Document:

9

                                                                   EXHIBIT 10.18

                               SEVERANCE AGREEMENT

         This agreement is made as of the 26th day of March, 2001, between St.
Jude Medical, Inc., a Minnesota corporation, with its principal offices at St.
Paul, Minnesota (the "Company") and ___________ ("Executive"), residing at
__________________________________.

                                WITNESSETH THAT:

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

         WHEREAS, this Agreement is intended to replace and supersede the
existing Employment Agreement between the Company and Executive dated as of
____________ relating to payments to be made to Executive upon a change in
control of the Company (the "Prior Agreement"); and

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

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

         1. Term of Agreement. The term of this Agreement shall commence on the
date hereof as first written above and shall continue through January 1, 2003;
provided that commencing on January 1, 2003 and each January 1st thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless not later than December 31 of the preceding year, the Company shall have
given notice that it does not wish to extend this Agreement; and provided,
further, that notwithstanding any such notice by the Company not to extend, this
Agreement shall continue in effect for a period of 36 months beyond the term
provided herein if a Change in Control (as defined in Section 3(i) hereof) shall
have occurred during such term.

         2. Termination of Employment.

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

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         (ii) After a Change in Control.

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

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

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

         3. Definitions.

         (i) A "Change in Control" shall mean:

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

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

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

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

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

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

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

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

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

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

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

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

         (iv) "Disability" shall mean that, as a result of incapacity due to
physical or mental illness, Executive shall have been absent from the full-time
performance of Executive's duties

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

         (v) "Retirement" shall mean termination on or after attaining normal
retirement age in accordance with the Company's Profit Sharing Executive Savings
Plan and Trust.

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

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

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

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

              (b) In lieu of any further salary payments for periods subsequent
to the date the termination of Executive's employment became effective, the
Company shall pay a severance payment in an amount equal to three times
Executive's Annual Compensation, as defined below. For purposes of this Section
4, "Annual Compensation" shall mean Executive's annual salary (regardless of
whether all or any portion of such salary has been contributed to a deferred
compensation plan), the annual amount of Executive's Perk Package, the target
bonus for which Executive is eligible upon attainment of 100% of the target
(regardless of whether

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such target bonus has been achieved or whether conditions of such target bonus
are actually fulfilled), and any other type or form of compensation paid to
Executive by the Company (or any entity affiliated with the Company
("Affiliate") within the meaning of Section 1504 of the Internal Revenue Code of
1986, as may be amended from time to time (the "Code")) and included in
Executive's gross income for federal tax purposes during the twelve month period
ending immediately prior to the date that the termination of Executive's
employment became effective but reduced by: (i) any amount actually paid to
Executive as a cash payment of the target bonus (regardless of whether all or
any portion of such target bonus was contributed to a deferred compensation
plan); (ii) compensation income recognized as a result of the exercise of stock
options or sale of the stock so acquired; and (iii) any payments actually or
constructively received from a plan or arrangement of deferred compensation
between the Company and Executive. All of the factors included in Annual
Compensation shall be those in effect on the date that the termination of
Executive's employment became effective and shall be calculated without giving
effect to any reduction in such compensation that would constitute a breach of
this Agreement.

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

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

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

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

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

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

         (iii) Any payment not made to Executive when due hereunder shall
thereafter, until paid in full, bear interest at the rate of interest equal to
the reference rate announced from time to

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time by Wells Fargo Bank Minnesota, National Association, plus two percent, with
such interest to be paid to Executive upon demand or monthly in the absence of a
demand.

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

         5. Executive's Agreements.

            Executive agrees that:

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

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

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

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

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

         6. Successors and Binding Agreement.

         (i) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise to all or substantially all of
the business and/or assets of the Company), by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a

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breach of this Agreement and shall entitle Executive to compensation from the
Company in the same amount and on the same terms as Executive would be entitled
hereunder if Executive terminated employment after a Change in Control for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date that the
termination of Executive's employment becomes effective. As used in this
Agreement, "Company" shall mean the Company and any successor to its business
and/or assets which executes and delivers the agreement provided for in this
Section 6(i) or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.

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

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

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

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

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

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

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

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

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

                                              ST. JUDE MEDICAL, INC.

                                              By
                                                --------------------------------
                                               Its
                                                  ------------------------------

                                              EXECUTIVE

                                              ----------------------------------

                                       9EXHIBIT 10.19

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT
                    -----------------------------------------

         THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
made effective as of the 25th day of March, 2001, by and between St. Jude
Medical, Inc., a Minnesota corporation with its principal place of business at
Lillihei Plaza, Little Canada, Minnesota (the "Company"), and Terry L. Shepherd,
an individual residing at 1370 Meadow Avenue, Shoreview, Minnesota (the
"Executive") and amends and restates the EMPLOYMENT AGREEMENT dated May 5, 1999
between the Company and Executive.

                                    RECITALS

         Prior to the original EMPLOYMENT AGREEMENT Executive was employed by
the Company in the capacity of President, Heart Valve Division. The Company
desires to continue the employ the Executive, due to his certain unique skills,
talents, contacts, judgment and knowledge of the Company's business, strategies,
ethics and objectives and the Executive desires to be employed by the Company.
In consideration of the mutual covenants and promises contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the parties agree as follows:

         1. Term of Employment. The Term of this Agreement shall commence on the
date hereof and, subject to the further provisions of this Agreement, shall end
on the 4th day of May, 2004.

         2. Title; Capacity. The Executive shall serve as President and Chief
Executive Officer of the Company or in such other position as the Company's
Board of Directors (the "Board") may determine from time to time. The Executive
shall be subject to the supervision of, shall report directly to, and shall have
such authority as is delegated to him by, the Board of Directors.

            The Executive shall be responsible for all operations of the Company
and all administrative functions, including strategic planning, annual profit
planning, diversification (M&A), public relations and investor relations. The
following functions and units shall report to the Executive: CRMD, Heart Valve
Division, International, Administration, Legal, Finance, Corporate
Communications, Business Development and Information Systems. Executive shall,
if appointed or elected to the Company's Board of Directors, serve as a member
at no additional compensation.

            The Executive hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Executive agrees to devote his entire business
time, attention and energies to the business and interests of the Company (and
its affiliates as required by the Company's investments and the Executive's
positions therein) during the Employment Period. The Executive agrees to abide
by the rules, regulations, instructions, personnel practices and policies of the
Company and any changes therein which may be adopted from time to time. The
Executive acknowledges receipt of copies of all such rules and policies
committed to writing as of the date of this Agreement.

<PAGE>

         3. Compensation and Benefits.

            a. Salary. The Company shall pay the Executive an annual base salary
of $500,000.00 for the one-year period commencing on the Commencement Date in
the same intervals as other exempt employers. Such salary shall be subject to
annual increases thereafter as determined by the Board, in its sole discretion.

            b. Bonus. The Executive's target bonus under the MICP shall be 100%
of base salary (and shall be prorated for 1999).

            c. Perk Package. The Executive shall be eligible for the Company's
executive perk package at the level of $26,000.

            d. Fringe Benefits. The Executive shall be entitled to participate
in all bonus and benefit programs that the Company establishes and makes
available to its Executives, if any, to the extent that Executive's position,
tenure, salary, age, health and other qualifications make him eligible to
participate.

            e. Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
or paid by the Executive in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement, upon presentation
by the Executive of documentation, expense statements, vouchers and/or such
other supporting information in accordance with standard company policies.

            f. Stock Options. Under separate agreement, the Executive is being
granted a non-qualified stock option to purchase 200,000 shares of stock,
vesting at the rate of 20% per year for five years and another non-qualified
stock option to purchase 200,000 shares which will vest based upon performance
criteria.

         4. Employment Termination. The employment of the Executive by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:

            a. Expiration of the Employment Period in accordance with Section 1;

            b. At the election of the Company, for "Cause", immediately upon
written notice by the Company to the Executive. "Cause" for such termination
shall include, but not limited to, the following:

               i. Dishonesty of the Executive with respect to the Company;

               ii. Willful misfeasance or nonfeasance of duty intended to injure
or having the effect of injuring the reputation, business or business
relationships of the Company or its respective officers, directors or
Executives;

               iii. Upon a charge by a governmental entity against the Executive
of any crime involving moral turpitude which is demonstrably and materially
injurious to the

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Company or upon the filing of any civil action involving a charge of
embezzlement, theft, fraud or other similar act which is demonstrably and
materially injurious to the Company;

               iv. Willful or prolonged absence from work by the Executive
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Executive to perform his duties and
responsibilities without the same being corrected upon ten (10) days prior
written notice; or

               v. Breach by the Executive of any of the covenants contained in
this Agreement.

            c. Immediately upon the death or disability of the Executive. As
used in this Agreement, the term "disability" shall mean the inability of the
Executive, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360 day period to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician to the Company.

            d. At the election of the Company or the Executive, with or without
cause upon 90 days written notice by one party to the other.

         5. Effect of Termination.

            a. Termination for Cause or at Election of Either Party. In the
event the Executive's employment is terminated at the election of the Company
pursuant to Section 4(d), the Company shall immediately pay to the Executive an
amount equal to the two times the Executive's then current salary and two times
the Executive's then current target bonus.

            b. Termination for Death or Disability. If the Executive's
employment is terminated by death or because of disability pursuant to Section
4(c), the Company shall pay to the estate of the Executive or to the Executive,
as the case may be, the compensation which would otherwise be payable to the
Executive up to the end of the month in which the termination of his employment
because of death or disability occurs.

            c. Terminate for Cause or Voluntary. In the event a termination for
cause pursuant to Section 4(b) or by the voluntary resignation of Executive
pursuant to Section 4(d), then no further compensation other than that already
accrued shall be due to Executive under this Agreement.

            d. In the event Executive is entitled to, and actually receives the
full compensation he is entitled to, under the separate SEVERANCE AGREEMENT
dated the same date as this Agreement, then, notwithstanding the previous
subsections of Section 5, the Company shall have no additional obligation to
make a payment to Executive under Section 5 of this Agreement.

         6. Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at

                                       3
<PAGE>

the address shown above, or at such other address or addresses as either party
shall designate to the other in accordance with this Section 9.

         7. Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.

         8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.

         9. Other Agreements. This Agreement is intended to supplement and not
replace the following other agreements between the Executive and the Company:
Non-Disclosure and Non-Competition Agreement, Indemnification Agreement,
Severance Agreement (Change of Control), all previous stock option grants, 2001
MICP and other employment benefits arising from Executive's prior employment
with the Company.

         10. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.

         11. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Minnesota, without giving
effect to that State's conflict of laws provisions.

         12. Choice of Venue. All actions or proceedings with respect to this
Agreement shall be instituted only in any state or federal court sitting in
Ramsey County, Minnesota, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject to the jurisdiction (both
subject matter and personal) of each such court and irrevocably and
unconditionally waive: (a) any objection that the parties might now or hereafter
have to the venue of any of such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient forum.

         13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Executive are personal and shall not be assigned by him.

         14. Waiver. No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any once occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.

         15. Captions and Headings. The captions of the sections of this
Agreement are for convenience of reference only and in no way define, limit or
affect the scope or substance of any section of this Agreement.

                                       4
<PAGE>

         16. Severability. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.

         17. Counterparts. This Agreement may be executed in a number of
counterparts and all of such counterparts executed by the Company or the
Executive, shall constitute one and the same agreement, and it shall not be
necessary for all parties to execute the same counterpart hereof.

         18. Facsimile Signatures. The parties hereby agree that, for purposes
of the execution of this Agreement, facsimile signatures shall constitute
original signatures.

         19. Incorporation by Reference. The preamble and recitals to this
Agreement are hereby incorporated by reference and made a part hereof.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.

                                           ST. JUDE MEDICAL, INC.,
                                           A MINNESOTA CORPORATION

                                           /s/ FRIEDA J. VALK
                                           ------------------------------
                                           Name:  Frieda J. Valk
                                           Title: Vice President, Administration

                                           EXECUTIVE:

                                           /s/ TERRY L. SHEPHERD
                                           ------------------------------
                                           Name:  Terry L. Shepherd
                                           Title: Chairman/CEO

                                       5

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