EXHIBIT 10.3

NOTICE OF NON-QUALIFIED STOCK OPTION GRANT
TO EMPLOYEE
(2006 STOCK PLAN)

          This certifies that ____________________ has an option to purchase
____________________ shares of common stock, par value $.10 per share, of St.
Jude Medical, Inc., a Minnesota corporation.

 

 

 

Social Security Number: ____________________

 

 

 

Address: ________________________________

 

 

 

Grant Date: ______________________________

 

 

 

Purchase Price Per Share: $ _________________

 

 

 

Expiration Date: __________________________

 

 

 

Exercisable Date: [insert vesting schedule, e.g., 25% exercisable on each of
first four anniversaries of grant date]

          This stock option is governed by, and subject in all respects to, the
terms and conditions of the Non-Qualified Stock Option Agreement for Employees,
a copy of which is attached to and made a part of this document, and the St.
Jude Medical, Inc. 2006 Stock Plan, a copy of which is available upon request.
This Notice of Non-Qualified Stock Option Grant to Employee has been duly
executed, by manual or facsimile signature, on behalf of St. Jude Medical, Inc.

 

 

 

 

ST. JUDE MEDICAL, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

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ST. JUDE MEDICAL, INC. 2006 STOCK PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEES

          This Non-Qualified Stock Option Agreement for Employees (this
“Agreement”) is between St. Jude Medical, Inc., a Minnesota corporation (the
“Company”), and you, the person named in the attached Notice of Non-Qualified
Stock Option Grant to Employee (the “Notice”). This Agreement is effective as of
the date of grant set forth in the attached Notice (the “Grant Date”).

          The Company desires to provide you with an opportunity to purchase
shares of the Company’s common stock, $.10 par value (the “Common Stock”), as
provided in this Agreement in order to carry out the purpose of the St. Jude
Medical, Inc. 2006 Stock Plan (the “Plan”).

          Accordingly, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and you hereby agree as
follows:

 

 

 

 

1.

Grant of Option.

          The Company hereby grants to you, effective as of the Grant Date, the
right and option (the “Option”) to purchase all or any part of the aggregate
number of shares of Common Stock set forth in the attached Notice, on the terms
and conditions contained in this Agreement and in accordance with the terms of
the Plan. The Option is not intended to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”).

 

 

 

 

2.

Exercise Price.

          The per share purchase price of the shares subject to the Option shall
be the purchase price per share set forth in the attached Notice.

 

 

 

 

3.

Term of Option and Exercisability.

          The term of the Option shall be for a period of eight years from the
Grant Date, terminating at the close of business on the expiration date set
forth in the attached Notice (the “Expiration Date”), or such shorter period as
is prescribed in the attached Notice or in Section 5 of this Agreement. The
Option shall become exercisable, or vest, on the date or dates and in the amount
or amounts set forth in the attached Notice, subject to the provisions of
Sections 4 and 5 of this Agreement. To the extent the Option is exercisable, you
may exercise it in whole or in part, at any time, or from time to time, prior to
the termination of the Option.

 

 

 

 

4.

Change of Control.

          Notwithstanding the vesting provisions contained in Section 3 above,
but subject to the other terms and conditions contained in this Agreement, from
and after a Change of Control (as defined below) the Option shall become
immediately exercisable in full. As used herein, “Change of Control” shall mean
any of the following events:

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          (i)          the acquisition by any person, entity or “group,” within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), other than the Company or any of its
Subsidiaries, or any employee benefit plan of the Company and/or one or more of
its Subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 35% or more of either the then
outstanding shares of Common Stock or the combined voting power of the Company’s
then outstanding voting securities in a transaction or series of transactions
not approved in advance by a vote of at least three-quarters of the Continuing
Directors (as defined below); or

 

 

 

          (ii)         individuals who, as of the Grant Date, constitute the
Board of Directors of the Company (generally the “Directors” and as of the Grant
Date the “Continuing Directors”) cease for any reason to constitute at least a
majority thereof, provided that any person becoming a Director subsequent to the
Grant Date whose nomination for election was approved in advance by a vote of at
least three-quarters of the Continuing Directors (other than a nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened solicitation with respect to the election or removal of the Directors
of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under
the Exchange Act) shall be deemed to be a Continuing Director; or

 

 

 

          (iii)        the consummation of a reorganization, merger,
consolidation, liquidation or dissolution of the Company or of the sale (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company other than a reorganization, merger, consolidation,
liquidation, dissolution or sale approved in advance by a vote of at least
three-quarters of the Continuing Directors; or

 

 

 

          (iv)        the first purchase under any tender offer or exchange
offer (other than an offer by the Company or any of its Subsidiaries) pursuant
to which shares of Common Stock are purchased; or

 

 

 

          (v)         at least a majority of the Continuing Directors determines
in their sole discretion that there has been a change in control of the Company.

 

 

 

 

5.

Effect of Termination of Employment.

          (a)      If your employment is terminated by reason of your death, the
Option may be exercised at any time within 12 months after the date of your
death, to the extent that the Option was exercisable by you on the date of
death, by your personal representatives or administrators or by any person or
persons to whom the Option has been transferred by will or the applicable laws
of descent and distribution, subject to the condition that the Option shall not
be exercisable after the Expiration Date of the Option.

          (b)      If your employment is terminated by reason of Disability, you
may exercise the Option at any time within 12 months after such termination of
employment, to the extent that the Option was exercisable by you on the date of
such termination, subject to the condition that the Option shall not be
exercisable after the Expiration Date of the Option.

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          (c)      If your employment is terminated by reason of Retirement, you
may exercise the Option at any time within 36 months after such termination of
employment, to the extent that the Option was exercisable by you on the date of
such termination, subject to the condition that the Option shall not be
exercisable after the Expiration Date of the Option.

          (d)      If your employment is terminated for Cause, the Option shall
terminate immediately upon termination of employment and shall not be
exercisable thereafter.

          (e)      If your employment is terminated for any reason other than
your death, Disability, Retirement or for Cause, you may exercise the Option at
any time within 90 days after the date of such termination of employment, to the
extent that the Option was exercisable by you on the date of such termination,
subject to the condition that the Option shall not be exercisable after the
Expiration Date of the Option. However, if concurrently with the termination of
your employment you become a consultant to the Company pursuant to a written
consulting agreement, then you may continue to exercise the Option at any time
until 90 days after the date of termination of such consulting agreement, to the
extent the Option was exercisable by you on the date of your termination of
employment, subject to the condition that the Option will not be exercisable
after the Expiration Date of the Option.

 

 

 

 

6.

Method of Exercising Option.

          (a)      Subject to the terms and conditions of this Agreement, you
may exercise the Option by following the procedures established by the Company
from time to time. In addition, you may exercise the Option by written notice to
the Company, as provided in Section 9(i) of this Agreement, that states (i) your
election to exercise the Option, (ii) the Grant Date of the Option, (iii) the
purchase price of the shares, (iv) the number of shares as to which the Option
is being exercised, (v) the manner of payment of the exercise price and (vi) the
manner of payment for any income tax withholding amount. The notice shall be
signed by you or the person(s) exercising the Option. The notice shall be
accompanied by payment in full of the exercise price for all shares designated
in the notice. To the extent that the Option is exercised after your death, the
notice of exercise shall also be accompanied by appropriate proof of the right
of such person(s) to exercise the Option.

          (b)      Payment of the exercise price shall be made to the Company
through one or a combination of the following methods:

 

 

 

          (i)          cash, in United States currency (including check, draft,
money order or wire transfer made payable to the Company); or

 

 

 

          (ii)         delivery (either actual delivery or by attestation) of
shares of Common Stock acquired by you more than six months prior to the date of
exercise having a Fair Market Value on the date of exercise equal to the Option
exercise price. You shall represent and warrant in writing that you are the
owner of the shares so delivered, free and clear of all liens, encumbrances,
security interests and restrictions, and you shall duly endorse in blank all
certificates delivered to the Company.

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7.

Income Tax Withholding.

          (a)      You acknowledge that you will consult with your personal tax
adviser regarding the income tax consequences of exercising the Option or any
other matters related to this Agreement and that any federal, state, local or
foreign payroll, withholding, income or other taxes are your sole and absolute
responsibility. In order to comply with all applicable federal, state, local or
foreign income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal, state, local or foreign
payroll, withholding, income or other taxes are withheld or collected from you.

          (b)      In accordance with the terms of the Plan, and such rules as
may be adopted by the Committee administering the Plan, you may elect to satisfy
any applicable tax withholding obligations arising from the exercise of the
Option by (i) delivering cash (including check, draft, money order or wire
transfer made payable to the order of the Company), (ii) having the Company
withhold a portion of the shares of Common Stock otherwise to be delivered upon
exercise of the Option having a Fair Market Value equal to the amount of such
taxes or (iii) delivering to the Company shares of Common Stock having a Fair
Market Value equal to the amount of such taxes. The Company will not deliver any
fractional share of Common Stock but will pay, in lieu thereof, the Fair Market
Value of such fractional share. Your election must be made on or before the date
that the amount of tax to be withheld is determined.

 

 

 

 

8.

Adjustments.

          If the Committee administering the Plan determines that any merger,
reorganization, consolidation, recapitalization, stock dividend, stock split,
reverse stock split, other change in corporate structure affecting the Common
Stock, spin-off, split-up or other distribution of assets to shareholders, or
other similar corporate transaction or event affects the shares of Common Stock
such that an adjustment is determined by the Committee administering the Plan to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this Agreement, then the
Committee administering the Plan shall, in such manner as it may deem equitable,
in its sole discretion, adjust any or all of the number and type of the shares
covered by the Option and the exercise price of the Option.

 

 

 

 

9.

General Provisions.

          (a)      Interpretations. This Agreement is subject in all respects to
the terms of the Plan. A copy of the Plan is available upon your request. Terms
used herein which are defined in the Plan shall have the respective meanings
given to such terms in the Plan, unless otherwise defined herein. In the event
that any provision of this Agreement is inconsistent with the terms of the Plan,
the terms of the Plan shall govern. Any question of administration or
interpretation arising under this Agreement shall be determined by the Committee
administering the Plan, and such determination shall be final, conclusive and
binding upon all parties in interest.

          (b)      No Rights as a Shareholder. Neither you nor your legal
representatives shall have any of the rights and privileges of a shareholder of
the Company with respect to the shares of Common Stock subject to the Option
unless and until certificates for such shares have been issued upon exercise of
the Option.

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          (c)          No Right to Employment. Nothing in this Agreement or the
Plan shall be construed as giving you the right to be retained as an employee of
the Company. In addition, the Company may at any time dismiss you from
employment, free from any liability or any claim under this Agreement, unless
otherwise expressly provided in this Agreement.

          (d)          Option Not Transferable. The Option may not be
transferred, pledged, alienated, attached or otherwise encumbered, and any
purported transfer, pledge, alienation, attachment or encumbrance of the Option
will be void and unenforceable against the Company, except that the Option may
be transferred (i) by will or by the laws of descent and distribution or (ii) if
approved in advance by the Committee administering the Plan, in its discretion
and subject to such additional terms and conditions as it determines, by gift,
without consideration, under a written instrument that is approved in advance by
the Committee administering the Plan, to a member of your family, as defined in
Section 267 of the Code, or to a trust or similar entity whose sole
beneficiaries are you and/or members of your family (such family member or other
entity, a “Permitted Transferee”), provided that such transfer and the exercise
of the Option by such Permitted Transferee do not violate any federal or state
securities laws. During your lifetime the Option will be exercisable only by you
or such Permitted Transferee.

          (e)          Reservation of Shares. The Company shall at all times
during the term of the Option reserve and keep available such number of shares
of Common Stock as will be sufficient to satisfy the requirements of this
Agreement.

          (f)          Securities Matters. The Company shall not be required to
deliver any shares of Common Stock until the requirements of any federal or
state securities or other laws, rules or regulations (including the rules of any
securities exchange) as may be determined by the Company to be applicable are
satisfied.

          (g)          Headings. Headings are given to the sections and
subsections of this Agreement solely as a convenience to facilitate reference.
Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of this Agreement or any provision hereof.

          (h)          Governing Law. The internal law, and not the law of
conflicts, of the State of Minnesota will govern all questions concerning the
validity, construction and effect of this Agreement.

          (i)          Notices. You should send all written notices regarding
this Agreement or the Plan to the Company at the following address:

 

 

 

St. Jude Medical, Inc.
Stock Option Administrator
One Lillehei Plaza
St. Paul, MN 55117

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          (j)          Notice of Non-Qualified Stock Option Grant to Employee.
This Agreement is attached to and made part of a Notice of Non-Qualified Stock
Option Grant to Employee and shall have no force or effect unless such Notice is
duly executed and delivered by the Company to you.

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