Table of Contents





|                                                                        
|------------------------------------------------------------------------
|UNITED STATES SECURITIES AND EXCHANGE
 COMMISSION Washington, D.C. 20549
|                                                                        
|                                                                        
|FORM 10-K                                                               
|                                                                        

| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| | x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

|                                                       
|-------------------------------------------------------
|For the fiscal year ended January 3, 2009              
|                                                       
|Commission File Number 0-8672                          
|                                                       
|                                                       
|                                                       
|ST. JUDE MEDICAL, INC.                                 
|(Exact
 name of registrant as specified in its charter)
|                                                       

|                                                                  |  |                                        
|----------------------------------------------------------------- |  | ---------------------------------------
|Minnesota                                                         |  | 41-1276891                             
|(State
 or other jurisdiction of                                  |  | (I.R.S.
 Employer Identification No.)  
|incorporation
 or organization)                                   |  |                                        
|                                                                  |  |                                        
|One St. Jude Medical Drive                                        |  | (651) 483-2000                         
|St. Paul, Minnesota 55117                                         |  | (Registrants
 telephone number,       
|(Address
 of principal executive                                  |  | including
 area code)                  
|offices,
 including zip code)                                     |  |                                        
|                                                                 
|Securities registered pursuant to Section 12(b) of the Act:      
|                                                                 
|Common Stock ($.10 par value)                                     |  | New York Stock Exchange                
|(Title
 of class)                                                 |  | (Name
 of exchange on which registered)
|                                                                  |  |                                        
|Securities registered pursuant to Section 12(g) of the Act:
 None
|                                                                 

Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. 
Yes x
        No o

Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. 
Yes o        No
x

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing requirements for the past 90
days. 
Yes x
        No o

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments to this Form 10-K. o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act. (Check one):


|                                                                            |                            
|--------------------------------------------------------------------------- | ---------------------------
|Large accelerated filer x                                                   | Accelerated filer o        
|                                                                            |                            
|Non-accelerated filer o      (Do not
 check if a smaller reporting company) | Smaller reporting company o

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). 
Yes o        No
x

The aggregate market value
of the voting and non-voting stock held by non-affiliates of the registrant was
$13.7 billion at June 27, 2008 (the last trading day of the registrants most
recently completed second fiscal quarter), when the closing sale price of such
stock, as reported on the New York Stock Exchange, was $40.54 per share.

The registrant had
346,153,801 shares of its $0.10 par value Common Stock outstanding as of
February 18, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Companys
Annual Report to Shareholders for the fiscal year ended January 3, 2009, are
incorporated by reference into Parts I and II. Portions of the Companys Proxy
Statement for its 2009 Annual Meeting of Shareholders are incorporated by
reference into Part III.





---

TABLE OF CONTENTS

|     |  |                                                                                                                |  |     
|---- |  | -------------------------------------------------------------------------------------------------------------- |  | ----
|ITEM |  | DESCRIPTION                                                                                                    |  | PAGE
|     |  |                                                                                                                |  |     
|     |  |                                                                                                                |  |     
|     |  |                                                                                                                |  |     
|     |  | PART I                                                                                                         |  |     
|     |  |                                                                                                                |  |     
|1.   |  | Business                                                                                                       |  | 1   
|1A.  |  | Risk Factors                                                                                                   |  | 14  
|1B.  |  | Unresolved
 Staff Comments                                                                                     |  | 21  
|2.   |  | Properties                                                                                                     |  | 21  
|3.   |  | Legal
 Proceedings                                                                                             |  | 21  
|4.   |  | Submission
 of Matters to a Vote of Security Holders                                                           |  | 22  
|     |  |                                                                                                                |  |     
|     |  | PART II                                                                                                        |  |     
|     |  |                                                                                                                |  |     
|5.   |  | Market for
 Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
 of Equity Securities |  | 22  
|6.   |  | Selected
 Financial Data                                                                                       |  | 22  
|7.   |  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                         |  | 22  
|7A.  |  | Quantitative
 and Qualitative Disclosures About Market Risk                                                    |  | 22  
|8.   |  | Financial
 Statements and Supplementary Data                                                                   |  | 22  
|9.   |  | Changes in
 and Disagreements with Accountants on Accounting and Financial Disclosure                          |  | 22  
|9A.  |  | Controls
 and Procedures                                                                                       |  | 22  
|9B.  |  | Other
 Information                                                                                             |  | 23  
|     |  |                                                                                                                |  |     
|     |  | PART III                                                                                                       |  |     
|     |  |                                                                                                                |  |     
|10.  |  | Directors,
 Executive Officers and Corporate Governance                                                        |  | 23  
|11.  |  | Executive
 Compensation                                                                                        |  | 23  
|12.  |  | Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters               |  | 23  
|13.  |  | Certain
 Relationships and Related Transactions, and Director Independence                                     |  | 23  
|14.  |  | Principal
 Accountant Fees and Services                                                                        |  | 23  
|     |  |                                                                                                                |  |     
|     |  | PART IV                                                                                                        |  |     
|     |  |                                                                                                                |  |     
|15.  |  | Exhibits
 and Financial Statement Schedules                                                                    |  | 24  
|     |  |                                                                                                                |  |     
|     |  | Signatures                                                                                                     |  | 30  

---

Table of Contents

PART I

Item 1. BUSINESS

GeneralSt. Jude Medical,
Inc. develops, manufactures and distributes cardiovascular medical devices for
the global cardiac rhythm management, cardiology and cardiac surgery and atrial
fibrillation therapy areas and neurostimulation medical devices for the management
of chronic pain. Our four operating segments are Cardiac Rhythm Management
(CRM), Cardiovascular (CV), Atrial Fibrillation (AF), and Neuromodulation
(Neuro). 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 (ICDs)
and bradycardia pacemaker systems (pacemakers); CV  vascular closure devices,
heart valve replacement and repair products and pressure measurement
guidewires; AF  electrophysiology (EP) introducers and catheters, advanced
cardiac mapping, navigation and recording systems and ablation systems; and
Neuro  neurostimulation devices. References to St. Jude Medical, St. Jude,
the Company, we, us, and our are to St. Jude Medical, Inc. and its
subsidiaries.

We market and sell our
products through both a direct sales force and independent distributors. The
principal geographic markets for our products are the United States, Europe,
Japan and Asia Pacific. St. Jude Medical was incorporated in Minnesota in 1976.

We aggregate our four
operating segments into two reportable segments based primarily upon their
similar operational and economic characteristics: CRM/Neuro and CV/AF. Our
performance by reportable segment is included in Note 13 of the Consolidated
Financial Statements in the Financial Report included in our 2008 Annual Report
to Shareholders and filed as Exhibit 13 to this Form 10-K.

We utilize a 52/53-week fiscal
year ending on the Saturday nearest December 31st. Fiscal year 2008
consisted of 53 weeks and ended on January 3, 2009, and fiscal years 2007 and
2006 consisted of 52 weeks and ended on December 29, 2007 and December 30,
2006, respectively. The additional week in fiscal year 2008 has been reflected
in our fourth quarter results.

The table below shows net
sales and percentage of total net sales contributed by each of our four
operating segments for the fiscal years 2008, 2007, and 2006:

|                          |  |      |           |      |   |           |  |   |           | 
|------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | --------- | 
|Net Sales(in thousands)   |  | 2008 |           | 2007 |   | 2006      | 
|Cardiac Rhythm Management |  | $    | 2,701,463 |      | $ | 2,368,081 |  | $ | 2,055,765 | 
|Cardiovascular            |  |      | 862,136   |      |   | 790,630   |  |   | 741,612   | 
|Atrial Fibrillation       |  |      | 545,512   |      |   | 410,672   |  |   | 325,707   | 
|Neuromodulation           |  |      | 254,140   |      |   | 209,894   |  |   | 179,363   | 
|                          |  | $    | 4,363,251 |      | $ | 3,779,277 |  | $ | 3,302,447 | 

|                               |  |      |      |      |  |      |   |  |      |  
|------------------------------ |  | ---- | ---- | ---- |  | ---- | - |  | ---- | -
|Percentage
 of Total Net Sales |  | 2008 |      | 2007 |  | 2006 |  
|Cardiac Rhythm Management      |  |      | 61.9 | %    |  | 62.7 | % |  | 62.2 | %
|Cardiovascular                 |  |      | 19.8 | %    |  | 20.9 | % |  | 22.5 | %
|Atrial Fibrillation            |  |      | 12.5 | %    |  | 10.9 | % |  | 9.9  | %
|Neuromodulation                |  |      | 5.8  | %    |  | 5.5  | % |  | 5.4  | %

Principal Products Cardiac Rhythm Management:
Cardiac Rhythm Management focuses on the research, development and manufacture
of products for cardiac arrhythmias, or irregular heart beats. In 2008, we
introduced multiple new products, including: ICDs to provide life-saving
therapy to patients suffering from lethal heart conditions such as sudden
cardiac arrest; cardiac resynchronization therapy (CRT) devices to save and
improve the lives of heart failure (HF) patients; pacemakers to help people
whose hearts beat too slowly or who suffer from other cardiac arrhythmias; and
leads, which connect our devices to the heart and carry the electrical impulses
to the heart and information from the heart back to the device. CRM also
develops and markets programmers and
remote monitoring equipment that are used by physicians and healthcare
professionals to program and analyze data from our devices for the management
of their patients.

Our ICDs and cardiac
resynchronization therapy-defibrillator (CRT-D) devices treat patients
with hearts that beat inappropriately fast, a condition known as tachycardia.
ICDs monitor the heartbeat and deliver high energy electrical impulses, or
shocks, to terminate ventricular tachycardia (VT) and ventricular
fibrillation (VF). In VT, the lower chambers of the heart contract at an
abnormally rapid rate and typically deliver less blood to the bodys tissues
and organs. VT can progress to VF, in which the heart beats so rapidly and
erratically that it can no longer pump blood. ICDs are typically implanted
pectorally, below the collarbone, connected to the heart by leads.

1

---

Table of Contents

In November 2008, we
received European CE Mark approval of our AnalyST VR/DR ICDs. These devices
are capable of continuously monitoring the electrical charges between heart
beats (called ST segments), providing physicians insight into clinical events
to help improve patient management. In addition, our ICD product portfolio
includes the Current RF (radio frequency) VR/DR, which the U.S. Food and Drug
Administration (FDA) approved in November 2007. These devices are available in
both standard and high energy versions and feature wireless telemetry. Other
ICD offerings include the Epic® II+ DR (FDA approved in March 2006) and high
energy Atlas® II+ DR and Atlas® II VR/DR ICDs (FDA approved in July 2006) that
offer our vibratory patient alert feature designed for greater patient safety
and enhanced telemetry speeds to facilitate faster patient follow-ups. We
continue to offer our Epic®+ VR/DR ICDs which received FDA approval and
European CE Mark in April 2003, and our Atlas®+ VR/DR ICDs which received FDA
approval and European CE Mark in October 2003. The Epic®+ICD family devices are
the Companys smallest line of ICDs and deliver 30 joules of energy. The
Atlas®+ ICD family devices offer high energy and small size without
compromising charge times, longevity or feature set flexibility. The AnalyST, Current
RF DR, Epic® II+ DR, Epic®+ DR, Atlas® II +DR and the Atlas®+ DR contain St.
Jude Medicals AF Suppression algorithm, which is clinically proven to reduce
atrial fibrillation burden.

The Promote RF family of
devices was approved by the FDA in November 2007. These CRT-D devices are
available in both standard and high energy versions, and feature wireless
telemetry and include many of the same advanced features of the Current RF.
Other CRT-D product offerings include the Epic® II HF (FDA approved in March
2006) and high energy Atlas® II HF CRT-Ds (FDA approved in July 2006), which
both contain the same unique patient vibratory alert and enhanced telemetry
technology found in our Atlas® II VR/DR family of ICDs.

In 2008, we also received
approval in Japan for our first CRT product offerings which include the Atlas®+
HF, a high output CRT-D with 36 joules delivered and 42 joules stored; the
Epic® HF, with 30 joules delivered; and the QuickSite® left-ventricular (LV)
lead.

St. Jude Medicals QuickOpt
Timing Cycle Optimization technology was FDA approved in July 2006 and provides
for automatic optimized ventricle to ventricle (V-V) and atria to ventricle
(A-V) timing in all St. Jude Medical CRT-Ds and dual-chamber ICDs.

Our ICDs are used with the
single and dual-shock electrode transvenous defibrillation leads. Our latest
ICD lead offering is the Durata high voltage lead (FDA approved in January
2008), which features a soft silicone tip and curved right-ventricular (RV)
coil designed to further improve implant performance. The Durata leads, along
with the Riata® ST Optim leads (FDA approved in July 2006), are small-diameter
ICD leads and feature our exclusive Optim insulation material that combines
the durability of polyurethane and the softness of silicone. Optim insulation
material was designed specifically for high and low voltage cardiac pacing
leads. The Riata® leads are an advanced family of small-diameter,
steroid-eluting, active or passive fixation defibrillation leads. The Riata®
integrated bipolar single and dual-shock leads were FDA approved and launched
in April 2004 and received European CE Mark in May 2004.

Our QuickSite® Bipolar Model
1056T LV lead was launched in Europe in December 2004 and in the United States
in mid-2005. In December 2007, we released the QuickFlex family of LV leads in
the United States and Europe.

Our pacemakers treat
patients with hearts that beat too slowly, a condition known as bradycardia.
Similar to ICDs, pacemakers are typically implanted pectorally, monitor the
hearts rate and, when necessary, deliver low-voltage electrical impulses that
stimulate an appropriate heartbeat. Single-chamber pacemakers sense and
stimulate only one chamber of the heart (atrium or ventricle), while
dual-chamber devices can sense and pace in both the upper atrium and lower
ventricle chambers. Bi-ventricular pacemakers can sense and pace in three
chambers (atrium and both ventricle chambers).

Our current pacing products
include the Zephyr family of pacemakers, Victory® product line as well as Team
ADx® pacemakers, a group comprised of the Identity® ADx, Integrity® ADx and
Verity ADx families of devices.

The Zephyr family of
pacemakers (FDA approved in May 2007) includes automaticity features to
simplify device follow-up. All standard follow-up tests may be done
automatically by the device. The Zephyr family of pacemakers includes
functionality to reduce unnecessary ventricular pacing.

The Victory® line was
approved by the FDA in December 2005. The Victory® and Victory® XL family
models provide the enhancements of previous St. Jude Medical families, while
adding new capabilities such as automatic P-wave and R-wave measurements with
trends, lead monitoring and automatic polarity switch, follow-up electrograms,
Ventricular Intrinsic Preference (VIPTM) to reduce right ventricle
pacing and a ventricular rate during automatic mode switch histogram.

2

---

Table of Contents

The Identity® DR and
Identity® XL DR devices were approved by the FDA in November 2001, with the
rest of the Team ADx devices receiving FDA approval in May 2003. The Team ADx
devices received European CE Mark in August 2003. The Identity® ADx family
models maintain the therapeutic features of previous St. Jude Medical
pacemakers, including the AF Suppression algorithm and the Beat-by-Beat
AutoCapture Pacing System. This family offers atrial tachycardia and atrial
fibrillation arrhythmia diagnostics. These features are designed to help
physicians better manage pacemaker patients suffering from atrial fibrillation
 the worlds most common cardiac arrhythmia. We also offer the Microny® II SR+
and Microny® K. These small-sized pacemakers are available worldwide. Another
pacemaker, the Regency®, is offered outside of the United States.

All of our available
pacemaker families offer the unique Beat-by-Beat AutoCapture Pacing System.
The AutoCapture Pacing System enables the pacemaker to monitor every paced
beat to verify that the heart has been stimulated (known as capture), delivers
a back-up pulse in the event of noncapture, continuously measures threshold
(the amount of voltage necessary to stimulate the heart muscle), and makes
adjustments in energy output to match changing patient needs. In addition, the
Identity® ADx, Integrity® ADx and Identity® pacemakers include St. Jude
Medicals AF Suppression Algorithm.

We also market low-voltage
device-based ventricular resynchronization systems (bi-ventricular) designed
for the treatment of heart failure and suppression of atrial fibrillation. Within
the United States, our Frontier II CRT-P (cardiac resynchronization
therapy-pacing) (FDA approved in
August 2004 and CE Mark approved in September 2004) is a bi-ventricular pacing
device indicated for use in patients with chronic atrial fibrillation who have
been treated with atrioventricular nodal ablation. For placement of these
leads, we provide the following delivery systems and accessories: the CPS
Direct, CPS Aim, CPS Luminary, CPS Duo, CPS Courier guidewires, and the
CPS Venture wire control catheter.

Our current pacing leads
include the Optisense Optim, Optisense, Tendril® ST Optim, Tendril ST, and
Tendril® SDX (models 1688, 1488, 1788 and 1782) lead families and the IsoFlex®
Optim, IsoFlex® S, IsoFlex P and Passive Plus® DX passive-fixation lead
families, all available worldwide. All of these lead families feature steroid
elution, which helps suppress the bodys inflammatory response to a foreign
object. Our Optisense leads offer an electrode spacing technology that has
been clinically proven to significantly reduce far-field over sensing and
inappropriate mode switching.

Our CRM devices interact
with an external device referred to as a programmer. A programmer has two
general functions. First, a programmer is used at the time of implant to
establish the initial therapeutic settings of these devices as determined by
the physician. A programmer is also used for follow-up patient visits, which
usually occur every three to 12 months based on patient need, to download
stored diagnostic information from the implanted device for physicians to
verify appropriate therapeutic settings. Since the introduction of programmable
pacemakers, all pacemaker manufacturers, including St. Jude
Medical, have retained title to their programmers which are used by their field
sales force or by physicians and nurses or technicians.

In April 2006, we received
FDA approval for the first software module of our Merlin Patient Care System,
a universal programmer for St. Jude Medical ICDs and pacemakers. This
completely redesigned programmer has a larger display, built-in full-size printer,
touch screen and advanced new user interface. The programmer is a result of
detailed customer research activities to optimize ease of use and to set new
standards for efficient and effective in-clinic follow-up. This programmer has
had several software updates since release to extend capabilities and support
new products and markets. In 2008, the programmer was updated to include
Japanese and Mandarin Chinese language support.

St. Judes Model 3510
universal series pacemaker and ICD programmer is an easy-to-use programmer that
supports our pacemakers and ICDs. The Model 3510 universal series programmer
allows the physician to utilize the diagnostic and therapeutic capabilities of
our pacemakers and ICDs.

In addition to
the programmer, physicians can monitor implanted devices and patient status
using the Merlin.netTM Patient Care Network. The latest version of
this system (v3.0) was launched in the United States in December 2007. This
system allows patients to use their home transmitters to send data stored in
devices to an internet site for retrieval by their physician through standard
analog or DSL telephone lines. Physicians can better manage their increased
number of ICD patients by conducting remote follow-up sessions and using alerts
of clinically important events, thereby increasing efficiency and reducing
risks for the patient. Additionally, patient flexibility is enhanced by the
reduction in the number of office visits required and the ability to quickly
have a physician interrogate device data whenever symptoms warrant.

3

---

Table of Contents

In 2008, we
launched the Merlin@home line of RF transmitters (FDA approved in July 2008 and
European CE Mark approved in September 2008). The RF technology enables daily
monitoring and scheduled remote follow-ups to occur in the patients home
without any required activity by the patient once the unit has been installed.

Cardiovascular: Our
Cardiovascular Division focuses on both the cardiology and cardiac surgery
therapy areas. We offer both mechanical and tissue replacement heart valves as
well as heart valve repair products. Additionally, we offer specialized
disposable interventional devices, including vascular closure devices,
percutaneous catheter introducers, diagnostic guidewires and temporary bipolar
pacing catheters. During 2008, we expanded our product offering through the
acquisition of Radi Medical Systems AB (Radi Medical Systems). This acquisition
expands our reach into two segments of the cardiovascular market in which we
previously had not participated: 1) physiological assessment of coronary artery
lesions using intravascular pressure during a cardiovascular procedure, which
provides physicians additional diagnostic information to better treat their
patients, and 2) assisted manual compression devices for vascular closure,
which helps arrest bleeding of the radial and femoral arteries following an
intravascular device procedure.

Heart valve
replacement or repair may be necessary because the native heart valve has
deteriorated due to congenital defects or disease. Heart valves facilitate blood
flow from the chambers of the heart throughout the entire body. St. Jude
Medical® mechanical heart valves have been implanted in over 1.8 million
patients worldwide. The SJM Regent® mechanical heart valve was approved for
sale in Europe in December 1999 and received FDA approval for U.S. market
release in March 2002. We market both the Epic and Biocor® stented tissue
heart valves. The Epic stented tissue valve is identical in design to the
Biocor® stented tissue valve but also incorporates an anti-calcification
treatment, designed to protect against tissue mineralization, or hardening. In
2007, we initiated the Trifecta stented tissue heart valve United States
Investigational Device Exemption (IDE) clinical trial.

Annuloplasty
rings are prosthetic devices used to repair diseased or damaged mitral heart
valves. We offer a line of heart valve repair products, including the
semi-rigid SJM® Séguin annuloplasty ring, the fully flexible SJM Tailor®
annuloplasty ring and a St. Jude Medical® rigid saddle-shaped annuloplasty
ring.

Our vascular
closure devices are used to close radial and femoral artery puncture sites
following percutaneous coronary interventions, diagnostic procedures and
certain peripheral procedures. Active or passive (manual) compression is
utilized to assist in closing artery puncture sites. Our active closure devices
include our Angio-Seal product offering. In 2008, we launched the Angio-SealTM
Evolution vascular closure system in the U.S. and most international
geographies. In addition to the performance and ease of use benefits offered
from prior versions of Angio-SealTM, Angio-SealTM
Evolution features automated collagen compaction  thus making it easier for
the clinician to ensure immediate arterial hemostasis and rapid deployment of
the device. Prior versions of Angio-Seal, Angio-SealTM VIP and
Angio-SealTM STS Plus, continue to generate revenue in our active
closure product offering.

We estimate
that manual compression is utilized in approximately two-thirds of all vascular
closure cases. As a result of our Radi Medical Systems acquisition, we now have
passive closure product offerings, expanding our market presence and addressing
the vascular closure preferences of all physicians. Our passive closure
offerings include both the RadiStop® and FemoStop® manual compression systems
that arrest bleeding of the radial and femoral arteries, respectively. External
compression devices are often used to maintain pressure on the arteriotomy in
order to facilitate hemostasis.

In coronary
disease diagnosis and intervention, an emerging treatment model involves the
use of tools for physiologic lesion assessment rather than sole reliance on
contrast-enhanced angiography. In this treatment model, blood flow through
a stenotic coronary lesion is measured with a special purpose coronary
guidewire containing a pressure sensor. As a result of our Radi Medical Systems
acquisition, we now market PressureWire® Certus, which provides precise
measurements of intravascular pressure during a cardiovascular procedure and
helps aid physicians in determining the most beneficial lesions to treat. At the
October 2008 Transcatheter Cardiovascular Therapeutics conference, results from
the pivotal Fractional flow reserve versus Angiography in Multivessel
Evaluation (FAME) study were presented which demonstrated significant
reductions in mortality, morbidity, stent utilization and procedural cost when
PressureWire® Certus was employed to guide the physician decision-making
process. The results of the FAME study were published in the New England
Journal of Medicine in January 2009. PressureWire® Certus has regulatory
approval in Europe and Japan as well as FDA approval in the United States.

Percutaneous
catheter introducers are used to create passageways for cardiovascular
catheters from outside the human body through the skin into a vein, artery or
other location inside the body. Our percutaneous catheter introducer portfolio
consists primarily of peel-away and non peel-away sheaths, sheaths with and
without hemostasis valves, dilators, guidewires, repositioning sleeves and
needles. These products are offered in a variety of sizes and packaging
configurations. Diagnostic guidewires, such as the GuideRight and HydroSteer
guidewires, are used in conjunction with percutaneous catheter introducers to
aid in the introduction of intravascular catheters. Our diagnostic guidewires
are available in multiple lengths and incorporate a surface finish for lasting
lubricity.

4

---

Table of Contents

Our bipolar
temporary pacing catheters are inserted percutaneously for temporary use
(ranging from less than one hour to a maximum of one week) with external
pacemakers to provide patient stabilization prior to implantation of a
permanent pacemaker, following a heart attack or during surgical procedures. We
produce and market several designs of bipolar temporary pacing catheters, including
our Pacel pacing catheters, which are available in both torque control and
flow-directed models with a broad range of curve choices and electrode spacing
options.

Atrial Fibrillation:
Atrial fibrillation is a rapid and inconsistent heart rhythm that occurs in the
upper chambers of the heart. People suffering from atrial fibrillation may
experience fatigue and shortness of breath, and atrial fibrillation has been
shown to increase the risk of stroke. Atrial fibrillation and other irregular
heart rhythms such as atrial flutter and Wolff-Parkinson-White Syndrome are
often managed with medications that palliate the symptoms of the irregular
heartbeat. We are committed to developing device-based ablation therapies for
these conditions that offer the potential for a cure.

We provide a
complete system of products  for access, diagnosis, visualization and ablation
- that assist physicians in diagnosing and treating various irregular heart
rhythms. Our products are designed to be used in the electrophysiology (EP) lab
and cardiac surgery.

Our access
products enable clinicians to facilitate the percutaneous delivery of
diagnostic and ablation catheters to areas of the heart where arrhythmias
occur. These products include, among others, our Swartz and Swartz Braided
Transseptal fixed-curve introducers, which are designed to guide catheters to
precise locations in the left atrium. In addition, our Agilis NxT Steerable
Introducer (FDA approved in July 2006) enables flexible mobility and stability
of catheters in the heart while reducing the outside diameter of the
introducer.

For diagnosing
arrhythmias percutaneously, we offer a portfolio of fixed-curve and steerable
catheters. Our Response and Supreme fixed curve catheters gather electrical
information from the heart that indicates what may be causing an arrhythmia.
Our steerable product lines include Livewire and Reflexion, which allow
clinicians to move the catheter tip in precise movements in order to diagnose
the more anatomically challenging areas within the heart. Our Reflexion Spiral
(FDA approved in October 2006) and Inquiry Optima PLUS (FDA approved in March
2006) are circular mapping catheters that enable the physician to check for
electrical isolation of the pulmonary vein openings during an AF ablation
procedure. In addition, our EnSite Array Non-contact Mapping Catheter works
with the EnSite® System, enabling physicians to record electrical activity for
a number of arrhythmias and is especially well suited to quickly map complex
and unstable arrhythmias in a single heartbeat without touching the walls of
the patients heart.

In 2008, we
also entered the market for implantable cardiac monitors with the release of
our Confirm device (FDA approved and CE Mark approved in September 2008). This
small implantable device is designed to help physicians monitor for abnormal
cardiac conditions.

In July 2008,
we acquired EP MedSystems, Inc. (EP MedSystems), broadening our portfolio of
diagnostic products with the addition of the EPWorkMate® recording system and
the ViewFlex® range of ultrasound products. The EPWorkMate® recording system
is used to monitor electrical activity of the heart via intracardiac catheters
and features our new ClearWave technology for high fidelity signals and an integrated
stimulator. The ultrasound product line consists of the ViewMate® II ultrasound
console and the ViewFlex® PLUS ultrasound catheter. This ultrasound system
provides intracardiac ultrasound imaging to help provide more detail about the
cardiac anatomy and guide therapy delivery.

Our EnSite®
System is a mapping and navigation system that, when used in conjunction with
the EnSite® Array non-contact mapping catheter or EnSite NavX navigation and
visualization technology, creates three-dimensional (3D) cardiac models, shows
catheters moving within those models, and allows physicians to map and
visualize electrical activity in the heart. In 2008, we launched the EnSite®
System Version 8.0 software platform, which enables the creation of cardiac
models with a higher level of detail while also providing improved
reproducibility as well as several new approaches to visually present arrhythmia
patterns. In 2007, we launched the EnSite Fusion Registration Module, a
software expansion module for our EnSite® System that registers the EnSite
NavX 3D model to a segmented computed tomography (CT) image of cardiac
anatomy, allowing for additional detailed levels of cardiac anatomy to be
visualized and navigated within one image during an ablation procedure.

We offer two
general ablation product lines which focus on disabling abnormal tissue that
causes or perpetuates arrhythmias: ablation catheters, which are used as part
of a percutaneous procedure and are designed to apply RF energy to the inside
of the heart; and surgical cardiac ablation devices, which are used to ablate
cardiac tissue from the epicardium (outside the heart).

5

---

Table of Contents

Our Livewire
TC Ablation Catheters include uni- and bi-directional models that offer
stability and excellent tissue contact with cardiac tissue. Our Safire
Bi-directional Ablation Catheter product line offers a comprehensive range of
catheter tip sizes (4mm and 5mm, FDA approved in August 2006; and 8mm, FDA
approved in October 2007) and curve configurations and is built on our
ComfortGrip handle platform that is designed for physician comfort and control
during EP procedures. Our Therapy 4 and 8 mm tip standard catheter lines
provide a range of curve options and temperature control. When used with our
IBI-1500 series Cardiac Ablation Generators, power can be effectively managed
for the creation of longer ablation lines. In addition to the standard
(non-irrigated) tip ablation catheters, we also offer the open-irrigated tip Therapy
Cool Path ablation catheter. The Therapy Cool Path catheter features holes at
the tip of the catheter that allow infused saline to circulate around the tip
during therapy delivery. The ability to infuse saline allows the tip to be
cooled and lessens the potential for char or thrombus to form during ablation.

Our surgical
cardiac ablation product line, the Epicor Cardiac Ablation System (Epicor
System), creates cardiac ablation lesions by applying high intensity focused
ultrasound (HIFU) to the outside of a beating heart without the need to put the
patient on a heart-lung bypass machine. The primary components of the Epicor
System include the Epicor Ablation Control System that generates and controls
the ultrasound energy, the UltraCinch Ablation Device (FDA approved in May
2004) that creates circumferential lesions in cardiac tissue and the UltraWand
Handheld Ablation Device (FDA approved in February 2004) that allows for
additional linear lesions to be created.

Neuromodulation: The
neuromodulation market has two main
categories of treatment: neurostimulation, in which an implantable device
delivers electrical current directly to targeted nerve sites, and implantable
drug infusion systems, in which an implanted pump delivers drugs through a catheter
directly to targeted nerve sites. The majority of our Neuromodulation product offerings provide neurostimulation treatment.

Neurostimulation for the treatment of chronic pain involves delivering
low-level electrical impulses via an implanted device (sometimes referred to as
a pacemaker for pain) directly to the spinal cord or peripheral nerves. This
stimulation interferes with the transmission of pain signals to the brain and
inhibits or blocks the sensation of pain felt by the patient. This stimulation
of nerves at or near the site where pain is perceived replaces the painful
sensations with a sensation called paresthesia, which is often described as a
tingling or massaging sensation. Neurostimulation for chronic pain is generally
used to manage sharp, intense and constant pain arising from nerve damage or
nervous system disorders. A neurostimulation system typically consists of three
components: a pulse generator/receiver that produces the electric current
directed to the lead(s) and is generally implanted under the patients skin; a
programmer/transmitter that is used to program the power supply and to adjust
the intensity, frequency and duration of the stimulation; and leads that carry
the electrical impulses to the targeted nerve sites. Clinical results
demonstrate that many patients who are implanted with a neurostimulation system
experience a substantial reduction in pain, an increase in activity level, a
reduction in use of narcotics and a reduction in hospitalization.

We offer a wide array of neurostimulation systems including
rechargeable implantable pulse generators (IPGs), primary cell implantable
pulse generators and RF powered systems. We currently market three
neurostimulation product platforms worldwide: Eon IPG systems, which include
rechargeable and primary cell battery models, Genesis® primary cell IPG systems
and Renew® RF systems.

The Eon rechargeable IPG is a 16-contact IPG with a high capacity
battery. It offers a broad range of options to help the clinician maximize
success in managing chronic pain. The Eon IPG provides enhanced longevity
between recharges, allowing patients added flexibility in their recharging
schedule. It is FDA approved to operate at least 24 hours between recharges at
10 years at high settings. The device is designed to provide consistent pain
therapy.

In 2008, we
introduced the Eon Mini rechargeable 16-contact IPG. Its small size
offers the potential for alternative placement options, which helps clinicians treat
a variety of patients. It is FDA-approved to operate at least 24 hours between
recharges for 10 years at high settings  a long battery life for its small
size. The Eon Mini IPG is well-suited for patients with smaller body mass and
low to high power requirements.

In 2008, we also introduced the EonC primary cell IPG. It
features a large-capacity battery and constant current pulse delivery for
consistent, low-maintenance therapy. It is well-suited for patients with low to
medium power requirements and those who prefer the simplicity of a non-rechargeable
IPG.

The Genesis® IPG system offers a high battery capacity-to-size ratio
and flexibility in addressing different pain patterns. The GenesisXP IPG
system offers a greater battery capacity, resulting in enhanced longevity
and/or additional power to treat more complex pain. Conventional IPGs, such as
Genesis® and GenesisXP, are well-suited for patients with relatively simple
pain or modest power requirements and for patients who would have difficulty
managing a rechargeable system or a RF system.

The Renew® RF system features a small implanted RF receiver/pulse
generator, leads and a transmitter containing a power source that is worn
externally. The system is powered with the help of an antenna that is attached
to the patients skin with a removable belt or an adhesive pad. As the Renew®
system has a rechargeable, external power source, we believe it is best suited
for patients with complex, changing or multi-extremity pain patterns that
require higher power levels for treatment when battery management, even with a
rechargeable system, is problematic.

6

---

Table of Contents

We currently market Rapid Programmer®, a programming platform designed
to allow clinicians to quickly and efficiently test patients intraoperatively
and to program postoperatively. The Rapid Programmer® system features two
technologies for delivering stimulation to pain patients: Dynamic MultiStim
and Active Balancing. Dynamic MultiStim technology allows for real-time
programming adjustments to multiple areas of pain, which better targets pain
coverage and decreases programming time. This is especially useful when
patients have complex pain patterns, such as a combination of back and leg
pain. Active Balancing lets patients and clinicians fine-tune stimulation
levels in multiple coverage areas, quickly establishing relief and giving
patients sophisticated, yet easy-to-use, control over their therapy. This
palm-sized programmer features a touch screen interface, which clinicians can
navigate to create multiple programs, adjust variables and generate pain and
stimulation maps while decreasing the average postoperative programming time.

We market a broad variety of leads, which are intended to give
clinicians the flexibility to meet a range of patient needs. Our leads can be
divided into two types: percutaneous and paddle leads. Our percutaneous leads
consist of the 8-contact Octrode® and 4-contact Quattrode® lead designs. Our
paddle lead offering consists of the Lamitrode® family of leads. This family
includes the Lamitrode® 88 lead, which consists of single and dual column
paddle leads that provide up to two vertebral segments of coverage; Tripole
leads, which feature a three-column electrode array that is designed to focus
stimulation more precisely for enhanced targeting of low back pain; Lamitrode
S-Series leads, which feature a small profile that is intended to ease
insertion, and an integrated stylet that is engineered to improve steering and
control during implantation; and Lamitrode C-Series leads, shaped to mimic the
curve of the epidural space of the spine and designed to facilitate lead
placement and reduce lead migration.

The neurostimulation market continues to develop. Deep brain
stimulation (DBS) for motor disorders (e.g. Parkinsons disease and essential
tremor) continue to grow and potential new indications such as DBS for
depression, occipital stimulation for migraine, angina, and obesity continue to
be investigated. We continue to enroll patients in our pivotal studies in the
U.S. for Parkinsons disease and essential tremor to investigate the safety and
efficacy of the Libra® DBS system. We are also continuing enrollment for another
pivotal study for chronic migraine. We have conducted a multi-center trial for
depression in Canada and in the second quarter of 2008 we began enrollment of
patients into the BROADEN (BROdmann Area 25 Deep brain Neuromodulation)
clinical study. BROADEN is a clinical study that is evaluating the safety and
effectiveness of DBS therapy in patients with depression for whom currently
available treatments are not effective. Other potential indications are in
various stages of evaluation, regulatory review and trial. In December 2008, we
received European CE Mark approval for the Libra® and LibraXP DBS systems for
treating the symptoms of Parkinsons disease, a neurological disorder that
progressively diminishes a persons control over his or her movements and
speech. The limited launch of these systems in Europe are our first approved
products in the DBS market.

Competition 
The medical device market is intensely competitive and characterized by
extensive research and development and rapid technological change. In addition,
competitors have historically employed litigation to gain a competitive
advantage. Our competitors range from small start-up companies to larger
companies that have significantly greater resources and broader product
offerings, and we anticipate that in the coming years, other large companies
will enter certain markets in which we currently hold a strong position. We
expect competition will continue to intensify with the increased use of
strategies such as consigned inventory and reduced pricing.

Our customers
consider many factors when choosing suppliers, including product reliability,
clinical outcomes, product availability, inventory consignment, price and
product services provided by the manufacturer. As a result, market share can
shift due to technological innovation, product field actions and safety alerts
as well as from other business factors.

We are one of
the three principal manufacturers and suppliers in the global CRM market. Our
primary competitors in this market are Medtronic, Inc. (Medtronic) and Boston
Scientific Corporation (Boston Scientific). These two competitors are larger
than us and have invested substantial amounts in CRM research and development
(R&D). These markets are highly competitive and rapid technological change
is expected to continue, requiring us to invest heavily in R&D and to
effectively market our products.

The
cardiovascular market is also highly competitive with numerous competitors. The
majority of our sales is generated from our vascular closure devices and heart
valve replacement and repair products. We continue to hold the number one
market position in the vascular closure device market; however, the market for
vascular closure devices is highly competitive and there are several companies
in addition to St. Jude Medical that manufacture and market these products
worldwide. Our primary vascular closure device competitor is Abbott
Laboratories. Additionally, we anticipate other large companies will enter this
market in the coming years, which will increase competition. The cardiovascular
market also includes cardiac surgery products such as mechanical heart valves,
tissue heart valves and valve repair products, which are also highly
competitive. We are the worlds leading manufacturer and supplier in the
mechanical heart valve market. Our principal competitors in the mechanical
heart valve market are Sorin CarboMedics, ATS Medical, Inc. and several smaller
manufacturers. In the tissue heart valve market, we compete against two
principal tissue heart valve manufacturers  Edwards Lifesciences Corporation
(Edwards Lifesciences) and Medtronic  as well as many other smaller
manufacturers. Cardiac surgery therapies continue to shift from mechanical
heart valves to tissue valves and repair products. Other competitors such as
Edwards Lifesciences manufacture transcatheter heart valves that are marketed
to patients who may be too frail for traditional heart valve surgery.

7

---

Table of Contents

The atrial
fibrillation therapy area is broadening to include multiple therapy methods and
treatments which include drugs, percutaneous delivery of diagnostic and
ablation catheters, external electrical cardioversion and defibrillation,
implantable defibrillators and open-heart surgery. As a result, we have
numerous competitors in the emerging atrial fibrillation market. Larger
competitors, such as Medtronic, have started to extend their presence in the
atrial fibrillation market through acquisitions or by leveraging their cardiac
rhythm management capabilities. Our primary competitors include Biosense
Webster, a division of Johnson & Johnson, Inc., C.R. Bard, Inc. and Boston
Scientific.

The
neuromodulation market is one of medical technologys fastest growing segments.
We are one of three principal manufacturers of neurostimulation devices. Competitive
pressures will increase in the future as our primary competitors, Medtronic and
Boston Scientific, attempt to secure and grow their positions in the
neuromodulation market. Although we also compete against smaller competitors
like Cyberonics, Inc., barriers to entry for new competitors are high, due to a
long and expensive product development and regulatory approval process as well
as the intellectual property and patent positions existing in the market.
However, other larger medical device companies may be able to enter the
neuromodulation market by leveraging their existing medical device
capabilities, thereby decreasing the time and resources required to enter the
market.

Patents, Licenses and
Trademarks
Our policy is to protect our intellectual property rights related to our
medical devices. Where appropriate, we apply for U.S. and foreign patents. We
own or hold licenses to numerous U.S. and foreign patents. U.S. patents are
typically granted for a term of twenty years from the date a patent application
is filed. The actual protection afforded by a foreign patent, which can vary
from country to country, depends upon the type of patent, the scope of its
coverage and the availability of legal remedies in the country. In those
instances where we have acquired technology from third parties, we have sought
to obtain rights of ownership to the technology through the acquisition of
underlying patents or licenses.

We also have
obtained certain trademarks and tradenames for our products to distinguish our
products from our competitors products. U.S. trademark registrations are for a
term of ten years and are renewable every ten years as long as the trademarks
are used in the regular course of trade. We register our trademarks in the U.S.
and in a number of countries where we do business.

While we
believe design, development, regulatory and marketing aspects of the medical
device business represent the principal barriers to entry, we also recognize
that our patents and license rights may make it more difficult for competitors
to market products similar to those we produce. We can give no assurance that
any of our patent rights, whether issued, subject to license, or in process,
will not be circumvented or invalidated. Furthermore, there are numerous existing
and pending patents on medical products and biomaterials. There can be no
assurance that our existing or planned products do not or will not infringe
such rights or that others will not claim such infringement. No assurance can
be given that we will be able to prevent competitors from challenging our
patents or entering markets we currently serve.

Research and Development

We are focused on the development of new products and on improvements to
existing products. Research and development expense reflects the cost of these
activities, as well as the costs to obtain regulatory approvals of certain new
products and processes and to maintain the highest quality standards with
respect to our existing products. Our research and development expenses were $531.8
million (12.2% of net sales) in 2008, $476.3 million (12.6% of net sales) in
2007 and $431.1 million (13.1% of net sales) in 2006. Although our research and
development expenses have decreased as a percent of net sales in recent years,
total research and development expense has increased over 10% in each of the
last two years. We also recognized $319.4 million of purchased in-process
research and development expense in connection with acquisitions completed in
2008.

Acquisitions 
In addition to generating growth internally through our own research and
development activities, we also make strategic acquisitions and investments to
access new technologies and therapy areas. We expect to continue to make
acquisitions and investments in future periods to strengthen our business.

8

---

Table of Contents

On July 3, 2008, we completed the acquisition of EP MedSystems for
$95.7 million (consisting of $59.0 million in net cash consideration and direct
acquisition costs and 0.9 million shares of St. Jude Medical common stock). EP
MedSystems had been publicly traded on the NASDAQ Capital Market under the
ticker symbol EPMD. EP MedSystems is based in West Berlin, New Jersey and
develops, manufactures and markets medical devices for the electrophysiology
market which are used for visualization, diagnosis and treatment of heart
rhythm disorders. We acquired EP MedSystems to strengthen our portfolio of
products used to treat heart rhythm disorders. EP MedSystems has become part of
our Atrial Fibrillation division.

On December 19, 2008, we completed the acquisition of Radi Medical
Systems for $248.9 million in net cash consideration, including direct
acquisition costs. Radi Medical Systems is based in Uppsala, Sweden and
develops, manufactures and markets products that provide precise measurements
of intravascular pressure during a cardiovascular procedure and manual
compression systems that arrest bleeding of the femoral and radial arteries
following an intravascular medical device procedure. We acquired Radi Medical
Systems to accelerate our cardiovascular growth platform in these two segments
of the cardiovascular medical device market in which we previously had not
participated. Radi Medical Systems has become part of our Cardiovascular
division.

On December 22, 2008, we completed the acquisition of MediGuide, Inc.
(MediGuide) for $285.2 million in net consideration, which includes future
estimated cash payments of approximately $145 million and direct acquisition costs.
MediGuide was a development-stage company based in Haifa, Israeli and has been focused
on developing its Medical Positioning System (gMPSTM) technology for
localization and tracking capability for interventional medical devices. We
plan to expend additional research and development efforts to achieve
technological feasibility for this technology. MediGuide has become part of our
Atrial Fibrillation division.

Marketing and Distribution

Our products are sold in more than 100 countries throughout the world. No
distributor organization or single customer accounted for more than 10% of 2008,
2007, or 2006 consolidated net sales.

In the United
States, we sell directly to healthcare providers primarily through a direct
sales force. In Europe, we have direct sales organizations selling in 23
countries. In Japan, we sell directly to healthcare providers through a direct
sales force and we also continue to use longstanding independent distributor
relationships. In Asia Pacific, we have direct sales organizations selling in
seven countries, and we also utilize independent distributors. Throughout the
rest of the world, we use a combination of independent distributors and direct
sales forces.

Group
purchasing organizations (GPO), independent delivery networks (IDN) and large
single accounts such as the Veterans Administration in the United States continue
to consolidate purchasing decisions for some of our healthcare provider
customers. We have contracts in place with many of these organizations. In some
circumstances, our inability to obtain a contract with a GPO or IDN could
adversely affect our efforts to sell products to a particular healthcare
provider.

International Operations

Our net sales and long-lived assets by significant geographic areas are
presented in Note 13 of the Consolidated Financial Statements in the Financial
Report included in St. Jude Medicals 2008 Annual Report to Shareholders and
filed as Exhibit 13 to this Form 10-K.

Our
international business is subject to special risks such as: foreign currency
exchange controls and fluctuations; the imposition of or increase in import or
export duties, surtaxes, tariffs or customs duties; the imposition of import or
export quotas or other trade restrictions; foreign tax laws and increased costs
associated with overlapping tax structures; longer accounts receivable cycles;
and other international regulatory, economic, legal and political problems.
Such risks are further described in Item 1A, Risk Factors of this Form
10-K. Currency exchange rate fluctuations relative to the U.S. Dollar can
affect reported consolidated revenues and net earnings. We hedge a portion of
this exposure to reduce the effect of foreign currency rate fluctuations on net
earnings. See the Market Risk section of Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Financial Report included
in St. Jude Medicals 2008 Annual Report to Shareholders and filed as Exhibit
13 to this Form 10-K.

Seasonality
Our quarterly net sales are influenced by many factors, including new product
introductions, acquisitions, regulatory approvals, patient and physician
holiday schedules and other factors. Net sales in the third quarter are
typically lower than other quarters of the year as a result of patient
tendencies to defer, if possible, procedures during the summer months and from
the seasonality of the U.S. and European markets, where summer vacation
schedules normally result in fewer procedures.

9

---

Table of Contents

Suppliers
We purchase raw materials and other products from numerous suppliers. Our
manufacturing requirements comply with the rules and regulations of the FDA and
comparable agencies in foreign countries, which mandate validation of materials
prior to use in our products. We purchase certain supplies used in our
manufacturing processes from single sources due to quality considerations, costs
or constraints resulting from regulatory requirements. Agreements with certain
suppliers are terminable by either party upon short notice and we have been
advised periodically by some suppliers that in an effort to reduce their
potential product liability exposure, they may terminate sales of products to
customers that manufacture implantable medical devices. While some of these
suppliers have modified their positions and have indicated a willingness to
continue to provide a product temporarily until an alternative vendor or
product can be qualified (or even to reconsider the supply relationship), where
a particular single-source supply relationship is terminated, we may not be
able to establish additional or replacement suppliers for certain components or
materials quickly. A reduction or interruption by a sole-source supplier of the
supply of materials or key components used in the manufacturing of our products
or an increase in the price of those materials or components could adversely
affect our business, financial condition and results of operations.

Government Regulation

Our products, development activities and manufacturing processes are subject to
extensive and rigorous regulation by the FDA pursuant to the Federal Food,
Drug, and Cosmetic Act (FDCA), by comparable agencies in foreign countries and
by other regulatory agencies and governing bodies. Under the FDCA and
associated regulations, manufacturers of medical devices must comply with
certain regulations that cover the composition, labeling, testing, clinical
study, manufacturing, packaging and distribution of medical devices. Medical
devices must receive FDA clearance or approval before they can be commercially
marketed in the United States. The most comprehensive level of approval
requires the completion of an FDA-approved clinical evaluation program and
submission and approval of a pre-market approval (PMA) application before a
device may be commercially marketed. Our vascular closure devices, mechanical
and tissue heart valves, ICDs, pacemakers and certain leads, neurostimulation
devices and EP catheter applications require a PMA application or supplement to
a PMA. Other leads and lead delivery tools, annuloplasty ring products, other
neurostimulation devices and other EP and cardiology products are currently
marketed under the less rigorous 510(k) pre-market notification procedure of
the FDCA.

Furthermore,
our international business is subject to medical device laws in individual
countries outside the United States. Most major markets for medical devices
outside the United States require clearance, approval or compliance with
certain standards before a product can be commercially marketed. The applicable
laws range from extensive device approval requirements in some countries for
all or some of our products, to requests for data or certifications in other
countries. Generally, international regulatory requirements are increasing. In
the European Union, the regulatory systems have been consolidated, and approval
to market in all European Union countries (represented by the CE Mark) can be
obtained through one agency. The process of obtaining marketing clearance from
the FDA and foreign regulatory agencies for new products or with respect to
enhancements or modifications to existing products can take a significant
period of time, require the expenditure of substantial resources, involve
rigorous pre-clinical and clinical testing, require changes to the products and
result in limitations on the indicated uses of the products.

The FDA
conducts inspections prior to approval of a PMA application to determine
compliance with the quality system regulations that cover manufacturing and
design. In addition, the FDA may require testing and surveillance programs to
monitor the effects of approved products that have been commercialized, and may
prevent or limit further marketing of products based on the results of these
post-marketing programs. At any time after approval of a product, the FDA may
conduct periodic inspections to determine compliance with both the FDAs
Quality System Regulation (QSR) requirements and/or current medical device
reporting regulations. Product approvals by the FDA can be withdrawn due to
failure to comply with regulatory standards or the occurrence of unforeseen
problems following initial approval. The failure to comply with regulatory
standards or the discovery of previously unknown problems with a product or
manufacturer could result in fines, delays or suspensions of regulatory
clearances, seizures or recalls of products (with the attendant expenses), the
banning of a particular device, an order to replace or refund the cost of any
device previously manufactured or distributed, operating restrictions and
criminal prosecution, as well as decreased sales as a result of negative publicity
and product liability claims.

We are
required to register with the FDA as a device manufacturer and as a result, we
are subject to periodic inspection by the FDA for compliance with the FDAs QSR
requirements, which require manufacturers of medical devices to adhere to
certain regulations, including testing, quality control and documentation
procedures. In addition, the federal Medical Device Reporting regulations
require us to provide information to the FDA whenever there is evidence that
reasonably suggests that a device may have caused or contributed to a death or
serious injury or, if a malfunction were to occur, could cause or contribute to
a death or serious injury. Compliance with applicable regulatory requirements
is subject to continual review and is rigorously monitored through periodic
inspections by the FDA. In the European Community, we are required to maintain
certain International Organization for Standardization (ISO) certifications in
order to sell products, and we undergo periodic inspections by notified bodies
to obtain and maintain these certifications.

10

---

Table of Contents

The FDA also
regulates recordkeeping for medical devices and reviews hospital and
manufacturers required reports of adverse experiences to identify potential
problems with FDA-authorized devices. Regulatory actions may be taken by the
FDA due to adverse experience reports.

Diagnostic-related
group (DRG) and Ambulatory Patient Classification (APC) reimbursement schedules
dictate the amount that the U.S. government, through the Centers for Medicare
and Medicaid Services (CMS), will reimburse hospitals for care of persons
covered by Medicare. In response to rising Medicare and Medicaid costs, from
time to time Congress and state legislatures consider legislation that would
restrict funding for these programs. Changes in current DRG and APC
reimbursement levels could have an adverse effect on market demand and our
domestic pricing flexibility. In the U.S., Medicare payment to providers is
based on prospectively set rates. CMS, which administers the Medicare and
Medicaid programs, uses separate Prospective Payment Systems for reimbursement
to acute inpatient hospitals, hospital outpatient departments and ambulatory
surgery centers. In response to rising Medicare costs, from time to time Congress
considers proposals that would reduce the annual update in federal payments to
hospitals. Reduced funding could have an adverse effect on market demand and
our domestic pricing flexibility.

More
generally, 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 and in the shifting of services between inpatient and outpatient
settings. From time to time, initiatives to limit the growth of healthcare
costs, including price regulation, are underway in several countries in which
we do business. Implementation of healthcare reforms in the United States and
in significant overseas markets may limit the price of or the level at which
reimbursement is provided for our products.

The United
States Medicare-Medicaid Anti-kickback law generally prohibits payments to
physicians or other purchasers of medical products under these government
programs as an inducement to purchase a product. Many foreign countries have
similar laws. We subscribe to the AdvaMed Code (AdvaMed is a U.S. medical
device industry trade association) which limits certain marketing and other
practices in our relationships with product purchasers. We also adhere to many
similar codes in countries outside the United States. In addition, we have in
place and are continuously improving our internal business integrity and
compliance program.

Federal and
state laws protect the confidentiality of certain patient health information,
including patient records, and restrict the use and disclosure of such
information. In particular, the U.S. Department of Health and Human Services
has issued patient privacy standards (HIPAA privacy standards) under the Health
Insurance Portability and Accountability Act of 1996 (HIPAA). The HIPAA privacy
standards govern the use and disclosure of protected health information by
covered entities, which are healthcare providers that submit electronic
claims, health plans and healthcare clearinghouses. Our employee health benefit
plans are considered covered entities and therefore are subject and adhere to
the HIPAA privacy standards. Additionally, our Merlin.net Patient Care Network
system adheres to the HIPAA privacy standards and the security requirements for
the electronic transmission of health information as set forth by HIPAA. Our
policy continues to be to work with our customers and business partners in
their HIPAA compliance efforts.

Some medical
device regulatory agencies have considered and are considering whether to
continue to permit the sale of medical devices that incorporate any bovine
material because of concerns about Bovine Spongiform Encephalopathy (BSE),
sometimes referred to as mad cow disease, a disease which has sometimes been
transmitted to humans through the consumption of beef. We are not aware of any
reported cases of transmission of BSE through medical products. Some of our
products (Angio-Seal and vascular grafts) use bovine collagen. In addition,
some of the tissue heart valves we market incorporate bovine pericardial
material. We are cooperating with the regulatory agencies regarding these
issues.

Product Liability
The design, manufacture and marketing of our medical devices entail an inherent
risk of product liability claims. Our products are often used in intensive care
settings with seriously ill patients, and many of the medical devices we
manufacture and sell are designed to be implanted in the human body for long
periods of time or indefinitely. There are a number of factors that could
result in an unsafe condition or injury to, or death of, a patient with respect
to these or other products which we manufacture or sell, including component
failures, manufacturing flaws, design defects or inadequate disclosure of
product-related risks or product-related information. Product liability claims
may be brought by individuals or by groups seeking to represent a class.

We are
currently the subject of various product liability claims, including several
lawsuits which may be allowed to proceed as class actions in the United States
and Canada. The outcome of litigation, particularly class action lawsuits, is
difficult to assess or quantify. Plaintiffs in these types of lawsuits often
seek recovery of very large or indeterminate amounts, and the magnitude of the
potential loss relating to such lawsuits may remain unknown for substantial
periods of time. In addition, product liability claims may be asserted against
us in the future, relative to events that are not known to management at the
present time.

11

---

Table of Contents

Insurance
Problems with our products can result in product liability claims or a field
action, safety alert or advisory notice relating to the product. Our product
liability insurance coverage is designed to help protect us against a
catastrophic claim. Our current product liability policies (for the period June
15, 2008 through June 15, 2009) provide $350 million of insurance coverage,
with a $50 million per occurrence deductible or a $100 million deductible if
the claims are deemed an integrated occurrence under the policies.

Our facilities
could be materially damaged by earthquakes, hurricanes and other natural disasters
or catastrophic circumstances. California earthquake insurance is currently
difficult to obtain, extremely costly, and restrictive with respect to scope of
coverage. Our earthquake insurance for our significant CRM facilities located
in Sylmar and Sunnyvale, California, provides $10 million of insurance coverage
in the aggregate, with a deductible equal to 5% of the total value of the
facility and contents involved in the claim. Consequently, despite this
insurance coverage, we could incur uninsured losses and liabilities arising
from an earthquake near one or both of our California facilities as a result of
various factors, including the severity and location of the earthquake, the
extent of any damage to our facilities, the impact of an earthquake on our
California workforce and on the infrastructure of the surrounding communities
and the extent of damage to our inventory and work in process. While we believe
that our exposure to significant losses from a California earthquake could be
partially mitigated by our ability to manufacture some of our CRM products at
our manufacturing facilities in Sweden and Puerto Rico, the losses could have a
material adverse effect on our business for an indeterminate period of time
before this manufacturing transition is complete and operates without
significant disruption. Furthermore, our manufacturing facilities in Puerto
Rico may suffer damage as a result of hurricanes which are frequent in the
Caribbean and could result in lost production and additional expenses to us to
the extent any such damage is not fully covered by our hurricane and business
interruption insurance.

Employees
As of January 3, 2009, we had approximately 14,000 employees worldwide. Our
employees are not represented by any labor organizations, with the exception of
certain employees in Sweden and France. We have never experienced a work
stoppage as a result of labor disputes. We believe that our relationship with
our employees is generally good.

Executive Officers of the Registrant

The following is a list of our executive officers as of February 18, 2009. For
each position, the dates in parentheses indicate the year during which each
executive officer began serving in such capacity.

|                        |  |     |  |                                                                                    
|----------------------- |  | --- |  | -----------------------------------------------------------------------------------
|Name                    |  | Age |  | Position                                                                           
|                        |  |     |  |                                                                                    
|Daniel J.
 Starks       |  | 54  |  | Chairman
 (2004), President (2001) and Chief Executive Officer (2004)              
|                        |  |     |  |                                                                                    
|John C.
 Heinmiller     |  | 54  |  | Executive
 Vice President (2004) and Chief Financial Officer (1998)                
|                        |  |     |  |                                                                                    
|Joseph H.
 McCullough   |  | 59  |  | Group
 President (2008), Interim President, U.S. (2008)                            
|                        |  |     |  |                                                                                    
|Michael T.
 Rousseau    |  | 53  |  | Group
 President (2008)                                                            
|                        |  |     |  |                                                                                    
|Frank J.
 Callaghan     |  | 55  |  | President,
 Cardiovascular (2008)                                                  
|                        |  |     |  |                                                                                    
|Christopher
 G. Chavez  |  | 53  |  | President,
 Neuromodulation (2005)                                                 
|                        |  |     |  |                                                                                    
|Eric S.
 Fain, M.D.     |  | 48  |  | President,
 Cardiac Rhythm Management (2007)                                       
|                        |  |     |  |                                                                                    
|Denis M.
 Gestin        |  | 45  |  | President,
 International (2008)                                                   
|                        |  |     |  |                                                                                    
|Jane J. Song            |  | 46  |  | President,
 Atrial Fibrillation (2004)                                             
|                        |  |     |  |                                                                                    
|I. Paul Bae             |  | 44  |  | Vice
 President, Human Resources (2006)                                            
|                        |  |     |  |                                                                                    
|Angela D. Craig         |  | 37  |  | Vice
 President, Corporate Relations (2006)                                        
|                        |  |     |  |                                                                                    
|Pamela S.
 Krop         |  | 50  |  | Vice
 President (2006), General Counsel (2006) and Secretary (2006)                
|                        |  |     |  |                                                                                    
|Thomas R.
 Northenscold |  | 51  |  | Vice
 President, Information Technology (2008) and Chief Information Officer (2008)
|                        |  |     |  |                                                                                    
|Donald J.
 Zurbay       |  | 41  |  | Vice
 President (2006) and Corporate Controller (2004)                             

12

---

Table of Contents

Mr. Starks has
served on St. Jude Medicals Board of Directors since 1996 and has been
Chairman, President and Chief Executive Officer of St. Jude Medical since May 2004. Previously, Mr. Starks was President and Chief Operating Officer of
St. Jude Medical from February 2001 to May 2004. From April 1998 to February 2001, he
was President and Chief Executive Officer of our Cardiac Rhythm Management
Division, and prior to that, Mr. Starks was Chief Executive Officer and
President of Daig Corporation, a wholly-owned subsidiary of St. Jude Medical.
Mr. Starks serves on the Board of Directors of Urologix, Inc., a urology
medical device company.

Mr. Heinmiller
joined St. Jude Medical in May 1996 as a part of our acquisition of Daig
Corporation, where Mr. Heinmiller had served as Vice President of Finance and
Administration since 1995. In May 1998, he was named Vice President of
Corporate Business Development. In September 1998, he was appointed Vice President,
Finance and Chief Financial Officer and in May 2004 was promoted to Executive
Vice President.

Mr. McCullough
joined St. Jude Medical in 1994 as a Cardiac Rhythm Management Regional Sales
Director. He became Director of Cardiac Rhythm Management Marketing in 1996 and
was named Vice President of Cardiac Rhythm Management Marketing in January
1997. In December 1997, Mr. McCullough was appointed European Cardiac Rhythm
Management Business Unit Director. He became Vice President, Cardiac Rhythm
Management Europe and Managing Director of manufacturing operations in
Veddesta, Sweden, in January 1999, and Senior Vice President, Cardiac Rhythm
Management Europe in August 1999. Mr. McCullough served as President,
International Division from July 2001 to January 2008, when he was promoted to
Group President, with the Companys U.S. and International Divisions and
Corporate Brand and Global Marketing functions reporting directly to him. In
November 2008, Mr. McCullough also began serving as President, U.S. on an interim
basis.

Mr. Rousseau
joined St. Jude Medical in 1999 as Senior Vice President, Cardiac Rhythm
Management Global Marketing. In August 1999, Cardiac Rhythm Management
Marketing and Sales were combined under his leadership. In January
2001, he was named President, U.S. Cardiac Rhythm Management Sales, and in
July 2001, he was named President, U.S. Division, a position Mr. Rousseau
held until January 2008, when he was promoted to Group President, with the
Companys four product divisions reporting directly to him.

Mr. Callaghan
joined St. Jude Medical as Vice President of Research and Development for the
Atrial Fibrillation Division in January 2005 as part of the ESI acquisition.
From 1995 to 2005, Mr. Callaghan served as Vice President of Research and Development
for ESI. In January 2008, he was promoted to President, Cardiovascular
Division.

Mr. Chavez
serves as President, Neuromodulation Division, as a result of our acquisition
of Advanced Neuromodulation Systems (ANS) in November 2005. From April 1998 to
2005, he served as President, Chief Executive Officer and Director of ANS, when
it was a separate company and has since served as President, Neuromodulation
Division. Mr. Chavez serves on the Board of Directors of Advanced Medical
Optics, Inc., an optical medical device company.

Dr. Fain
joined St. Jude Medical in 1997 as a part of our acquisition of Ventritex,
Inc., where he had served since 1987. In 1998, he was named Senior Vice
President, Clinical Engineering and Regulatory Affairs, Cardiac Rhythm Management.
In 2002 he was appointed Senior Vice President for Development and
Clinical/Regulatory Affairs for Cardiac Rhythm Management and was promoted to
Executive Vice President over those functions in 2005. In July 2007, Dr. Fain
became President of our Cardiac Rhythm Management Division.

Mr. Gestin
joined St. Jude Medical in 1997 as manager of cardiac rhythm management and
catheter product sales in France. He was named Managing Director of St. Jude
Medical France in 1999 and was promoted to Vice President, Northern Europe
& Africa in 2002. He was named President of SJM Europe, Middle East, Africa
and Canada in August 2004, and in January 2008, Mr. Gestin was promoted to
President, International Division.

Ms. Song
joined St. Jude Medical in 1998 as Senior Vice President, Cardiac Rhythm
Management Operations. In May 2002, she was appointed President, Cardiac
Surgery Division, and in August 2004, was appointed President, Atrial
Fibrillation Division.

Mr. Bae joined
St. Jude Medical in 2003 and served as General Counsel and Vice President,
Human Resources for the U.S. Division. In September 2006, he was appointed Vice
President, Human Resources. Prior to joining St. Jude Medical, Mr. Bae was
Director of Litigation for Alpha Therapeutic Corporation, a biopharmaceutical
company.

Ms. Craig
joined St. Jude Medical in May 2005 as Vice President of Communications and
served in that position until being named Vice President, Corporate Relations,
in January 2006. Prior to joining St. Jude Medical, Ms. Craig spent 12 years
with Smith & Nephew plc, a medical device company headquartered in London,
England, where she served as Director of Corporate Affairs from 2002 to 2003
prior to serving as Vice President of U.S. Public Relations and Investor
Relations from 2003 to 2005.

13

---

Table of Contents

Ms. Krop
joined St. Jude Medical in July 2006 as Vice President, General Counsel and
Corporate Secretary. She previously spent 15 years at General Electric (GE)
Company, a diversified industrial corporation, and served as General Counsel of
GE Healthcare Bio-Sciences, a $3 billion business acquired by GE, formerly
known as Amersham plc.

Mr.
Northenscold joined St. Jude Medical in 2001 as Vice President, Finance and
Administration of Daig Corporation, a wholly-owned subsidiary of St. Jude
Medical. In March 2003, he was named Vice President, Administration and in
November 2007 was promoted to Vice President, Information Technology and Chief
Information Officer.

Mr. Zurbay
joined St. Jude Medical in 2003 as Director of Corporate Finance. In 2004, Mr.
Zurbay was named Corporate Controller, and in January 2006 he was named Vice
President and Corporate Controller. From 1999 to 2003, he served as Senior
Audit Manager at PricewaterhouseCoopers LLP, a global public accounting firm.

Availability of SEC Reports

We make available, free of charge, our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and any amendments filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (the Exchange Act) as soon as reasonably practical after they are filed or
furnished to the U.S. Securities and Exchange Commission (SEC). Such reports
are available on our website (http://www.sjm.com) underOur Company  Investor Relations  SEC
Filings or can be obtained by contacting our Investor Relations
group at 1.800.328.9634 or at St. Jude Medical, Inc., One St. Jude Medical
Drive, St. Paul, Minnesota 55117. Information included on our website is not
deemed to be incorporated into this Form 10-K.

Item 1A. RISK FACTORS

Our business
faces many risks. Any of the risks discussed below, or elsewhere in this Form
10-K or our other SEC filings, could have a material impact on our business,
financial condition or results of operations. Additional risks and uncertainties
not presently known to us or that we currently believe to be immaterial may
also impair our business operations.

We face intense
competition and may not be able to keep pace with the rapid technological
changes in the medical devices industry.

The medical
device market is intensely competitive and is characterized by extensive
research and development and rapid technological change. Our customers consider
many factors when choosing suppliers, including product reliability, clinical
outcomes, product availability, inventory consignment, price and product
services provided by the manufacturer, and market share can shift as a result
of technological innovation and other business factors. Major shifts in
industry market share have occurred in connection with product problems,
physician advisories and safety alerts, reflecting the importance of product
quality in the medical device industry. Our competitors range from small
start-up companies to larger companies which have significantly greater
resources and broader product offerings than us, and we anticipate that in the
coming years, other large companies will enter certain markets in which we
currently hold a strong position. For example, Boston Scientific acquired one
of our principal competitors, Guidant Corporation, in 2006. In addition, we
expect that competition will continue to intensify with the increased use of
strategies such as consigned inventory and we have seen increasing price
competition as a result of managed care, consolidation among healthcare
providers, increased competition and declining reimbursement rates. Product
introductions or enhancements by competitors which have advanced technology,
better features or lower pricing may make our products or proposed products
obsolete or less competitive. As a result, we will be required to devote
continued efforts and financial resources to bring our products under
development to market, enhance our existing products and develop new
products for the medical marketplace. If we fail to develop new products,
enhance existing products or compete effectively, our business, financial
condition and results of operations will be adversely affected.

We are subject to
stringent domestic and foreign medical device regulation which may impede the
approval process for our products, hinder our development activities and
manufacturing processes and, in some cases, result in the recall or seizure of
previously approved products.

Our products,
development activities and manufacturing processes are subject to extensive and
rigorous regulation by the FDA pursuant to the FDCA, by comparable agencies in
foreign countries and by other regulatory agencies and governing bodies. Under
the FDCA and associated regulations, manufacturers of medical devices must
comply with certain regulations that cover the composition, labeling, testing,
clinical study, manufacturing, packaging and distribution of medical devices.
In addition, medical devices must receive FDA clearance or approval before they
can be commercially marketed in the United States, and the FDA may require
testing and surveillance programs to monitor the effects of approved products
that have been commercialized and can prevent or limit further marketing of a
product based on the results of these post-marketing programs. Furthermore,
most major markets for medical devices outside the United States require
clearance, approval or compliance with certain standards before a product can
be commercially marketed. The process of obtaining marketing approval or
clearance from the FDA and foreign regulatory agencies for new products or with
respect to enhancements or modifications to existing products can take a
significant period of time, require the expenditure of substantial resources,
involve rigorous pre-clinical and clinical testing, require changes to the
products and result in limitations on the indicated uses of the products. We
cannot be certain that we will receive the required approval or clearance from
the FDA and foreign regulatory agencies for new products or modifications to
existing products on a timely basis. The failure to receive approval or
clearance for significant new products on a timely basis could have a material
adverse effect on our financial condition and results of operations.

14

---

Table of Contents

At any time
after approval of a product, the FDA may conduct periodic inspections to
determine compliance with both the FDAs QSR requirements and/or current
medical device reporting regulations. Product approvals by the FDA can be
withdrawn due to failure to comply with regulatory standards or the occurrence
of unforeseen problems following initial approval. The failure to comply with
regulatory standards or the discovery of previously unknown problems with a
product, component or manufacturer could result in fines, delays or suspensions
of regulatory clearances, seizures or recalls of products (with the attendant
expenses), the banning of a particular device, an order to replace or refund
the cost of any device previously manufactured or distributed, operating
restrictions and criminal prosecution, as well as decreased sales as a result
of negative publicity and product liability claims, and could have a material
adverse effect on our financial condition and results of operations.

We may not be able
to meet regulatory quality standards applicable to our manufacturing process.

We are
required to register with the FDA as a device manufacturer and as a result, we
are subject to periodic inspection by the FDA for compliance with the FDAs QSR
requirements, which require manufacturers of medical devices to adhere to
certain regulations, including testing, quality control and documentation
procedures. In addition, the federal Medical Device Reporting regulations
require us to provide information to the FDA whenever there is evidence that
reasonably suggests that a device may have caused or contributed to a death or
serious injury or, may contain an anomaly which, if a malfunction were to
occur, could cause or contribute to a death or serious injury. Compliance with
applicable regulatory requirements is subject to continual review and is
rigorously monitored through periodic inspections by the FDA. In the European
Community, we are required to maintain certain ISO certifications in order to
sell products and we undergo periodic inspections by notified bodies to obtain
and maintain these certifications. If we or our manufacturers fail to adhere to
QSR or ISO requirements, this could delay production of our products and lead
to fines, difficulties in obtaining regulatory clearances, recalls or other
consequences, which could in turn have a material adverse effect on our
financial condition and results of operations.

If we are unable to
protect our intellectual property effectively, our financial condition and
results of operations could be adversely affected.

Patents and
other proprietary rights are essential to our business and our ability to
compete effectively with other companies is dependent upon the proprietary
nature of our technologies. We also rely upon trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop, maintain and
strengthen our competitive position. We seek to protect these, in part, through
confidentiality agreements with certain employees, consultants and other
parties. We pursue a policy of generally obtaining patent protection in both
the United States and in key foreign countries for patentable subject matter in
our 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. We currently own
numerous United States and foreign patents and have numerous patent
applications pending. We are also a party to various license agreements
pursuant to which patent rights have been obtained or granted in consideration
for cash, cross-licensing rights or royalty payments. We cannot be certain that
any pending or future patent applications will result in issued patents, that
any current or future patents issued to or licensed by us will not be
challenged, invalidated or circumvented or that the rights granted thereunder
will provide a competitive advantage to us or prevent competitors from entering
markets which we currently serve. Any required license may not be available to
us on acceptable terms, if at all. In addition, some licenses may be
non-exclusive, and therefore our competitors may have access to the same technologies
as us. In addition, we may have to take legal action in the future to protect
our 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 us and we cannot be certain that any lawsuit will be successful.
The invalidation of key patents or proprietary rights which we own or an
unsuccessful outcome in lawsuits to protect our intellectual property could
have a material adverse effect on our financial condition and results
of operations.

15

---

Table of Contents

Pending and future
patent litigation could be costly and disruptive to us and may have an adverse
effect on our financial condition and results of operations.

We operate in
an industry that is susceptible to significant patent litigation and, in recent
years, it has been common for companies in the medical device field to
aggressively challenge the rights of other companies to prevent the marketing
of new devices. Companies that obtain patents for products or processes that
are necessary for or useful to the development of our products may bring legal
actions against us claiming infringement and at any given time, we generally
are involved as both a plaintiff and a defendant in a number of patent
infringement and other intellectual property-related actions. Among other
matters, we are currently defending a significant ongoing patent infringement
action brought against us by one of our principal competitors, Guidant
Corporation, which is now part of Boston Scientific. Defending intellectual
property litigation is expensive and complex and outcomes are difficult to
predict. Any pending or future patent litigation may result in significant
royalty or other payments or injunctions that can prevent the sale of products
and may cause a significant diversion of the efforts of our technical and
management personnel. While we intend to defend any such lawsuits vigorously,
we cannot be certain that we will be successful. In the event that our right to
market any of our products is successfully challenged or if we fail to obtain a
required license or are unable to design around a patent, our financial
condition and results of operations could be materially adversely affected.

Pending and future
product liability claims and litigation may adversely affect our financial
condition and results of operations.

The design,
manufacture and marketing of medical devices of the types we produce entail an
inherent risk of product liability claims. Our products are often used in
intensive care settings with seriously ill patients, and many of the medical
devices we manufacture and sell are designed to be implanted in the human body
for long periods of time or indefinitely. There are a number of factors that
could result in an unsafe condition or injury to, or death of, a patient with
respect to these or other products which we manufacture or sell, including
component failures, manufacturing flaws, design defects or inadequate
disclosure of product-related risks or product-related information. Product
liability claims may be brought by individuals or by groups seeking to
represent a class.

We are
currently the subject of various product liability claims, including several
lawsuits which may be allowed to proceed as class actions in the United States
and are being allowed to proceed as class actions in Canada. The outcome of
litigation, particularly class action lawsuits, is difficult to assess or
quantify. Plaintiffs in these types of lawsuits often seek recovery of very
large or indeterminate amounts, and the magnitude of the potential loss
relating to such lawsuits may remain unknown for substantial periods of time.
For example, in January 2000, we initiated a voluntary field action to replace
products incorporating Silzone® coating, which was used in certain of our
mechanical heart valves and heart valve repair products. After our voluntary
field action, we were sued in various jurisdictions and now have cases pending
in the United States, Canada and France which have been brought by some patients
alleging complications and past or future costs arising either from the
surgical removal or, alternatively, from the continued implantation and
maintenance of products incorporating Silzone® coating over and above the
medical monitoring all replacement heart valve patients receive. Some of the
cases involving Silzone®-coated products have been settled, others have been
dismissed and still others are ongoing. The complaints in the ongoing
individual cases in the United States request damages ranging from $10,000 to
$120.5 million and in some cases, seek an unspecified amount, and the
complaints in the Canadian class actions request damages ranging from the
equivalent of $1.2 million to $1.6 billion at January 3, 2009. We believe that
the final resolution of the Silzone®-coated product cases will take years and
cannot reasonably estimate the time frame in which any potential settlements or
judgments would be paid out or the amounts of any such settlements or
judgments. In addition, the cost to defend any future litigation, whether
Silzone®-related or not, may be significant. We believe that many settlements
and judgments relating to the Silzone® litigation and our other litigation may
be covered in whole or in part under our product liability insurance policies
and existing reserves. Any costs not covered under our product liability
insurance policies and existing reserves could have a material adverse effect
on our financial condition and results of operations.

We may be unable to
obtain appropriate levels of product liability insurance.

Problems with
our products can result in product liability claims or a field action, safety
alert or advisory notice relating to the product. Our product liability
insurance coverage is designed to help protect us against a catastrophic claim.
Our current product liability policies provide $350 million of insurance
coverage, with a $100 million deductible per occurrence. We cannot be certain
that such insurance will be available or adequate to satisfy future claims or that
our insurers will be able to pay claims on insurance policies which they have
issued to us. If we are unable to secure appropriate levels of product
liability insurance coverage, our financial condition and results of operations
could be materially adversely affected.

Our product
liability insurers may refuse to cover certain losses on the grounds that such
losses are outside the scope of our product liability insurance policies or may
agree that such losses are covered losses, but may not be able to meet their
current or future payment obligations to us.

One of our
product liability insurers has filed suits seeking court orders declaring that
they are not required to provide coverage for some of the costs we have
incurred or may incur in the future in the Silzone® litigation described above.
This insurer, as well as other insurers from whom we have purchased product
liability insurance, may deny coverage of these and other past and/or future
losses relating to our products on the grounds that such losses are outside the
scope of coverage of our insurance policies. To the extent that we suffer
losses that are outside of the scope of coverage of our product liability
insurance policies, those losses may have an adverse effect on our financial
condition and results of operations.

16

---

Table of Contents

Our remaining
product liability insurance for Silzone® claims consists of a number of layers,
each of which is covered by one or more insurance companies. Part of our final
layer of insurance is covered by a unit of the Kemper Insurance Companies
(Kemper), which is currently in run off and not issuing new policies or
generating any new revenue that could be used to cover claims made under
previously-issued policies such as ours. In the event that Kemper is unable to
pay part or all of the claims directed to it, we believe that the other
insurance carriers in Kempers layer will take the position that we will be
directly liable for any claims and costs that Kemper is unable to pay and that
the other insurance carriers in that layer will not provide coverage for
Kempers portion. If Kemper or any other insurance companies are unable to meet
their respective obligations to us, we could incur substantial losses which
could have an adverse effect on our financial condition and results of
operations.

The loss of any of
our sole-source suppliers or an increase in the price of inventory supplied to
us could have an adverse effect on our business, financial condition and
results of operations.

We purchase
certain supplies used in our manufacturing processes from single sources due to
quality considerations, costs or constraints resulting from regulatory
requirements. Agreements with certain suppliers are terminable by either party
upon short notice and we have been advised periodically by some suppliers that
in an effort to reduce their potential product liability exposure, they may
terminate sales of products to customers that manufacture implantable medical
devices. While some of these suppliers have modified their positions and have indicated
a willingness to continue to provide a product temporarily until an alternative
vendor or product can be qualified (or even to reconsider the supply
relationship), where a particular single-source supply relationship is
terminated, we may not be able to establish additional or replacement suppliers
for certain components or materials quickly. This is largely due to the FDA
approval system, which mandates validation of materials prior to use in our
products, and the complex nature of manufacturing processes employed by many
suppliers. In addition, we may lose a sole-source supplier due to, among other
things, the acquisition of such a supplier by a competitor (which may cause the
supplier to stop selling its products to us) or the bankruptcy of such a supplier,
which may cause the supplier to cease operations. A reduction or interruption
by a sole-source supplier of the supply of materials or key components used in
the manufacturing of our products or an increase in the price of those
materials or components could adversely affect our business, financial
condition and results of operations.

Cost containment
pressures and domestic and foreign legislative or administrative reforms
resulting in restrictive reimbursement practices of third-party payors or preferences
for alternate therapies could decrease the demand for products purchased by our
customers, the prices which they are willing to pay for those products and the
number of procedures using our devices.

Our products
are purchased principally by healthcare providers that typically bill 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 customers to obtain
appropriate reimbursement for their services and the products they provide from
government and third-party payors is critical to the success of medical
technology companies. 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
technology. After we develop a promising new product, we may find limited
demand for the product unless reimbursement approval is obtained from private
and governmental third-party payors.

Major
third-party payors for healthcare provider 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 healthcare provider charges
for services performed and in the shifting of services between inpatient and
outpatient settings. Initiatives to limit the growth of healthcare costs,
including price regulation, are also underway in several countries in which we
do business. Implementation of healthcare reforms in the United States and in significant
overseas markets such as Germany, Japan and other countries may limit the price
of, or the level at which, reimbursement is provided for our products and
adversely affect both our pricing flexibility and the demand for our products.
Healthcare providers may respond to such cost-containment pressures by
substituting lower cost products or other therapies for our products.

Further
legislative or administrative reforms to the U.S. or international
reimbursement systems that significantly reduce reimbursement for procedures
using our medical devices or deny coverage for such procedures, or adverse
decisions relating to our products by administrators of such systems in
coverage or reimbursement issues, would have an adverse impact on the products,
including clinical products, purchased by our customers and the prices our
customers are willing to pay for them. This in turn would have an adverse
effect on our financial condition and results of operations.

17

---

Table of Contents

Our failure to
comply with restrictions relating to reimbursement and regulation of healthcare
goods and services may subject us to penalties and adversely affect our
financial condition and results of operations.

Our devices
are subject to regulation regarding quality and cost by the United States
Department of Health and Human Services, including the Centers for Medicare and
Medicaid Services (CMS), as well as comparable state and foreign agencies
responsible for reimbursement and regulation of healthcare goods and services.
Foreign governments also impose regulations in connection with their healthcare
reimbursement programs and the delivery of healthcare goods and services. U.S.
federal government healthcare laws apply when we submit a claim on behalf of a
U.S. federal healthcare program beneficiary, or when a customer submits a claim
for an item or service that is reimbursed under a U.S. federal government
funded healthcare program, such as Medicare or Medicaid. The principal U.S.
federal laws implicated include those that prohibit the filing of false or
improper claims for federal payment, those that prohibit unlawful inducements
for the referral of business reimbursable under federally-funded healthcare
programs, known as the anti-kickback laws, and those that prohibit healthcare
service providers seeking reimbursement for providing certain services to a
patient who was referred by a physician that has certain types of direct or
indirect financial relationships with the service provider, known as the Stark
law.

The laws
applicable to us are subject to evolving interpretations. If a governmental
authority were to conclude that we are not in compliance with applicable laws
and regulations, we and our officers and employees could be subject to severe
criminal and civil penalties, including, for example, exclusion from
participation as a supplier of product to beneficiaries covered by CMS. If we
are excluded from participation based on such an interpretation, it could
adversely affect our financial condition and results of operations.

Consolidation
in the healthcare industry could lead to demands for price concessions or limit
or eliminate our ability to sell to certain of our significant market segments.

The cost of
healthcare has risen significantly over the past decade and numerous
initiatives and reforms initiated by legislators, regulators and third-party
payors to curb these costs have resulted in a consolidation trend in the
medical device industry as well as among our customers, including healthcare providers.
This in turn has resulted in greater pricing pressures and limitations on our
ability to sell to important market segments, as group purchasing
organizations, independent delivery networks and large single accounts, such as
the Veterans Administration in the United States, continue to consolidate
purchasing decisions for some of our healthcare provider customers. We expect
that market demand, government regulation, third-party reimbursement policies
and societal pressures will continue to change the worldwide healthcare
industry, resulting in further business consolidations and alliances which may
exert further downward pressure on the prices of our products and adversely
impact our business, financial condition and results of operations.

Failure to integrate
acquired businesses into our operations successfully could adversely affect our
business.

As part of our
strategy to develop and identify new products and technologies, we have made
several acquisitions in recent years and may make additional acquisitions in
the future. Our integration of the operations of acquired businesses requires
significant efforts, including the coordination of information technologies,
research and development, sales and marketing, operations, manufacturing and
finance. These efforts result in additional expenses and involve significant
amounts of managements time that cannot then be dedicated to other projects.
Our failure to manage successfully and coordinate the growth of the combined
company could also have an adverse impact on our business. In addition, we
cannot be certain that the businesses we acquire will become profitable or
remain so. If our acquisitions are not successful, we may record unexpected
impairment charges. Factors that will affect the success of our acquisitions
include:

| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the presence
 or absence of adequate internal controls and/or significant fraud in the
 financial systems of acquired companies;                                                                                                                
| |  | adverse
 developments arising out of investigations by governmental entities of the
 business practices of acquired companies;                                                                                                                  
| |  | any decrease
 in customer loyalty and product orders caused by dissatisfaction with the
 combined companies product lines and sales and marketing practices,
 including price increases;                                                       
| |  | our ability
 to retain key employees; and                                                                                                                                                                                                       
| |  | the ability
 of the combined company to achieve synergies among its constituent companies,
 such as increasing sales of the combined companys products, achieving cost
 savings and effectively combining technologies to develop new products.

18

---

Table of Contents

The success of many
of our products depends upon strong relationships with physicians.

If we fail to
maintain our working relationships with physicians, many of our products may
not be developed and marketed in line with the needs and expectations of the
professionals who use and support our products. The research, development,
marketing and sales of many of our new and improved products is dependent upon
our maintaining working relationships with physicians. We rely on these
professionals to provide us with considerable knowledge and experience
regarding our products and the marketing of our products. Physicians assist us
as researchers, marketing consultants, product consultants, inventors and as
public speakers. If we are unable to maintain our strong relationships with
these professionals and continue to receive their advice and input, the
development and marketing of our products could suffer, which could have a
material adverse effect on our financial condition and results of operations.

Instability in
international markets or foreign currency fluctuations could adversely affect
our results of operations.

Our products
are currently marketed in more than 100 countries around the world, with our
largest geographic markets outside of the United States being Europe, Japan and
Asia Pacific. As a result, we face currency and other risks associated with our
international sales. We are exposed to foreign currency exchange rate
fluctuations due to transactions denominated primarily in Euros, Japanese Yen,
Canadian Dollars, Australian Dollars, Brazilian Reals, British Pounds and
Swedish Kronor, which may potentially reduce the U.S. Dollars we receive for
sales denominated in any of these foreign currencies and/or increase the U.S.
Dollars we report as expenses in these currencies, thereby affecting our
reported consolidated revenues and net earnings. Fluctuations between the
currencies in which we do business have caused and will continue to cause
foreign currency transaction gains and losses. We cannot predict the effects of
currency exchange rate fluctuations upon our future operating results because
of the number of currencies involved, the variability of currency exposures and
the volatility of currency exchange rates.

In addition to
foreign currency exchange rate fluctuations, there are a number of additional
risks associated with our international operations, including those related to:

| |   |                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the
 imposition of or increase in import or export duties, surtaxes, tariffs or
 customs duties;                                                                                                                                                                                                                                                                             
| |  | the
 imposition of import or export quotas or other trade restrictions;                                                                                                                                                                                                                                                                                                      
| |  | foreign tax
 laws and potential increased costs associated with overlapping tax
 structures;                                                                                                                                                                                                                                                                                 
| |  | longer
 accounts receivable cycles in certain foreign countries, whether due to
 cultural, exchange rate or other factors;                                                                                                                                                                                                                                                   
| |  | changes in regulatory
 requirements in international markets in which we operate;                                                                                                                                                                                                                                                                                            
| |  | inquiries
 into possible improprieties in our international operations, such as our
 inclusion in the report of the Independent Inquiry Committee into the United
 Nations (U.N.) Oil-For-Food Programme as allegedly having made payments to
 the Iraqi government in connection with certain product sales which we made
 to Iraq under this program from 2000 to 2003; and
| |  | economic and
 political instability in foreign countries.                                                                                                                                                                                                                                                                                                                    

The medical device industry is the subject of
numerous governmental investigations into marketing and other business
practices. These investigations could result in the commencement of civil
and/or criminal proceedings, substantial fines, penalties and/or administrative
remedies, divert the attention of our management and have an adverse effect on
our financial condition and results of operations.

In October
2005, the U.S. Department of Justice, acting through the U.S. Attorneys office
in Boston, commenced an industry-wide investigation into whether the provision
of payments and/or services by makers of implantable cardiac rhythm devices to
doctors or other persons constitutes improper inducements under the federal
health care program anti-kickback law. As part of this investigation, we
received a civil subpoena from the U.S. Attorneys office in Boston requesting
documents created since January 2000 regarding our practices related to
pacemakers, ICDs, lead systems and related products marketed by our CRM
segment. We understand that our principal competitors in the CRM therapy areas
received similar civil subpoenas. We received an additional subpoena from the
U.S. Attorneys office in Boston in September 2006, requesting documents
created since January 2002 related to certain employee expense reports and
certain pacemaker and ICD purchasing arrangements. In December 2008, the U.S.
Attorneys Office in Boston delivered a third subpoena issued by the Department
of Health & Human Services Office of Inspector General requesting the
production of documents relating to implantable cardiac rhythm device and
pacemaker warranty claims.

In February
2006, we received a subpoena from the SEC requesting that we produce documents
concerning transactions under the U.N. Oil-for-Food Programme.

In July 2007,
we received a civil subpoena from the U.S. Department of Health and Human
Services, Office of the Inspector General requesting documents created during
the period from 2003 through 2006 regarding our relationships with ten Ohio
hospitals. We have received follow-up requests from the U.S. Department of
Justice and the U.S. Attorneys Office in Cleveland regarding this matter.

19

---

Table of Contents

In October
2008, we received a letter from the Civil Division of the U.S. Department of
Justice stating that we are under investigation for potential False Claims Act
and common law violations relating to the sale of our surgical ablation
devices. The Department of Justice is investigating whether companies marketed
surgical ablation devices for off-label treatment of atrial fibrillation. We
understand that other manufacturers of medical devices used in the treatment of
atrial fibrillation received similar letters. The Department of Justices
investigation is focused on our EpicorTM ablation devices. The
letter requests that we provide documents from January 1, 2005, to present
relating to FDA approval and marketing of EpicorTM ablation devices.

We are fully
cooperating with these investigations and are responding to these requests.
However, we cannot predict when these investigations will be resolved, the
outcome of these investigations or their impact on the Company. An adverse
outcome in one or more of these investigations could include the commencement
of civil and/or criminal proceedings, substantial fines, penalties and/or
administrative remedies, including exclusion from government reimbursement
programs. In addition, resolution of any of these matters could involve the
imposition of additional and costly compliance obligations. Finally, if these
investigations continue over a long period of time, they could divert the
attention of management from the day-to-day operations of our business and
impose significant administrative burdens on us. These potential consequences,
as well as any adverse outcome from these investigations, could have a material
adverse effect on our financial condition and results of operations.

Regulatory actions
arising from the concern over Bovine Spongiform Encephalopathy may limit our
ability to market products containing bovine material.

Our Angio-Seal
vascular closure device, as well as our vascular graft products, contain bovine
collagen. In addition, some of the tissue heart valves we market, such as our
Biocor® and Epic tissue heart valves, incorporate bovine pericardial material.
Certain medical device regulatory agencies may prohibit the sale of medical
devices that incorporate any bovine material because of concerns over BSE,
sometimes referred to as mad cow disease, a disease which may be transmitted
to humans through the consumption of beef. While we are not aware of any
reported cases of transmission of BSE through medical products and are
cooperating with regulatory agencies considering these issues, the suspension
or revocation of authority to manufacture, market or distribute products
containing bovine material, or the imposition of a regulatory requirement that
we procure material for these products from alternate sources, could result in
lost market opportunities, harm the continued commercialization and
distribution of such products and impose additional costs on us. Any of these
consequences could in turn have a material adverse effect on our financial
condition and results of operations.

We are not insured
against all potential losses. Natural disasters or other catastrophes could
adversely affect our business, financial condition and results of operations.

Our facilities
could be materially damaged by earthquakes, hurricanes and other natural
disasters or catastrophic circumstances, including acts of war. For example, we have significant CRM
facilities located in Sylmar and Sunnyvale, California. Earthquake insurance in
California is currently difficult to obtain, extremely costly and restrictive
with respect to scope of coverage. Our earthquake insurance for these
California facilities provides $10 million of insurance coverage in the
aggregate, with a deductible equal to 5% of the total value of the facility and
contents involved in the claim. Consequently, despite this insurance coverage,
we could incur uninsured losses and liabilities arising from an earthquake near
one or both of our California facilities as a result of various factors,
including the severity and location of the earthquake, the extent of any damage
to our facilities, the impact of an earthquake on our California workforce and
on the infrastructure of the surrounding communities and the extent of damage
to our inventory and work in process. While we believe that our exposure to
significant losses from a California earthquake could be partially mitigated by
our ability to manufacture some of our CRM products at our manufacturing
facilities in Sweden and Puerto Rico, the losses could have a material adverse
effect on our business for an indeterminate period of time before this
manufacturing transition is complete and operates without significant problems.
Furthermore, our manufacturing facilities in Puerto Rico may suffer damage as a
result of hurricanes which are frequent in the Caribbean and which could result
in lost production and additional expenses to us to the extent any such damage
is not fully covered by our hurricane and business interruption insurance.

Even with
insurance coverage, natural disasters or other catastrophic events, including acts of war, could cause
us to suffer substantial losses in our operational capacity and could also lead
to a loss of opportunity and to a potential adverse impact on our relationships
with our existing customers resulting from our inability to produce products
for them, for which we would not be compensated by existing insurance. This in
turn could have a material adverse effect on our financial condition and
results of operations.

20

---

Table of Contents

Our operations are subject to environmental,
health and safety laws and regulations that could require us to incur material
costs.

Our operations
are subject to environmental, health and safety laws and regulations
concerning, among other things, the generation, handling, transportation and
disposal of hazardous substances or wastes, particularly ethylene oxide, the
cleanup of hazardous substance releases, and emissions or discharges into the
air or water. We have incurred and expect to incur expenditures in the future
in connection with compliance with environmental, health and safety laws and
regulations. New laws and regulations, violations of these laws or regulations,
stricter enforcement of existing requirements, or the discovery of previously
unknown contamination could require us to incur costs or become the basis for
new or increased liabilities that could be material.

Failure to
successfully implement a new enterprise resource planning (ERP) system could
adversely affect our business.

We are in the
process of converting to a new ERP system. Failure to smoothly execute the
implementation of the ERP system could adversely affect the Companys business,
financial condition and results of operations.

The disruption in
the global financial markets and the economic downturn may adversely impact the
availability and cost of credit and customer purchasing and payment patterns.

Our ability to
refinance our indebtedness and to obtain financing for acquisitions or other
general corporate and commercial purposes will depend on our operating and
financial performance and is also subject to prevailing economic conditions and
to financial, business and other factors beyond our control. Recently, global
credit markets and the financial services industry have been experiencing a
period of unprecedented turmoil characterized by the bankruptcy, failure or
sale of various financial institutions, a general tightening of credit, and an
unprecedented level of market intervention from the United States and other
governments. These events have adversely affected the U.S. and world economy,
and may adversely affect the availability and cost of financing. Disruptions in
the global financial markets and the related economic downturn could also
negatively impact customer purchasing and payment patterns and also have a material adverse effect on our financial condition and results of operations. There can be no assurances as to the length or
severity of this period of disruption and the related economic downturn.

|         |                          
|-------- | -------------------------
|Item 1B. | UNRESOLVED STAFF COMMENTS

None.

|        |           
|------- | ----------
|Item 2. | PROPERTIES

We own our
principal executive offices, which are located in St. Paul, Minnesota. Our
manufacturing facilities are located in California, Minnesota, Arizona, South
Carolina, Texas, New Jersey, Oregon, Canada, Brazil, Puerto Rico, Sweden and
Thailand. We own approximately 63%, or 544,092 square feet, of our total
manufacturing space. We also maintain sales and administrative offices in the
United States at 37 locations in 17 states and outside the United States at 96
locations in 35 countries. With the exception of 13 locations, all of these
locations are leased.

We believe
that all buildings, machinery and equipment are in good condition, suitable for
their purposes and are maintained on a basis consistent with sound operations.
In late 2007, we began construction on a facility in St. Paul, Minnesota, which will be
used for manufacturing, research and development as well as general office
space, and is expected to be completed in early 2009. In late 2008, our
Cardiovascular division completed a 100,000-square-foot expansion to its
Woodridge facility in St. Paul, Minnesota. The expanded facility is being used
for tissue and mechanical heart valve manufacturing and research and
development. In Liberty, South Carolina, we are in the process of expanding our
CRM manufacturing facilities, and we added a 60,000-square-foot addition in
late 2008. Another CRM manufacturing facility in Liberty, South Carolina is
scheduled to be completed in early 2009. Additionally, we purchased a
manufacturing facility in Puerto Rico, which will be used for manufacturing CRM
products, and we purchased another manufacturing facility in Thailand in conjunction with our Radi Medical Systems acquisition. We believe that we have sufficient space for our current operations
and for foreseeable expansion in the next few years. We plan to open additional
manufacturing facilities in other cost advantage locations in 2010 and 2011 as
part of our global business expansion plan.

|        |                  
|------- | -----------------
|Item 3. | LEGAL PROCEEDINGS

We are the
subject of various pending or threatened legal actions and proceedings,
including those that arise in the ordinary course of our business. Such matters
are subject to many uncertainties and to outcomes that are not predictable with
assurance and that may not be known for extended periods of time. We record a
liability in our consolidated financial statements for costs related to claims,
including future legal costs, settlements and judgments, where we have assessed
that a loss is probable and an amount can be reasonably estimated. Our
significant legal proceedings are discussed in Note 5 of the Consolidated
Financial Statements in the Financial Report included in St. Jude Medicals
2008 Annual Report to Shareholders and filed as Exhibit 13 to this Form 10-K
and incorporated herein by reference. While it is not possible to predict the
outcome for most of the legal proceedings discussed in Note 5, the costs
associated with such proceedings could have a material adverse effect on our
consolidated results of operations, financial position or cash flows of a
future period.

21

---

Table of Contents

|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no
matters submitted to a vote of security holders during the fourth quarter of
the 2008 fiscal year.

PART II

|        |                                                                                                              
|------- | -------------------------------------------------------------------------------------------------------------
|Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
 AND ISSUER PURCHASES OF EQUITY SECURITIES

There were no
sales of unregistered securities during the 2008 fiscal year, and we did not
repurchase any of our shares during the fourth quarter of the 2008 fiscal year.
The information set forth under the Stock
Exchange Listings caption in the Financial Report included in St.
Jude Medicals 2008 Annual Report to Shareholders and filed as Exhibit 13 to
this Form 10-K is incorporated herein by reference. We have not declared or
paid any cash dividends during the past two years. We currently intend to
retain our earnings for use in the operation and expansion of our business and
therefore do not anticipate paying any cash dividends in the foreseeable
future.

|        |                        
|------- | -----------------------
|Item 6. | SELECTED FINANCIAL DATA

The
information set forth under the caption Five-Year
Summary Financial Data in the Financial Report included in St. Jude
Medicals 2008 Annual Report to Shareholders and filed as Exhibit 13 to this
Form 10-K is incorporated herein by reference.

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS

The
information set forth under Managements
Discussion and Analysis of Financial Condition and Results of Operations
in the Financial Report included in St. Jude Medicals 2008 Annual Report to
Shareholders and filed as Exhibit 13 to this Form 10-K is incorporated herein
by reference.

|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information
set forth under the Market Risk section of
Managements Discussion and Analysis of Financial Condition and Results of
Operations in the Financial Report included in St. Jude Medicals
2008 Annual Report to Shareholders and filed as Exhibit 13 to this Form 10-K is
incorporated herein by reference.

|        |                                            
|------- | -------------------------------------------
|Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The
Consolidated Financial Statements and Notes thereto and the Reports of
Independent Registered Public Accounting Firm set forth in the Financial Report
included in St. Jude Medicals 2008 Annual Report to Shareholders and filed as
Exhibit 13 to this Form 10-K are incorporated herein by reference.

|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE

None.

|         |                        
|-------- | -----------------------
|Item 9A. | CONTROLS AND PROCEDURES

Under the
supervision and with the participation of our management, including our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act of 1934). Based
on that evaluation, our CEO and CFO concluded that our disclosure controls and
procedures were effective as of January 3, 2009.

Managements
annual report on our internal control over financial reporting is provided in
the Financial Report included in St. Jude Medicals 2008 Annual Report to
Shareholders and filed as Exhibit 13 to this Form 10-K and incorporated herein
by reference. The effectiveness of our internal control over financial
reporting as of January 3, 2009 has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their report which
is provided in the Financial Report included in St. Jude Medicals 2008 Annual
Report to Shareholders and filed as Exhibit 13 to this Form 10-K and
incorporated herein by reference.

22

---

Table of Contents

During the
fiscal quarter ended January 3, 2009, there were no changes in our internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

|         |                  
|-------- | -----------------
|Item 9B. | OTHER INFORMATION

None.

PART III

|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The
information set forth under the captions Proposal
to Elect Directors, Director Nomination Process, Director Independence and
Audit Committee Financial Literacy and Expertise and Section 16(a) Beneficial
Ownership Reporting Compliance in St. Jude Medicals Proxy Statement
for the 2009 Annual Meeting of Shareholders is incorporated herein by
reference. The information set forth under the caption Executive Officers of the Registrant in
Part I, Item 1 of this Form 10-K is incorporated herein by reference.

We have
adopted a Code of Business Conduct for our principal executive officer,
principal financial officer, principal accounting officer, corporate controller
and all other employees. We have made our Code of Business Conduct available on
our website (http://www.sjm.com) under the Our
Company  About St. Jude Medical  Corporate Governance section and
it is available in print to any shareholder who submits a request to St. Jude
Medical, Inc., One St. Jude Medical Drive, St. Paul, Minnesota 55117,
Attention: Corporate Secretary. We intend to satisfy the disclosure requirement
under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a
provision of our Code of Business Conduct by posting such information on our
website at the web address and location specified above. Information included
on our website is not deemed to be incorporated into this Form 10-K.

|         |                       
|-------- | ----------------------
|Item 11. | EXECUTIVE COMPENSATION

The
information set forth under the captions Compensation
of Directors, Executive Compensation and Compensation Committee Interlocks and
Insider Participation in St. Jude Medicals Proxy Statement for the
2009 Annual Meeting of Shareholders is incorporated herein by reference.

|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
 RELATED STOCKHOLDER
 MATTERS

The
information set forth under the captions Share
Ownership of Management and Directors and Certain Beneficial Owners
in St. Jude Medicals Proxy Statement for the 2009 Annual Meeting of
Shareholders is incorporated herein by reference.

|         |                                                                           
|-------- | --------------------------------------------------------------------------
|Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
 INDEPENDENCE

The
information set forth under the captions Related
Person Transactions and Director Independence and Audit Committee Financial
Literacy and Expertise in St. Jude Medicals Proxy Statement for the
2009 Annual Meeting of Shareholders is incorporated herein by reference.

|         |                                       
|-------- | --------------------------------------
|Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES

The
information set forth under the caption Proposal
to Ratify the Appointment of Independent Registered Public Accounting Firm
in St. Jude Medicals Proxy Statement for the 2009 Annual Meeting of
Shareholders is incorporated herein by reference.

23

---

Table of Contents

PART IV

|         |                                           
|-------- | ------------------------------------------
|Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

|    |                                               
|--- | ----------------------------------------------
|(a) | List of documents filed as part of this Report

| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------
| | (1) | Financial Statements                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     | The
 following Consolidated Financial Statements of St. Jude Medical and Reports
 of Independent Registered Public Accounting Firm as set forth in the
 Financial Report included in St. Jude Medicals 2008 Annual Report to
 Shareholders are incorporated herein by reference from Exhibit 13 attached
 hereto:
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                    | Reports of
 Independent Registered Public Accounting Firm                                                                       
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                    | Consolidated
 Statements of Earnings  Fiscal Years ended January 3, 2009, December 29,
 2007, and December 30, 2006            
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                    | Consolidated
 Balance Sheets  January 3, 2009 and December 29, 2007                                                            
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                    | Consolidated
 Statements of Shareholders Equity  Fiscal Years ended January 3, 2009,
 December 29, 2007, and December 30, 2006
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                    | Consolidated
 Statements of Cash Flows  Fiscal Years ended January 3, 2009, December 29,
 2007, and December 30, 2006          
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                    | Notes to the
 Consolidated Financial Statements                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| | (2) | Financial Statement Schedules                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     | Schedule II
  Valuation and Qualifying Accounts, is filed as part of this Form 10-K (see
 Item 15(c)).                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     | All other
 financial statement schedules not listed above have been omitted because the
 required information is included in the Consolidated Financial Statements or
 Notes thereto, or is not applicable.                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| | (3) | Exhibits                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                    |                                                                                                                                 
| |     | Pursuant to
 Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining
 the rights of holders of certain long-term debt of St. Jude Medical are not
 filed, and in lieu thereof, we agree to furnish copies thereof to the SEC
 upon request.                                                 



|        |  |                                                                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Exhibit Index                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                  
|2.3     |  | Agreement
 and Plan of Merger between St. Jude Medical, Inc. and Advanced
 Neuromodulation Systems, Inc., dated as of October 15, 2005, is incorporated
 by reference to Exhibit 2.1 of St. Jude Medicals Current Report on Form 8-K
 filed on October 17, 2005.
|        |  |                                                                                                                                                                                                                                                                  
|3.1     |  | Articles of
 Incorporation, as amended on May 9, 2008, are incorporated by reference to
 Exhibit 3.1 of St. Jude Medicals Quarterly Report on Form 10-Q for the
 quarter ended June 28, 2008.                                                                   
|        |  |                                                                                                                                                                                                                                                                  
|3.2     |  | Bylaws, as
 amended and restated as of February 25, 2005, are incorporated by reference
 to Exhibit 3.1 of St. Jude Medicals Current Report on Form 8-K filed on
 March 2, 2005.                                                                                
|        |  |                                                                                                                                                                                                                                                                  
|4.1     |  | Indenture,
 dated as of December 12, 2005, between St. Jude Medical, Inc. and U.S. Bank
 National Association, as trustee, is incorporated by reference to Exhibit 4.1
 of St. Jude Medicals Current Report on Form 8-K filed on December 12, 2005.             

24

---

Table of Contents

|        |  |                                                                                                                                                                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Exhibit Index                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                  
|4.2     |  | Indenture
 between St. Jude Medical, Inc. and U.S. Bank National Association, as
 trustee, dated as of April 25, 2007 (including form of Convertible Debenture
 due 2008), is incorporated by reference to Exhibit 4.1 to St. Jude Medicals
 Current Report on Form 8-K filed on April 25, 2007.
|        |  |                                                                                                                                                                                                                                                                                                  
|4.3     |  | Registration
 Rights Agreement between St. Jude Medical, Inc. and Banc of America
 Securities LLC, dated as of April 25, 2007, is incorporated by reference to
 Exhibit 4.2 to St. Jude Medicals Current Report on Form 8-K filed on April
 25, 2007.                                           
|        |  |                                                                                                                                                                                                                                                                                                  
|10.1    |  | Form of
 Indemnification Agreement that St. Jude Medical, Inc. has entered into with
 officers and directors is incorporated by reference to Exhibit 10(d) of St.
 Jude Medicals Annual Report on Form 10- K for the year ended December 31,
 1986. *                                           
|        |  |                                                                                                                                                                                                                                                                                                  
|10.2    |  | St. Jude
 Medical, Inc. Management Incentive Compensation Plan is incorporated by
 reference to Appendix B of St. Jude Medicals Proxy Statement on Schedule 14A
 filed on April 7, 2004. *                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                  
|10.3    |  | St. Jude
 Medical, Inc. Management Savings Plan, restated effective January 1, 2008, is
 incorporated by reference to Exhibit 10.1 of St. Jude Medicals Current
 Report on Form 8-K filed on October 29, 2008. *                                                                                
|        |  |                                                                                                                                                                                                                                                                                                  
|10.4    |  | Retirement
 Plan for members of the Board of Directors, as amended on March 15, 1995, is
 incorporated by reference to Exhibit 10.6 of St. Jude Medicals Annual Report
 on Form 10-K for the year ended December 31, 1994. *                                                                    
|        |  |                                                                                                                                                                                                                                                                                                  
|10.5    |  | St. Jude
 Medical, Inc. 2000 Employee Stock Purchase Savings Plan is incorporated by
 reference to Exhibit 10.10 to St. Jude Medicals Annual Report on Form 10-K
 for the year ended December 31, 2001. *                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                  
|10.6    |  | Amendment
 No. 1, dated as of August 3, 2006, to the St. Jude Medical, Inc. 2000
 Employee Stock Purchase Savings Plan is incorporated by reference to Exhibit
 10.5 of St. Jude Medicals Quarterly Report on Form 10-Q for the quarter
 ended September 30, 2006. *                            
|        |  |                                                                                                                                                                                                                                                                                                  
|10.7    |  | St. Jude
 Medical, Inc. 2007 Employee Stock Purchase Plan is incorporated by reference
 to Exhibit 10.4 to St. Jude Medicals Current Report on Form 8-K filed on May
 18, 2007. *                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                  
|10.8    |  | St. Jude
 Medical, Inc. 1994 Stock Option Plan is incorporated by reference to Exhibit
 4(a) of St. Jude Medicals Registration Statement on Form S-8 filed July 1,
 1994 (Commission File No. 33-54435). *                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                  
|10.9    |  | Amendment,
 dated as of October 23, 2008, to the St. Jude Medical, Inc. 1994 Stock Option
 Plan is incorporated by reference to Exhibit 10.1 of St. Jude Medicals
 Quarterly Report on Form 10-Q for the quarter ended September 27, 2008. *                                                    
|        |  |                                                                                                                                                                                                                                                                                                  
|10.10   |  | St. Jude
 Medical, Inc. 1997 Stock Option Plan is incorporated by reference to Exhibit
 4.1 of St. Jude Medicals Registration Statement on Form S-8 filed December
 22, 1997 (Commission File No. 333- 42945). *                                                                                
|        |  |                                                                                                                                                                                                                                                                                                  
|10.11   |  | Amendment,
 dated as of October 23, 2008, to the St. Jude Medical, Inc. 1997 Stock Option
 Plan is incorporated by reference to Exhibit 10.2 of St. Jude Medicals
 Quarterly Report on Form 10-Q for the quarter ended September 27, 2008. *                                                    
|        |  |                                                                                                                                                                                                                                                                                                  
|10.12   |  | St. Jude
 Medical, Inc. 2000 Stock Plan, as amended, is incorporated by reference to
 Exhibit 10.4 of St. Jude Medicals Quarterly Report on Form 10-Q for the
 quarter ended June 30, 2006. *                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                  
|10.13   |  | Amendment,
 dated as of October 23, 2008, to the St. Jude Medical, Inc. 2000 Stock Plan
 is incorporated by reference to Exhibit 10.3 of St. Jude Medicals Quarterly
 Report on Form 10-Q for the quarter ended September 27, 2008. *                                                           
|        |  |                                                                                                                                                                                                                                                                                                  
|10.14   |  | St. Jude
 Medical, Inc. 2002 Stock Plan, as amended, is incorporated by reference to
 Exhibit 10.5 of St. Jude Medicals Quarterly Report on Form 10-Q for the
 quarter ended June 30, 2006. *                                                                                                   

25

---

Table of Contents

|        |  |                                                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Exhibit Index                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                             
|10.15   |  | Amendment,
 dated as of October 23, 2008, to the St. Jude Medical, Inc. 2002 Stock Plan
 is incorporated by reference to Exhibit 10.4 of St. Jude Medicals Quarterly
 Report on Form 10-Q for the quarter ended September 27, 2008. *                                                                      
|        |  |                                                                                                                                                                                                                                                                                                             
|10.16   |  | Form of
 Non-Qualified Stock Option Agreement under the St. Jude Medical, Inc. 2002
 Stock Plan, as amended, is incorporated by reference to Exhibit 10.14 of St.
 Jude Medicals Annual Report on Form 10-K for the year ended December 31,
 2004. *                                                       
|        |  |                                                                                                                                                                                                                                                                                                             
|10.17   |  | St. Jude
 Medical, Inc. 2006 Stock Plan is incorporated by reference to Exhibit 10.1 to
 St. Jude Medicals Current Report on Form 8-K filed on May 16, 2006. *                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                             
|10.18   |  | Amendment,
 dated as of October 23, 2008, to the St. Jude Medical, Inc. 2006 Stock Plan
 is incorporated by reference to Exhibit 10.5 of St. Jude Medicals Quarterly
 Report on Form 10-Q for the quarter ended September 27, 2008. *                                                                      
|        |  |                                                                                                                                                                                                                                                                                                             
|10.19   |  | Form of
 Non-Qualified Stock Option Agreement for Non-Employee Directors under the St.
 Jude Medical, Inc. 2006 Stock Plan is incorporated by reference to Exhibit
 10.2 to St. Jude Medicals Current Report on Form 8-K filed on May 16, 2006.
 *                                                         
|        |  |                                                                                                                                                                                                                                                                                                             
|10.20   |  | Form of
 Non-Qualified Stock Option Agreement for Employees under the St. Jude
 Medical, Inc. 2006 Stock Plan is incorporated by reference to Exhibit 10.4 of
 St. Jude Medicals Quarterly Report on Form 10-Q for the quarter ended
 September 30, 2006. *                                                
|        |  |                                                                                                                                                                                                                                                                                                             
|10.21   |  | St. Jude
 Medical, Inc. 2007 Stock Incentive Plan, as amended (2008), is incorporated
 by reference to Exhibit 10.1 to St. Jude Medicals Current Report on Form 8-K
 filed on May 12, 2008. *                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                             
|10.22   |  | Amendment,
 dated as of October 23, 2008, to the St. Jude Medical, Inc. 2007 Stock
 Incentive Plan is incorporated by reference to Exhibit 10.6 of St. Jude
 Medicals Quarterly Report on Form 10-Q for the quarter ended September 27,
 2008. *                                                           
|        |  |                                                                                                                                                                                                                                                                                                             
|10.23   |  | Form of
 Non-Qualified Stock Option Agreement and related Notice of Non-Qualified
 Stock Option Grant under the St. Jude Medical, Inc. 2007 Stock Incentive
 Plan, is incorporated by reference to Exhibit 10.2 to St. Jude Medicals
 Current Report on Form 8-K filed on May 18, 2007. *                  
|        |  |                                                                                                                                                                                                                                                                                                             
|10.24   |  | Form of
 Restricted Stock Award Agreement and related Restricted Stock Award
 Certificate under the St. Jude Medical, Inc. 2007 Stock Incentive Plan, is
 incorporated by reference to Exhibit 10.3 to St. Jude Medicals Current
 Report on Form 8-K filed on May 18, 2007. *                              
|        |  |                                                                                                                                                                                                                                                                                                             
|10.25   |  | St. Jude
 Medical, Inc. Amended and Restated 1995 Stock Option Plan (formerly the Quest
 Medical, Inc. 1995 Stock Option Plan) is incorporated by reference to Exhibit
 10.12 of St. Jude Medicals Annual Report on Form 10-K for the year ended
 December 31, 2005. *                                     
|        |  |                                                                                                                                                                                                                                                                                                             
|10.26   |  | St. Jude
 Medical, Inc. Amended and Restated 1998 Stock Option Plan (formerly the Quest
 Medical, Inc. 1998 Stock Option Plan) is incorporated by reference to Exhibit
 10.13 of St. Jude Medicals Annual Report on Form 10-K for the year ended
 December 31, 2005. *                                     
|        |  |                                                                                                                                                                                                                                                                                                             
|10.27   |  | St. Jude
 Medical, Inc. Amended and Restated 2000 Stock Option Plan (formerly the
 Advanced Neuromodulation Systems, Inc. 2000 Stock Option Plan) is
 incorporated by reference to Exhibit 10.14 of St. Jude Medicals Annual
 Report on Form 10-K for the year ended December 31, 2005. *                  
|        |  |                                                                                                                                                                                                                                                                                                             
|10.28   |  | St. Jude
 Medical, Inc. Amended and Restated 2001 Employee Stock Option Plan (formerly
 the Advanced Neuromodulation Systems, Inc. 2001 Employee Stock Option Plan)
 is incorporated by reference to Exhibit 10.15 of St. Jude Medicals Annual
 Report on Form 10-K for the year ended December 31, 2005. *
|        |  |                                                                                                                                                                                                                                                                                                             
|10.29   |  | St. Jude
 Medical, Inc. Amended and Restated 2002 Stock Option Plan (formerly the
 Advanced Neuromodulation Systems, Inc. 2002 Stock Option Plan) is
 incorporated by reference to Exhibit 10.16 of St. Jude Medicals Annual
 Report on Form 10-K for the year ended December 31, 2005. *                  

26

---

Table of Contents

|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Exhibit Index                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.30   |  | St. Jude
 Medical, Inc. Amended and Restated 2004 Stock Incentive Plan (formerly the
 Advanced Neuromodulation Systems, Inc. 2004 Stock Incentive Plan) is
 incorporated by reference to Exhibit 10.17 of St. Jude Medicals Annual
 Report on Form 10-K for the year ended December 31, 2005. *                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.31   |  | Form of
 Severance Agreement between St. Jude Medical, Inc. and executive officers is
 incorporated by reference to Exhibit 10.1 to St. Jude Medicals Current
 Report on Form 8-K filed on January 7, 2009. *                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.32   |  | Employment
 Agreement, dated as of April 1, 2002, between Advanced Neuromodulation
 Systems, Inc. and Christopher G. Chavez is incorporated by reference to
 Exhibit 10.16 of Advanced Neuromodulation Systems Quarterly Report on Form
 10-Q for the quarter ended March 31, 2002. *                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.33   |  | Amendment,
 dated as of July 27, 2006, between Advanced Neuromodulation Systems, Inc. and
 Christopher G. Chavez, to Employment Agreement, effective as of April 1,
 2002, between Advanced Neuromodulation Systems, Inc. and Christopher G.
 Chavez is incorporated by reference to Exhibit 10.2 to St. Jude Medicals
 Current Report on Form 8-K filed on August 2, 2006. *
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.34   |  | Consulting
 Agreement, dated as of November 30, 2007, between St. Jude Medical, Inc. and
 Michael J. Coyle is incorporated by reference to Exhibit 10.27 of St. Jude
 Medicals Annual Report on Form 10-K for the year ended December 29, 2007. *                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.35   |  | Stock
 Purchase Plan Engagement Agreement between St. Jude Medical, Inc. and Banc of
 America Securities LLC, dated as of April 21, 2006, is incorporated by
 reference to Exhibit 10.1 to St. Jude Medicals Current Report on Form 8-K
 filed on April 21, 2006.                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.36   |  | Stock
 Purchase Plan Engagement Agreement between St. Jude Medical, Inc. and Banc of
 America Securities LLC, dated as of January 29, 2007, is incorporated by
 reference to Exhibit 10.1 to St. Jude Medicals Current Report on Form 8-K
 filed on January 29, 2007.                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.37   |  | Purchase
 Agreement between St. Jude Medical, Inc. and Banc of America Securities LLC,
 dated as of April 19, 2007, is incorporated by reference to Exhibit 10.1 to
 St. Jude Medicals Current Report on Form 8-K filed on April 25, 2007.                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.38   |  | Confirmation
 of OTC Convertible Note Hedge, effective April 25, 2007, is incorporated by
 reference to Exhibit 10.2 to St. Jude Medicals Current Report on Form 8-K
 filed on April 25, 2007.                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.39   |  | Confirmation
 of OTC Warrant Transaction, effective April 25, 2007, is incorporated by
 reference to Exhibit 10.3 to St. Jude Medicals Current Report on Form 8-K
 filed on April 25, 2007.                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.40   |  | Stock
 Purchase Plan Engagement Agreement between St. Jude Medical, Inc. and Banc of
 America Securities LLC, dated as of April 25, 2007, is incorporated by
 reference to Exhibit 10.4 to St. Jude Medicals Current Report on Form 8-K
 filed on April 25, 2007.                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.41   |  | Settlement
 Agreement, dated as of July 29, 2006, by and between St. Jude Medical, Inc.
 and its affiliates named therein and Boston Scientific Corporation and its
 affiliates named therein is incorporated by reference to Exhibit 10.3 of St.
 Jude Medicals Quarterly Report on Form 10-Q for the quarter ended September
 30, 2006.                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.42   |  | CRM License
 Agreement, effective as of July 29, 2006, between St. Jude Medical, Inc. and
 Boston Scientific Corporation is incorporated by reference to Exhibit 10.6 of
 St. Jude Medicals Quarterly Report on Form 10-Q for the quarter ended
 September 30, 2006.                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.43   |  | SCS License
 Agreement, effective as of July 29, 2006, between St. Jude Medical, Inc. and
 Boston Scientific Corporation is incorporated by reference to Exhibit 10.7 of
 St. Jude Medicals Quarterly Report on Form 10-Q for the quarter ended
 September 30, 2006.                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                               
|10.44   |  | Settlement
 Agreement, dated as of June 26, 2007, by and between St. Jude Medical, Inc.
 and its affiliates named therein and Mirowski Family Ventures LLC is
 incorporated by reference to Exhibit 10.9 of St. Jude Medicals Quarterly
 Report on Form 10-Q for the quarter ended June 30, 2007.                                                                            

27

---

Table of Contents

|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Exhibit Index                                                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|10.45   |  | Multi-Year
 $1,000,000,000 Credit Agreement dated as of December 13, 2006 among St. Jude
 Medical, Inc., as the Borrower, Bank of America, N.A., as Administrative
 Agent, L/C Issuer and Lender, and the other Lenders Party thereto is
 incorporated by reference to Exhibit 10.1 to St. Jude Medicals Current
 Report on Form 8-K filed on December 13, 2006.
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|10.46   |  | Credit
 Agreement dated as of December 18, 2008 among St. Jude Medical, Inc., as the
 Borrower, Bank of America, N.A., as Administrative Agent and Lender, and the
 other Lenders party thereto, is incorporated by reference to Exhibit 10.1 to
 St. Jude Medicals Current Report on Form 8-K filed on December 24, 2008.                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|12      |  | Computation
 of Ratio of Earnings to Fixed Charges. #                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|13      |  | Portions of
 St. Jude Medicals 2008 Annual Report to Shareholders. #                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|21      |  | Subsidiaries
 of the Registrant. #                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|23      |  | Consent of
 Independent Registered Public Accounting Firm. #                                                                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|24      |  | Power of
 Attorney. #                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|31.1    |  | Certification
 of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002. #                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|31.2    |  | Certification
 of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002. #                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|32.1    |  | Certification
 of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
 of 2002. #                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                  
|32.2    |  | Certification
 of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
 of 2002. #                                                                                                                                                                                                                                                          

|  |                                                           | 
|- | --------------------------------------------------------- | 
|  |                                                          
|* | Management
 contract or compensatory plan or arrangement.
|# | Filed as an
 exhibit to this Annual Report on Form 10-K. 

28

---

Table of Contents

|    |                                                 
|--- | ------------------------------------------------
|(b) | Exhibits:   Reference is made
 to Item 15(a)(3).
|    |                                                 
|(c) | Schedules:                                      

SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS
(In thousands)

|                                  |  |                                |                     |           |   |                |  |           |     |  |                         |         |   |   |      |   |   |        | 
|--------------------------------- |  | ------------------------------ | ------------------- | --------- | - | -------------- |  | --------- | --- |  | ----------------------- | ------- | - | - | ---- | - | - | ------ | 
|                                  |  | Balance
 at Beginning
 of Year |                     | Additions |   | Deductions     |  |           |    
|                                  |  |                                | Charged to
 Expense |           |   |                |  |           |     |  | Balance at
 End of Year |        
|Description                       |  |                                |                     | Other (1) |   | Write-offs (2) |  | Other (3) |     | 
|                                  |  |                                |                     |           |   |                |  |           |     |  |                         |         |   |   |      |   |   |        | 
|Allowance for doubtful
 accounts: |  |                                |                     |           |   |                |  |           |     |  |                         |         |   |   |      |  
|Fiscal year ended                 |  |                                |                     |           |   |                |  |           |     |  |                         |         |   |   |      |   |   |        | 
|January 3, 2009                   |  | $                              | 26,652              |           | $ | 9,569          |  | $         |    |  | $                       | (6,275  | ) | $ | (975 | ) | $ | 28,971 | 
|December 29, 2007                 |  | $                              | 24,928              |           | $ | 6,939          |  | $         |    |  | $                       | (4,648  | ) | $ | (567 | ) | $ | 26,652 | 
|December 30, 2006                 |  | $                              | 33,319              |           | $ | 2,037          |  | $         | 563 |  | $                       | (10,991 | ) | $ |     |   | $ | 24,928 | 

|    |                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 2006, the
 $563 of other additions represents the effects of changes in foreign currency
 translation.                                
|    |                                                                                                                                          
|(2) | Uncollectible
 accounts written off, net of recoveries.                                                                                  
|    |                                                                                                                                          
|(3) | In 2008 and
 2007 the $975 and $567, respectively, of other deductions represent the
 effects of changes in foreign currency translation.

29

---

Table of Contents

SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|      |                    |                         |                                                      | 
|----- | ------------------ | ----------------------- | ---------------------------------------------------- | 
|      |                    | ST. JUDE
 MEDICAL, INC. |                                                     
|      |                    |                         |                                                      | 
|Date: | February 27,
 2009 | By                      | /s/ DANIEL
 J. STARKS                                | 
|      |                    |                         | Daniel J.
 Starks                                    | 
|      |                    |                         | Chairman, President and Chief Executive Officer      | 
|      |                    |                         | (Principal Executive Officer)                        | 
|      |                    |                         |                                                      | 
|      |                    | By                      | /s/ JOHN C.
 HEINMILLER                              | 
|      |                    |                         | John C.
 Heinmiller                                  | 
|      |                    |                         | Executive Vice President and Chief Financial Officer | 
|      |                    |                         | (Principal Financial and Accounting Officer)         | 

Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated, on the 27th day of February, 2009.

|                       |  |                       
|---------------------- |  | ----------------------
|/s/ DANIEL
 J. STARKS  |  | Chairman of
 the Board
|Daniel J.
 Starks      |  |                       
|                       |  |                       
|*                      |  | Director              
|John W.
 Brown         |  |                       
|                       |  |                       
|*                      |  | Director              
|Richard R.
 Devenuti   |  |                       
|                       |  |                       
|*                      |  | Director              
|Stuart M.
 Essig       |  |                       
|                       |  |                       
|*                      |  | Director              
|Thomas H.
 Garrett III |  |                       
|                       |  |                       
|*                      |  | Director              
|Barbara B.
 Hill       |  |                       
|                       |  |                       
|*                      |  | Director              
|Michael A.
 Rocca      |  |                       
|                       |  |                       
|*                      |  | Director              
|Stefan K.
 Widensohler |  |                       
|                       |  |                       
|*                      |  | Director              
|Wendy L.
 Yarno        |  |                       

|      |                   
|----- | ------------------
|* By: | /s/ PAMELA S. KROP
|      | Pamela S. Krop    
|      | Attorney-in-Fact  

30

---