Exhibit 10.1

SEVERANCE AGREEMENT

 

This agreement is made as of the _____ day of _________, 200__, between St. Jude
Medical, Inc., a Minnesota corporation, with its principal offices at St. Paul,
Minnesota (the “Company”) and ______________ (“Executive”), residing at
_________________________________________________.

WITNESSETH THAT:

 

WHEREAS, this Agreement is intended to specify the financial arrangements that
the Company will provide to Executive upon Executive’s separation from
employment with the Company under any of the circumstances described herein; and

 

[WHEREAS, this Agreement is intended to replace and supersede the existing
Severance Agreement between the Company and Executive dated as of
___________________ relating to payments to be made to Executive upon a change
in control of the Company (the “Prior Agreement”); and]

 

WHEREAS, this Agreement is entered into by the Company in the belief that it is
in the best interests of the Company and its shareholders to provide stable
conditions of employment for Executive notwithstanding the possibility, threat
or occurrence of certain types of change in control, thereby enhancing the
Company’s ability to attract and retain highly qualified people.

 

NOW, THEREFORE, to assure the Company that it will have the continued dedication
of Executive notwithstanding the possibility, threat or occurrence of a bid to
take over control of the Company, and to induce Executive to remain in the
employ of the Company, and for other good and valuable consideration, the
Company and Executive agree as follows:

 

1.           Term of Agreement. The term of this Agreement shall commence on the
date hereof as first written above and shall continue through January 1, 2007;
provided that commencing on January 1, 2007 and each January 1st thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless not later than December 31 of the preceding year, the Company shall have
given notice that it does not wish to extend this Agreement; and provided,
further, that notwithstanding any such notice by the Company not to extend, this
Agreement shall continue in effect for a period of 36 months beyond the term
provided herein if a Change in Control (as defined in Section 3(i) hereof) shall
have occurred during such term.

 

2.           Termination of Employment.

 

(i)          Prior to a Change in Control. Executive’s rights upon termination
of employment prior to a Change in Control (as defined in Section 3(i) hereof)
shall be governed by the Company’s standard employment termination policy
applicable to Executive in effect at the time of termination or, if applicable,
any written employment agreement between the Company and Executive other than
this Agreement in effect at the time of termination.

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(ii)           After a Change in Control.

 

(a)          From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement, the Company shall not
terminate Executive from employment with the Company except as provided in this
Section 2(ii) or as a result of Executive’s Disability (as defined in Section
3(iv) hereof), Retirement (as defined in Section 3(v) hereof) or death.

 

(b)          From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement, the Company shall have
the right to terminate Executive from employment with the Company at any time
during the term of this Agreement for Cause (as defined in Section 3(iii)
hereof), by written notice to Executive, specifying the particulars of the
conduct of Executive forming the basis for such termination.

 

(c)          From and after the date of a Change in Control (as defined in
Section 3(i) hereof) during the term of this Agreement: (x) the Company shall
have the right to terminate Executive’s employment without Cause (as defined in
Section 3(iii) hereof), at any time; and (y) Executive shall, upon the
occurrence of such a termination by the Company without Cause, or upon the
voluntary termination of Executive’s employment by Executive for Good Reason (as
defined in Section 3(ii) hereof), be entitled to receive the benefits provided
in Section 4 hereof. Executive shall evidence a voluntary termination for Good
Reason by written notice to the Company given within 60 days after the date of
the occurrence of any event that Executive knows or should reasonably have known
constitutes Good Reason for voluntary termination. Such notice need only
identify Executive and set forth in reasonable detail the facts and
circumstances claimed by Executive to constitute Good Reason. Any notice give by
Executive pursuant to this Section 2 shall be effective five business days after
the date it is given by Executive.

 

3.             Definitions.

 

(i)            A “Change in Control” shall mean:

 

(a)          a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or successor
provision thereto, whether or not the Company is then subject to such reporting
requirement;

 

(b)          any “person” (as such term is used in Sections 13(d) of the
Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing 35% or more of the combined voting power of the
Company’s then outstanding securities;

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(c)          the Continuing Directors (as defined in Section 3(vi) hereof) cease
to constitute a majority of the Company’s Board of Directors; provided that such
change is the direct or indirect result of a proxy fight and contested election
or elections for positions on the Board of Directors; or

 

(d)          the majority of the Continuing Directors (as defined in Section
3(vi) hereof), excluding any Continuing Director who has this Severance
Agreement, determine in their sole and absolute discretion that there has been a
change in control of the Company.

 

(ii)           “Good Reason” shall mean the occurrence of any of the following
events, except for the occurrence of such an event in connection with the
termination or reassignment of Executive’s employment by the Company for Cause
(as defined in Section 3(iii) hereof), for Disability (as defined in Section
3(iv) hereof), for Retirement (as defined in Section 3(v) hereof) or for death:

 

(a)          the assignment to Executive of any duties inconsistent with
Executive’s status or position with the Company, or a substantial alteration in
the nature or status of Executive’s responsibilities from those in effect
immediately prior to the Change in Control;

 

(b)          a reduction by the Company in Executive’s annual compensation in
effect immediately prior to the Change in Control;

 

(c)          the Company’s requiring Executive to be based anywhere other than
within 50 miles of Executive’s office location immediately prior to a Change in
Control except for required travel on the Company’s business to an extent
substantially consistent with Executive’s business travel obligations
immediately prior to the Change in Control;

 

(d)          the failure by the Company to continue to provide Executive with
benefits at least as favorable to those enjoyed by Executive under any of the
Company’s pension, life insurance, medical, health and accident, disability,
deferred compensation, incentive, stock, stock purchase, stock option, savings,
perk package or other plans or programs in which Executive participates, or any
action by the Company which would directly or indirectly materially reduce any
of such benefits or deprive Executive of any material fringe benefit enjoyed
immediately prior to the Change in Control, or the failure by the Company to
provide Executive with the number of paid vacation days to which Executive is
entitled immediately prior to the Change in Control; or

 

(e)          the failure of the Company to obtain, as specified in Section 6(i)
hereof, an assumption of the obligations of the Company to perform this
Agreement by any successor to the Company.

 

Notwithstanding anything herein to the contrary, if the Change in Control arises
from a transaction or series of transactions which are not authorized,
recommended or approved by formal action taken by the Continuing Directors (as
defined in Section 3(vi) hereof), Executive may voluntarily terminate his or her
employment for any reason on the 180th day following the Change in Control, and
such termination shall be deemed “Good Reason” for all purposes of this
agreement.

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(iii)        “Cause” shall mean termination by the Company of Executive’s
employment based upon the conviction of Executive by a court of competent
jurisdiction for felony criminal conduct.

 

(iv)        “Disability” shall mean that, as a result of incapacity due to
physical or mental illness, Executive shall have been absent from the full-time
performance of Executive’s duties with the Company for six consecutive months,
and within 30 days after written notice of termination is given, Executive shall
not have returned to the full-time performance of Executive’s duties. Any
question as to the existence of Executive’s Disability upon which Executive and
the Company cannot agree shall be determined by a qualified independent
physician selected by Executive (or, if Executive is unable to make such
selection, it shall be made by any adult member of Executive’s immediately
family), and approved by the Company. The determination of such physician made
in writing to the Company and to Executive shall be final and conclusive for all
purposes of this Agreement.

 

(v)         “Retirement” shall mean termination on or after attaining normal
retirement age in accordance with the Company’s Profit Sharing Employee Savings
Plan and Trust.

 

(vi)        “Continuing Director” shall mean any person who is a member of the
Board of Directors of the Company, while such person is a member of the Board of
Directors, and who (a) was a member of the Board of Directors on the date of
this Agreement as first written above or (b) subsequently becomes a member of
the Board of Directors, if such person’s nomination for election or initial
election to the Board of Directors is recommended or approved by a majority of
the Continuing Directors.

 

4.            Benefits upon Termination under Section 2(ii)(c).

 

(i)           Upon the termination (voluntary or involuntary) of the employment
of Executive pursuant to Section 2(ii)(c) hereof, Executive shall be entitled to
receive the benefits specified in this Section 4. The amounts due to Executive
under this Section 4(i) shall be paid to Executive in a lump sum not later than
one business day prior to the date that the termination of Executive’s
employment becomes effective. Subject to the provisions of Section 4(ii) hereof,
all benefits to Executive pursuant to this Section 4(i) shall be subject to any
applicable payroll or other taxes required by law to be withheld.

 

(a)          The Company shall pay Executive, through the date the termination
of Executive’s employment became effective, Executive’s base salary as in effect
at the time of the notice of termination is given and any other form or type of
compensation otherwise payable for such period. Executive shall be entitled to
receive all benefits payable to Executive under the Company’s Profit Sharing
Employee Savings Plan and Trust or any successor of such Plan and any other plan
or agreement relating to retirement benefits which shall be in addition to, and
not reduced by, any other amounts payable to Executive under this Section 4.
Executive shall be entitled to exercise all rights and to receive all benefits
accruing to Executive under any and all Company stock purchase plans, stock
option plans and other stock plans or programs, or any successor to any such
plans or programs, which shall be in addition to, and not reduced by, any other
amounts payable to Executive under this Section 4.

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(b)          In lieu of any further salary payments for periods subsequent to
the date the termination of Executive’s employment became effective, the Company
shall pay a severance payment in an amount equal to 2.9 times Executive’s Annual
Compensation, as defined below. For purposes of this Section 4, “Annual
Compensation” shall mean Executive’s annual salary (regardless of whether all or
any portion of such salary has been contributed to a deferred compensation
plan), the annual amount of Executive’s perk package, the target bonus for which
Executive is eligible upon attainment of 100% of the target (regardless of
whether such target bonus has been achieved or whether conditions of such target
bonus are actually fulfilled), and any other type or form of compensation paid
to Executive by the Company (or any entity affiliated with the Company
(“Affiliate”) within the meaning of Section 1504 of the Internal Revenue Code of
1986, as may be amended from time to time (the “Code”)) and included in
Executive’s gross income for federal tax purposes during the twelve month period
ending immediately prior to the date that the termination of Executive’s
employment became effective but reduced by: (i) any amount actually paid to
Executive as a cash payment of the target bonus (regardless of whether all or
any portion of such target bonus was contributed to a deferred compensation
plan); (ii) compensation income recognized as a result of the exercise of stock
options or sale of the stock so acquired; and (iii) any payments actually or
constructively received from a plan or arrangement of deferred compensation
between the Company and Executive. All of the factors included in Annual
Compensation shall be those in effect on the date that the termination of
Executive’s employment became effective and shall be calculated without giving
effect to any reduction in such compensation that would constitute a breach of
this Agreement.

 

(c)          For a period of 36 months following the date that the termination
of Executive’s employment became effective or until Executive reaches age 65 or
dies, whichever is the shorter period, the Company shall arrange to provide for
Executive, at the Company’s expense, the health, accident, disability and life
insurance benefits substantially similar to those in effect for Executive
immediately prior to the date that the termination of Executive’s employment
became effective.

 

(d)          The Company shall pay to Executive (1) any amount earned by
Executive as a bonus with respect to the fiscal year of the Company preceding
the termination of Executive’s employment if such bonus has not theretofore been
paid to Executive, and (2) an amount representing credit for any vacation earned
or accrued by Executive but not taken.

 

(e)          The Company shall also pay to Executive all legal fees and expenses
incurred by Executive as a result of such termination of employment (including
all fees and expenses, if any, incurred by Executive in contesting or disputing
any such termination or in seeking to obtain or enforce any right or benefit
provided to Executive by this Agreement whether by arbitration or otherwise).

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(f)          Any and all contracts, agreements or arrangements between the
Company and Executive prohibiting or restricting Executive from owning,
operating, participating in, or providing employment or consulting services to,
any business or company competitive with the Company at any time or during any
period after the date the termination of Executive’s employment becomes
effective, shall be deemed terminated and of no further force or effect as of
the date the termination of Executive’s employment becomes effective, to the
extent, but only to the extent, such contracts, agreements or arrangements so
prohibit or restrict Executive; provided that the foregoing provision shall not
constitute a license or right to use any proprietary information of the Company
and shall in no way affect any such contracts, agreements or arrangements
insofar as they relate to nondisclosure and nonuse or proprietary information of
the Company notwithstanding the fact that such nondisclosure and nonuse may
prohibit or restrict Executive in certain competitive activities.

 

(ii)           In the event that any payment or benefit received or to be
received by Executive in connection with a Change in Control of the Company or
termination of Executive’s employment (whether payable pursuant to the terms of
this Agreement or any other plan, contract, agreement or arrangement with the
company, with any person whose actions result in a Change in Control of the
Company or with any person constituting a member of an “affiliated group” as
defined in Section 280G(d)(5) of the Code, with the Company or with any person
whose actions result in a Change in Control of the Company (collectively, the
“Total Payments”)) would be subject to the excise tax imposed by Section 4999 of
the Code, or any successor provision thereto, or any interest, penalties or
additions to tax with respect to such excise tax (such excise tax, together with
any such interest, penalties or additions to tax, are collectively referred to
as the “Excise Tax”), then Executive shall be entitled to receive from the
Company an additional cash payment (a “Gross-Up Payment”) within thirty business
days of such determination in an amount such that after payment by Executive of
all taxes (including any interest, penalties or additions to tax imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Total Payments. All determinations required to be made
under this Section 4(ii), including whether a Gross-Up Payment is required and
the amount of such Gross-Up Payment, shall be made by the independent accounting
firm retained by the Company on the date of the Change in Control (the
“Accounting Firm”), which shall provide detailed supporting calculations both to
the Company and Executive within 15 business days of the date that the
termination of Executive’s employment becomes effective, or such earlier time as
is requested by the Company. If the Accounting Firm determines that no Excise
Tax is payable by Executive, it shall furnish Executive with an opinion that
Executive has substantial authority not to report any Excise Tax on Executive’s
federal income tax return.

 

Any uncertainty in the application of Section 4999 of the Code, or any successor
provision thereto, at the time of the initial determination by the Accounting
Firm hereunder shall be resolved in favor of Executive. As a result of the
uncertainty in the application of Section 4999 of the Code, or any successor
provision thereto, at the time of the initial determination by the Accounting
Firm hereunder, it is possible that at a later time there will be a
determination that the Gross-Up Payments made by the Company were less than the
Gross-Up Payments that should have been made by the Company (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that Executive is required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment, if any, that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of Executive. As a result of the uncertainty in the application of
Section 4999 of the Code, or any successor provision thereto, at the time of the
initial determination by the Accounting Firm hereunder, it is possible that at a
later time there will be a determination that the Gross-Up Payments made by the
Company were more than the Gross-Up Payments that should have been made by the
Company (“Overpayment”), consistent with the calculations required to be made
hereunder. Executive agrees to refund the Company the amount of any Overpayment
that the Accounting Firm shall determine has occurred hereunder. Any good faith
determination by the Accounting Firm as to the amount of any Gross-Up Payment,
including the amount of any Underpayment or Overpayment, shall be binding upon
the Company and Executive.

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(iii)          Any payment not made to Executive when due hereunder shall
thereafter, until paid in full, bear interest at the rate of interest equal to
the reference rate announced from time to time by Wells Fargo Bank Minnesota,
National Association, plus two percent, with such interest to be paid to
Executive upon demand or monthly in the absence of a demand.

 

(iv)          Executive shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise.
The amount of any payment or benefit provided in this section 4 shall not be
reduced by any compensation earned by Executive as a result of any employment by
another employer, by any retirement benefits or otherwise.

 

5.             Executive’s Agreements.

 

Executive agrees that:

 

(i)            Without the consent of the Company, Executive will not terminate
employment with the Company without giving 30 days prior notice to the Company,
and during such 30-day period Executive will assist the Company, as and to the
extent reasonably requested by the Company, in training the successor to
Executive’s position with the Company. The provisions of this Section 5(i) shall
not apply to any termination (voluntary or involuntary) of the employment of
Executive pursuant to Section 2(ii)(c) hereof.

 

(ii)           In the event that Executive has received any benefits from the
Company under Section 4 of this Agreement, then, during the period of 36 months
following the date that the termination of Executive’s employment became
effective, Executive, upon request by the Company:

 

(a)          Will consult with one or more of the executive officers concerning
the business and affairs of the Company for not to exceed four hours in any
month at times and places selected by Executive as being convenient to him, all
without compensation other than what is provided for in Section 4 of this
Agreement; and

 

(b)          Will testify as a witness on behalf of the Company in any legal
proceedings involving the Company which arise out of events or circumstances
that occurred or existed prior to the date that the termination of Executive’s
employment became effective (except for any such proceedings relating to this
Agreement), without compensation other than what is provided for in Section 4 of
this Agreement, provided that all out-of-pocket expenses incurred by Executive
in connection with serving as a witness shall be paid by the Company.

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Executive shall not be required to perform Executive’s obligations under this
Section 5(ii) if and so long as the Company is in default with respect to
performance of any of its obligations under this Agreement.

 

6.           Successors and Binding Agreement.

 

(i)          The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise to all or substantially all of
the business and/or assets of the Company), by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
Executive would be entitled hereunder if Executive terminated employment after a
Change in Control for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date that the termination of Executive’s employment becomes
effective. As used in this Agreement, “Company” shall mean the Company and any
successor to its business and/or assets which executes and delivers the
agreement provided for in this Section 6(i) or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.

 

(ii)         This Agreement is personal to Executive, and Executive may not
assign or transfer any part of Executive’s rights or duties hereunder, or any
compensation due to him hereunder, to any other person. Notwithstanding the
foregoing, this Agreement shall inure to the benefit of and be enforceable by
Executive’s personal or legal representatives, executors, administrators, heirs,
distributees, devisees, and legatees.

 

7.           Modification; Waiver. No provisions of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or discharge
is agreed to in a writing signed by Executive and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.

 

8.           Notice. All notices, requests, demand, and all other communications
required or permitted by either party to the other party by this Agreement
(including, without limitation, any notice of termination of employment and any
notice of an intention to arbitrate) shall be in writing and shall be deemed to
have been duly given when delivered personally or received by certified or
registered mail, return receipt requested, postage prepaid, at the address of
the other party, as first written above (directed to the attention of the Board
of Directors and Corporate Secretary in the case of the Company). Either party
hereto may change its address for purposes of this Section 8 by giving 15 days
prior notice to the other party hereto.

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9.           Severability. If any term or provision of this agreement or the
application hereof to any person or circumstances shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.

 

10.         Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

11.         Governing Law. This Agreement has been made in the State of
Minnesota and shall, in all respects, be governed by, and construed and enforced
in accordance with, the laws of the State of Minnesota, including all matters of
construction, validity and performance.

 

12.         Effect of Agreement; Entire Agreement. The Company and Executive
understand and agree that this Agreement is intended to reflect their agreement
only with respect to payments and benefits upon termination in certain cases and
is not intended to create any obligation on the part of either party to continue
employment. This Agreement supersedes any and all other oral or written
agreements or policies made relating to the subject matter hereof [(including,
without limitation, the Prior Agreement)] and constitutes the entire agreement
of the parties relating to the subject matter hereof; provided that this
Agreement shall not supersede or limit in any way Executive’s rights under any
benefit plan, program or arrangements in accordance with their terms (other than
the provisions of the Company’s policy HR-1.02.25 entitled “Severance Pay,”
effective January 1, 1994, as amended from time to time, or any successor to
such policy, to the extent that payments are made hereunder).

 

13.         ERISA. For purposes of the Executive Retirement Income Security Act
of 1974, this Agreement is intended to be a severance pay employee welfare
benefit plan, and not an employee pension benefit plan, and shall be construed
and administered with that intention.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its
name by a duly authorized officer, and Executive has hereunto set his or her
hand, all as of the date first written above.

 

 

 

 

ST. JUDE MEDICAL, INC.

   

 

By: 

 

 

Its

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

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