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Employment Agreement - St. Jude Medical Inc. and Terry L. Shepherd

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the 'Agreement') is made effective as of the
5th day of May, 1999, 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 [ADDRESS OMITTED] (the 'Executive').


         Executive is presently 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.

         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

                  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

         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

                       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

                       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 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.

         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 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 and 1998
Restated Employment Agreement (Change of Control).

         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.

         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/ R. A. MATRICARIA
                                        NAME:  RONALD A. MATRICARIA
                                        TITLE: CHAIRMAN/CEO


                                        /s/ T. L. SHEPHERD

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