any Lien
existing on property when acquired, constructed or improved and which Lien
(i) secured or provided for the payment of all or any part of the acquisition
costs of the property or the cost of construction or improvement thereof and
(ii) is created prior to, at the same time or within one year after, the
completion of such acquisition, construction or improvement to the property,
as the case may be;
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Liens on
property of a Person existing at the time such Person is merged into or
consolidated with us or a Restricted Subsidiary or at the time of a sale,
lease or other disposition of the properties of a Person as an entirety or
substantially as an entirety to us or a Restricted Subsidiary;
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Any Lien
arising by reason of deposits with, or the giving of any form of security to,
any governmental agency or any body created or approved by law or
governmental regulation;
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Liens
securing Debt of a Restricted Subsidiary owed to us or another Restricted
Subsidiary;
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Liens for
taxes, fees, assessments or other governmental charges which are not
delinquent or remain payable without penalty;
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Carriers,
warehousemens, materialmens, repairmens, mechanics, landlords and other
similar Liens arising in the ordinary course of business which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings, which proceedings have the effect
of preventing the forfeiture or sale of the property or assets subject to any
such Lien;
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Liens (other
than any Lien imposed by ERISA) consisting of pledges or deposits required in
the ordinary course of business in connection with workers compensation,
unemployment insurance and other social security legislation;
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Liens on
property securing (i) the non-delinquent performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations on surety and appeal bonds, and (iii) other non-delinquent
obligations of a like nature; in each case, incurred in the ordinary course
of business, provided that all such Liens under this bullet point in the
aggregate would not (even if enforced) cause a material adverse change in, or
a material adverse effect upon, the operations, business, properties,
liabilities (actual or contingent), condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole;
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Liens
securing obligations in respect of capital leases on assets subject to such
leases; provided that such leases are otherwise permitted under the covenant
Limitations on Sale and Leaseback Transactions set forth below;
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Liens
securing reimbursement obligations with respect to letters of credit arising
by operation of law under Section 5-118(a) of the Uniform Commercial Code;
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Liens
arising solely by virtue of any statutory or common law provision relating to
bankers liens, rights of set-off or similar rights and remedies as to
deposit accounts or other funds maintained with a creditor depository
institution; provided that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by us in
excess of those set forth by regulations promulgated by the Board of
Governors of the Federal Reserve System of the United States, and (ii) such
deposit account is not intended by us or any Subsidiary to provide collateral
to the depository institution;
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Easements,
right-of-way restrictions and other similar encumbrances incurred in the
ordinary course of our business which, in the aggregate, are not substantial
in amount, and which do not in any case materially detract from the value of
the property subject thereto or interfere with the ordinary course of our and
our Subsidiaries business; and
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Any
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any permitted Lien referred to in the
bullets set forth above, inclusive of any Lien existing at the date of the
indenture; provided that the obligation secured by such new Lien shall not
extend beyond the property subject to the existing Lien and is not greater in
amount than the obligations secured by the Lien extended, renewed or replaced
(plus an amount in respect of reasonable financing fees and related
transaction costs).
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7
The
indenture will further provide that we and any Restricted Subsidiary may,
without securing the debt securities, create, incur, issue, assume or guarantee
secured Debt which would otherwise be subject to the foregoing restrictions;
provided that, if after giving effect to such Debt, the aggregate of such
secured Debt then outstanding (not including secured Debt permitted under the
foregoing exceptions) plus the aggregate amount of Attributable Debt
outstanding of sale and leaseback transactions that would otherwise be
prohibited by the covenant described under Limitations on Sale and Leaseback
Transactions below, does not exceed 15% of Consolidated Net Tangible Assets as
stated on the Companys most recent publicly available consolidated balance
sheet preceding the date of determination.
(Section
5.2)
Limitations on Sale
and Leaseback Transactions
We
will not, and will not permit any Restricted Subsidiary to, enter into any sale
and leaseback transaction with respect to any Restricted Property, except a
lease for a period (including extensions or renewals at our option or the
option of a Restricted Subsidiary) of three years or less. Notwithstanding the
foregoing, we or any Restricted Subsidiary may enter into a sale and leaseback
transaction if:
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The lease is
between us and a Restricted Subsidiary or between Restricted Subsidiaries;
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We or such
Restricted Subsidiary would, at the time of entering into such sale and
leaseback transaction, be entitled pursuant to the covenant described under
Limitations on Liens above, to incur Debt secured by a Lien on such
Restricted Property involved in a principal amount at least equal to the
Attributable Debt of such transaction without equally and ratably securing
the debt securities;
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We or any of
our Restricted Subsidiaries, during the six months following the effective
date of the sale and leaseback transaction, apply an amount equal to the
greater of the net proceeds of such sale or transfer or the fair value of the
Restricted Property that we or our Restricted Subsidiary lease in the
transaction to the voluntary retirement of the debt securities or other Debt
of ours or that of any Restricted Subsidiary, provided that such Debt (i)
ranks pari passu or senior to the debt securities under the indenture and
(ii) has a stated maturity which is either more than 12 months from the date
of such application or which is extendable or renewable at the option of the
obligor thereon to a date more than 12 months from the date of such
application; or
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The
Attributable Debt of the Company and its Restricted Subsidiaries in respect
of such sale and leaseback transaction and all other sale and leaseback
transactions involving Restricted Property (other than sale and leaseback
transactions as are permitted in the bullets above), plus the aggregate
principal amount of Debt secured by Liens on Restricted Property then
outstanding that otherwise would be prohibited by the covenant described
under Limitations on Liens above, would not exceed 15% of Consolidated Net
Tangible Assets as stated on the Companys most recent publicly available
consolidated balance sheet preceding the date of determination.
(Section 5.3)
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Certain Definitions
Set
forth below are certain of the defined terms used in the indenture.
Attributable
Debt
means, in respect of a sale and leaseback
transaction, as of any particular time, the present value (discounted at the
rate of interest implicit in the terms of the lease involved in such sale and
leaseback transaction, as determined in good faith by us) of the obligation of
the lessee thereunder for rental payments (excluding, however, any amounts required
to be paid by such lessee, whether or not designated as rent or additional
rent, on account of maintenance and repairs, insurance, taxes, assessments,
water rates or similar charges or any amounts required to be paid by such
lessee thereunder contingent upon the amount of sales, maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges) during the
remaining term of such lease (including any period for which such lease has
been extended or may, at the option of the lessor, be extended).
Consolidated
Net Tangible Assets
means the total amount of assets
(less applicable reserves and other properly deductible items) after deducting
(1) all current liabilities (excluding the amount of those which are by their
terms extendable or renewable at the option of the obligor to a date more than
12 months after the date as of which the amount is being determined) and (2)
all customer lists, computer software, licenses, patents, patent applications,
copyrights, trademarks, trade names, goodwill, capitalized research and
development costs and other like intangibles, treasury stock and unamortized
debt discount and expense, and all other like intangible assets, all as stated
on the Companys most recent publicly available consolidated balance sheet
preceding the date of determination and determined in accordance with generally
accepted accounting principles.
Debt
means any and all of the obligations of a Person for
money borrowed which in accordance with generally accepted accounting
principles would be reflected on the balance sheet of such Person as a
liability as of the date of which the Debt is to be determined.
8
Lien
means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement, and any financing lease having substantially the same
economic effect as any of the foregoing) on or with respect to any property.
Person
means an individual, a corporation, a company, a
voluntary association, a partnership, a trust, a joint venture, a limited
liability company, an unincorporated organization, or a government or any
agency, instrumentality or political subdivision thereof.
Restricted
Property
means, as to any particular series of notes,
any manufacturing facility or plant owned, or leased, by the Company or a
Restricted Subsidiary and located within the United States, including Puerto
Rico, the gross book value (including related land, machinery and equipment
without deduction of any depreciation reserves) of which is not less than 1% of
Consolidated Tangible Net Assets as stated on the Companys most recent
publicly available consolidated balance sheet preceding the date of
determination, other than any such manufacturing facility or plant which the
board of directors reasonably determines is not material to the operation of
the Companys business and its Subsidiaries, taken as a whole.
Restricted
Subsidiary
means a Subsidiary (as defined below) (i)
which is a significant subsidiary as defined in Rule 1-02(w) of Regulation
S-X under the U.S. federal securities laws or (ii) which owns a Restricted
Property; provided, however, that the term shall not include any Subsidiary
which is solely or primarily engaged in the business of providing or obtaining
financing for the sale or lease of products sold or leased by us or any
Subsidiary.
Subsidiary
means, with respect to any Person, any corporation,
partnership, joint venture, limited liability company or other business entity
of which a majority of the outstanding shares or other interests having voting
power is at the time directly or indirectly owned or controlled by such Person
or one or more of the Subsidiaries of such Person. Unless the context otherwise
requires, all references to Subsidiary or Subsidiaries herein shall refer to
our Subsidiaries.
United
States
means the United States of America (including
the States thereof and the District of Columbia), its territories and
possessions and other areas subject to its jurisdiction.
Merger, Consolidation and Sale
The
indenture generally provides that we may not consolidate with or merge into, or
sell, transfer or convey, including by lease, all or substantially all of our
assets to another entity, unless: (i) the resulting, surviving or transferee
entity (A) is a corporation or entity organized under the laws of the United
States and (B) assumes by a supplemental indenture all our obligations under
the debt securities and the indenture, (ii) immediately after giving effect to
such transaction no Event of Default (as defined herein) and no circumstances
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing, and (iii) we shall have delivered to the
trustee an officers certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture comply
with the indenture.
(Section 6.1)
Global Securities
The
debt securities of a series may be issued in whole or in part in the form of
one or more global securities that will be deposited with the depositary
identified in the applicable prospectus supplement. Unless it is exchanged in
whole or in part for debt securities in definitive form, a global security may
not be transferred. However, transfers of the whole security between the
depositary for that global security and its nominees or their respective
successors are permitted.
Unless
otherwise provided in the applicable prospectus supplement, The Depository
Trust Company, New York, New York, which we refer to in this prospectus as
DTC will act as depositary for each series of global securities. Beneficial
interests in global securities will be shown on, and transfers of global
securities will be effected only through, records maintained by DTC and its
participants.
Amendment, Supplement and Waiver
Subject
to certain exceptions, the indenture or the debt securities of any series may
be amended or supplemented with the written consent of the holders of not less
than a majority in principal amount of the then outstanding debt securities of
the affected series; provided that we and the trustee may not, without the
consent of the holder of each outstanding debt security of such series affected
thereby:
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reduce the
amount of debt securities of such series whose holders must consent to an
amendment, supplement or waiver;
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reduce the
rate of or extend the time for payment of interest on any debt security of
such series;
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9
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reduce the
principal of or extend the fixed maturity of any debt security of such
series;
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reduce the
portion of the principal amount of a discounted security of such series
payable upon acceleration of its maturity;
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impair the
right to sue for the enforcement of payment at the maturity of the debt
security; or
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make any
debt security of such series payable in money other than that stated in such
debt security.
(Section 12.2)
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Any
past default or compliance with any provisions may be waived with the consent
of the holders of a majority in principal amount of the debt securities of the
affected series, except a default in payment of principal or interest or in
respect of other provisions requiring the consent of the holder of each such
debt security of that series in order to amend. Without the consent of any
holder of debt securities of such series, we and the trustee may amend or
supplement the indenture or the debt securities without notice to, among
others:
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cure any
ambiguity, omission, defect or inconsistency;
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to provide
for uncertificated debt securities in addition to or in place of certificated
debt securities;
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to comply with the provisions of the indenture concerning
mergers, consolidations and transfers of all or substantially all of our
assets;
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to appoint a
trustee other than U.S. Bank National Association (or any successor thereto)
as trustee in respect of one or more series of debt securities;
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to add,
change or eliminate provisions of the indenture as shall be necessary or
desirable in accordance with any amendment to the Trust Indenture Act of
1939; or
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to make any
change that does not materially adversely affect the rights of any holder of
that series of debt securities.
(Section
12.1)
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Whenever
we request the trustee to take any action under the indenture, including a
request to amend or supplement the applicable indenture without the consent of
any holder of debt securities, we are required to furnish the trustee with an
officers certificate and an opinion of counsel to the effect that all
conditions precedent to the action have been complied with. Without the consent
of any holder of debt securities, the trustee may waive compliance with any
provisions of the indenture or the debt securities if the waiver does not materially
adversely affect the rights of any such holder.
Default and Remedies
An
Event of Default under the indenture in respect of any series of debt
securities is:
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default for
30 days in payment of interest on the debt securities of that series;
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default in
payment of principal, or any premium on the debt securities of that series;
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default for
30 days in the payment of any sinking fund installment on the debt securities
of that series;
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failure by
us for 90 days after notice to us to comply with any of our other agreements
in the applicable indenture for the benefit of holders of debt securities of
that series;
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certain
events of bankruptcy, insolvency or reorganization; and
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any other
event of default specifically provided for by the terms of such series, as
described in the related prospectus supplement.
(Section 7.1)
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If
an Event of Default (other than an Event of Default relating to certain events
of bankruptcy, insolvency or reorganization) occurs and is continuing, the
trustee or the holders of at least 25% in principal amount of the outstanding
debt securities of the affected series may declare the debt securities of that
series to be due and payable immediately, but under certain conditions such
acceleration may be rescinded by the holders of a majority in principal amount
of the outstanding debt securities of the affected series. In case of certain
events of bankruptcy, insolvency or reorganization involving us, the principal
and accrued and unpaid interest on the outstanding debt securities of the
affected series will automatically become immediately due and payable. In
addition, an Event of Default applicable to a particular series of debt
securities that causes the one or more series to be accelerated may give rise
to a cross-default under our existing and future borrowing arrangements.
(Section 7.2)
No
holder of debt securities may pursue any remedy against us under the indenture
(other than with respect to the right to receive payment of principal (and
premium, if any) or interest, if any) unless such holder previously shall have
given to the trustee written notice of default and unless the holders of at
least 25% in principal amount of the debt securities of the
10
affected
series shall have requested the trustee to pursue the remedy and shall have
offered the trustee indemnity satisfactory to it, the trustee shall not have
complied with the request within 60 days of receipt of the request and the
offer of indemnity, and the trustee shall not have received direction
inconsistent with the request during such 60-day period from the holders of a
majority in principal amount of the debt securities of the affected series.
(Section 7.5)
Holders
of debt securities may not enforce the indenture or the debt securities except
as provided in the indenture. The trustee may refuse to enforce the indenture
or the debt securities unless it receives indemnity satisfactory to it from us
or, under certain circumstances, the holders of debt securities seeking to
direct the trustee to take certain actions under the indenture against any
loss, liability or expense. Subject to certain limitations, holders of a
majority in principal amount of the debt securities of any series may direct
the trustee in its exercise of any trust or power under the indenture in
respect of that series. The indenture provides that the trustee will give to
the holders of debt securities of any particular series notice of all defaults
known to it, within 90 days after the occurrence of any default with respect to
such debt securities, unless the default shall have been cured or waived. The
trustee may withhold from holders of debt securities notice of any continuing
default (except a default in payment of principal or interest) if it determines
in good faith that withholding such notice is in the interests of such holders.
We are required annually to certify to the trustee as to the compliance by us
with all conditions and any covenants under the indenture and the absence of a
default thereunder, or as to any such default that existed.
(Section 10.3)
Our
directors, officers, employees and stockholders, as such, shall not have any
liability for any of our obligations under the debt securities or the indenture
or for any claim based on, in respect of, or by reason of such obligations or
their creation. By accepting a debt security, each holder of such debt security
waives and releases all such claims and liability. This waiver and release are
part of the consideration for the issue of the debt securities.
(Section 15.1)
Satisfaction, Discharge and Defeasance
The
indenture provides, unless such provision is made inapplicable to the debt
securities of any series issued pursuant to the indenture, that we may, subject
to certain conditions described below, discharge certain obligations to holders
of debt securities that have not already been delivered to the trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the trustee, in trust, funds in an amount
sufficient to pay the entire indebtedness on such debt securities in respect of
principal (and premium, if any) and interest to the date of such deposit (if
such debt securities have become due and payable) or to the stated maturity and
redemption date, as the case may be.
The
indenture provides that we may elect either:
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to defease
and be discharged from all of our obligations with respect to the debt
securities of a series (this is known as defeasance); or
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to be
released from our obligations with respect to the debt securities of a series
under the restrictions described under Certain Covenants or, if provided
pursuant to the indenture, our obligations under any other covenant, and any
omission to comply with such obligations will not constitute an event of
default with respect to those debt securities (this is known as covenant
defeasance);
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in either case
upon the irrevocable deposit by us with the trustee, in trust, of an amount, in
the currency in which those debt securities are payable at stated maturity, or
government obligations, or both, applicable to those debt securities that through
the scheduled payment of principal and interest in accordance with their terms
will provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest on those debt securities, and any mandatory
sinking fund or analogous payments thereon, on the scheduled due dates.
Such
a trust will only be permitted to be established if, among other things, we
have delivered to the trustee an opinion of counsel to the effect that the
holders of such debt securities will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if the
defeasance or covenant defeasance had not occurred, and such opinion of
counsel, in the case of defeasance, will be required to refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable U.S.
federal income tax law occurring after the date of the indenture.
(Section 11.3)
Governing Law
The
debt securities and the indenture will be governed by the laws of the State of
New York.
11
Trustee
U.S.
Bank National Association will act as trustee under the indenture. U.S. Bank
National Association is a lender to us under our syndicated credit facilities,
and also provides from time to time other services to us in the ordinary course
of business.
Additional Information
The
indenture is an exhibit to the registration statement of which this prospectus
is a part. Any person who receives this prospectus may obtain a copy of such
indenture without charge by writing to us at the address listed under the
caption Where You Can Find More Information.
12
D
ESCRIPTION OF CAPITAL
STOC
K
General
This
section summarizes the general terms of our capital stock. The following
description is only a summary and does not purport to be complete and is
qualified by reference to our amended and restated articles of incorporation
and amended and restated bylaws. Our amended and restated articles of
incorporation and amended and restated bylaws have been incorporated in this
prospectus by reference. See Where You Can Find More Information for
information on how to obtain copies.
Authorized Capital Stock
Our
authorized capital stock consists of 500,000,000 shares of common stock, par
value $0.10 per share, and 25,000,000 shares of preferred stock, par value
$1.00 per share. As of July 15, 2009, there were approximately 347,731,671
shares of our common stock outstanding, approximately 34,785,322 shares of our
common stock reserved to be issued upon exercise of outstanding options and no
shares of our preferred stock outstanding.
Common Stock
The
holders of our common stock are entitled to one vote for each share on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Our board of directors is classified into three classes, one of which
is elected each year. Accordingly, holders of a majority of our common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. The holders of our common stock are entitled to share
ratably in all of our assets which are legally available for distribution,
after payment of all debts and other liabilities, and subject to the prior
rights, if any, of any holders of preferred stock then outstanding. The holders
of our common stock have no preemptive, subscription, redemption or conversion
rights. The outstanding shares of our common stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of our common
stock are subject to the rights of the holders of shares of any series of
preferred stock which we may issue. We currently do not pay cash dividends on
our common stock. We presently intend to retain earnings for use in the
operations and expansion of our business and therefore do not anticipate paying
any cash dividends in the foreseeable future. The transfer agent and registrar
for our common stock is Wells Fargo.
Preferred Stock
Our
board of directors has the authority, without further action by our
shareholders, to issue shares of our preferred stock in one or more series and
may determine, with respect to any such series, the powers, preferences and
rights of such series, and its qualifications, limitations and restrictions,
including, without limitation:
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the number
of shares to constitute such series and the designations thereof;
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the voting
power, if any, of holders of shares of such series and, if voting power is
limited, the circumstances under which such holders may be entitled to vote;
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the rate of
dividends, if any, and the extent of further participation in dividend distributions,
if any, whether dividends shall be cumulative or non-cumulative;
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whether or
not such series shall be redeemable, and, if so, the terms and conditions
upon which shares of such series shall be redeemable;
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the extent,
if any, to which such series shall have the benefit of any sinking fund
provision for the redemption or purchase of shares;
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the rights,
if any, of such series, in the event of our dissolution, liquidation, winding
up of our affairs; and
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any other relative
rights, powers, preferences, qualifications, limitations or restrictions
thereof relating to such series.
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You
should refer to the prospectus supplement relating to the series of preferred
stock being offered for the specific terms of that series, including:
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the title of
the series and the number of shares in the series;
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the price at
which the preferred stock will be offered;
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the dividend
rate or rates or method of calculating the rates, the dates on which the
dividends will be payable, whether or not dividends will be cumulative or
non-cumulative and, if cumulative, the dates from which dividends on the
preferred stock being offered will cumulate, whether the dividends are
payable in cash, securities, other property or a combination of the
foregoing;
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13
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the voting
rights, if any, of the holders of shares of the preferred stock being
offered;
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the
provisions for a sinking fund, if any, and the provisions for redemption, if
applicable, of the preferred stock being offered;
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the
liquidation preference per share;
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the terms
and conditions, if applicable, upon which the preferred stock being offered
will be convertible into our common stock (including any mandatory conversion
provisions), or other securities, including the conversion price, or the
manner of calculating the conversion price, and the conversion period;
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the terms
and conditions, if applicable, upon which the preferred stock being offered
will be exchangeable for debt securities, including the exchange price, or
the manner of calculating the exchange price, and the exchange period;
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any listing
of the preferred stock being offered on any securities exchange;
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a discussion
of any material U.S. federal income tax considerations applicable to the
preferred stock being offered;
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the relative
ranking and preferences of the preferred stock being offered as to dividend
rights and rights upon liquidation, dissolution or the winding up of our
affairs;
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any limitations
on the issuance of any class or series of preferred stock ranking senior or
equal to the series of preferred stock being offered as to dividend rights
and rights upon liquidation, dissolution or the winding up of our affairs;
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any limitations
on our ability to take certain actions without the consent of a specified
number of holders of preferred stock; and
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any
additional rights, preferences, qualifications, limitations and restrictions
of the series.
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Certain Provisions of Our Articles of
Incorporation and Bylaws
Our
amended and restated articles of incorporation and our amended and restated
bylaws currently contain provisions that could make the acquisition of control
of our company or the removal of our existing management more difficult,
including the following:
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we do not
provide for cumulative voting for our directors;
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we have a
classified board of directors with each class serving a staggered three-year
term;
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a vote of
80% of the outstanding shares of voting stock, voting together as a single
class, is required to remove directors, and such directors may only be
removed for cause;
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the
affirmative vote of the holders of 80% of the outstanding shares of voting
stock, voting together as a single class, is required to amend provisions of
our restated articles of incorporation relating to the staggered terms and
the removal of directors;
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our board of
directors fixes the size of the board of directors within certain limits, may
create new directorships and may appoint new directors to serve for the full
term of the class of directors in which the new directorship was created. The
board of directors (or its remaining members, even though less than a quorum)
also may fill vacancies on the board of directors occurring for any reason
for the remainder of the term of the class of director in which the vacancy
occurred;
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our board of
directors retains the power to designate series of preferred stock and to
determine the powers, rights, preferences, qualifications and limitations of
each series;
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all
shareholder actions must be taken at a regular or special meeting of the
shareholders and cannot be taken by written consent without a meeting; and
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our amended
and restated articles of incorporation contain fair price provisions which
require the affirmative vote of 75% of the voting power of the outstanding
shares of voting stock, voting together as a single class, to approve certain
business combinations involving St. Jude Medical and a related shareholder
(including mergers, consolidations and sales of a substantial part of our
assets) unless specified price criteria and procedural requirements are met
or unless the transaction is approved by a majority of the continuing directors
as provided therein. The affirmative vote of the holders of 80% of the
outstanding shares of voting stock, voting together as a single class, is
required to amend provisions of our restated articles of incorporation
relating to the fair price provisions.
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14
Business Combinations and Control Share
Acquisitions
We
are governed by the provisions of Sections 671, 673 and 675 of the Minnesota
Business Corporation Act. These provisions may have an effect of delaying,
deferring or preventing an unsolicited takeover of St. Jude Medical and deprive
our shareholders of an opportunity to sell their shares at a premium over the
market price. The following description of certain provisions of the Minnesota
Business Corporation Act is only a summary and does not purport to be complete
and is qualified in its entirety by reference to the Minnesota Business
Corporation Act.
In
general, Section 671 of the Minnesota Business Corporation Act provides that a
corporations shares acquired in a control share acquisition have no voting
rights unless voting rights are approved in a prescribed manner. A control
share acquisition is a direct or indirect acquisition 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 673 of the Minnesota Business Corporation Act 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 either
the business combination or the acquisition by which such person becomes an
interested shareholder is approved in a prescribed manner before the person
became an interested shareholder. The term 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 a corporations
voting stock, or who is an affiliate or associate of the corporation, and who,
at any time within four years before the date in question, was the beneficial
owner, directly or indirectly, of 10% or more of the corporations outstanding
voting stock. Section 673 does not apply if a committee of our board of
directors consisting of one or more of our disinterested directors (excluding
our current and former officers and employees) approves the proposed
transaction or the interested shareholders acquisition of shares before the
share acquisition date or on the share acquisition date but before the
interested shareholder becomes an interested shareholder.
If
a takeover offer is made for our stock, Section 675 of the Minnesota Business
Corporation Act precludes the offeror from acquiring additional shares of stock
(including in acquisitions pursuant to mergers, consolidations or statutory
share exchanges) within two years following the completion of the takeover
offer, unless shareholders selling their shares in the later acquisition are
given the opportunity to sell their shares on terms that are substantially the
same as those contained in the earlier takeover offer. A takeover offer is a
tender offer which results in an offeror who owned ten percent or less of a
class of our shares acquiring more than ten percent of that class, or which
results in the offeror increasing its beneficial ownership of a class of our
shares by more than ten percent of the class, if the offeror owned ten percent
or more of the class before the takeover offer. Section 675 does not apply if a
committee of our board of directors approves the proposed acquisition before
any shares are acquired pursuant to the earlier tender offer. The committee
must consist solely of directors who were directors or nominees for our board
of directors at the time of the first public announcement of the takeover offer,
and who are not our current or former officers and employees, offerors,
affiliates or associates of the offeror or nominees for our board of directors
by the offeror or an affiliate or associate of the offeror.
15
D
ESCRIPTION OF WARRANT
S
We
may issue warrants to purchase debt securities, preferred stock, common stock
or other securities. We may issue warrants independently or together with other
securities. Warrants sold with other securities may be attached to or separate
from the other securities. We will issue warrants under one or more warrant
agreements between us and a bank or trust company, as warrant agent, that we
will name in the prospectus supplement. The warrant agent will act solely as
our agent in connection with the warrants and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
warrants.
The
prospectus supplement relating to any warrants we offer will include specific
terms relating to the offering. These terms may include some or all of the
following:
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the title of
such warrants;
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the
aggregate number of such warrants;
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the price or
prices at which such warrants will be issued;
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the currency
or currencies, including composite currencies, in which the price of such
warrants may be payable;
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the
designation and terms of the securities purchasable upon exercise of such
warrants and the number of such securities issuable upon exercise of such
warrants;
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the price at
which and the currency or currencies, including composite currencies, in
which the securities purchasable upon exercise of such warrants may be
purchased;
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the date on
which the right to exercise such warrants shall commence and the date on
which such right will expire;
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whether such
warrants will be issued in registered form or bearer form;
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if
applicable, the minimum or maximum amount of such warrants which may be
exercised at any one time;
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if
applicable, the designation and terms of the securities with which such
warrants are issued and the number of such warrants issued with each such
security;
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if
applicable, the date on and after which such warrants and the related
securities will be separately transferable;
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information
with respect to book-entry procedures, if any; and
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any other
terms of such warrants, including terms, procedures and limitations relating
to the exchange and exercise of such warrants.
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The
description in the prospectus supplement will not necessarily be complete and
will be qualified in its entirety by reference to the applicable warrant
agreement, which will be filed with the SEC.
16
D
ESCRIPTION OF
SUBSCRIPTION RIGHT
S
We
may issue subscription rights to purchase debt securities, preferred stock,
common stock or other securities. These subscription rights may be issued
independently or together with any other security offered hereby and may or may
not be transferable by the shareholder receiving the subscription rights in
such offering. In connection with any offering of subscription rights, we may
enter into a standby arrangement with one or more underwriters or other
purchasers pursuant to which the underwriters or other purchasers may be
required to purchase any securities remaining unsubscribed for after such
offering.
The
applicable prospectus supplement will describe the specific terms of any
offering of subscription rights for which this prospectus is being delivered,
including the following:
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the price,
if any, for the subscription rights;
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the exercise
price payable for each share of debt securities, preferred stock, common
stock or other securities upon the exercise of the subscription rights;
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the number
of subscription rights issued to each shareholder;
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the number
and terms of the shares of debt securities, preferred stock, common stock or
other securities which may be purchased per each subscription right;
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the extent
to which the subscription rights are transferable;
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any other
terms of the subscription rights, including the terms, procedures and
limitations relating to the exchange and exercise of the subscription rights;
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the date on
which the right to exercise the subscription rights shall commence, and the
date on which the subscription rights shall expire;
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the extent
to which the subscription rights may include an over-subscription privilege
with respect to unsubscribed securities; and
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if
applicable, the material terms of any standby underwriting or purchase
arrangement entered into by us in connection with the offering of
subscription rights.
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The
description in the applicable prospectus supplement of any subscription rights
we offer will not necessarily be complete and will be qualified in its entirety
by reference to the applicable subscription rights certificate, which will be
filed with the SEC if we offer subscription rights. For more information on how
you can obtain copies of any subscription rights certificate if we offer
subscription rights, please see the section entitled Where You Can Find More
Information.
17
D
ESCRIPTION OF STOCK
PURCHASE CONTRACTS AND STOCK PURCHASE UNIT
S
We
may issue stock purchase contracts, including contracts obligating holders to
purchase from or sell to us, and us to sell to or purchase from the holders, a
specified number of shares of common stock or shares of preferred stock at a
future date or dates. The consideration per share of common stock or preferred
stock and the number of shares of each may be fixed at the time the stock
purchase contracts are issued or may be determined by reference to a specific
formula set forth in the stock purchase contracts. The stock purchase contracts
may be issued separately or as part of units, often known as stock purchase
units, consisting of a stock purchase contract and any combination of:
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debt
securities, or
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debt
obligations of third parties, including U.S. Treasury securities,
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which may
secure the holders obligations to purchase the common stock or preferred stock
under the stock purchase contracts. The stock purchase contracts may require us
to make periodic payments to the holders of the stock purchase units or vice
versa, and these payments may be unsecured or pre-funded on some basis. The
stock purchase contracts may require holders to secure their obligations under
those contracts in a specified manner.
The
applicable prospectus supplement will describe the terms of the stock purchase
contracts and stock purchase units, including, if applicable, collateral
arrangements relating thereto.
18
P
LAN OF DISTRIBUTIO
N
We
may offer and sell the securities being offered hereby in one or more of the
following ways from time to time:
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to
underwriters or dealers for resale to the public or to institutional
investors;
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directly to
institutional investors;
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directly to
a limited number of purchasers or to a single purchaser;
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through
agents to the public or to institutional investors; or
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through a
combination of any of these methods of sale.
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The
prospectus supplement with respect to each series of securities will state the
terms of the offering of the securities, including:
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the offering
terms, including the name or names of any underwriters, dealers or agents;
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the purchase
price of the securities and the net proceeds to be received by us from the
sale;
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any
underwriting discounts or agency fees and other items constituting
underwriters or agents compensation;
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any public
offering price;
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any
discounts or concessions allowed or reallowed or paid to dealers; and
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any
securities exchange on which the securities may be listed.
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If
we use underwriters or dealers in the sale, the securities will be acquired by
the underwriters or dealers for their own account and may be resold from time
to time in one or more transactions, including:
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privately
negotiated transactions;
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at a fixed
public offering price or prices, which may be changed;
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in at the
market offerings within the meaning of Rule 415(a)(4) of the Securities Act;
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at prices
related to prevailing market prices; or
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at
negotiated prices.
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Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If
underwriters are used in the sale of any securities, the securities may be
offered either to the public through underwriting syndicates represented by
managing underwriters, or directly by underwriters. Generally, the underwriters
obligations to purchase the securities will be subject to certain conditions
precedent. The underwriters will be obligated to purchase all of the securities
if they purchase any of the securities.
We
may enter into derivative transactions with third parties, or sell securities
not covered by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates, in connection
with those derivatives, the third parties may sell securities covered by this
prospectus and the applicable prospectus supplement, including short sale
transactions. If so, the third party may use securities pledged by us or
borrowed from us or others to settle those sales or to close out any related
open borrowings of common shares, and may use securities received from us in
settlement of those derivatives to close out any related open borrowings of
common shares. The third party in such sale transactions will be an underwriter
and, if not identified in this prospectus, will be identified in the applicable
prospectus supplement or a post-effective amendment to this registration
statement.
If
indicated in an applicable prospectus supplement, we may sell the securities
through agents from time to time. The applicable prospectus supplement will
name any agent involved in the offer or sale of the securities and any
commissions we pay to them. Generally, any agent will be acting on a best
efforts basis for the period of its appointment. We may authorize underwriters,
dealers or agents to solicit offers by certain purchasers to purchase the
securities from us at the public offering price set forth in the applicable
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. The delayed delivery
contracts will be subject only to those conditions set forth in the applicable
prospectus supplement, and the applicable prospectus supplement will set forth
any commissions we pay for solicitation of these delayed delivery contracts.
Offered
securities may also be offered and sold, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or
otherwise,
19
by one or more
remarketing firms, acting as principals for their own accounts or as agents for
us. Any remarketing firm will be identified and the terms of its agreements, if
any, with us and its compensation will be described in the applicable
prospectus supplement.
Agents,
underwriters and other third parties described above may be entitled to
indemnification by us against certain civil liabilities under the Securities
Act, or to contribution with respect to payments which the agents or
underwriters may be required to make in respect thereof. Agents, underwriters
and such other third parties may be customers of, engage in transactions with,
or perform services for us in the ordinary course of business.
Each
series of securities will be a new issue of securities and will have no
established trading market, other than our common stock, which is listed on the
New York Stock Exchange. Any common stock sold will be listed on the New York
Stock Exchange, upon official notice of issuance. The securities other than the
common stock may or may not be listed on a national securities exchange and no
assurance can be given that there will be a secondary market for any such
securities or liquidity in the secondary market if one develops. Any
underwriters to whom securities are sold by us for public offering and sale may
make a market in the securities, but such underwriters will not be obligated to
do so and may discontinue any market making at any time without notice.
20
L
EGAL MATTER
S
In
connection with particular offerings of the securities in the future, unless
otherwise stated in the applicable prospectus supplement, the validity of those
securities will be passed upon for us by Pamela S. Krop, Vice President,
General Counsel and Secretary of St. Jude and Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York. Any underwriters will also be advised about
legal matters by their own counsel, which will be named in the prospectus
supplement.
E
XPERT
S
The
consolidated financial statements of St. Jude Medical, Inc. incorporated by
reference in St. Jude Medical Inc.s Annual Report on Form 10-K for the year
ended January 3, 2009, as revised by a Current Report on Form 8-K dated July
22, 2009, including the schedule appearing therein, and the effectiveness of
St. Jude Medical Inc.s internal control over financial reporting as of January
3, 2009, have been audited by Ernst & Young LLP, independent registered
public accounting firm, as set forth in their reports thereon and included or
incorporated by reference therein, respectively, and incorporated herein by
reference. Such consolidated financial statements and schedule are incorporated
herein by reference in reliance upon such reports given on the authority of
such firm as experts in accounting and auditing.
21
$500,000,000
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St.
Jude Medical, Inc.
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%
Senior Notes due
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Prospectus Supplement
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December
, 2010
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Joint Book-Running Managers
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BofA Merrill Lynch
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Mitsubishi UFJ Securities
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Wells Fargo Securities
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