10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007 OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________.

Commission File Number 0-8672

___________________________

ST. JUDE MEDICAL, INC.

(Exact name of registrant as specified in its charter)

MINNESOTA
(State or other jurisdiction
of incorporation or organization) 41-1276891
(I.R.S. Employer
Identification No.)

One Lillehei Plaza, St. Paul, Minnesota 55117

(Address of principal executive offices, including zip code)

(651) 483-2000

(Registrant’s telephone number, including area code)

_________________

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x   Accelerated filer o   Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o  No x  

The number of shares of common stock, par value $.10 per share, outstanding on July 31, 2007 was 339,796,163.

TABLE OF CONTENTS

ITEM	DESCRIPTION	PAGE
PART I  – FINANCIAL INFORMATION
1.	Financial Statements
	Condensed Consolidated Statements of Earnings		1
	Condensed Consolidated Balance Sheets		2
	Condensed Consolidated Statements of Cash Flows		3
	Notes to Condensed Consolidated Financial Statements
	Note 1 – Basis of Presentation		4
	Note 2 – New Accounting Pronouncements		4
	Note 3 – Goodwill and Other Intangible Assets		4
	Note 4 – Inventories		5
	Note 5 – Restructuring Activities		5
	Note 6 – Debt		6
	Note 7 – Commitments and Contingencies		7
	Note 8 – Shareholders’ Equity		12
	Note 9 – Net Earnings Per Share		13
	Note 10 – Comprehensive Income		14
	Note 11 – Other Income (Expense), Net		14
	Note 12 – Income Taxes		14
	Note 13 – Segment and Geographic Information		15
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
	Overview		17
	New Accounting Pronouncements		18
	Critical Accounting Policies and Estimates		18
	Segment Performance		18
	Results of Operations		21
	Liquidity		23
	Debt and Credit Facilities		24
	Share Repurchases		25
	Commitments and Contingencies		25
	Cautionary Statements		26
3.	Quantitative and Qualitative Disclosures About Market Risk		27
4.	Controls and Procedures		27
PART II – OTHER INFORMATION
1.	Legal Proceedings		27
1A.	Risk Factors		28
2.	Unregistered Sales of Equity Securities and Use of Proceeds		29
4.	Submission of Matters to a Vote of Security Holders		30
6.	Exhibits		31
	Signature		32
	Index to Exhibits		33

PART I	FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS

ST. JUDE MEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2007			July 1, 2006			June 30, 2007			July 1, 2006
Net sales	$	947,336		$	832,922		$	1,834,314		$	1,617,338
Cost of sales		253,023			226,964			492,000			435,411
Gross profit		694,313			605,958			1,342,314			1,181,927
Selling, general and administrative expense		348,694			301,022			677,034			585,230
Research and development expense		119,458			108,840			235,416			214,098
Special charges		35,000			—			35,000			—
Operating profit		191,161			196,096			394,864			382,599
Other income (expense), net		(10,450	)		(5,219	)		(15,618	)		(5,923	)
Earnings before income taxes		180,711			190,877			379,246			376,676
Income tax expense		45,911			49,845			98,721			98,575
Net earnings	$	134,800		$	141,032		$	280,525		$	278,101
Net earnings per share:
Basic	$	0.40		$	0.39		$	0.82		$	0.76
Diluted	$	0.39		$	0.38		$	0.79		$	0.73
Weighted average shares outstanding:
Basic		338,734			362,175			342,883			365,441
Diluted		349,567			375,141			354,422			380,069

See notes to condensed consolidated financial statements.

1

ST. JUDE MEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

	June30,2007 (Unaudited)			December30,2006
ASSETS
Current Assets
Cash and cash equivalents	$	108,261		$	79,888
Accounts receivable, less allowances for doubtful accounts of $23,994 at June 30, 2007 and $24,928 at December 30, 2006		947,529			882,098
Inventories		493,394			452,812
Deferred income taxes, net		117,572			117,330
Other		205,905			158,037
Total current assets		1,872,661			1,690,165
Property, plant and equipment at cost		1,276,998			1,161,266
Less accumulated depreciation		(592,676	)		(543,415	)
Net property, plant and equipment		684,322			617,851
Other Assets
Goodwill		1,648,930			1,649,581
Other intangible assets, net		542,455			560,276
Other		301,413			271,921
Total other assets		2,492,798			2,481,778
TOTAL ASSETS	$	5,049,781		$	4,789,794
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	181,661		$	162,954
Income taxes payable		—			121,663
Accrued expenses
Employee compensation and related benefits		223,745			217,694
Other		173,110			173,896
Total current liabilities		578,516			676,207
Long-term debt		1,656,862			859,376
Deferred income taxes, net		128,027			163,336
Other liabilities		238,603			121,888
Total liabilities		2,602,008			1,820,807
Commitments and Contingencies (Note 7)		—			—
Shareholders’ Equity
Preferred stock ($1.00 par value; 25,000,000 shares authorized; none outstanding)		—			—
Common stock ($0.10 par value; 500,000,000 shares authorized; 338,307,540 and 353,932,000 shares issued and outstanding at June 30, 2007 and December 30, 2006, respectively)		33,831			35,393
Additional paid-in capital		36,687			100,173
Retained earnings		2,311,722			2,787,092
Accumulated other comprehensive income
Cumulative translation adjustment		50,842			23,243
Unrealized gain on available-for-sale securities		14,691			23,086
Total shareholders’ equity		2,447,773			2,968,987
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,049,781		$	4,789,794

See notes to condensed consolidated financial statements.

2

ST. JUDE MEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended	June30,2007			July1,2006
OPERATING ACTIVITIES
Net earnings	$	280,525		$	278,101
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		57,916			42,753
Amortization		37,295			35,099
Gain on sale of investment		(7,929	)		—
Stock-based compensation		25,895			35,520
Excess tax benefits from stock-based compensation		(69,082	)		(24,477	)
Deferred income taxes		12,228			(4,386	)
Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable		(52,565	)		(24,721	)
Inventories		(43,515	)		(45,279	)
Other current assets		(65,451	)		(27,567	)
Accounts payable and accrued expenses		22,438			(30,755	)
Income taxes payable		56,516			11,414
Net cash provided by operating activities		254,271			245,702
INVESTING ACTIVITIES
Purchases of property, plant and equipment		(121,481	)		(138,010	)
Business acquisition payments, net of cash acquired		(9,038	)		(6,047	)
Proceeds from the sale of investment		12,929			—
Other, net		(17,669	)		(15,692	)
Net cash used in investing activities		(135,259	)		(159,749	)
FINANCING ACTIVITIES
Proceeds from exercise of stock options and stock issued		101,367			45,549
Excess tax benefits from stock-based compensation		69,082			24,477
Common stock repurchased, including related costs		(999,867	)		(700,000	)
Issuance of convertible debentures		1,200,000			—
Purchase of call options		(101,040	)		—
Proceeds from the sale of warrants		35,040			—
Borrowings under debt facilities		7,236,849			1,442,600
Payments under debt facilities		(7,633,704	)		(1,123,413	)
Net cash used in financing activities		(92,273	)		(310,787	)
Effect of currency exchange rate changes on cash and cash equivalents		1,634			5,221
Net increase (decrease) in cash and cash equivalents		28,373			(219,613	)
Cash and cash equivalents at beginning of period		79,888			534,568
Cash and cash equivalents at end of period	$	108,261		$	314,955

See notes to condensed consolidated financial statements.

3

ST. JUDE MEDICAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of St. Jude Medical, Inc. (St. Jude Medical or the Company) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements and footnotes. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended December 30, 2006 (2006 Annual Report on Form 10-K). Certain prior period reportable segment information (Notes 3 and 13) has been reclassified to conform to current year presentation.

NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS

At the beginning of its 2007 fiscal year, the Company adopted the provisions of the Financial Accounting Standards Board Interpretation Number 48, Accounting for Uncertainty in Income Taxes (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement process for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The adoption of FIN 48 did not have a material impact on the Company’s consolidated results of operations or cash flows. In accordance with the transition provisions of FIN 48, the Company recorded an $8.5 million decrease to its liability for unrecognized income tax benefits, which was recorded as an adjustment to the opening balance of retained earningsand cumulative translation adjustment, a separate component of shareholders’ equity. Additionally, in order to comply with the requirements of FIN 48, the Company reclassified its liability for unrecognized income tax benefits from current to non-current liabilities as payment is not anticipated within one year. See Note 12 for further information regarding the Company’s accounting for uncertain tax positions.

NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for each of the Company’s reportable segments (see Note 13) for the six months ended June 30, 2007 are as follows (in thousands):

	CRM/Neuro			CV/AF		Total
Balance at December 30, 2006	$	1,189,892		$	459,689	$	1,649,581
Foreign currency translation		(963	)		312		(651	)
Balance at June 30, 2007	$	1,188,929		$	460,001	$	1,648,930

4

The following table provides the gross carrying amount of other intangible assets and related accumulated amortization (in thousands):  

	June 30, 2007				December 30, 2006
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Purchased technology and patents	$	473,132	$	86,251	$	472,874	$	70,422
Customer lists and relationships		149,004		42,652		140,061		34,963
Distribution agreements		41,318		17,371		41,986		15,683
Trademarks and tradenames		23,300		2,459		23,300		1,682
Licenses and other		7,217		2,783		7,348		2,543
	$	693,971	$	151,516	$	685,569	$	125,293

NOTE 4 – INVENTORIES

The Company’s inventories consisted of the following (in thousands):

	June30,2007		December30,2006
Finished goods	$	348,052	$	315,306
Work in process		31,721		29,844
Raw materials		113,621		107,662
	$	493,394	$	452,812

NOTE 5 – RESTRUCTURING ACTIVITIES

During the third quarter of 2006, Company management performed a review of the organizational structure of the Company’s Cardiac Surgery and Cardiology divisions and its international selling organization. In August 2006, Company management approved restructuring plans to streamline its operations within its Cardiac Surgery and Cardiology divisions and combine them into one new Cardiovascular division at the beginning of the 2007 fiscal year, and implement changes in its international selling organization to enhance the efficiency and effectiveness of sales and customer service operations in certain international geographies. This strategic reorganization and operational restructuring will allow the Company to enhance operating efficiencies and increase investment in product development.

A summary of the activity relating to the restructuring accrual is as follows (in thousands):

	Employee termination costs			Inventory write-downs			Asset write-downs			Other			Total
Balance at December 31, 2005	$	—		$	—		$	—		$	—		$	—
Restructuring charges		14,710			8,694			7,361			4,062			34,827
Non-cash charges used		—			(8,694	)		(7,361	)		—			(16,055	)
Cash payments		(3,642	)		—			—			(586	)		(4,228	)
Balance at December 30, 2006	$	11,068		$	—		$	—		$	3,476		$	14,544
Cash payments		(4,589	)								(2,432	)		(7,021	)
Balance at June 30, 2007	$	6,479		$	—		$	—		$	1,044		$	7,523

5

NOTE 6 – DEBT

The Company’s total long-term debt consisted of the following (in thousands):

	June30,2007		December30,2006
Commercial paper borrowings	$	281,500	$	678,350
1.02% Yen-denominated notes		169,864		175,523
1.22% Convertible senior debentures		1,200,000		—
2.80% Convertible senior debentures		5,498		5,498
Other		—		5
Total long-term debt	$	1,656,862	$	859,376

The Company classifies all of its commercial paper borrowings as long-term debt as the Company has the ability to repay any short-term maturity with available cash from its $1.0 billion long-term, committed credit facility. During the first quarter of 2007, the Company had borrowed $350.0 million under an interim liquidity facility to finance a portion of the common stock repurchases made during that period. On April 25, 2007, this facility expired and the Company repaid the related outstanding borrowings using a portion of the proceeds from the issuance of 1.22% Convertible Senior Debentures (1.22% Convertible Debentures).

Issuance of Convertible Debt

In April 2007, the Company issued $1.2 billion aggregate principal amount of 1.22% Convertible Debentures that mature on December 15, 2008. Interest is payable on June 15 and December 15 of each year, beginning on June 15, 2007. Holders may require the Company to repurchase the 1.22% Convertible Debentures for cash upon the occurrence of certain corporate transactions, such as a change in control. Holders may convert their 1.22% Convertible Debentures at an initial conversion rate of 19.2101 shares of the Company’s common stock per $1,000 principal amount of the 1.22% Convertible Debentures (equivalent to an initial conversion price of approximately $52.06 per share) under the following circumstances: (1) during any fiscal quarter after June 30, 2007, if the closing price of the Company’s common stock is greater than 130% of the conversion price for 20 trading days during a specified period; (2) if the trading price of the 1.22% Convertible Debentures falls below a certain threshold; (3) on or after October 15, 2008; or (4) upon the occurrence of certain corporate transactions. Upon conversion, the Company is required to satisfy 100% of the principal amount of the 1.22% Convertible Debentures solely in cash, with any amounts above the principal amount to be satisfied in shares of the Company’s common stock, cash or a combination of common stock and cash, at the Company’s election. If certain corporate transactions, such as a change in control, occur on or prior to December 15, 2008, the Company will in certain circumstances increase the conversion rate by a number of additional shares of common stock or, in lieu thereof, the Company may in certain circumstances elect to adjust the conversion rate and related conversion obligation so that the 1.22% Convertible Debentures are convertible into shares of the acquiring or surviving company.

The 1.22% Convertible Debentures are unsecured and unsubordinated obligations and rank equal in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness and junior in right of payment to all of the Company’s existing and future secured debt as well as all liabilities of the Company’s subsidiaries. The 1.22% Convertible Debentures will be effectively subordinated to the claims of creditors, including trade creditors, of the Company’s subsidiaries.

In connection with the issuance of the 1.22% Convertible Debentures, the Company purchased a call option in a private transaction to receive shares of its common stock. The purchase of the call option is intended to offset potential dilution to the Company’s common stock upon potential future conversion of the 1.22% Convertible Debentures. The call option is exercisable at approximately $52.06 per share and allows the Company to receive the same number of shares and/or amount of cash from the counterparty as the Company would be required to deliver upon potential future conversion of the 1.22% Convertible Debentures. The call option terminates upon the earlier of the conversion date or maturity date of the 1.22% Convertible Debentures. The Company paid $101.0 million for the call option which was recorded as a reduction ($63.2 million, net of tax benefit) to shareholders’ equity.

6

Separately, the Company also sold warrants for approximately 23.1 million shares of its common stock in a private transaction. Over a two-month period beginning in April 2009, the Company may be required to issue shares of its common stock to the counterparty if the average price of the Company’s common stock during a defined period exceeds the warrant exercise price of approximately $60.73 per share. The Company received proceeds of $35.0 million from the sale of these warrants, which were recorded as an increase to shareholders’ equity.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Silzone® Litigation and Insurance Receivables:  In July 1997, the Company began marketing mechanical heart valves which incorporated Silzone® coating. The Company later began marketing heart valve repair products incorporating Silzone® coating. Silzone® coating was intended to reduce the risk of endocarditis, a bacterial infection affecting heart tissue, which is associated with replacement heart valve surgery. In January 2000, the Company initiated a voluntary field action for products incorporating Silzone® coating after receiving information from a clinical study that patients with a Silzone®-coated heart valve had a small, but statistically significant, increased incidence of explant due to paravalvular leak compared to patients in that clinical study with heart valves that did not incorporate Silzone® coating.

Subsequent to the Company’s voluntary field action, the Company has been sued in various jurisdictions by some patients who received a product with Silzone® coating and, as of July 20, 2007, such cases are pending in the United States, Canada, United Kingdom and France. Some of these claimants allege bodily injuries as a result of an explant or other complications, which they attribute to Silzone®-coated products. Others, who have not had their Silzone®-coated heart valve explanted, seek compensation for past and future costs of special monitoring they allege they need over and above the medical monitoring all other replacement heart valve patients receive. Some of the lawsuits seeking the cost of monitoring have been initiated by patients who are asymptomatic and who have no apparent clinical injury to date. The Company has vigorously defended against the claims that have been asserted and expects to continue to do so with respect to any remaining claims.

In 2001, the U.S. Judicial Panel on Multi-District Litigation (MDL) ruled that certain lawsuits filed in U.S. federal district court involving products with Silzone® coating should be part of MDL proceedings under the supervision of U.S. District Court Judge John Tunheim in Minnesota (the District Court). As a result, actions in federal court involving products with Silzone® coating have been and will likely continue to be transferred to the District Court for coordinated or consolidated pretrial proceedings.

The District Court ruled against the Company on the issue of preemption by finding that the plaintiffs’ causes of action were not preempted by the U.S. Food and Drug Act. The Company sought to appeal this ruling, but the appellate court determined that it would not review the ruling at that point in the proceedings.

Certain plaintiffs requested the District Court to allow some cases to proceed as class actions. The first complaint seeking class-action status was served upon the Company in April 2000 and all eight original class-action complaints were consolidated into one case by the District Court in October 2001. One proposed class in the consolidated complaint seeks injunctive relief in the form of medical monitoring. A second class in the consolidated complaint seeks an unspecified amount of monetary damages. In response to the requests of the claimants in these cases, the District Court issued several rulings concerning class action certification. The Company requested the Eighth Circuit Court of Appeals (the Eighth Circuit) to review the District Court’s class certification orders.

In October 2005, the Eighth Circuit issued a decision reversing the District Court’s class certification rulings. More specifically, the Eighth Circuit ruled that the District Court erred in certifying a consumer protection class seeking damages based on Minnesota’s consumer protection statutes, and required the District Court in further proceedings to conduct a thorough conflicts-of-law analysis as to each plaintiff class member before applying Minnesota law. In addition, in its October 2005 opinion, the Eighth Circuit also ruled that the District Court’s certification of a medical monitoring class was an abuse of discretion and thus reversed the District Court’s certification of a medical monitoring class involving the products with Silzone® coating.

After briefing and oral argument by the parties, the District Court issued its further ruling on class certification issues in October 2006. At that time, the District Court granted plaintiffs’ renewed motion to certify a nationwide consumer protection class under Minnesota’s consumer protection statutes and the Private Attorney General Act. The Company sought appellate review of the District Court’s October 2006 decision, and in November 2006, the Eighth Circuit agreed to conduct a review of the District Court’s decision. The parties have submitted briefs to the Eighth Circuit and oral arguments are expected to occur later in 2007.

7

In addition to the purported class action before the District Court, as of July 20, 2007, there were 15individual Silzone® cases initiated in various federal courts which were pending before the District Court. Plaintiffs in those cases are requesting damages ranging from $10 thousand to $120.5 million and, in some cases, seeking an unspecified amount. The first individual complaint that was transferred to the MDL court was served upon the Company in November 2000, and the most recent individual complaint that was transferred to the MDL court was served upon the Company in November 2006. These cases, which are consolidated before the District Court, are proceeding in accordance with the scheduling orders the District Court has rendered.

There are 23 individual state court suits concerning Silzone®-coated products pending as of July 20, 2007, involving 26 patients. These cases are venued in Florida, Minnesota, Missouri, Nevada, Pennsylvania and Texas. The first individual state court complaint was served upon the Company in March 2000, and the most recent individual state court complaint was served upon the Company in June 2007. The complaints in these state court cases request damages ranging from $10 thousand to $100 thousand and, in some cases, seek an unspecified amount. These state court cases are proceeding in accordance with the orders issued by the judges in those matters.

In addition, a lawsuit seeking a class action for all persons residing in the European Economic Union member jurisdictions who have had a heart valve replacement and/or repair procedure using a product with Silzone® coating was filed in Minnesota state court and served upon the Company in February 2004 by two European citizens who now live in Canada. The complaint seeks damages in an unspecified amount for the class, and in excess of $50 thousand for each plaintiff. The complaint also seeks injunctive relief in the form of medical monitoring. The Company is opposing the plaintiffs’ pursuit of this case on jurisdictional, procedural and substantive grounds.

There are also four class-action cases and one individual case pending against the Company in Canada. In one such case in Ontario, the court certified that a class action involving Silzone® patients may proceed. The Company’s request for leave to appeal the rulings on certification was rejected, and the trial of the initial phase of this matter is scheduled for April 2008. A second case seeking class action in Ontario has been stayed pending resolution of the other Ontario action. A case filed as a class action in British Columbia is in the early stages of discovery and has not been certified by the court as a class action. A court in Quebec has certified a class action, and that matter is proceeding in accordance with the court orders. Additionally, in December 2005, the Company was served with a lawsuit by the Quebec Provincial health insurer. The lawsuit asserts a subrogation right to recover the cost of insured services furnished or to be furnished to class members in the class action pending in Quebec. The complaints in these cases each request damages ranging from 1.5 million to 2.0 billion Canadian Dollars (the equivalent to $1.4 million to $1.9 billion at June 30, 2007).

In France, one case involving one plaintiff is pending as of July 20, 2007. In November 2004, an Injunctive Summons to Appear was served, requesting damages in excess of 3 million Euros (the equivalent to $4.0 million at June 30, 2007).

The Company is not aware of any unasserted claims related to Silzone®-coated products. Company management believes that the final resolution of the Silzone® cases will take several years.

The Company has recorded an accrual for probable legal costs that it will incur to defend the various cases involving Silzone®-coated products, and the Company has recorded a receivable from its product liability insurance carriers for amounts expected to be recovered. The Company has not accrued for any amounts associated with settlements or judgments because management cannot reasonably estimate such amounts. Based on the Company’s experience in these types of individual cases, the amount ultimately paid, if any, often does not bear any relationship to the amount claimed by the plaintiffs and is often significantly less than the amount claimed. Management expects that any costs (the material components of which are settlements, judgments, legal fees and other related defense costs) not covered by the Company’s product liability insurance policies or existing reserves will not have a material adverse effect on the Company’s consolidated financial position, although such costs may be material to the Company’s consolidated earnings and cash flows of a future period.

8

A summary of the activity relating to the Silzone® litigation reserve is as follows (in thousands):

	Legal and monitoring costs
Balance at December 31, 2005	$	34,907
Accrued costs		7,000
Cash payments		(2,413	)
Balance at December 30, 2006		39,494
Cash payments		(979	)
Balance at June 30, 2007	$	38,515

The Company records insurance receivables for amounts related to probable future legal costs associated with the Silzone® litigation that are expected to be reimbursable by the Company’s insurance carriers. In 2006, the Company determined that the Silzone® reserves should be increased by $7.0 million as a result of an increase in management’s estimate of the probable future legal costs that would be incurred. The Company also increased the receivable from the Company’s insurance carriers as the Company expects such costs to be reimbursable by the Company’s insurance carriers. At June 30, 2007, the Company’s receivable from insurance carriers was $30.6 million.

The Company’s remaining product liability insurance ($121.9 million at July 20, 2007) for Silzone® claims consists of a number of layers, each of which is covered by one or more insurance companies. Part of the Company’s final layer of insurance ($20 million of the final $50 million layer) is covered by Lumberman’s Mutual Casualty Insurance, a unit of the Kemper Insurance Companies (collectively referred to as Kemper). Prior to being no longer rated by A.M. Best, Kemper’s financial strength rating was downgraded to a “D” (poor). Kemper is currently in “run off,” which means it is no longer issuing new policies, and therefore, is not generating any new revenue that could be used to cover claims made under previously-issued policies. In the event Kemper is unable to pay claims directed to it, the Company believes the other insurance carriers in the final layer of insurance will take the position that the Company will be directly liable for any claims and costs that Kemper is unable to pay. It is possible that Silzone® costs and expenses will reach the limit of the final Kemper layer of insurance coverage, and it is possible that Kemper will be unable to meet its full obligations to the Company. If this were to happen, the Company could incur expense up to approximately $20 million. The Company has not accrued for any such losses as potential losses are possible, but not estimable at this time.

Symmetry™ Bypass System Aortic Connector (Symmetry™ device) Litigation:  The Company has been sued in various jurisdictions by claimants who allege that the Company’s Symmetry™ device caused bodily injury or might cause bodily injury. The Company’s Symmetry™ device was cleared through a 510(K) submission to the U.S. Food and Drug Administration (FDA), and therefore, the Company is unable to rely on a defense under the doctrine of federal preemption that such suits are prohibited. Given the Company’s self-insured retention levels under its product liability insurance policies, the Company expects that it will be solely responsible for these lawsuits, including any costs of defense, settlements and judgments.

Since August 2003, when the first lawsuit involving the Symmetry™ device was filed against the Company, through July 20, 2007, the Company has resolved the claims involving over 90% of the plaintiffs that have initiated lawsuits against the Company involving the Symmetry™ device. As of July 20, 2007, all but three of the lawsuits which allege that the Symmetry™ device caused bodily injury or may cause bodily injury have been resolved. All of the unresolved cases involving the Symmetry™ device are pending in Minnesota state court. The first of the unresolved cases involving the Symmetry™ device was commenced against the Company in June 2004, and the most recently initiated unresolved case was commenced against the Company in January 2007. Each of the complaints in these unresolved cases request damages in excess of $50 thousand. In addition to this litigation, some persons have made claims against the Company involving the Symmetry™ device without filing a lawsuit, although, as with the lawsuits, the vast majority of the claims that the Company has been made aware of as of July 20, 2007 have been resolved.

Potential losses arising from future settlements or judgments of unresolved cases and claims are possible, but not estimable, at this time. Moreover, the Company currently expects that any costs (the material components of which are settlements, judgments, legal fees and other related defense costs) not covered by any remaining reserve will not have a material adverse effect on the Company’s consolidated financial position, although such costs may be material to the Company’s consolidated earnings and cash flows of a future period.

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Guidant 1996 Patent Litigation:  In November 1996, Guidant Corporation (Guidant), which became a subsidiary of Boston Scientific Corporation in 2006, sued the Company in federal district court for the Southern District of Indiana alleging that the Company did not have a license to certain patents controlled by Guidant covering tachycardia implantable cardioverter defibrillator products (ICDs) and alleging that the Company was infringing those patents. The Company’s contention was that it had obtained a license from Guidant to the patents at issue when it acquired certain assets of Telectronics in November 1996. In July 2000, an arbitrator rejected the Company’s position, and in May 2001, a federal district court judge also ruled that the Guidant patent license with Telectronics had not transferred to the Company.

Guidant’s suit originally alleged infringement of four patents by the Company. Guidant later dismissed its claim on one patent and a court ruled that a second patent was invalid. This determination of invalidity was appealed by Guidant, and the Court of Appeals upheld the lower court’s invalidity determination. In a jury trial involving the two remaining patents (the ‘288 and ‘472 patents), the jury found that these patents were valid and that the Company did not infringe the ‘288 patent but did infringe the ‘472 patent; however, the jury also determined that the ‘472 patent infringement was not willful. As a result of this hearing, the jury awarded damages of $140.0 million to Guidant. In post-trial rulings, however, the judge overseeing the jury trial ruled that the ‘472 patent was invalid, and therefore, not infringed upon by the Company, eliminating the $140.0 million verdict against the Company. The trial court also made other rulings as part of the post-trial order, including a ruling that the ‘288 patent was invalid on several grounds.

In August 2002, Guidant commenced an appeal of certain of the trial judge’s post-trial decisions pertaining to the ‘288 patent. Guidant did not appeal the trial court’s finding of invalidity and non-infringement of the ‘472 patent. As part of its appeal, Guidant requested that the monetary damages awarded by the jury pertaining to the ‘472 patent ($140.0 million) be transferred to the ‘288 patent infringement claim.

In August 2004, a three judge panel of the Court of Appeals for the Federal Circuit (CAFC) issued a ruling on Guidant’s appeal of the trial court decision concerning the ‘288 patent. The CAFC reversed the decision of the trial court judge that the ‘288 patent was invalid. The CAFC also ruled that the trial judge’s claim construction of the ‘288 patent was incorrect and, therefore, the jury’s verdict of non-infringement was set aside. Guidant’s request to transfer the $140.0 million to the ‘288 patent was rejected. The CAFC also ruled on other issues that were raised by the parties. The Company’s request for re-hearing of the matter by the panel and the entire CAFC court was rejected.

The case was returned to the district court in Indiana in November 2004, but since that time, further appellate activity has occurred. In this regard, the U.S. Supreme Court rejected the Company’s request that it review certain aspects of the CAFC decision. In addition, further appellate review has occurred after Guidant brought a motion in the district court seeking to have a new judge assigned to handle the case in lieu of the judge that oversaw the prior trial. On a motion for reconsideration, the judge reversed his initial decision in response to Guidant’s motion and agreed to have the case reassigned to a new judge but also certified the issue to the CAFC. In July 2005, the CAFC ruled that the original judge should continue with the case. A hearing on claims construction issues and various motions for summary judgment brought by both parties was held in December 2005, and the district court issued rulings on claims construction and a response to some of the motions for summary judgment in March 2006. In response to the district court ruling, Guidant filed a special request with the CAFC to appeal certain aspects of the March 2006 rulings, or to clarify the August 2004 CAFC decision. In June 2006, the CAFC rejected Guidant’s special request for an appeal. In March 2007, the federal district court judge responsible for the case granted summary judgment in favor of the Company, ruling that the only remaining patent claim asserted against the Company in the case is invalid. On that basis, the district court entered final judgment in favor the Company. In April 2007, Guidant filed and served a notice appealing the district court’s March 2007 and March 2006 rulings. It is likely that the CAFC will not issue a decision in response to this appeal until sometime in 2008.

In July 2006, in exchange for the Company agreeing not to pursue the recovery of attorneys’ fees or assert certain claims and defenses, Guidant agreed that it would not seek to recover lost profits in the case, that the maximum royalty rate that it would seek for any patents found to be infringed by the Company would not exceed 3% of net sales, and that it would not seek prejudgment interest. These agreements have the effect of limiting the Company’s financial exposure. However, any potential losses arising from any legal settlements or judgments could be material to the Company’s consolidated earnings, financial position and cash flows. The Company has not accrued any amounts for legal settlements or judgments related to the Guidant 1996 patent litigation. Although the Company believes that the assertions and claims in the Guidant 1996 patent litigation are without merit, potential losses arising from any legal settlements or judgments are possible, but not estimable, at this time. Additionally, as the ‘288 patent expired in December 2003, the final outcome of the lawsuit involving the ‘288 patent cannot result in an injunction precluding the Company from selling ICD products in the future.

Guidant 2004 Patent Litigation:  In February 2004, Guidant sued the Company in federal district court in Delaware alleging that the Company’s Epic® HF ICD, Atlas®+ HF ICD and Frontier™ devices infringe U.S Patent No. RE 38,119E (the ‘119

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patent). In July 2006, Guidant and the Company entered into an agreement on how the parties would litigate the case and which legal defenses would be used. This agreement had the effect of limiting the Company’s financial and operational exposure. This matter was set for trial in August 2007, but in June 2007, Mirowski Family Ventures, L.L.C. (MFV), a co-plaintiff in the case, entered into a settlement agreement with the Company, fully resolving this patent litigation matter. Pursuant to the July 2006 agreement between the Company and Guidant, the settlement agreement with MFV also fully resolved the Company’s related ‘119 patent litigation with Guidant. In connection with settling this patent litigation with MFV and Guidant, the Company made a $35.0 million payment on June 29, 2007, which was recorded as a special charge in the second quarter of 2007. The Company had not previously accrued any amounts for legal settlements or judgments because although potential losses arising from any settlements or judgments were possible, they were not estimable prior to the June settlement.

Securities Class Action Litigation:  In April and May 2006, five shareholders, each purporting to act on behalf of a class of purchasers during the period January 25 through April 4, 2006 (the Class Period), separately sued the Company and certain of its officers in federal district court in Minnesota alleging that the Company made materially false and misleading statements during the Class Period relating to financial performance, projected earnings guidance and projected sales of ICDs. The complaints, which all seek unspecified damages and other relief, as well as attorneys’ fees, have all been consolidated. The Company filed a motion to dismiss which was denied by the district court in March 2007. The Company intends to vigorously defend against the claims asserted in these actions. The Company’s directors and officers liability insurance provides $75 million of insurance coverage for the Company, the officers and the directors, after a $15 million self-insured retention level has been reached.

Derivative Action:  In February 2007, a derivative action was filed in state court in Minnesota which purported to bring claims belonging to the Company against the Company’s Board of Directors and various officers and former officers for alleged malfeasance in the management of the Company. The defendants (consisting of the Company’s Board of Directors and various officers and former officers) filed a motion to dismiss, and in June 2007, the state court granted the motion, thus dismissing the entire derivative case.

ANS OIG Investigation:  In January 2005, prior to being acquired by the Company, ANS received a subpoena from the U.S. Department of Health and Human Services, Office of the Inspector General (OIG) requesting documents related to certain of its sales and marketing, reimbursement, Medicare and Medicaid billing, and other business practices. On July 2, 2007, ANS finalized a settlement agreement with the OIG to resolve this investigation. The agreement provided for a payment of $3.0 million to the OIG, which the Company had previously accrued. Additionally, ANS entered into a three-year Corporate Integrity Agreement, under which ANS has committed to further enhance its existing compliance program.

Boston U.S. Attorney Investigation:  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 ICDs and pacemakers to doctors or other persons constitutes improper inducements under the federal health care program anti-kickback law. As part of this investigation, the Company received a civil subpoena from the U.S. Attorney’s office in Boston requesting documents created since January 2000 regarding the Company’s practices related to bradycardia pacemaker systems (pacemakers), ICDs, lead systems and related products marketed by the Company’s CRM segment. The Company understands that its principal competitors in the CRM therapy areas received similar civil subpoenas. The Company 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.

Ohio OIG Investigation:  In July 2007, the Company received a civil subpoena from the OIG requesting documents regarding the Company’s relationships with 10 Ohio hospitals during the period from 2003 through 2006.

French Competition Investigation:  In January 2007, the French Conseil de la Concurrence (one of the bodies responsible for the enforcement of antitrust/competition law in France) issued a Statement of Objections alleging that the Company had agreed with the four other main suppliers of ICDs in France to collectively refrain from responding to a 2001 tender for ICDs conducted by a group of 17 university hospital centers in France. This alleged collusion is said to be contrary to the French Commercial Code and Article 81 of the European Community Treaty. If the allegations contained in the Statement of Objections are upheld, the most likely outcome is that the Company’s French subsidiary will become liable to pay a civil fine. It is too early in the proceedings to estimate the likely amount of any fine that may be payable. The Company filed its defense brief in March 2007.

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United Nations Oil-For-Food Programme Investigation:  The Company has been named in the report of the Independent Inquiry Committee into the United Nations (U.N.) Oil-For-Food Programme as having made payments to the Iraqi government in connection with certain product sales made by the Company to Iraq under the U.N. Oil-For-Food Programme in 2001, 2002 and 2003. In February 2006, the Company received a subpoena from the Securities and Exchange Commission (SEC) requesting the Company to produce documents concerning transactions under the U.N. Oil-for-Food Programme. The Company is cooperating with the SEC’s request.

Product Warranties: The Company offers a warranty on various products, the most significant of which relates to its pacemaker and ICD systems. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the product is sold. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s product warranty liability during the three and six months ended June 30, 2007 and July 1, 2006 were as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30, 2007			July 1, 2006			June 30, 2007			July 1, 2006
Balance at beginning of period	$	14,250		$	19,674		$	12,835		$	19,897
Warranty expense recognized		2,077			(1,222	)		3,933			51
Warranty credits issued		(482	)		(2,559	)		(923	)		(4,055	)
Balance at end of period	$	15,845		$	15,893		$	15,845		$	15,893

Other Commitments: The Company has certain contingent commitments to acquire various businesses involved in the distribution of the Company’s products, to fund minority investments and to pay other contingent acquisition consideration payments. While it is not certain if and/or when these payments will be made, as of June 30, 2007, the Company estimates it could be required to pay approximately $162 million in future periods to satisfy such commitments. Refer to Part II, Item 7A, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements and Contractual Obligations of the Company’s 2006 Annual Report on Form 10-K for additional information.

NOTE 8 – SHAREHOLDERS’ EQUITY

Shareholder Rights Plan

On July 15, 2007, the Company’s shareholder rights plan expired. This plan had entitled shareholders to purchase one-hundredth of a share of preferred stock at a stated price, or to purchase either the Company’s shares or shares of an acquiring entity at half their market value, upon the occurrence of certain events which result in a change in control, as defined by the plan. The Company may choose to adopt a new shareholder rights plan in the future.

Share Repurchases

On January 25, 2007, the Company’s Board of Directors authorized a share repurchase program of up to $1.0 billion of the Company’s outstanding common stock. As of May 8, 2007, the Company had repurchased nearly the $1.0 billion amount authorized by the Board of Directors, $775.3 million in the open market and $224.6 million through a private block trade in connection with the issuance of the 1.22% Convertible Debentures. In total, the Company repurchased 23.6 million shares which was recorded as a $246.1 million aggregate reduction of common stock and additional paid-in capital and a $753.8 million reduction in retained earnings.

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NOTE 9 – NET EARNINGS PER SHARE

The table below sets forth the computation of basic and diluted net earnings per share (in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	June 30, 2007		July 1, 2006		June 30, 2007		July 1, 2006
Numerator:
Net earnings	$	134,800	$	141,032	$	280,525	$	278,101
Denominator:
Basic weighted average shares outstanding		338,734		362,175		342,883		365,441
Effect of dilutive securities:
Stock options		10,750		12,944		11,441		14,506
Restricted shares		83		22		98		122
Diluted weighted average shares outstanding		349,567		375,141		354,422		380,069
Basic net earnings per share	$	0.40	$	0.39	$	0.82	$	0.76
Diluted net earnings per share	$	0.39	$	0.38	$	0.79	$	0.73

Approximately 9.6 million and 9.7 million shares of common stock subject to stock options and restricted stock were excluded from the diluted net earnings per share computation for the three months ended June 30, 2007 and July 1, 2006, respectively, because they were not dilutive. Additionally, approximately 11.3 million and 7.1 million shares of common stock subject to stock options and restricted stock were excluded from the diluted net earnings per share computation for the six months ended June 30, 2007 and July 1, 2006, respectively, because they were not dilutive.

Additionally, diluted weighted average shares outstanding have not been adjusted for the Company’s 1.22% Convertible Debentures due 2008 or its 2.80% Convertible Senior Debentures due 2035 (the 2.80% Convertible Debentures). As the principal values of the 1.22% Convertible Debentures and 2.80% Convertible Debentures are required to be settled only in cash, the dilutive impact would be equal to the number of shares needed to satisfy their intrinsic values, assuming conversion. The potentially dilutive common shares related to the 1.22% Convertible Debentures and 2.80% Convertible Debentures would only be included in diluted weighted average shares outstanding if the Company’s average stock price was greater than the conversion prices of $52.06 and $64.51, respectively.

Diluted weighted average shares outstanding have also not been adjusted for the warrants the Company sold in April 2007. The potentially dilutive common shares to be issued under the warrants would only be included in diluted weighted average shares outstanding if the Company’s average stock price was greater than the warrant exercise price of $60.73. The dilutive impact would be equal to the number of shares needed to satisfy the intrinsic value of the warrants, assuming exercise.

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NOTE 10 – COMPREHENSIVE INCOME

The table below sets forth the amounts in other comprehensive income, net of the related income tax impact (in thousands):

	Three Months Ended						Six Months Ended
	June 30, 2007			July 1, 2006			June 30, 2007			July 1, 2006
Net earnings	$	134,800		$	141,032		$	280,525		$	278,101
Other comprensive income (loss):
Cumulative translation adjustment – net		9,615			23,795			27,599			29,467
Unrealized loss on available-for-sale securities		(4,592	)		(4,249	)		(3,479	)		(1,858	)
Reclassification of realized gain to net earnings		—			—			(4,916	)		—
Total comprehensive income	$	139,823		$	160,578		$	299,729		$	305,710

Upon the sale of an available-for-sale investment, the unrealized gain (loss) is reclassified out of other comprehensive income and reflected as a realized gain (loss) in net earnings. In the first quarter of 2007, the Company sold an available-for-sale investment, recognizing a realized after-tax gain of $4.9 million. The total pre-tax gain of $7.9 million was recognized as other income (see Note 11).

NOTE 11 – OTHER INCOME (EXPENSE), NET

The Company’s other income (expense) consisted of the following (in thousands):

	Three Months Ended						Six Months Ended
	June 30, 2007			July 1, 2006			June 30, 2007			July 1, 2006
Interest income	$	761		$	3,589		$	1,130		$	7,706
Interest expense		(11,226	)		(9,383	)		(24,814	)		(15,854	)
Other		15			575			8,066			2,225
Total other income (expense), net	$	(10,450	)	$	(5,219	)	$	(15,618	)	$	(5,923	)

NOTE 12 – INCOME TAXES

The Company adopted FIN 48 at the beginning of fiscal year 2007. The adoption of FIN 48 did not have a material impact on the Company’s consolidated results of operations or cash flows. In accordance with the transition provisions of FIN 48, the Company recorded an $8.5 million decrease to its liability for unrecognized income tax benefits, which was recorded as an adjustment to the opening balance of retained earnings and cumulative translation adjustment, a separate component of shareholders’ equity. As of June 30, 2007, the Company had approximately $95 million of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. The Company had approximately $10 million accrued for interest and penalties as of June 30, 2007. The Company recognizes interest and penalties related to income tax matters in income tax expense.

The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for all tax years through 2001, and expects to receive proposed adjustments from the Internal Revenue Service in connection with their 2002 and 2003 audit in the third quarter of 2007. Substantially all material foreign, state and local income tax matters have been concluded for all tax years through 1999. Federal income tax returns for 2004 and 2005 are currently under examination.

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NOTE 13 – SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company develops, manufactures and distributes cardiovascular medical devices for the global cardiac rhythm management, cardiovascular and atrial fibrillation therapy areas and implantable neurostimulation devices for the management of chronic pain. The Company’s four operating segments are Cardiac Rhythm Management (CRM), Cardiovascular (CV), Atrial Fibrillation (AF) and Neuromodulation (Neuro). At the beginning of its 2007 fiscal year, the Company combined its cardiac surgery and cardiology operating segments to form the CV operating segment. Each operating segment focuses on developing and manufacturing products for its respective therapy area. The primary products produced by each operating segment are: CRM – ICDs and pacemakers; CV – vascular closure devices and heart valve replacement and repair products; AF – electrophysiology introducers and catheters, advanced cardiac mapping and navigation systems and ablation systems; and Neuro – neurostimulation devices.

The Company has aggregated the four operating segments into two reportable segments based upon their similar operational and economic characteristics: CRM/Neuro and CV/AF. Net sales of the Company’s reportable segments include end-customer revenue from the sale of products they each develop and manufacture or distribute. The costs included in each of the reportable segments’ operating results include the direct costs of the products sold to end-customers and operating expenses managed by each reportable segment. Certain operating expenses managed by the Company’s selling and corporate functions, including all stock-based compensation expense, are not included in the reportable segments’ operating profit. As a result, reportable segment operating profit is not representative of the operating profit of the products in these reportable segments. Additionally, certain assets are managed by the Company’s selling and corporate functions, principally including end-customer receivables, inventory, corporate cash and cash equivalents and deferred income taxes. For management reporting purposes, the Company does not compile capital expenditures by reportable segment and, therefore, this information has not been presented as it is impracticable to do so. The Company has reclassified certain prior period reportable segment information to conform to the new organizational structure.

The following table presents net sales and operating profit by reportable segment (in thousands):

	CRM/NEURO		CV/AF		Other			Total
Three Months ended June 30, 2007:
Net sales	$	647,089	$	300,247	$	—		$	947,336
Operating profit		397,142		144,172		(350,153	)		191,161
Three Months ended July 1, 2006:
Net sales	$	562,624	$	270,298	$	—		$	832,922
Operating profit		334,010		128,375		(266,289	)		196,096
Six Months ended June 30, 2007:
Net sales	$	1,243,842	$	590,472	$	—		$	1,834,314
Operating profit		757,850		282,390		(645,376	)		394,864
Six Months ended July 1, 2006:
Net sales	$	1,087,790	$	529,548	$	—		$	1,617,338
Operating profit		648,922		255,287		(521,610	)		382,599

The following table presents the Company’s total assets by reportable segment (in thousands):

Total assets	June30,2007		December30,2006
CRM/Neuro	$	1,946,794	$	1,893,200
CV/AF		820,538		800,907
Other		2,282,449		2,095,687
	$	5,049,781	$	4,789,794

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Geographic Information

The following table presents net sales by geographic location of the customer (in thousands):

	Three Months Ended				Six Months Ended
Net sales	June 30, 2007		July 1, 2006		June 30, 2007		July 1, 2006
United States	$	526,344	$	483,995	$	1,039,256	$	948,151
International
Europe		240,948		190,353		458,454		368,315
Japan		76,385		71,778		142,166		139,765
Other (a)		103,659		86,796		194,438		161,107
		420,992		348,927		795,058		669,187
	$	947,336	$	832,922	$	1,834,314	$	1,617,338

(a) No one geographic market is greater than 5% of consolidated net sales.

The following table presents long-lived assets by geographic location (in thousands):

Long-lived assets	June30,2007		December30,2006
United States	$	2,836,643	$	2,765,936
International
Europe		129,395		124,071
Japan		115,217		120,503
Other		95,865		89,119
		340,477		333,693
	$	3,177,120	$	3,099,629

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Our business is focused on the development, manufacture and distribution of cardiovascular medical devices for the global cardiac rhythm management, cardiovascular and atrial fibrillation therapy areas and implantable neurostimulation devices for the management of chronic pain. We sell our products in more than 100 countries around the world. Our largest geographic markets are the United States, Europe and Japan. Our four operating segments are Cardiac Rhythm Management (CRM), Cardiovascular (CV), Atrial Fibrillation (AF) and Neuromodulation (Neuro). At the beginning of our 2007 fiscal year, we combined our cardiac surgery and cardiology operating segments to form the CV operating segment. Each operating segment focuses on developing and manufacturing products for its respective therapy area. 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 and heart valve replacement and repair products; AF – electrophysiology introducers and catheters, advanced cardiac mapping and navigation 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.

Net sales in the second quarter and first six months of 2007 were $947.3 million and $1,834.3 million, respectively, an increase of approximately 14% and 13% over the second quarter and first six months of 2006, led by growth in sales of our ICDs and pacemakers as well as products to treat atrial fibrillation. Our ICD and pacemaker net sales grew 18% and 11%, respectively, in the second quarter of 2007, and 17% and 11%, respectively, during the first six months of 2007. Additionally, AF net sales increased 25% and 26% during the three and six months ended June 30, 2007 to $99.8 million and $193.2 million, respectively. Favorable foreign currency translation comparisons increased second quarter fiscal 2007 sales by $20.8 million and increased the first six month fiscal 2007 sales by $38.5 million. Refer to the Segment Performance section below for a more detailed discussion of the results for the respective segments.

The global ICD market grew at an estimated compounded annual growth rate of approximately 28% from 2001 to 2005. We believe the rate of growth in the United States declined significantly in the second half of 2005 and 2006 due to a number of factors, including adverse publicity relating to product recalls of a competitor during 2005 and fiscal year 2006. Although the U.S. ICD market may remain depressed in the near term, therefore depressing overall market growth, we believe that the market decline in the U.S. has stabilized and therefore global growth will rebound and grow at a compounded rate of 3% to 9% during 2007 and 10% to 15% over a period of multiple years thereafter. We base our belief on data that indicates the potential patient populations remain significantly under penetrated. Management’s goal is to continue to increase our estimated 20% worldwide market share of the growing ICD market. In order to help accomplish this objective, we have expanded our United States selling organization and plan to continue to introduce new ICD products.

Net earnings and diluted net earnings per share for the second quarter of 2007 were $134.8 million and $0.39 per diluted share, which includes an after-tax $21.9 million special charge, or $0.06 per diluted share, related to the settlement of the Guidant 2004 patent litigation (see Note 7 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q). Compared to the second quarter of 2006, net earnings decreased by 4% and diluted net earnings per share increased by 3%, respectively. Additionally, net earnings and diluted net earnings per share for the first six months of 2007 were $280.5 million and $0.79 per diluted share, increases of 1% and 8%, respectively, over the first six months of 2006. The increases in our earnings per share for both the second quarter and first six months of 2007 compared to the same prior year periods resulted from lower outstanding shares as a result of our common stock repurchases. These increases were partially offset by the special charge relating to the settlement of the Guidant 2004 patent litigation. From April 2006 through May 2007, we returned $1.7 billion to shareholders in the form of share repurchases.

We generated $254.3 million of operating cash flows for the first six months of 2007, a 3% increase over the first six months of 2006. We ended the second quarter with $108.3 million of cash and cash equivalents and $1,656.9 million of total debt. We have strong short-term credit ratings, with an A2 rating from Standard & Poor’s and a P2 rating from Moody’s. In January 2007, our Board of Directors authorized a share repurchase program of up to $1.0 billion of our outstanding common stock, and by May 8, 2007, we had repurchased 23.6 million shares for approximately $1.0 billion. In April 2007, we issued $1.2 billion of 1.22% Convertible Senior Debentures (1.22% Convertible Debentures). We used a portion of the proceeds from the sale of the 1.22% Convertible Debentures to purchase approximately $300 million of our common stock in the second quarter of 2007. We also used a portion of the proceeds to repay borrowings under our commercial paper program and

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to repay borrowings under an interim liquidity facility, which were both used to repurchase approximately $700 million of our common stock in the first quarter of 2007.

NEW ACCOUNTING PRONOUNCEMENTS

Information regarding new accounting pronouncements is included in Note 2 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Potential Changes in Accounting Pronouncements

In July 2007, the Financial Accounting Standards Board (FASB) approved the preparation of a proposed FASB Staff Position (FSP) on the accounting treatment for certain convertible debt instruments that may be settled entirely or partially in cash upon conversion. As publicly discussed by the FASB to date, the proposed FSP would require the proceeds from the issuance of such convertible debt instruments to be allocated between a liability component and an equity component. The resulting debt discount would be amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. The change in accounting treatment would be effective for fiscal years beginning after December 15, 2007, and applied retrospectively to prior periods. If adopted and issued as publicly discussed, this FSP would change the accounting treatment for our 1.22% Convertible Senior Debentures and 2.80% Convertible Senior Debentures, which were issued in April 2007 and December 2005, respectively. The impact of this new accounting treatment could be significant and result in an increase to non-cash interest expense beginning in fiscal year 2008 for financial statements covering past and future periods. Until the final FSP is ultimately adopted and issued by the FASB, we cannot determine the exact impact of the change in accounting treatment.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have adopted various accounting policies in preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States. Our significant accounting policies are disclosed in Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2006 (2006 Annual Report on Form 10-K).

Preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to adopt various accounting policies and to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and assumptions, including those related to accounts receivable allowance for doubtful accounts; estimated useful lives of diagnostic equipment; valuation of purchased in-process research and development, other intangible assets and goodwill; income taxes; legal reserves and insurance receivables; and stock-based compensation. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. As discussed in Note 2 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) at the beginning of our 2007 fiscal year. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Other than the adoption of FIN 48, there have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2006 Annual Report on Form 10-K.

SEGMENT PERFORMANCE

Our four operating segments are Cardiac Rhythm Management (CRM), Cardiovascular (CV), Atrial Fibrillation (AF) and Neuromodulation (Neuro). Each operating segment focuses on developing and manufacturing products for its respective therapy area. At the beginning ofour 2007 fiscal year, we combined our cardiac surgery and cardiology operating segments to form the CV operating segment. The primary products produced by each operating segment are: CRM – ICDs and pacemakers; CV – vascular closure devices and heart valve replacement and repair products; AF – electrophysiology introducers and catheters, advanced cardiac mapping and navigation systems and ablation systems; and Neuro – neurostimulation devices.

We aggregate our four operating segments into two reportable segments based upon their similar operational and economic characteristics: CRM/Neuro and CV/AF. Net sales of our reportable segments include end-customer revenues from the sale of products they each develop and manufacture. The costs included in each of the reportable segments’ operating results include the direct costs of the products sold to end-customers and operating expenses managed by each reportable segment. Certain operating expenses managed by our selling and corporate functions, including all stock-based compensation expense, are not included in our reportable segments’ operating profit. As a result, reportable segment operating profit is not representative of the operating profit of the products in these reportable segments. We have reclassified certain prior period reportable segment information to conform to the new organizational structure.

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The following table presents net sales and operating profit by reportable segment (in thousands):

	CRM/NEURO		CV/AF		Other			Total
Three Months ended June 30, 2007:
Net sales	$	647,089	$	300,247	$	—		$	947,336
Operating profit		397,142		144,172		(350,153	)		191,161
Three Months ended July 1, 2006:
Net sales	$	562,624	$	270,298	$	—		$	832,922
Operating profit		334,010		128,375		(266,289	)		196,096
Six Months ended June 30, 2007:
Net sales	$	1,243,842	$	590,472	$	—		$	1,834,314
Operating profit		757,850		282,390		(645,376	)		394,864
Six Months ended July 1, 2006:
Net sales	$	1,087,790	$	529,548	$	—		$	1,617,338
Operating profit		648,922		255,287		(521,610	)		382,599

The following discussion of the changes in our net sales is provided by class of similar products within our four operating segments, which is the primary focus of our sales activities. This analysis sufficientlydescribes the changes in our sales results for our two reportable segments.

Cardiac Rhythm Management

	Three Months Ended					Six Months Ended
(in thousands)	June 30, 2007		July 1, 2006		% Change	June 30, 2007		July 1, 2006		% Change
ICD systems	$	327,137	$	278,114	17.6%	$	629,406	$	540,467	16.5%
Pacemaker systems		268,207		241,008	11.3%		514,566		461,865	11.4%
	$	595,344	$	519,122	14.7%	$	1,143,972	$	1,002,332	14.1%

Cardiac Rhythm Management net sales increased by nearly 15% in the second quarter of 2007 as compared to the second quarter of 2006 and increased 14% in the first six months of 2007 over the same period one year ago. CRM net sales for both the second quarter and first six months of 2007 were driven by strong volume growth. Foreign currency translation had a $13.7 million and $24.7 million favorable impact on CRM net sales in the second quarter and first six months of 2007, respectively, compared to the same periods in 2006.

ICD net sales increased approximately 18% and 17% in the second quarter and first six months of 2007, respectively, due to strong volume growth. During 2006, adverse publicity relating to product recalls by a competitor depressed the rate of growth in the U.S. ICD market. The improved volume growth in ICD net sales in the second quarter and first six months of 2007 was broad-based across both U.S. and international markets and reflects our continued market penetration into new customer accounts and strong market demand for our cardiac resynchronization therapy ICD devices. In the United States, second quarter 2007 ICD net sales of $221.7 million increased approximately 11% over last year’s second quarter. Internationally, second quarter 2007 ICD net sales of $105.4 million increased 36% compared to the second quarter of 2006. Foreign currency translation had a $6.7 million positive impact on international ICD net sales in the second quarter of 2007 compared to the second quarter of 2006. In the United States, the first six months of 2007 ICD net sales of $436.5 million increased 10% over the same period last year. Internationally, the first six months of 2007 ICD net sales of $192.9 million increased approximately 34% compared to the first six months of 2006. Foreign currency translation had an $11.8 million positive impact on international ICD net sales during the first six months of 2007 compared to the same period in 2006.

Pacemaker net sales increased over 11% during both the second quarter and first six months of 2007, respectively, driven by strong volume growth, which was also broad-based across both U.S. and international markets. In the United States, second quarter 2007 pacemaker net sales of $127.2 million increased 9% over the same period last year. Internationally, second quarter 2007 pacemaker net sales of $141.0 million increased 13% compared to the second quarter of 2006. Foreign currency

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translation had a $7.0 million positive impact on international pacemaker net sales in the second quarter of 2007 compared to the second quarter of 2006. In the United States, the first six months of 2007 pacemaker net sales of $249.3 million increased 11% over the same period last year. Internationally, the first six months of 2007 pacemaker net sales of $265.2 million increased 11% compared to the first six months of 2006. Foreign currency translation had a $12.9 million positive impact on international pacemaker net sales in the first six months of 2007 compared to the first six months of 2006.

Cardiovascular

	Three Months Ended					Six Months Ended
(inthousands)	June30, 2007		July1, 2006		% Change	June30, 2007		July1, 2006		% Change
Vascular closure devices	$	89,033	$	86,939	2.4%	$	178,878	$	170,969	4.6%
Heart valve products		75,889		70,818	7.2%		147,442		140,250	5.1%
Other cardiovascular products		35,518		32,456	9.4%		70,996		64,491	10.1%
	$	200,440	$	190,213	5.4%	$	397,316	$	375,710	5.8%

Cardiovascular net sales increased over 5% in the second quarter of 2007 compared to the second quarter of 2006 and increased nearly 6% in the first six months of 2007 over the same period one year ago. CV net sales for both the second quarter and first six months of 2007 were favorably impacted by strong volume growth for tissue heart valves. Foreign currency translation had a favorable impact on CV net sales of approximately $4.4 million and $8.4 million, respectively, in the second quarter and first six months of 2007 compared with these same periods in 2006. Heart valve net sales increased over 7% and 5% during the second quarter and first six months of 2007, respectively, over the same periods in 2006 due primarily to an increase in tissue heart valve sales which continues to be partially offset by declines in mechanical heart valves net sales. Net sales of vascular closure devices increased over 2% and approximately 5% during the second quarter and first six months of 2007, respectively, compared to the same periods in 2006 due to volume growth from continued market acceptance of our Angio-Seal™ product line, which continues to be the market share leader in the vascular closure device market. Additionally, net sales of other cardiovascular products increased $3.1 million and $6.5 million during the second quarter and first six months of 2007, respectively, over the same periods in 2006 due to increased sales volumes.

Atrial Fibrillation

	Three Months Ended					Six Months Ended
(in thousands)	June 30, 2007		July 1, 2006		% Change	June 30, 2007		July 1, 2006		% Change
Atrial fibrillation products	$	99,807	$	80,085	24.6%	$	193,156	$	153,837	25.6%

Atrial Fibrillation net sales increased approximately 25% and 26% during the second quarter and first six months of 2007, respectively, when compared to the same periods one year ago. The increases in AF net sales were driven by strong volume growth from continued market acceptance of device-based ablation procedures to treat the symptoms of atrial fibrillation. Our access, diagnosis, visualization and ablation products assist physicians in diagnosing and treating atrial fibrillation and other irregular heart rhythms. Foreign currency translation had a favorable impact on AF net sales of approximately $2.4 million and $4.7 million, in the second quarter and first six months of 2007, respectively, as compared with these same periods in 2006.

Neuromodulation

	Three Months Ended					Six Months Ended
(in thousands)	June 30, 2007		July 1, 2006		% Change	June 30, 2007		July 1, 2006		% Change
Neurostimulation devices	$	51,745	$	43,504	18.9%	$	99,870	$	85,459	16.9%

Neuromodulation net sales increased nearly 19% and 17% during the second quarter and first six months of 2007, respectively, when compared to the same prior year periods. The increases in Neuro net sales were driven by continued growth in the market for neurostimulation devices.

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RESULTS OF OPERATIONS

Net sales

	Three Months Ended					Six Months Ended
(in thousands)	June 30, 2007		July 1, 2006		% Change	June 30, 2007		July 1, 2006		% Change
Net sales	$	947,336	$	832,922	13.7%	$	1,834,314	$	1,617,338	13.4%

Overall, net sales increased nearly 14% in the second quarter of 2007 over the second quarter of 2006. For the first six months of 2007, net sales increased over 13% compared to the same period one year ago. Net sales growth was favorably impacted by strong volume growth, driven by CRM and AF product sales. Additionally, foreign currency translation had a favorable impact on the second quarter and first six months of 2007 of $20.8 million and $38.5 million, respectively, due primarily to the strengthening of the Euro against the U.S. Dollar. These amounts are not indicative of the net earnings impact of foreign currency translation for the second quarter and first six months of 2007 due to partially offsetting unfavorable foreign currency translation impacts on cost of sales and operating expenses.

Net sales by geographic location of the customer were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2007		July 1, 2006		June 30, 2007		July 1, 2006
United States	$	526,344	$	483,995	$	1,039,256	$	948,151
International
Europe		240,948		190,353		458,454		368,315
Japan		76,385		71,778		142,166		139,765
Other (a)		103,659		86,796		194,438		161,108
		420,992		348,927		795,058		669,188
	$	947,336	$	832,922	$	1,834,314	$	1,617,339

(a) No one geographic market is greater than 5% of consolidated net sales.

Gross profit

	Three Months Ended				Six Months Ended
(dollars in thousands)	June 30, 2007		July 1, 2006		June 30, 2007		July 1, 2006
Gross profit	$	694,313	$	605,958	$	1,342,314	$	1,181,927
Percentage of net sales		73.3%		72.8%		73.2%		73.1%

Gross profit for the second quarter of 2007 totaled $694.3 million, or 73.3% of net sales, compared to $606.0 million, or 72.8% of net sales, for the second quarter of 2006. Gross profit for the first six months of 2007 totaled $1,342.3 million, or 73.2% of net sales, compared to $1,181.9 million, or 73.1% of net sales, for the first six months of 2006. The increase in our gross profit percentage for both the second quarter and first six months of 2007 reflects increased manufacturing efficiencies, partially offset by increased diagnostic equipment depreciation expense resulting from our second-half 2006 launch of the Merlin^TM programmer platform for our ICDs and pacemakers.

Selling, general and administrative (SG&A) expense

	Three Months Ended				Six Months Ended
(dollars in thousands)	June 30, 2007		July 1, 2006		June 30, 2007		July 1, 2006
Selling, general and administrative	$	348,694	$	301,022	$	677,034	$	585,230
Percentage of net sales		36.8%		36.1%		36.9%		36.2%

SG&A expense for the second quarter of 2007 totaled $348.7 million, or 36.8% of net sales, compared to $301.0 million, or 36.1% of net sales, for the second quarter of 2006. SG&A expense for the first six months of 2007 totaled $677.0 million, or

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36.9% of net sales, compared to $585.2 million, or 36.2% of net sales, for the first six months of 2006. The increase in SG&A expense as a percent of net sales reflects the investments made in expanding our U.S. selling organization infrastructure and market development programs which began in the second quarter of 2006.

Research and development (R&D) expense

	Three Months Ended				Six Months Ended
(dollars in thousands)	June30, 2007		July1, 2006		June30, 2007		July1, 2006
Research and development expense	$	119,458	$	108,840	$	235,416	$	214,098
Percentage of net sales		12.6%		13.1%		12.8%		13.2%

R&D expense in the second quarter of 2007 totaled $119.5 million, or 12.6% of net sales, compared to $108.8 million, or 13.1% of net sales, for the second quarter of 2006. R&D expense in the first six months of 2007 totaled $235.4 million, or 12.8% of net sales, compared to $214.1 million, or 13.2% of net sales, for the first six months of 2006. While 2007 R&D expense as a percent of net sales decreased compared to 2006, total R&D expense in absolute terms increased 10% compared to the same prior year periods, reflecting our continuing commitment to fund future long-term growth opportunities.

Special charges

In June 2007, we settled the Guidant 2004 patent litigation (see Note 7 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q) and recorded a related pre-tax special charge of $35.0 million.

Other income (expense), net

	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2007			July 1, 2006			June 30, 2007			July 1, 2006
Interest income	$	761		$	3,589		$	1,130		$	7,706
Interest expense		(11,226	)		(9,383	)		(24,814	)		(15,854	)
Other		15			575			8,066			2,225
Total other (expense) income, net	$	(10,450	)	$	(5,219	)	$	(15,618	)	$	(5,923	)

The unfavorable change in other income (expense) during the second quarter and first six months of 2007 as compared with the same periods in 2006 was due primarily to higher interest expense from higher average debt balances in 2007. During the first quarter of 2007, we borrowed $350.0 million under an interim liquidity facility and issued additional commercial paper to finance the repurchase of approximately $700 million of our common stock. These borrowings were repaid in April 2007 with proceeds from the issuance of$1.2 billion aggregate principal amount of 1.22% Convertible Debentures. Higher interest expense was partially offset by a realized gain of $7.9 million on the sale of our Conor Medical, Inc. common stock investment in the first quarter of 2007. The realized gain is reflected in the other category of the preceding table. The decline in interest income for the second quarter and first six months ended June 30, 2007 was due to lower invested cash balances compared to the same prior year periods.

Income taxes

	Three Months Ended		Six Months End
(as a percent of pre-tax income)	June 30, 2007	July 1, 2006	June 30, 2007	July 1, 2006
Effective tax rate	25.4%	26.1%	26.0%	26.2%

Our effective income tax rate was 25.4% and 26.1% for the second quarter of 2007 and 2006, respectively, and 26.0% and 26.2% for the first six months of 2007 and 2006, respectively. The after-tax $21.9 million special charge related to the settlement of the Guidant 2004 patent litigation favorably impacted the effective tax rate for the three and six months ended June 30, 2007 by 1.6% and 1.0%, respectively.

We adopted FIN 48, a new accounting standard, at the beginning of fiscal year 2007. This accounting standard is not expected to materially impact our fiscal 2007 effective tax rate (see Notes 2 and 12 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details on the impact of the adoption of this accounting standard).

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LIQUIDITY

We believe that our existing cash balances, available borrowings under our $1.0 billion committed credit facility and future cash generated from operations will be sufficient to meet our working capital and capital investment needs over the next twelve months and in the foreseeable future thereafter. Should suitable investment opportunities arise, we believe that our earnings, cash flows and balance sheet position will permit us to obtain additional debt financing or equity capital, if necessary. Primary short-term liquidity needs are provided through our commercial paper program, for which credit support is provided by a long-term $1.0 billion committed credit facility.

At June 30, 2007, our short-term credit ratings were A2 from Standard & Poor’s and P2 from Moody’s. The ratings are not a recommendation to buy, sell or hold our securities, may be changed, superseded or withdrawn at any time and should be evaluated independently of any other rating.

At June 30, 2007, substantially all of our cash and cash equivalents were held by our non-U.S. subsidiaries. These funds are only available for use by our U.S. operations if they are repatriated into the United States. We are not dependent on the repatriation of these funds to meet our future cash flow needs. We have sufficient access to capital markets to meet currently anticipated growth and to fund potential acquisition and/or investment funding needs.

A summary of our cash flows from operating, investing and financing activities is provided in the table below (in thousands):

	Six Months Ended
	June 30, 2007			July 1, 2006
Net cash provided by (used in):
Operating activities	$	254,271		$	245,702
Investing activities		(135,259	)		(159,749	)
Financing activities		(92,273	)		(310,787	)
Effect of currency exchange rate changes on cash and cash equivalants		1,634			5,221
Net increase (decrease) in cash and cash equivalants	$	28,373		$	(219,613	)

Operating Cash Flows

Cash provided by operating activities was $254.3 million in the first six months of 2007 compared to $245.7 million in the first six months of 2006. Operating cash flows can fluctuate significantly from period to period as a result of payment timing differences of working capital accounts. Compared to the first six months of 2006, operating cash flows during the first six months of 2007 improved as a result of increased sales partially offset by the $35.0 million patent litigation settlement paid in the second quarter of 2007 and $44.6 million of additional excess tax benefits from stock option exercises, as a result of more stock option exercises in the first six months of 2007 compared to the same period last year.

As of June 30, 2007, accounts receivable and inventory increased $52.6 million and $43.5 million, respectively, compared to December 30, 2006. We use two primary measures that focus on accounts receivable and inventory – days sales outstanding (DSO) and days inventory on hand (DIOH). These measures may not be computed the same as similarly titledmeasures used by other companies. Accounts receivable increased in the first six months of 2007 from higher sales volume, and our DSO (ending net accounts receivable divided by average daily sales for the quarter) improved to 91 days at June 30, 2007 compared to 93 days at December 30, 2006. We use DSO as a measure that places emphasis on how quickly we collect our accounts receivable balances from customers. Inventory increased to support new CRM product introductions as well as to support our increased sales volumes. As a result, DIOH (ending net inventory divided by average daily cost of sales for the most recent six months) increased to 183 days at June 30, 2007 from 178 days at December 30, 2006. We use DIOH, which can also be expressed as a measure of the estimated number of days of cost of sales on hand, as a measure that places emphasis on how efficiently we are managing our inventory levels.

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Investing Cash Flows

Cash used in investing activities was $135.3 million in the first six months of 2007 compared to $159.7 million in the same period last year. Our purchases of property, plant and equipment, which totaled $121.5 million and $138.0 million in the first six months of 2007 and 2006, respectively, reflect our continued investment in our CRM and AF operating segments to support the product growth platforms in place. As a result of Conor Medical, Inc. being acquired, we liquidated this strategic investment in the first quarter of 2007, receiving proceeds of $12.9 million. We continue to invest in companies that provide us with strategic opportunities. In March 2007, we made a $12.5 million equity investment in Cambridge Heart, Inc., a company that develops and markets products for the non-invasive diagnosis of cardiac disease, specifically sudden cardiac death. In January 2006, we made a second $12.5 million investment in ProRhythm, Inc. (ProRhythm), increasing our total investment to $25.0 million. ProRhythm is a privately-held company focused on the development of a high-intensity-focused ultrasound catheter-based ablation system for the treatment of atrial fibrillation.

Financing Cash Flows

Cash used in financing activities was $92.3 million in the first six months of 2007 compared to $310.8 million in the first six months of 2006. Our financing cash flows can fluctuate significantly depending upon our liquidity needs. We repurchased approximately $1.0 billion of our common stock during the first six months of 2007, which was financed through a portion of the proceeds from the issuance of $1.2 billion of 1.22% Convertible Debentures, proceeds from the issuance of commercial paper and borrowings under an interim liquidity facility. Approximately $700 million of proceeds from the issuance of 1.22% Convertible Debentures were used to repay commercial paper borrowings and borrowings under an interim liquidity facility. The amount of stock option exercises also impacts our financing cash flows. As a result of more stock option exercises in the first six months of 2007 compared to the same period last year, financing cash flows for the first six months of 2007 were favorably impacted by higher proceeds from the exercise of stock options and larger excess tax benefits from stock option exercises compared to the same period last year. In the second quarter of 2006, we repurchased $700.0 million of our common stock. These repurchases were primarily financed through proceeds from the issuance of commercial paper.

DEBT AND CREDIT FACILITIES

Total debt increased to $1,656.9million at June 30, 2007 from $859.4 million at December 30, 2006 as we ultimately financed the repurchase of approximately $1.0 billion of our common stock with the issuance of $1.2 billion of 1.22% Convertible Debentures.

We had $281.5 million of commercial paper outstanding at June 30, 2007 which bears interest at a weighted average effective interest rate of 5.4% and has a weighted average original maturity of 25 days. Our commercial paper program provides for the issuance of short-term, unsecured commercial paper with maturities up to 270 days. Any future commercial paper borrowings we make would bear interest at the applicable current market rates. We have a long-term $1.0 billion committed credit facility that we may draw on to support our commercial paper program and for general corporate purposes. Borrowings under this facility bear interest at the United States Dollar London InterBank Offered Rate (LIBOR) plus 0.27%, or in the event over half of the facility is drawn on, LIBOR plus 0.32%. The interest rate is subject to adjustment in the event of a change in our credit ratings. We have the option for borrowings to bear interest at a base rate, as further described in the facility agreement.

During the first quarter of 2007, we had borrowed $350.0 million under an interim liquidity facility to finance a portion of the common stock repurchases made during that period. On April 25, 2007, this facility expired and we repaid the related outstanding borrowings using a portion of the proceeds from the issuance of 1.22% Convertible Debentures. Interest payments related to the 1.22% Convertible Debentures are required on a semi-annual basis. We may be required to repurchase some or all of the 1.22% Convertible Debentures for cash upon the occurrence of certain corporate transactions. The 1.22% Convertible Debentures are convertible under certain circumstances for cash and shares of our common stock, if any, at a conversion rate of 19.2101 shares of our common stock per $1,000 principal amount of the 1.22% Convertible Debentures (equivalent to an initial conversion price of approximately $52.06 per share). Upon conversion, we are required to satisfy up to 100% of the principal amount of the 1.22% Convertible Debentures solely in cash, with any amounts above the principal amount to be satisfied in shares of our common stock, cash or a combination of common stock and cash, at our election. See Note 6 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details on the 1.22% Convertible Debentures.

In connection with the issuance of the 1.22% Convertible Debentures, we purchased a call option for $101.0 million in a private transaction to receive shares of our common stock. The purchase of the call option is intended to offset potential dilution to our common stock upon potential future conversion of the 1.22% Convertible Debentures. The call option is

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exercisable at approximately $52.06 per share and allows us to receive the same number of shares and/or amount of cash from the counterparty as we would be required to deliver upon potential future conversion of the 1.22% Convertible Debentures. The call option terminates upon the earlier of the conversion date or maturity date of the 1.22% Convertible Debentures.

Separately, we also sold warrants for 23.1 million shares of our common stock in a private transaction and received proceeds of $35.0 million. Over a two-month period beginning in April 2009, we may be required to issue shares of our common stock to the counterparty if the average price of our common stock during a defined period exceeds the warrant exercise price of approximately $60.73 per share.

We had $5.5 million of 2.80% Convertible Senior Debentures due 2035 (2.80% Convertible Debentures) outstanding at both June 30, 2007 and December 30, 2006. We have the right to redeem some or all of the 2.80% Convertible Debentures for cash at any time. We also may be required to repurchase some or all of the remaining outstanding 2.80% Convertible Debentures for cash on various dates after December 15, 2008 or upon the occurrence of certain events. The 2.80% Convertible Debentures are convertible into less than 0.1 million shares of our common stock if the price of our common stock exceeds $64.51 per share.

We had 1.02% Yen-denominated notes in Japan (Yen Notes) totaling 20.9 billion Yen, or $169.9 million at June 30, 2007 and $175.5 million at December 30, 2006. Interest payments are required on a semi-annual basis and the entire principal balance is due in May 2010. The principal amount recorded on our balance sheet fluctuates based on the effects of foreign currency translation.

Our $1.0 billion committed credit facility and Yen Notes contain certain operating and financial covenants. Specifically, the credit facility requires that we have a leverage ratio (defined as the ratio of total debt to EBITDA (net earnings before interest, income taxes, depreciation and amortization)) not exceeding 3.0 to 1.0. The Yen Notes require that we have a ratio of total debt to total capitalization not exceeding 55% and a ratio of consolidated EBIT (net earnings before interest and income taxes) to consolidated interest expense of at least 3.0 to 1.0. Under the credit facility and the Yen Notes we also have certain limitations on additional liens or indebtedness and limitations on certain acquisitions, investments and dispositions of assets. We were in compliance with all of our debt covenants during the first six months of 2007.

SHARE REPURCHASES

On January 25, 2007, the Company’s Board of Directors authorized a share repurchase program of up to $1.0 billion of our outstanding common stock. As of May 8, 2007, we had repurchased 23.6 million shares for approximately $1.0 billion – $775.3 million in the open market and $224.6 million through a private block trade in connection with the issuance of the 1.22% Convertible Debentures.

COMMITMENTS AND CONTINGENCIES

We have certain contingent commitments to acquire various businesses involved in the distribution of our products, to fund minority investments and to pay other contingent acquisition consideration payments. While it is not certain if and/or when these payments will be made, as of June 30, 2007, we could be required to pay approximately $162 million in future periods to satisfy such commitments. A description of our contractual obligations and other commitments is contained in Part II, Item 7A, Management’s Discussion and Analysis of Financial Condition and Results of Operations– Off-Balance Sheet Arrangements and Contractual Obligations, included in our 2006 Annual Report on Form 10-K. Our significant legal proceedings are discussed in Note 7 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. As of June 30, 2007, there have been no significant changes in our contractual obligations and other commitments as previously disclosed in our 2006 Annual Report on Form 10-K other than our long-term debt obligations.

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The following schedule presents a summary of our long-term debt obligations as of June 30, 2007 (in thousands):

	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Contractual obligations reflected in the balance sheet:
Long-term debt (a)	$	1,753,312	$	16,145	$	1,253,553	$	483,614	$	—

(a) These amounts also include scheduled interest payments on our long-term debt. We have the ability to repay any short-term maturities of our commercial paper borrowings with available cash from our long-term committed credit facility that expires in 2011. See Note 6 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information regarding our long-term debt obligations.

In April 2007, we issued $1.2 billion of 1.22% Convertible Debentures that are convertible under certain circumstances for cash and shares of our common stock, if any (see Note 6 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q). The convertible features of the 1.22% Convertible Debentures are considered to be an equity-linked derivative which is not required to be reflected in our balance sheet. Due to the call option we purchased to offset potential dilution to our common stock upon potential future conversion of the 1.22% Convertible Debentures, we do not believe that the equity-linked derivative currently exposes us to a material amount of off-balance sheet risk. We have no off-balance sheet financing arrangements other than the equity-linked derivative associated with our 1.22% Convertible Debentures and those previously disclosed in our 2006 Annual Report on Form 10-K.

CAUTIONARY STATEMENTS

In this Quarterly Report on Form 10-Q and in other written or oral statements made from time to time, we have included and may include statements that constitute “forward-looking statements” with respect to the financial condition, results of operations, plans, objectives, new products, future performance and business of St. Jude Medical, Inc. and its subsidiaries. Statements preceded by, followed by or that include words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “forecast,” “project,” “believe” or similar expressions are intended to identify some of the forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. These forward-looking statements involve risks and uncertainties. By identifying these statements for you in this manner, we are alerting you to the possibility that actual results may differ, possibly materially, from the results indicated by these forward-looking statements. We undertake no obligation to update any forward-looking statements. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties discussed in Part I, Item 1A, Risk Factors of our 2006 Annual Report on Form 10-K, as well as the various factors described below. Since it is not possible to foresee all such factors, you should not consider these factors to be a complete list of all risks or uncertainties. We believe the most significant factors that could affect our future operations and results are set forth in the list below.

1.	Any legislative or administrative reform to the U.S. Medicare or Medicaid systems or international reimbursement systems that significantly reduces reimbursement for procedures using our medical devices or denies coverage for such procedures, as well as adverse decisions relating to our products by administrators of such systems in coverage or reimbursement issues.
2.	Assertion, acquisition or grant of key patents by or to others that have the effect of excluding us from market segments or requiring us to pay royalties.
3.	Economic factors, including inflation, changes in interest rates and changes in foreign currency exchange rates.
4.	Product introductions by competitors which have advanced technology, better features or lower pricing.
5.	Price increases by suppliers of key components, some of which are sole-sourced.
6.	A reduction in the number of procedures using our devices caused by cost-containment pressures or preferences for alternate therapies.
7.	Safety, performance or efficacy concerns about our products, many of which are expected to be implanted for many years, leading to recalls and/or advisories with the attendant expenses and declining sales.

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8.	Changes in laws, regulations or administrative practices affecting government regulation of our products, such as Food and Drug Administration laws and regulations that increase the time and/or expense of obtaining approval for products or impose additional burdens on the manufacture and sale of medical devices.
9.	Regulatory actions arising from concern over Bovine Spongiform Encephalopathy, sometimes referred to as “mad cow disease,” that have the effect of limiting our ability to market products using bovine collagen, such as Angio-Seal™, or products using bovine pericardial material, such as our Bicor® and Epic™ tissue heart valves, or that impose added costs on the procurement of bovine collagen or bovine pericardial material.
10.	Difficulties obtaining, or the inability to obtain, appropriate levels of product liability insurance.
11.	The ability of our Silzone® product liability insurers to meet their obligations to us.
12.	Serious weather or other natural disasters that cause damage to the facilities of our critical suppliers or one or more of our facilities, such as an earthquake affecting our facilities in California or a hurricane affecting our facility in Puerto Rico.
13.	Healthcare industry consolidation leading to demands for price concessions or the exclusion of some suppliers from significant market segments.
14.	Adverse developments in the investigation of business practices in the cardiac rhythm management industry by the U.S. Attorney’s Office in Boston.
15.	Adverse developments in litigation, including product liability litigation, patent or other intellectual property litigation or shareholder litigation.
16.	Inability to successfully integrate the businesses that we have acquired in recent years and that we plan to acquire.
17.	Failure to successfully complete clinical trials for new indications for our products and failure to successfully develop markets for such new indications.
18.	Changes in accounting rules that adversely affect the characterization of our results of operations, financial position or cash flows.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes since December 30, 2006 in our market risk. For further information on market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our 2006 Annual Report on Form 10-K.

Item 4. CONTROLS AND PROCEDURES

As of June 30, 2007, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2007.

During the fiscal quarter ended June 30, 2007, there were no changes in the Company’s 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, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. 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 7 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q and are incorporated herein by reference. While it is not possible to predict the outcome for most of the legal proceedings discussed in Note 7, the costs associated with such proceedings could have a material adverse effect on our consolidated earnings, financial position or cash flows of a future period.

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Item 1A. RISK FACTORS

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, the United Kingdom 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 $1.3 million to $1.8 billion at December 30, 2006. We believe that the final resolution of the Silzone®-coated product cases will take several years and we 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. While 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 so covered could have a material adverse effect on our financial condition and results of operations.

The medical device industry is the subject of a governmental investigation into marketing and other business practices. This and other governmental 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 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 January 2007, the French Conseil de la Concurrence (one of the bodies responsible for the enforcement of antitrust/competition law in France) issued a Statement of Objections alleging that St. Jude Medical had agreed with the four other main suppliers of ICDs in France to collectively refrain from responding to a 2001 tender for ICDs conducted by a group of 17 University Hospital Centers in France. This alleged collusion is said to be contrary to the French Commercial Code and Article 81 of the European Community Treaty.

In July 2007, we received a civil subpoena from the OIG requesting documents regarding our relationships with 10 Ohio hospitals during the period from 2003 through 2006.

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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 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 an 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.

Other than the changes to our risk factors discussed in the preceding paragraphs, there has been no material change in the risk factors set forth in our 2006 Annual Report on Form 10-K. For further information, see Part I, Item 1A, Risk Factors in our 2006 Annual Report on Form 10-K.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

On January 25, 2007, the Company’s Board of Directors authorized and the Company announced a share repurchase program of up to $1.0 billion of the Company’s outstanding common stock. The Company began making share repurchases on January 29, 2007, and as of May 8, 2007, had repurchased 23.6 million shares for approximately $1.0 billion. The following table provides information about the shares repurchased by the Company during the second quarter of2007:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
04/01/07 – 04/28/07	5,560,400	$	43.40	5,560,400	$	58,662,276
04/29/07 – 06/02/07	1,328,300		44.04	1,328,300		—
06/03/07 – 06/30/07	—		—	—		—
Total	6,888,700	$	43.53	6,888,700	$	—

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

At the Company’s 2007 Annual Meeting of Shareholders held on May 16, 2007, the shareholders voted on and approved the proposals listed as follows:

a) A proposal to elect two directors to the Company’s Board of Directors to serve three-year terms ending at the Company’s annual meeting in 2010, as follows:

Director	Votes For	Votes Withheld
Michael A. Rocca	270,902,611	5,932,588
Stefan K. Widensohler	259,858,777	16,976,422

In addition, the terms of the following directors continued after the meeting: directors with a term ending in 2008 – Richard R. Devenuti, Stuart M. Essig, Thomas H. Garrett III and Wendy L. Yarno; and directors with a term ending in 2009 – John W. Brown and Daniel J. Starks.

b) A proposal to approve the St. Jude Medical, Inc. 2007 Stock Incentive Plan. The proposal received 185,061,720 votes for and 46,987,499 votes against, with the holders of 3,062,348 shares abstaining; and 41,723,632 broker non-votes.

c)	A proposal to approve the St. Jude Medical, Inc. 2007 Employee Stock Purchase Plan. The proposal received 218,331,025 votes for and 14,091,680 votes against, with the holders of 2,689,861 shares abstaining; and 41,722,633 broker non-votes.
d)	A proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2007. The proposal received 267,923,935 votes for and 6,512,484 votes against, with the holders of 2,398,779 shares abstaining.

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Item 6. EXHIBITS

4.1	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.
4.2	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	St. Jude Medical, Inc. 2007 Stock Incentive Plan, dated as of May 16, 2007, is incorporated by reference to Exhibit 10.1 to St. Jude Medical’s Current Report on Form 8-K filed on May 18, 2007.
10.2	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.
10.3	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.
10.4	St. Jude Medical, Inc. 2007 Employee Stock Purchase Plan, dated as of May 16, 2007, is incorporated by reference to Exhibit 10.4 to St. Jude Medical’s Current Report on Form 8-K filed on May 18, 2007.
10.5	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.
10.6	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.
10.7	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.
10.8	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.
*10.9	Settlement Agreement, dated as of July 26, 2007, by and between St. Jude Medical, Inc. and its affiliates named therein and Mirowski Family Ventures LLC.
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.

* Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, confidential portions of this exhibit have been deleted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

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SIGNATURE

Pursuant to the requirements 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.
August 9, 2007	/s/   JOHN C. HEINMILLER
DATE	JOHN C. HEINMILLER Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

Exhibit No.	Description
4.1	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.
4.2	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	St. Jude Medical, Inc. 2007 Stock Incentive Plan, dated as of May 16, 2007, is incorporated by reference to Exhibit 10.1 to St. Jude Medical’s Current Report on Form 8-K filed on May 18, 2007.
10.2	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.
10.3	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.
10.4	St. Jude Medical, Inc. 2007 Employee Stock Purchase Plan, dated as of May 16, 2007, is incorporated by reference to Exhibit 10.4 to St. Jude Medical’s Current Report on Form 8-K filed on May 18, 2007.
10.5	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.
10.6	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.
10.7	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.
10.8	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.
*10.9	Settlement Agreement, dated as of July 26, 2007, by and between St. Jude Medical, Inc. and its affiliates named therein and Mirowski Family Ventures LLC. #
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. #

_________________

* Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, confidential portions of this exhibit have been deleted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

#  Filed as an exhibit to this Quarterly Report on Form 10-Q.

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EX-10.9

Exhibit 10.9

SETTLEMENT AGREEMENT

This Settlement Agreement (the “Agreement”) is entered into as of this 26th day of June, 2007, by and between Mirowski Family Ventures, L.L.C., a limited liability corporation organized and existing under the laws of the State of Maryland (“MFV”), on the one hand and St. Jude Medical, Inc., a corporation organized and existing under the laws of the State of Minnesota, St. Jude Medical S.C., Inc., a corporation organized and existing under the laws of the State of Minnesota, and Pacesetter, Inc., a corporation organized and existing under the laws of the State of Delaware, on the other hand (hereafter collectively referred to as “St. Jude”). MFV and St. Jude shall collectively be referred to as the “Parties” in this Agreement.

RECITALS

WHEREAS, there currently are pending between MFV and St. Jude the following litigation matters:

1. Cardiac Pacemakers v. St. Jude Medical, Docket No. 2007-1296 (Fed. Cir.) on appeal from Cardiac Pacemakers, Inc.et al. v. St. Jude Medical, Inc. et al., Civil Action No. 1-96-cv-1718 DFH/TAB, (S.D. Ind.) (the “Indiana Case”); and

2. Guidant Corp. et al. v. St. Jude Medical, Inc. et al., Civil Action No. 04-0067-SLR (D. Del.) (the “Delaware Case”) (collectively, the “Indiana case and the Delaware case are hereafter referred to as the Litigation”);

WHEREAS, the Guidant Parties (as defined in Section 1.01, below) and St. Jude previously entered into a Settlement Agreement on July 29, 2006, that limited the scope of the issues to be tried in the Litigation;

**  The appearance of a double asterisk denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.

AND WHEREAS, although St. Jude has denied liability and disputes the allegations of infringement and validity of the patent at issue in the Delaware Case, nevertheless MFV and St. Jude now wish to settle the Delaware Case upon the terms and conditions set forth in this Agreement (and the Exhibits hereto) while continuing to litigate the issues remaining in the Indiana Case;

NOW, THEREFORE, in consideration of the promises and of the mutual covenants hereinafter set forth, and of the good and valuable consideration flowing from each party to the other, the Parties hereto, intending to be legally bound hereby, covenant and agree as follows:

ARTICLE I

Definitions

Section 1.01.Guidant Parties. “Guidant Parties” as used herein shall mean Guidant Corporation, Cardiac Pacemakers, Inc., and Guidant Sales Corporation, all of whom are plaintiffs along with MFV in the Litigation.

Section 1.02.Affiliates. “Affiliates” as used herein shall mean any person or entity that controls or is controlled by or is under common control with a party on the Effective Date or at any time thereafter. For purposes of this Section 1.01, ownership, directly or indirectly, of more than fifty percent (50%) of the capital stock or other comparable ownership interest of the corporation or entity carrying the right to vote for or appoint directors or their equivalent (if not a corporation) shall constitute control thereof. “Affiliate” of a third party means a person or entity that controls, is controlled by, or under common control, with such third party. Without in any way limiting the foregoing, “Affiliates” of St. Jude Medical, Inc. include Pacesetter, Inc., St. Jude Medical AB, and St. Jude Medical S.C., Inc.

Section 1.03. 2006 Settlement Agreement. “2006 Settlement Agreement” as used herein shall mean the settlement agreement entered into by and between Boston Scientific Corporation, Guidant Corporation, Cardiac Pacemakers, Inc., Guidant Sales Corporation, and Advance Bionics, on the one hand, and St. Jude Medical, Inc., Pacesetter, Inc., and Advanced Neuromodulation Systems, Inc., on the other hand, dated July 29, 2006, an executed copy of which (excluding all exhibits other than exhibit A, thereto) is attached hereto as Exhibit A.

Section 1.04. 2004 Exclusive License Agreement. “2004 Exclusive License Agreement” as used herein shall mean the Amended and Restated Exclusive License Agreement entered into by and between Mirowski Family Ventures, L.L.C. and Guidant Corporation, dated January 28, 2004, an executed copy of which is attached hereto as Exhibit B.

Section 1.05. Current Products. “Current Products” as used herein shall mean any device or method, including parts, components, or accessories for such device or method, which has received CE mark in Europe, 510(k) clearance or PMA approval in the U.S., and/or regulatory approval in Japan, at any time prior to, or on, the Effective Date of the Agreement.

Section 1.06. CRM License Agreement. “CRM License Agreement” as used herein shall mean the cross-license agreement entered into by and between Boston Scientific Corporation and St. Jude Medical, Inc., dated July 29, 2006, an executed copy of which is attached as Exhibit A to the 2006 Settlement Agreement.

Section 1.07. ‘288 Patent. “‘288 Patent” as used herein shall mean U.S. Patent No. 4,407,288, entitled “Implantable Heart Stimulator and Stimulation Method,” which issued on October 4, 1983.

Section 1.08. MFV Patent Rights. “MFV Patent Rights” shall mean the “Patent Rights” as that term is defined in Section 1 of the 2004 Exclusive License Agreement, including all “Improvements” thereof as that term is defined in Section 2 of the 2004 Exclusive License Agreement, and all divisions, continuations, reissues, reexaminations, extensions, and foreign counterparts of the foregoing, whether presently filed or filed in the future, and all patents resulting therefrom to the extent not excluded in the remainder of this section. Pursuant to Section 6.03, below, MFV also represents and warrants that Exhibit C hereto is a true, accurate and complete listing of all U.S. and foreign issued patents and pending applications for patents that constitute the “MFV Patent Rights” as of the Effective Date of this Agreement to the extent not excluded in the remainder of this section. Notwithstanding the foregoing, for purposes of this Agreement “MFV Patent Rights” shall specifically exclude:

(1) the ‘288 patent; and

(2) the United States Patent Applications reflected on Exhibit B to the 2004 Exclusive License Agreement and all divisions, continuations, reissues, reexaminations, extensions and foreign counterparts of the foregoing, whether presently filed or filed in the future, and all patents resulting therefrom (the patent and patent applications excluded by this subsection (2) shall hereafter collectively be known as the “Exhibit B Patent Rights”).

The Exhibit B Patent Rights are as set forth in Exhibit H, hereto.

Section 1.09. Effective Date. “Effective Date” as used herein shall mean June 26, 2007.

ARTICLE II

License Grant; Lump Sum Payment

Section 2.01.    Pursuant to the authority granted to MFV by the agreement of the Guidant Parties as reflected in Section 2.03 of the 2006 Settlement Agreement and as reflected in the Consent to License and Mutual Release attached hereto as Exhibit D, MFV hereby grants to St. Jude and its Affiliates a non-exclusive, irrevocable, perpetual, fully paid-up worldwide license, without the right to sublicense, under all of the MFV Patent Rights to make, have made, use, sell, have sold, offer to sell, distribute, have distributed, import, and otherwise dispose of any and all devices or other products, in the United States and throughout the world.

Section 2.02.    As consideration for the settlement of the Delaware Case, the license granted by Section 2.01, and the other covenants and agreements of MFV as set forth herein, St. Jude agrees to make a one time payment to MFV in the amount of thirty-five million dollars ($35,000,000). This one time, lump sum payment shall be made by St. Jude via wire transfer on or before June 29, 2007, to the following account:

**

The Parties agree that each Party shall be responsible for its own payment of any and all federal, state, or foreign tax payments that may be required of that Party in connection with lump-sum payment of this Section 2.02.

Section 2.03.    MFV further covenants and agrees that it will take no action, either directly or indirectly, that interferes with St. Jude’s ability to exercise the sublicense option granted to St. Jude by Section 2.06 of the CRM License Agreement.

ARTICLE III

Dismissal of Delaware Case and Conduct of Indiana Case

Section 3.01.  Dismissal with Prejudice. Following the execution of this Agreement and subject to the payment required by Section 2.02, the Parties shall execute and promptly file with the United States District Court for the District of Delaware a stipulation for dismissal with prejudice of the Delaware Case substantially in the form of Exhibit E, hereto. In addition, solely for purposes of the settlement and compromise of disputed claims in the Delaware Case, the Parties shall execute and promptly file with the Court a stipulation substantially in the form of Exhibit F hereto, in which St. Jude acknowledges and agrees that one or more of the accused products infringes at least one claim of U.S. Reissue Patent No. RE 38,119, and further acknowledges and agrees that the asserted claims of the patent are not invalid or unenforceable. The latter stipulation in the form of Exhibit F shall be filed under seal, and MFV covenants and agrees to maintain the confidentiality of the stipulation, if possible, except that the copies of the stipulation may be disclosed to Guidant, Medtronic, or other third parties (so long as such parties are informed of the confidential nature of the stipulation) solely for purposes of enforcing United States Reissue Patent No. RE 38,119, or any division, continuation, reissue or reexamination thereof, against Guidant, Medtronic or other third parties.

Section 3.02.    Conduct of the Indiana Case. The Parties further agree that nothing in this Agreement shall in any way affect the conduct of the Indiana Case, which the Parties intend to continue to litigate. MFV and St. Jude further covenant and agree that neither will seek to offer into evidence, cite as authority, or otherwise use or construe either the stipulations and agreements referred to in Section 3.01 or this Agreement itself in the Indiana case or in any other case, litigation, or other proceeding against St. Jude except as necessary to enforce the terms of this Agreement.

ARTICLE IV

Releases

Section 4.01   Subject to the payment required by Section 2.03, the Parties covenant and agree that all claims and counterclaims in the Delaware Case shall be dismissed with prejudice, and each party, for itself and its successors and assigns, hereby releases, acquits, and forever discharges the other party and its Affiliates, successors, and assigns, and all their respective officers, directors, employees, agents, representatives, distributors, resellers, customers, and end users from all such claims and counterclaims.

Section 4.02.  MFV, for itself and its beneficiaries, shareholders, agents, employees, directors, officers, predecessors, successors, and assignees, hereby releases and forever discharges St. Jude and its Affiliates, and all present or former agents, employees, directors, officers, predecessors, successors, and assignees of St. Jude and its Affiliates, from any and all claims, debts, defenses, liabilities, costs, attorneys’ fees, actions, suits at law or equity, demands, contracts, expenses, damages, whether general, special, punitive, exemplary, contractual, or extra contractual, and causes of action of any kind and nature with respect to the MFV Patent Rights which MFV may have as of the Effective Date, whether known or unknown, against St. Jude and/or its Affiliates, and/or all present or former agents, employees, directors, officers, predecessors, successors, and assignees of St. Jude and its Affiliates.

Section 4.03.  St. Jude, for itself and its shareholders, agents, employees, directors, officers, predecessors, successors, and assignees, hereby releases and forever discharges MFV, and all present or former agents, employees, directors, officers, predecessors, successors, and assignees of MFV, from any and all claims, debts, defenses, liabilities, costs, attorneys’ fees, actions, suits at law or equity, demands, contracts, expenses, damages, whether general, special, punitive, exemplary, contractual, or extra contractual, and causes of action of any kind and nature with respect to the MFV Patent Rights which St. Jude may have as of the Effective Date, whether known or unknown, against MFV and/or all present or former agents, employees, directors, officers, predecessors, successors, and assignees of MFV.

ARTICLE V

MFV Covenant Not to Sue

Section 5.01.  MFV hereby covenants not to sue St. Jude and/or its Affiliates, their respective successors, assigns, affiliated entities, directors, officers, shareholders, and legal representatives, distributors, resellers, customers, and end users upon any claim, demand, or right of action related to any alleged infringement of the MFV Patent Rights. MFV further covenants not to sue St. Jude and/or its Affiliates, their respective successors, assigns, affiliated entities, directors, officers, shareholders, and legal representatives, distributors, resellers, customers, and end users upon any claim, demand, or right of action related to any alleged infringement of the Exhibit B Patent Rights arising from the manufacture, use, sale, offer for sale, distribution or import by or on behalf of St. Jude of any Current Products.

ARTICLE VI

Representations and Warranties

Section 6.01.  Each of the Parties represents and warrants that it has the power and authority to execute, deliver, enter into and perform this Agreement and that it is legally permitted to grant the rights granted and to make all covenants and perform all obligations required by this Agreement, including all of the exhibits hereto.

Section 6.02.  Each of the Parties represents and warrants that, with the exception of any consents required from the Guidant Parties, to the extent that any third-party consents are required for the performance of any of its obligations under this Agreement, it has obtained all such required consents.

Section 6.03.  MFV represents that, with the exception of the rights granted to the Guidant Parties and its sub-licensees under the 2004 Exclusive License Agreement, MFV is the sole and exclusive owner of all right, title and interest in and to the MFV Patent Rights, and it has not assigned, in whole or in part, to any other person or entity any claims against St. Jude or any of its Affiliates, distributors, resellers, customers, and end users that are the subject of the releases granted in Section 4.01 and Section 4.02. MFV also represents and warrants that Exhibit C hereto is a true, accurate and complete listing of all U.S. and foreign issued patents and pending applications for patents that constitute the MFV Patent Rights as of the Effective Date of this Agreement.

ARTICLE VII

Confidentiality/Publicity Concerning Agreement

Section 7.01.  No party or any Affiliate of a party shall originate any publicity, news release, or other such general public announcement or make any other disclosure to any third party regarding the terms of this Agreement without the express written consent of the other party (without limitation, the foregoing provision is not intended to limit communications deemed reasonably necessary or appropriate by a party or its Affiliate to its employees, shareholders, directors, officers, accountants, auditors and legal counsel). Notwithstanding the foregoing provision, the Parties and their respective Affiliates shall not be prohibited from making any disclosure or release that is required by law, court order, or applicable regulation, or is considered necessary by counsel to fulfill an obligation under securities laws or the rules of the New York Stock Exchange or other applicable stock exchange or to protect any intellectual property right in any territory so long as the disclosing party provides notice to the other party at least five(5) business days prior to such disclosure. However, the Parties agree that, with regard to any required disclosure to the Securities and Exchange Commission regarding this Agreement or the fact that it has been executed that is made on or around the Effective Date, prior notice to the other party shall not be required.

ARTICLE VIII

Notices

Section 8.01.  Any notice or other communication to be made pursuant to this Agreement shall be sent to the other party at its address listed below or at such other address such party may hereinafter designate to the other party in writing:

If to MFV: Mirowski Family Ventures, L.L.C.

Attn: Ginat Wintermeyer Mirowski, DMD, M.D.

President

10440 High Grove Drive

Carmel, Indiana 46032

with a copy to

Sidney J. Silver, Esq.

Silver Freedman & Taff, LLP.

3299 K Street, N.W., Suite 100

Washington, DC 20007-4444

Facsimile Nos.: 202-337-5502 or 202-295-4512

If to St. Jude:

President and CEO

St. Jude Medical, Inc.

One Lillehei Plaza

St. Paul, MN 55117

Facsimile No.: (651) 481-7690

with a copy to: General Counsel

Notice shall be deemed to have been given: (i) at the expiration of two (2) business days from the date of delivery by facsimile transmission, provided a copy is deposited postage prepaid for delivery with the postal service or given for delivery to an express courier service on the same date as the sending of the facsimile, or (ii) ten (10) business days from the date the communication is deposited postage prepaid with the postal service or given to an express courier service, unless actual receipt of the notice at an earlier date is established. Without limitation of the foregoing, a written receipt signed by the addressee or its duly appointed representative situated at the addresses set forth hereinabove shall constitute sufficient evidence of service. Either party may change its address and facsimile information by written notice given in accordance with the provisions of this Section 8.01.

ARTICLE IX

Alternative Dispute Resolution

Section 9.01.  (a) Any dispute that arises out of or relates to this Agreement, including an alleged breach of this Agreement, which is not resolved by negotiation as provided in subsection (b) of this Section 9.01 shall be resolved by binding Alternative Dispute Resolution (“ADR”) in the manner described in Exhibit G.

(b) The Parties recognize that a bonafide dispute may arise from time to time as to certain matters that relate to this Agreement. In all such instances, any party may, by written notice to the other party, have such dispute referred to their respective employees designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. Such designated employees are as follows:

For MFV: Mirowski Family Ventures, L.L.C.

Attn: Ginat Wintermeyer Mirowski, DMD, M.D.

President

10440 High Grove Drive

Carmel, Indiana 46032

with a copy to

Sidney J. Silver, Esq.

Silver Freedman & Taff, LLP.

3299 K Street, N.W., Suite 100

Washington, DC 20007-4444

Facsimile Nos.: 202-337-5502 or 202-295-4512

For St. Jude:

General Counsel

St. Jude Medical, Inc.

One Lillehei Plaza

St. Paul, MN 55117

Facsimile No.: (651) 481-7690

Any settlement reached by the Parties under this Section 9.01 shall not be binding until reduced to writing and signed by authorized officers of the parties involved in the dispute. If the designated employees are unable to resolve such dispute within such sixty-day period, any party may invoke the ADR provisions of this Section 9.01.

ARTICLE X

General Provisions

Section 10.01.  Modification. This Agreement may not be modified, changed, or terminated orally. No change, modification, addition, or amendment shall be valid unless given in a writing expressly indicating an intent to modify the Agreement and duly executed by the Parties.

Section 10.02.  Entire Agreement. This Agreement, along with all of the other agreements and stipulations that are to be executed by the Parties as contemplated herein, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes any and all negotiations, correspondence, understandings and agreements, whether written or oral, between the Parties respecting the subject matter hereof.

Section 10.03.  Governing Law. Recognizing that the laws within the United States and international jurisdictions vary in their content and effect with respect to similar subject matter, and that the Parties desire uniformity and predictability in interpretation and enforcement of this Agreement, the Parties have agreed to the following provisions regarding applicable law to govern this Agreement: All matters affecting the interpretation, form, validity, and performance of this Agreement shall be decided under the laws of the State of Delaware (without regard to principles of conflicts of laws), including its procedural laws; provided, however, that (a) nothing in Delaware state procedural law shall be deemed to alter or affect the applicability of the Federal Arbitration Act as governing arbitration of disputes as provided in this Agreement, and (b) no Delaware state arbitration laws or arbitration rules shall be applicable.

Section 10.04.  Force Majeure. No party (including any of its Affiliates) shall be liable in damages for, nor shall this Agreement be terminable or cancelable by reason of, any delay or default in any party’s performance hereunder if such default or delay is caused by events beyond such party’s reasonable control including, but not limited to, acts of God, action of any government or agency thereof, war or insurrection, civil commotion, destruction of facilities or materials by earthquake, fire, flood or storm, labor disturbances, epidemic, or failure of public utilities or common carriers. The party (or Affiliates) so affected shall give prompt notice to the other Parties of such cause, and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as possible. All Parties (or Affiliates) agree to endeavor to resume their performance hereunder if such performance is delayed or interrupted by reason of force majeure.

Section 10.05.  Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original.

Section 10.06.  Captions. The captions in this Agreement are intended solely as a matter of convenience and are for reference only, and shall be given no effect in the construction or interpretation of this Agreement.

Section 10.07.  Severability of Provisions. Should any part or provision of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding.

Section 10.08.  No Agency. At no time shall any party or its Affiliate hold itself out to be the agent, employee, lessee, sublessee, partner, or joint venture partner of the other party or its Affiliates. No party or its Affiliates shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other party or its Affiliates or to bind the other party or its Affiliates with regard to any other contract, agreement, or undertaking with a third party.

Section 10.09.  Further Assurances. At such time and from time to time on and after the Effective Date upon request by a party, the other party will execute and deliver or will cause to be executed and delivered, all such further acts, acknowledgments, and assurances that may be reasonably required for carrying out the purposes of this Agreement.

Section 10.10.  Construction Against Waiver. No waiver of any term, provision, or condition of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such term, provision, or condition of this Agreement; nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision.

Section 10.11.  Protective Orders. The court-entered confidentiality agreements and protective orders shall remain in full force and effect after dismissal of the Delaware Case, and the Parties shall remain bound by their terms.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed and duly attested by their corporate officers authorized for this purpose.

MIROWSKI FAMILY VENTURES, L.L.C.

By:

/s/ Ginat W. Mirowski

President

ATTEST:

By:   [Illegible signature]

ST. JUDE MEDICAL, INC., PACESETTER, INC.,

AND ST. JUDE MEDICAL S.C., INC.

By:

/s/ Pamela S. Krop

Vice President, General Counsel and Secretary

ATTEST:

By:

EXHIBIT A

2006 Settlement Agreement

SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) is entered into as of this 29th day of July, 2006, by and between Boston Scientific Corporation, a corporation organized and existing under the laws of the State of Delaware (“BSC”), Guidant Corporation, a corporation organized and existing under the laws of the State of Indiana (“Guidant”), Cardiac Pacemakers, Inc., a corporation organized and existing under the laws of the State of Minnesota (“CPI”), Guidant Sales Corporation, a corporation organized and existing under the laws of the State of Indiana (“GSC”), and Advanced Bionics Corporation, a corporation organized and existing under the laws of the State of Delaware (“ABC”), on the one hand (hereinafter collectively referred to as the “BSC Parties”), and St. Jude Medical, Inc., a corporation organized and existing under the laws of the State of Minnesota (“St. Jude”), St. Jude Medical S.C., Inc., a corporation organized and existing under the laws of the State of Minnesota (“SJMSC”), Pacesetter, Inc., a corporation organized and existing under the laws of the State of Delaware (“Pacesetter”), and Advanced Neuromodulation Systems, Inc., a corporation organized and existing under the laws of the State of Texas (“ANS”), on the other hand (hereinafter collectively referred to as the “St. Jude Parties”). The BSC Parties and the St. Jude Parties shall collectively be referred to as the “Parties” in this Agreement.

RECITALS

WHEREAS, there currently are pending between the BSC Parties and the St. Jude Parties the following cases:

1. Cardiac Pacemakers, Inc.et al. v. St. Jude Medical, Inc. et al., Civil Action No. 1-96-cv-1718 DFH/TAB, (S.D. Ind.) (the “Indiana case”);

2. Pacesetter, Inc. et al. v. Cardiac Pacemakers, Inc.et al., Case No. 02-1337 DWF/SRN, (D. Minn.) (the “Minnesota Pacesetter case”);

3. Cardiac Pacemakers, Inc. et al. v. St. Jude Medical, Inc. et al., Civil Action No. 04-1016 JMR/FLN (D. Minn.) (the “Minnesota CPI case”);

4. Guidant Corp. et al. v. St. Jude Medical, Inc. et al., Civil Action No. 04-0067-SLR (D. Del.) (the “Delaware case”);

5. Pacesetter, Inc. et al. v. Intermedics, Inc. et al., Case No. CV 06-3166 GHK(FFMx) (C.D. Cal.) (the “California case”);

6. Advanced Neuromodulation Systems, Inc. v. Advanced Bionics Corp., Civil Action No. 4:04cv131 (E.D. Tex); Advanced Bionics Corp. v. Advanced Neuromodulation Systems, Inc., Civil Action No. 4:04cv131 (E.D. Tex.); and the Advanced Neuromodulation Systems, Inc. v. Advanced Bionics Corp arbitration, Institute for Conflict Prevention and Resolution Case No. G-06-08A (the “ANS/ABC cases”);

all of which are collectively referred to herein as the “Litigation”;

WHEREAS, the BSC Parties and the St. Jude Parties entered into discussions in an effort to resolve the Litigation;

WHEREAS, in connection with the discussions with the BSC Parties (and with their permission), the St. Jude Parties entered into discussions with representatives of MFV (as defined below) in an effort to resolve the Indiana case and the Delaware case, but the St. Jude Parties’ efforts at negotiating a resolution of those cases with the representatives of MFV were unsuccessful;

WHEREAS, the Parties now wish to settle certain cases of the Litigation and to limit the issues remaining in the rest of the Litigation, upon the terms and conditions set forth in this Agreement (and the Exhibits hereto);

NOW, THEREFORE, in consideration of the promises and of the mutual covenants hereinafter set forth, and of the good and valuable consideration flowing from each party to the other, the Parties hereto, intending to be legally bound hereby, covenant and agree as follows:

ARTICLE I

Definitions

Section 1.01. Affiliates. “Affiliates” as used herein shall have the meaning set forth in the CRM License Agreement.

Section 1.02. CRM License Agreement. “CRM License Agreement” as used herein shall mean the license agreement relating to cardiac rhythm management products by and between Boston Scientific Corporation and St. Jude Medical, Inc., dated July 29, 2006, an executed copy of which is attached hereto as Exhibit A.

Section 1.03. SCS License Agreement. “SCS License Agreement” as used herein shall mean the license agreement relating to spinal cord stimulation products by and between Boston Scientific Corporation and St. Jude Medical, Inc., dated July 29, 2006, an executed copy of which is attached hereto as Exhibit B.

Section 1.04. Medtronic Action. The “Medtronic Action” as used herein shall mean the litigation captioned Medtronic, Inc. v. Guidant Corporation, et al., case number 05-1515, currently pending in the U.S. Court of Appeals for the Federal Circuit, and any continuation of that action at the district court or appellate court levels following the issuance of a mandate by the Federal Circuit.

Section 1.05. MFV.   ”MFV” as used herein shall mean Mirowski Family Ventures, LLC, a limited liability company organized under the laws of the State of Maryland. MFV is also a plaintiff adverse to the St. Jude Parties in the Indiana case and the Delaware case.

Section 1.06. SCS Field. “SCS Field” as used herein shall have the meaning set forth in the SCS License Agreement.

Section 1.07. Derivative Product. “Derivative Product” as used herein shall mean any product subsequently approved by applicable regulatory authorities for use in spinal cord stimulation to manage chronic pain of the trunk and limbs that is of substantially equivalent design and functionality as a product that is commercially marketed and sold as of the Effective Date. In the interest of clarity, a future product shall be considered a “Derivative Product” unless it is covered by a patent (other than the Licensed Patents) that does not cover a product commercially marketed and sold as of the Effective Date. Whether a future product is a “Derivative Product” shall be determined on a patent-by-patent basis; a future product that is not a “Derivative Product” with respect to one patent shall not be exposed to claims of infringement based on any other patent for which the product is a “Derivative Product.”

Section 1.08. Effective Date. “Effective Date” as used herein shall mean July 29, 2006.

ARTICLE II

Dismissal of Certain Cases and Narrowing of Issues In Remaining Cases

Section 2.01.   Contemporaneously with the execution of this Agreement, the Parties shall execute and promptly file with the appropriate courts the following documents:

a. A stipulation for dismissal with prejudice of the Minnesota Pacesetter case in the form of Exhibit C;

b. A stipulation for dismissal with prejudice of the Minnesota CPI case in the form of Exhibit D;

c. A stipulation for dismissal with prejudice of the California case in the form of Exhibit E;

d. A stipulation for dismissal with prejudice of the ANS/ABC cases in the form of Exhibits F and G;

The foregoing cases constitute the “Dismissed Litigation.” Those cases not so dismissed pursuant to this Section 2.01 constitute the “Remaining Litigation.”

Section 2.02.   The Parties further agree that the issues remaining to be litigated in the Remaining Litigation shall be circumscribed and continue only within the following parameters:

a. The Indiana case.

i. In consideration for the St. Jude Parties’ covenants and agreements in Sections 2.02, 2.03 and 2.04 of this Agreement, the BSC Parties covenant and agree that plaintiffs in the Indiana case shall withdraw and/or not further pursue any damages claim for lost profits, price erosion, an “up front” royalty payment, prejudgment interest, or attorneys’ fees against the St. Jude Parties. In addition, the BSC Parties covenant and agree that plaintiffs in the Indiana case shall only pursue a damages claim based on pulse generators and leads which plaintiffs contend infringe the patent claim asserted in the Indiana case, and will withdraw and/or not pursue any damages claim based on other products, whether through a “convoyed sales” theory or otherwise. Notwithstanding such covenant and agreement, it is understood that the defendants in the Indiana case shall continue to be free to argue that damages are not warranted due to non-infringement, invalidity and/or other defenses, except as set forth in Section 2.02(a)(ii), below. The BSC Parties further covenant and agree that plaintiffs in the Indiana case shall limit any claim for damages to a reasonable royalty theory, with a royalty that shall not exceed three percent (3%) of the net sales revenue from any sales found to infringe the patent in suit, and that plaintiffs shall not be entitled to receive any payment in connection with the Indiana case, by way of judgment or otherwise, that exceeds three percent (3%) of the net sales revenue from any sales found to infringe the patent in suit.

ii. In consideration for the BSC Parties’ covenants and agreements in Sections 2.02, 2.03 and 2.04 of this Agreement, the St. Jude Parties covenant and agree that they will withdraw and/or not further pursue their fraud claim and any claim for attorneys’ fees. In addition, the St. Jude Parties covenant and agree not to seek to introduce any evidence of Guidant product recalls; provided, however, that the BSC Parties covenant and agree to ensure that plaintiffs will not seek to introduce any evidence of St. Jude product recalls. The St. Jude Parties further covenant and agree that (1) defendants in the Indiana case will not seek discovery on or introduce any evidence in pleadings or court relating to Dr. Bourland’s conduct or plaintiffs’ conduct vis a vis Dr. Bourland in connection with the trial of this matter in June 2001 and related information revealed after that trial; and (2) defendants in the Indiana case will not pursue any claim or defense (e.g., unclean hands, inequitable conduct, unenforceability, estoppel, misuse, and/or fraud) based, in-whole or in-part, on Dr. Bourland’s conduct in connection with the trial of this matter in June 2001 or based, in-whole or in-part, on plaintiffs’ conduct vis a vis Dr. Bourland in connection with the trial of this matter in June 2001 and related information revealed after that trial. Defendants will remain free to pursue any defense (including, but not limited to, inequitable conduct, unenforceability and misuse) to the extent that such defense is not based in whole or in part on Dr. Bourland’s conduct in connection with the trial of this matter in June 2001 or based, in-whole or in-part, on plaintiffs’ conduct vis a vis Dr. Bourland in connection with the trial of this matter in June 2001 and related information revealed after that trial; and plaintiffs will remain free to argue that any such defense is not warranted or is not properly before the Indiana court, whether based on law of the case, waiver, failure of proof, judgment as a matter of law, or other ground.

b. The Delaware case.

i. In consideration for the St. Jude Parties’ covenants and agreements in Sections 2.02, 2.03 and 2.04 of this Agreement, the BSC Parties covenant and agree that plaintiffs in the Delaware case shall withdraw and/or not further pursue any damages claim for lost profits, price erosion, an “up front” royalty payment, enhanced damages (i.e., treble damages and/or attorneys’ fees), or prejudgment interest, against the St. Jude Parties. In addition, the BSC Parties covenant and agree that plaintiffs in the Delaware case shall only pursue a damages claim based on pulse generators and leads which plaintiffs contend infringe the patent claims asserted in the Delaware case, and will withdraw and/or not pursue any damages claim based on other products, whether through a “convoyed sales” theory or otherwise. Notwithstanding such covenant and agreement, it is understood that the defendants in the Delaware case shall continue to be free to argue that damages are not warranted due to non-infringement, invalidity and/or other defenses, except as set forth in Section 2.02(b)(ii), below. The BSC Parties also covenant and agree that plaintiffs in the Delaware case shall withdraw their request for and/or not further pursue an injunction until all appeals have been exhausted and any judgment of infringement is final and no longer appealable. The BSC Parties further covenant and agree that plaintiffs in the Delaware case shall limit any claim for damages to a reasonable royalty theory, with a royalty that shall not exceed three percent (3%) of the net sales revenue from any sales found to infringe the patent in suit, and that plaintiffs shall not be entitled to receive any payment in connection with the Delaware case, by way of judgment or otherwise, that exceeds three percent (3%) of the net sales revenue from any sales found to infringe the patent in suit.

ii. In consideration for the BSC Parties’ covenants and agreements in Sections 2.02, 2.03 and 2.04 of this Agreement, the St. Jude Parties covenant and agree that they will withdraw and/or not further pursue their fourth (“no error”), sixth (“intervening rights”), and eighth (“claim splitting”) affirmative defenses, and any claim for attorneys’ fees. In addition, the St. Jude Parties covenant and agree not to seek to introduce any evidence of Guidant product recalls; provided, however, that the BSC Parties covenant and agree to ensure that plaintiffs will not seek to introduce any evidence of St. Jude product recalls.

iii. Notwithstanding any contrary outcome of the Delaware case, the Parties agree that defendants in the Delaware case shall not be placed in a position that is worse than that of Medtronic as a result of the final resolution of the Medtronic Action. In particular, should Medtronic obtain a final, non-appealable judgment in the Medtronic Action invalidating one or more patent claims which plaintiffs in the Delaware case have asserted against the defendants in the Delaware case, the Parties agree that defendants in the Delaware case shall owe no damages or payments to the plaintiffs on any such patent claim(s). In addition, the Parties agree that, should Medtronic agree to a settlement with BSC and/or MFV of the Medtronic Action on terms more favorable than the terms plaintiffs have sought from the defendants in the Delaware case, then plaintiffs in the Delaware case shall limit their pursuit of any claim for damages in the Delaware case such that any damages claim is no less favorable for the defendants in the Delaware case than the terms of the settlement in the Medtronic Action are favorable for Medtronic, and any damages or payments owed by the defendants in the Delaware case shall be so limited.

Section 2.03.    Further Agreements. The BSC Parties agree that St. Jude and its Affiliates shall be free to seek to negotiate an agreement with MFV resolving the Indiana case and the Delaware case and that the BSC Parties will take no action to interfere with the further efforts of St. Jude and its Affiliates to negotiate with MFV a resolution of such cases. In connection with, and contingent upon, MFV’s settlement of the Indiana case and the Delaware case with St. Jude and its Affiliates, the BSC Parties covenant, consent and agree to: (1) license or sublicense the MFV patent portfolio to the St. Jude and/or its Affiliates (as provided in Section 2.06 of the CRM License Agreement) and/or permit MFV to provide St. Jude and/or its Affiliates with such a license or sublicense directly on the same or different terms as St. Jude and MFV may agree; and (2) dismiss the Indiana case and the Delaware case for no royalty or other consideration payable to BSC (including, by way of example, no payment of any settlement proceeds to BSC and no reimbursement of the costs of litigation BSC or any of its Affiliates may have incurred). The BSC Parties further covenant and agree that any license or sub-license resulting from a settlement between St. Jude and its Affiliates and MFV may be on different terms than those terms under which BSC and/or its Affiliates are currently licensed by MFV, but, in any event, shall not be on terms less favorable to St. Jude and/or its Affiliates than the terms under which BSC and/or its Affiliates are currently licensed by MFV. The BSC Parties also covenant and agree to execute any further documents or make any additional undertakings that may be necessary to effectuate the provisions of this Section 2.03. The St. Jude Parties covenant and agree that St. Jude and/or its Affiliates will be solely responsible for any payments to MFV in connection with any settlement with MFV resolving the Indiana case and the Delaware case.

Section 2.04.    Conduct of the Remaining Litigation. The BSC Parties and the St. Jude Parties further covenant and agree to conduct remaining portions of the Indiana case and the Delaware case as follows:

a.    Scheduling of the Indiana Case. The BSC Parties and the St. Jude Parties covenant and agree that plaintiffs and defendants will cooperate in good faith to negotiate and make such adjustments to the pre-trial and trial schedule in the Indiana case as are mutually acceptable such that no party suffers prejudice in meeting any applicable discovery, pretrial or trial deadlines. In order to effectuate the foregoing, the Parties covenant and agree to develop a jointly proposed pre-trial and trial schedule through good faith negotiations and to jointly request that the Court in the Indiana case vacate the existing pre-trial and trial schedule if they cannot agree on a schedule that maintains the existing trial date.

b.    Scheduling of the Delaware Case. The BSC Parties and the St. Jude Parties covenant and agree that plaintiffs and defendants will cooperate in good faith to negotiate and make such adjustments to the pre-trial and trial schedule in the Delaware case as are mutually acceptable such that no party suffers prejudice in meeting any applicable discovery, pretrial or trial deadlines. In order to effectuate the foregoing, the Parties covenant and agree to develop a jointly proposed pre-trial and trial schedule through good faith negotiations and to jointly request that the Court in the Delaware case vacate the existing pre-trial and trial schedule.

c.    Use of This Agreement in the Remaining Litigation. The BSC Parties and the St. Jude Parties covenant and agree that this Agreement, along with all of the other agreements and stipulations that are to be executed by the Parties as contemplated herein, shall be protected under Federal Rule of Evidence 408 and any other applicable state or federal privileges or immunities from use as evidence with respect to settlements or offers to compromise and that neither plaintiffs nor defendants shall seek to introduce this Agreement or the CRM License Agreement as evidence in either the Indiana case or the Delaware case for any purpose other than as may reasonably be required to enforce and effectuate the provisions of this Agreement.

d.    No Admissions. The BSC Parties and the St. Jude Parties covenant and agree that nothing in this Agreement shall be construed as an admission of liability by any party and that neither plaintiffs nor defendants will seek to use or construe this Agreement in the Indiana case or the Delaware case as an admission of liability by any party.

Section 2.05.   Additional Agreements Regarding the Lauro Arbitration. With respect to the arbitration claims asserted by ANS against Bonaventura (Reno) Lauro (International Institute for Conflict Prevention and Resolution Case No. G-06-07A) (the “Lauro Arbitration”), the BSC Parties additionally covenant and agree to deliver to St. Jude within five (5) business days of the Effective Date, a signed, written release and stipulation from Bonaventura (Reno) Lauro in which Mr. Lauro has agreed to a mutual dismissal with prejudice of the arbitration between ANS and Mr. Lauro that is pending before the International Institute for Conflict Prevention and Resolution, Case No. G-06-07A (the “Lauro Arbitration”) and releasing all related claims between Mr. Lauro and the St. Jude Parties.

ARTICLE III

Cross Licenses

Section 3.01.   As part of the consideration for entering into this Agreement, the Parties shall execute contemporaneously with the execution of this Agreement the CRM License Agreement and the SCS License Agreement. The Parties further covenant and agree to cause each of their Affiliates that holds any ownership interest in the Licensed Patents (as defined in the CRM License Agreement or SCS License Agreement, as appropriate) to execute and deliver to the other party within thirty (30) days after the Effective Date a Consent and Agreement to be Bound by License, substantially in the form of Exhibit I, hereto, with regard to the CRM License Agreement, and the SCS License Agreement. The Parties agree that their sole remedy for any failure by a party to cause an Affiliate to execute and deliver a required Consent and Agreement to be Bound by License pursuant to this Section 3.01 shall be limited to the provisions of Section 7.06 of this Agreement.

ARTICLE IV

Mutual Releases

Section 4.01.    All claims and counterclaims in the Dismissed Litigation shall be dismissed with prejudice, and each party, for itself and its successors and assigns, hereby releases, acquits, and forever discharges the other party and its Affiliates, successors, and assigns, and all their respective officers, directors, employees, agents, and representatives from all such claims and counterclaims. Neither these releases, nor the dismissal of the ANS/ABC Cases, are intended to prejudice or impair the rights created or preserved in the SCS License Agreement, and the Parties specifically agree not to assert otherwise.

Section 4.02.   Each party, for itself and its successors and assigns, and its Affiliates and their respective successors and assigns, hereby expressly waives any right that it may have under the laws or statutes of any jurisdiction that limits the extension of a release to certain types of claims, including, but not limited to, California Civil Code § 1542, which provides that: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

ARTICLE V

Termination of Japanese Distribution Agreement

Section 5.01.   The Parties hereby agree that the Distribution Agreement by and between Advanced Neuromodulation Systems, Inc. and Boston Scientific Corporation dated June 20, 2002, (the “Japanese Distribution Agreement”) and the respective rights and obligations of St. Jude and its Affiliates and BSC and its Affiliates set forth therein are terminated in all respects except for those provisions that by their terms were contemplated to survive any termination of the Japanese Distribution Agreement (the “Surviving Obligations”). Other than for the Surviving Obligations, each of the parties, for itself, its successors and assigns, hereby covenants not to sue, releases and forever discharges the other parties, their respective successors, assigns, affiliated entities, directors, officers, shareholders, and legal representatives, of and from any claims, demands, actions, cause and causes of action, suits, liabilities, obligations, promises, injuries or damages, of any name, nature or description in law or in equity, whether known or unknown, asserted or unasserted, suspected or unsuspected, or fixed or contingent, which the releasing party now has, or ever had, or which it shall or may have in the future, arising out of or in connection with the Japanese Distribution Agreement.

ARTICLE VI

Covenant Not to Sue on Spinal Cord Stimulation Products

Section 6.01.   The St. Jude Parties and their Affiliates hereby covenant not to sue the BSC Parties and/or their Affiliates, their respective successors, assigns, affiliated entities, directors, officers, shareholders, and legal representatives, distributors, resellers, customers, and end users with respect to any alleged infringement of patent or other intellectual property rights owned or held by St. Jude and/or its Affiliates by any products used in spinal cord stimulation to manage chronic pain that are currently commercially marketed and sold as of the Effective Date anywhere in the world, pursuant to FDA, CE mark, or MHLW approval, and all Derivative Products.

Section 6.02.   The BSC Parties and their Affiliates hereby covenant not to sue the St. Jude Parties and/or their Affiliates, their respective successors, assigns, affiliated entities, directors, officers, shareholders, and legal representatives, distributors, resellers, customers, and end users with respect to any alleged infringement of patent or other intellectual property rights owned or held by BSC and/or its Affiliates by any products used in spinal cord stimulation to manage chronic pain that are currently commercially marketed and sold as of the Effective Date anywhere in the world, pursuant to FDA, CE mark, or MHLW approval, and all Derivative Products.

ARTICLE VII

Representations and Warranties

Section 7.01.   Each of the Parties represents and warrants that it has the power and authority to execute, deliver, enter into and perform this Agreement and that it is legally permitted to grant the rights granted and to make all covenants and perform all obligations required by this Agreement, including all of the exhibits hereto.

Section 7.02.   Each of the Parties represents and warrants that to the extent that any third-party consents are required for the performance of any of its obligations under this Agreement, it has obtained all such required consents. Notwithstanding the foregoing, to the extent that a third party consent is required for sublicensing under Section 2.02 of the CRM License Agreement, this Section 7.02 is not intended as a representation and warranty by any party that such consent has been secured.

Section 7.03.   The BSC Parties represent and warrant to the St. Jude Parties that all plaintiffs in the Delaware case and the Indiana case shall conduct those cases in accordance with, and subject to, the covenants and agreements set forth in Sections 2.02 and 2.04, above, which are incumbent on the BSC Parties. The Parties agree that the St. Jude Parties’ sole remedy for any breach of this Section 7.03 by the BSC Parties shall be as set forth in the provisions of Section 7.06, except that any breach of this Section 7.03 by the BSC Parties as a result of a failure to conduct those cases in accordance with, and subject to, the covenants and agreements in Section 2.02 shall also operate to relieve the St. Jude Parties from their obligations under Section 2.02, above, to an extent that is commensurate with the failure of the BSC Parties. Absent agreement of the Parties, the extent of relief that shall be afforded the St. Jude Parties from their obligations under Section 2.02, above, shall be determined by the Court in which the failure of the BSC Parties arose.

Section 7.04.   The St. Jude Parties represent and warrant to the BSC Parties that defendants in the Delaware case and the Indiana case shall conduct those cases in accordance with, and subject to, the covenants and agreements set forth in Section 2.02, above, which are incumbent on the St. Jude Parties. The Parties agree that any breach by the St. Jude Parties of this Section 7.04 shall not result in termination of the Parties’ other rights and obligations as set forth in the other provisions of this Agreement and that the sole remedy for breach of this Section 7.04 by the St. Jude Parties as a result of a failure to conduct those cases in accordance with, and subject to, the covenants and agreements in Section 2.02 shall be to relieve the BSC Parties from their obligations under Section 2.02, above, to an extent that is commensurate with the failure of the St. Jude Parties. Absent agreement of the Parties, the extent of relief that shall be afforded to the BSC Parties from their obligations under Section 2.02, above, shall be determined by the Court in which the failure of the St. Jude Parties arose.

Section 7.05.   The BSC Parties represent and warrant that, with regard to the Indiana case and the Delaware case and subject to the terms of Section 2.02, above, BSC and/or its Affiliates shall fully perform all obligations required of BSC and/or its Affiliates and enforce all rights to which BSC and/or its Affiliates are entitled under its current agreements with MFV, except that BSC and its Affiliates waive any right to any settlement proceeds and/or reimbursement of the costs of litigation pursuant to Section 2.03, above, in the event of an agreement between St. Jude and its Affiliates and MFV resolving the Indiana case and the Delaware case. The BSC Parties further represent and warrant that until final, non-appealable judgments are entered in both the Indiana case and the Delaware case, or both of those cases are otherwise fully resolved and dismissed, neither BSC nor any of its Affiliates will modify, alter or waive any of their obligations or rights under any current agreement with MFV without first providing notice to and receiving written consent from the St. Jude Parties, which consent shall not be unreasonably withheld.

Section 7.06.   Each party shall defend, indemnify, and hold harmless the other party and its Affiliates, and all officers, directors, employees, attorneys, agents, successors, and assigns of the other party and its Affiliates (collectively, the “Indemnified Parties”), against any and all legal expenses, costs, settlements, judgments, claims, controversies, demands, rights, disputes, grievances, causes of action, damages, enhanced damages, injunctions, attorneys’ fees or prejudgment interest imposed on or incurred by any of the Indemnified Parties by reason of any failure, inaccuracy, or breach of any of the representations and warranties of such party pursuant to this Article VII or failure to obtain the consent of an Affiliate pursuant to Section 3.01, above.

ARTICLE VIII

Confidentiality/Publicity Concerning Agreement

Section 8.01.   It is intended that, to the extent possible, the terms of this Agreement remain confidential. No party or any Affiliate of a party shall originate any publicity, news release, or other such general public announcement or make any other disclosure to any third party regarding the terms of this Agreement without the express written consent of the other party (without limitation, the foregoing provision is not intended to limit communications deemed reasonably necessary or appropriate by a party or its Affiliate to its employees, shareholders, directors, officers, accountants, auditors and legal counsel). Notwithstanding the foregoing provision, the Parties and their respective Affiliates shall not be prohibited from making any disclosure or release that is required by law, court order, or applicable regulation, or is considered necessary by counsel to fulfill an obligation under securities laws or the rules of the New York Stock Exchange or other applicable stock exchange or to protect any intellectual property right in any territory so long as the disclosing party provides notice to the other party at least five(5) business days prior to such disclosure. However, the Parties agree that, with regard to any required disclosure to the Securities and Exchange Commission regarding this Agreement or the fact that it has been executed that is made on or around the Effective Date, prior notice to the other party shall not be required.

ARTICLE IX

Notices

Section 9.01.   Any notice or other communication to be made pursuant to this Agreement shall be sent to the other party at its address listed below or at such other address such party may hereinafter designate to the other party in writing:

If to the BSC Parties:

President and CEO

Boston Scientific Corporation

One Boston Scientific Place

Natick, MA 01760-1537

Facsimile No.: (508) 650-8956

with a copy to: General Counsel

If to the St. Jude Parties:

President and CEO

St. Jude Medical, Inc.

One Lillehei Plaza

St. Paul, MN 55117

Facsimile No.: (651) 481-7690

with a copy to: General Counsel

Notice shall be deemed to have been given: (i) at the expiration of two (2) business days from the date of delivery by facsimile transmission, provided a copy is deposited postage prepaid for delivery with the postal service or given for delivery to an express courier service on the same date as the sending of the facsimile, or (ii) ten (10) business days from the date the communication is deposited postage prepaid with the postal service or given to an express courier service, unless actual receipt of the notice at an earlier date is established. Without limitation of the foregoing, a written receipt signed by the addressee or its duly appointed representative situated at the addresses set forth hereinabove shall constitute sufficient evidence of service. Either party may change its address and facsimile information by written notice given in accordance with the provisions of this Section 9.01.

ARTICLE X

Alternative Dispute Resolution

Section 10.01. (a)   Except as to any dispute concerning Sections 2.02 and 2.04, any dispute that arises out of or relates to this Agreement, including an alleged breach of this Agreement but excluding any dispute under Section 8.01(a) of the CRM License Agreement or Section 8.01(a) of the SCS License Agreement, between (i) St. Jude or a St. Jude Affiliate and (ii) BSC or a BSC Affiliate which is not resolved by negotiation as provided in subsection (b) of this Section 10.01 shall be resolved by binding Alternative Dispute Resolution (“ADR”) in the manner described in Exhibit H. Disputes relating to Sections 2.02 and 2.04 of this Agreement may be resolved by the Court in the Indiana case or the Delaware case, as appropriate, or by negotiation as provided in subsection (b) of this Section 10.01; however, if the dispute is not resolved by such means, then the dispute shall be resolved by the ADR procedure of Exhibit H.

(b)   The Parties recognize that a bonafide dispute may arise from time to time as to certain matters that relate to this Agreement. In all such instances, any party may, by written notice to the other party, have such dispute referred to their respective employees designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. Such designated employees are as follows:

For the BSC Parties:

General Counsel

Boston Scientific Corporation

One Boston Scientific Place

Natick, MA 01760-1537

Facsimile No.: (508) 650-8956

For the St. Jude Parties:

General Counsel

St. Jude Medical, Inc.

One Lillehei Plaza

St. Paul, MN 55117

Facsimile No.: (651) 481-7690

Any settlement reached by the Parties under this Section 10.01 shall not be binding until reduced to writing and signed by authorized officers of BSC and St. Jude. If the designated employees are unable to resolve such dispute within such sixty-day period, any party may invoke the ADR provisions of this Section 10.01.

ARTICLE XI

General Provisions

Section 11.01.  Modification. This Agreement may not be modified, changed, or terminated orally. No change, modification, addition, or amendment shall be valid unless given in a writing expressly indicating an intent to modify the Agreement and duly executed by the Parties.

Section 11.02.  Entire Agreement. This Agreement, along with all of the other agreements and stipulations that are to be executed by the Parties as contemplated herein, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes any and all negotiations, correspondence, understandings and agreements, whether written or oral, between the Parties respecting the subject matter hereof.

Section 11.03.  Governing Law. Recognizing that the laws within the United States and international jurisdictions vary in their content and effect with respect to similar subject matter, and that the Parties desire uniformity and predictability in interpretation and enforcement of this Agreement, the Parties have agreed to the following provisions regarding applicable law to govern this Agreement: All matters affecting the interpretation, form, validity, and performance of this Agreement shall be decided under the laws of the State of Minnesota (without regard to principles of conflicts of laws), including its procedural laws; provided, however, that (a) nothing in Minnesota state procedural law shall be deemed to alter or affect the applicability of the Federal Arbitration Act as governing arbitration of disputes as provided in this Agreement, and (b) no Minnesota state arbitration laws or arbitration rules shall be applicable.

Section 11.04.  Force Majeure. No party (including any of its Affiliates) shall be liable in damages for, nor shall this Agreement be terminable or cancelable by reason of, any delay or default in any party’s performance hereunder if such default or delay is caused by events beyond such party’s reasonable control including, but not limited to, acts of God, action of any government or agency thereof, war or insurrection, civil commotion, destruction of facilities or materials by earthquake, fire, flood or storm, labor disturbances, epidemic, or failure of public utilities or common carriers. The party (or Affiliates) so affected shall give prompt notice to the other Parties of such cause, and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as possible. All Parties (or Affiliates) agree to endeavor to resume their performance hereunder if such performance is delayed or interrupted by reason of force majeure.

Section 11.05.  Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original.

Section 11.06.  Captions. The captions in this Agreement are intended solely as a matter of convenience and are for reference only, and shall be given no effect in the construction or interpretation of this Agreement.

Section 11.07.  Severability of Provisions. Should any part or provision of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding.

Section 11.08.  No Agency. At no time shall any party or its Affiliate hold itself out to be the agent, employee, lessee, sublessee, partner, or joint venture partner of the other party or its Affiliates. No party or its Affiliates shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other party or its Affiliates or to bind the other party or its Affiliates with regard to any other contract, agreement, or undertaking with a third party.

Section 11.09.  Further Assurances. At such time and from time to time on and after the Effective Date upon request by a party, the other party will execute and deliver or will cause to be executed and delivered, all such further acts, acknowledgments, and assurances that may be reasonably required for carrying out the purposes of this Agreement. Such further assurances may include, but not be limited to, an acknowledgment by Affiliates of a party that such Affiliates are bound by the terms and provisions of this Settlement Agreement.

Section 11.10.  Construction Against Waiver. No waiver of any term, provision, or condition of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such term, provision, or condition of this Agreement; nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision.

Section 11.11.  Protective Orders. The court-entered confidentiality agreements and protective orders shall remain in full force and effect after dismissal of the Dismissed Litigation, and the Parties shall remain bound by their terms. Each party shall sequester protected information and documents produced in the Litigation (including all copies thereof), as well as other materials containing information that the other party has designated as confidential and subject to protective order. Within ninety (90) days of the Effective Date, each party may identify any information and/or document(s) produced in one or more of the Minnesota Pacesetter case, the Minnesota CPI case, or the Indiana case that the party desires to use in the Delaware case as well as any information and/or document(s) produced in one or more of the Minnesota Pacesetter case, the Minnesota CPI case, or the Delaware case that the party desires to use in the Indiana case. Absent an objection for good cause by the non-identifying party, the identifying party shall thereafter be entitled to use the information and/or document(s) as though produced in the Indiana case and/or the Delaware case, as appropriate. Should the non-identifying party have good cause to object to the use of any information and/or document(s) so identified, the non-identifying party shall provide the basis for such objection within ten (10) court days of the identification of the information and/or document(s). If an objection is made, the parties shall promptly meet and confer to attempt a good faith resolution. If a resolution is not reached, the non-identifying party can request that the court in the Indiana case and/or the Delaware case, as appropriate, preclude any use of the objectionable information and/or document(s) by the identifying party.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed and duly attested by their corporate officers authorized for this purpose.

BOSTON SCIENTIFIC CORPORATION
By:	/s/   Paul W. Sandman
	Executive Vice President, Secretary and General Counsel

ATTEST:
By:	/s/   Lawrence J. Knopf

ST. JUDE MEDICAL, INC.
By:	/s/   Pamela S. Krop
	Vice President, General Counsel and Secretary

ATTEST:
By:	/s/   James W.A. Ladner

Exhibit A

CRM LICENSE AGREEMENT

This CRM License Agreement (the “Agreement”), which is agreed to be effective as hereinafter provided, is by and between St. Jude Medical, Inc., a Minnesota corporation having its principal place of business at One Lillehei Plaza, St. Paul, Minnesota, 55117 (“St. Jude”), and Boston Scientific Corporation, a Delaware corporation having its principal place of business at One Boston Scientific Place, Natick Massachusetts, 01760-1537 (“BSC”).

RECITALS

A.    BSC and/or certain of its Affiliates, on the one hand, and St. Jude and/or certain of its Affiliates, on the other hand, are adverse parties in the following currently pending litigation matters, which are being terminated pursuant to a Settlement Agreement by and between BSC and certain of its Affiliates, on the one hand, and St. Jude and certain of its Affiliates, on the other hand, dated July 29, 2006 (the “Settlement Agreement”):

1) Pacesetter, Inc. v. Cardiac Pacemakers, Inc., et al., Case No. 02-1337 DWF/SRN (D. Minn.) (the “Minnesota Pacesetter Case”);

2) Cardiac Pacemakers, Inc., et al., v. St. Jude Medical, Inc., et al., Civil Action No. 04-1016 JMR/FLN (D. Minn.) (the “Minnesota CPI Case”);and

5) Pacesetter, Inc. et al. v. Intermedics, Inc.et al., Case No. CV 06-3166 GHK(FFMx) (C.D. Cal.) (the “California case”).

B.    St. Jude and BSC and/or certain of their respective Affiliates are engaged in, inter alia, the design, development, manufacture, and sale of CRM Products.

C.    St. Jude and BSC and/or certain of their respective Affiliates own or hold certain Licensed Patents and rights under Sublicensable Patents relating to CRM Products.

D.    Pursuant to the Settlement Agreement, St. Jude and BSC have agreed to terminate the Minnesota Pacesetter Case, the Minnesota CPI Case, and the California case and have agreed to enter into a cross licensing of certain rights under the Licensed Patents and Sublicensable Patents.

Now therefore, in consideration of the covenants and agreements set forth herein and for valuable consideration receipt of which is hereby acknowledged, St. Jude and BSC mutually agree as follows:

ARTICLE I

Definitions of Certain Terms

For the purposes of this Agreement, the following capitalized terms shall have the meaning specified below. In addition, whenever used in the Agreement, “include,” “includes,” and “including” shall be deemed to be followed by “without limitation,” whether or not it is followed by such words.

Section 1.01.  Affiliate. “Affiliate” means any person or entity that controls or is controlled by or is under common control with St. Jude or BSC on the Effective Date or at any time thereafter. For purposes of this Section 1.01, ownership, directly or indirectly, of more than fifty percent (50%) of the capital stock or other comparable ownership interest of the corporation or entity carrying the right to vote for or appoint directors or their equivalent (if not a corporation) shall constitute control thereof. “Affiliate” of a third party means a person or entity that controls, is controlled by, or under common control with, such third party. Without in any way limiting the foregoing, “Affiliates” of St. Jude include Pacesetter, Inc., St. Jude Medical AB, and St. Jude Medical S.C., Inc. and “Affiliates” of BSC include Guidant Corporation, Cardiac Pacemakers, Inc., Guidant Sales Corporation, and Intermedics, Inc.

Section 1.02.  CRM Products. “CRM Products” means devices for monitoring or electrically stimulating or shocking the heart which are suitable for chronic implantation, in whole or in part, by or with human patients. The term “CRM Products” includes, without limitation: cardiac pacemakers, antitachycardia pacemakers, cardiac resynchronization therapy systems, cardioverters, and defibrillators, including combinations thereof; loop recording systems, implantable cardiac monitoring systems, implantable hemodynamic monitoring systems, pulse generators and other waveform generators for such devices; cardiac lead implant catheters and associated tools; leads, electrodes, sensors, capacitors, batteries, power sources, and all other components for such devices; mechanisms for coupling such generators in a stimulating, shocking, sensing, or monitoring relationship to the heart; and data dispensing, processing, and gathering systems for such devices, including programmers, pacing system analyzers, defibrillation system analyzers, testers, encoders, decoders, transtelephonic and other remote monitoring systems and services for use with implantable devices, transmitters, receivers, and computer software-controlled systems, and including the software. The term “CRM Products” excludes, by way of example and not limitation, nerve stimulators (unless used for cardiac therapy), bone growth stimulators, drug release pumps, cardiac pumps, artificial hearts, prosthetic heart valves, catheter ablation devices, imaging systems, catheter location systems, apparatus for revascularization or correction of other physical defects in heart tissue, arrhythmia mapping devices (except as part of an implantable cardiac therapy or monitoring device), angioplasty devices and EKG monitors (other than cardiac stimulation device programmers or other telemetry devices for use with implantable pulse generators or cardiac monitors) which are standalone, non-ambulatory and not intended for transtelephonic or other remote monitoring.

Section 1.03.  Licensed Patents.

(a)    “Licensed Patents” means any and all patents relating to CRM Products (including the manufacture or use thereof), which are (i) owned (whether by development, acquisition, or otherwise) by St. Jude or its Affiliates as of the Effective Date or BSC or its Affiliates as of the Effective Date and have a priority date on or before the Effective Date or (ii) licensed to St. Jude or its Affiliates or BSC or its Affiliates as of the Effective Date under licenses or other agreements, and which permit St. Jude or its Affiliates or BSC or its Affiliates to grant licenses or sublicenses, in each case without any right in a non-Affiliated third party to receive royalties or any other continuing payments to maintain the license or other agreement in effect, which are within the scope of the following class: all patents issued in any country from patent applications filed as of the Effective Date including all patents maturing from continuation, continuation-in-part, divisional, and reissue applications, or reexaminations of such patents and patent applications, and further including all patents which are counterparts of such patents or patent applications which are described in this Section 1.03, regardless of whether such patent matures from a convention or non-convention patent application, and any other substitution, renewal, extension, addition, utility model, or other patent, non-U.S. or U.S., which claims priority based on such a patent application.

(b)    Notwithstanding the foregoing, the term “Licensed Patents” specifically excludes the ** Patents and the ** Patents.

(c)    Notwithstanding the foregoing, the term “Licensed Patents” specifically excludes Sublicensable Patents.

(d)    Notwithstanding the foregoing, the term “Licensed Patents” specifically excludes the patents listed on Exhibit A which are or will be subject to licensing restrictions being negotiated with a third party.

Section 1.04.  Sublicensable Patents.

(a)    “Sublicensable Patents” shall mean patents and patent applications, both U.S. and non-U.S., which relate to CRM Products and which are the subject of licenses or assignments or other agreements with non-Affiliated third parties in force as of the Effective Date and which licenses or assignments or other agreements (a) convey rights to St. Jude or its Affiliates or BSC or its Affiliates as licensee or assignee or grantee, including the right to grant sublicenses or licenses, and further (b) (i) require the payment of royalties or any other continuing payments either for use of the patents or patent applications or to maintain the license or assignment or other agreement in effect or (ii) have other licensing restrictions such as field of use restrictions.

(b)    Without limiting the foregoing, the term “Sublicensable Patents” specifically includes, but is not limited to, all present patents and patent applications listed on Exhibit B of this Agreement. The parties believe that Exhibit B is a complete listing of their respective U.S. patents and patent applications within the foregoing definition of Sublicensable Patents which are in existence as of the Effective Date, and any errors, overinclusions or omissions from Exhibit B will be deemed to be inadvertent and not a material breach. Present foreign patents and applications, including foreign counterparts of U.S. patents and patent applications listed on Exhibit B, have intentionally not been included in Exhibit B but are deemed to be Sublicensable Patents if they are covered by the foregoing definition in this Section 1.04.

(c)    Notwithstanding the foregoing, the term “Sublicensable Patents” excludes the Mirowski-Owned Patents.

Section 1.05. Mirowski-Owned Patents. “Mirowski-Owned Patents” shall mean all patent rights that are the subject of the Amended and Restated Exclusive License Agreement dated January 28, 2004, by and between Guidant Corporation and Mirowski Family Ventures, LLC (“MFV”), a limited liability company organized under the laws of the State of Maryland (the “MFV Exclusive License”).

Section 1.06.  ** Patents. “** Patents” shall mean those patents and patent applications, and all patents and patent applications claiming priority therefrom, ** as set forth in Exhibit C.

Section 1.07.  ** Patents. “** Patents” shall mean those patents and patent applications, and all patents and patent applications claiming priority therefrom, ** as set forth in Exhibit D. The ** Patents shall include the sublicensable patents and patent applications of ** listed in Exhibit D.

Section 1.08. Effective Date. “Effective Date” shall mean July 29, 2006.

ARTICLE II

Cross License; Covenant Not to Sue

Section 2.01.  License. Subject to the terms, conditions, and limitations set forth herein:

(a)    St. Jude grants (and will cause its Affiliates to grant) to BSC and its Affiliates a non-exclusive, irrevocable, perpetual, fully paid-up worldwide license or sublicense, as the case may be, without the right to sublicense, under all Licensed Patents of St. Jude (and its Affiliates) to make, have made, use, sell, have sold, offer to sell, distribute, have distributed, and otherwise dispose of CRM Products, including supplying or causing to be supplied components thereof for use therein, and further including importing CRM Products, including components thereof for use therein, into any jurisdiction where Licensed Patents of St. Jude (or its Affiliates) are effective.

(b)    BSC grants (and will cause its Affiliates to grant) to St. Jude and its Affiliates, a non-exclusive, irrevocable, perpetual, fully paid-up, worldwide license or sublicense, as the case may be, without the right to sublicense, under all Licensed Patents of BSC (and its Affiliates) to make, have made, use, sell, have sold, offer to sell, distribute, have distributed, and otherwise dispose of CRM Products, including supplying or causing to be supplied components thereof for use therein, and further including importing CRM Products, including components thereof for use therein, into any jurisdiction where Licensed Patents of BSC (or its Affiliates) are effective.

(c)    If any party has CRM Products made for it under the above license grant, such CRM Products must bear its or one of its Affiliates’ trade names or trademarks; however, such CRM Products may bear third-party trade names or trademarks for materials or components used in such CRM Products.

(d)    The licenses granted in this Section 2.01 shall be irrevocable except for the specific right to terminate described in Section 9.02, below.

Section 2.02.  Option to Obtain Sublicense on Sublicensable Patents. It is the intent of each party to afford the other party and its Affiliates the opportunity to obtain sublicenses under the Sublicensable Patents. Accordingly:

(a)    St. Jude grants (and will cause its Affiliates to grant) to BSC and its Affiliates the right and option until sixty (60) days following the termination of this Agreement to obtain sublicenses under one or more of the Sublicensable Patents. Upon written request by BSC to St. Jude, St. Jude will inform BSC of the provisions of the agreement or license with a third party conveying rights in a particular Sublicensable Patent to St. Jude or its Affiliates, and shall make available to BSC and its Affiliates a non-exclusive, non-transferable license affording them the most favorable terms and conditions permissible to sublicensees under such agreement or license with such third party (but in no event under terms more favorable than those of St. Jude or its Affiliates).

(b)    BSC grants (and will cause its Affiliates to grant) to St. Jude and its Affiliates the right and option until sixty (60) days following the termination of this Agreement to obtain sublicenses under one or more of the Sublicensable Patents. Upon written request by St. Jude to BSC, BSC will inform St. Jude of the provisions of the agreement or license with a third party conveying rights in a particular Sublicensable Patent to BSC or its Affiliates, and shall make available to St. Jude and its Affiliates a non-exclusive, non-transferable license affording them the most favorable terms and conditions permissible to sublicensees under such agreement or license with such third party (but in no event under terms more favorable than those of BSC or its Affiliates).

(c)    It is the intention of the parties under this Section 2.02 that a party acquiring a sublicense under Sublicensable Patents be required to make only current payments based on current usage and that no previously paid “front end” payments be recovered by the sublicensor under such sublicensing arrangement. Notwithstanding any contrary foregoing provisions, if the party elects to obtain a sublicense thereunder and the license or assignment granted to the sublicensor requires ongoing minimum payments to maintain the license or assignment, payments by the sublicensor for the right to grant a sublicense or option to sublicense, or if the sublicensor is required to pay to the original licensor or assignor amounts based on the sublicensor’s or its sublicensee’s current usage, then the sublicensor may require under the sublicensing arrangement that its sublicensee pay the amounts required for the grant of the sublicense or option to sublicense as well as a pro rata portion of such minimum payments under the original license or such usage payments due from the sublicensor, with each party’s respective pro rata amount based upon the volume of their respective sales of products covered by the original license agreement. The obligation to pay a pro rata share of minimum royalty does not apply to a minimum royalty required to maintain an exclusive license under a Sublicensable Patent unless otherwise agreed.

(d)    This Section 2.02 shall not apply to the ** Patents.

Section 2.03.  Royalty Payments to Third Parties. Any royalty payments required to be made to the owner of a patent sublicensed in the future in accordance with this Agreement shall be made, if permissible under the applicable license agreement and if acceptable to the sublicensor, directly by the sublicensee to such owner in accordance with the terms of the applicable license agreement. Unless otherwise required by the applicable license agreement, questions regarding the applicability, validity, or enforceability of any patent sublicensed in accordance with this Agreement shall be resolved by the owner of the sublicensed patent and the sublicensee. The sublicensor of such patent shall have the right in its discretion to participate in any such discussions or negotiations between the owner of the sublicensed patent and the sublicensee. In any event, the sublicensee shall keep the sublicensor fully informed of all discussions and negotiations between such sublicensee and the owner of the sublicensed patent. Any dispute arising between the sublicensor and sublicensee of any such patent shall be resolved by alternative dispute resolution as provided in Article 8 of this Agreement.

Section 2.04.  Rights under Section 2.02 Subject to Continued Payment of Royalties. In the event that either party fails in any material respect to pay to the other party (or to the licensor of a Sublicensable Patent, as the case may be) royalties required under this Agreement, and such failure is not cured within sixty (60) days of written notice to the defaulting party of such failure, then all license rights of the defaulting party under Section 2.02 of this Agreement, with respect only to the particular patent or patents in dispute, shall terminate. Such a termination shall in no way affect or impair the rights of the other party under such Section 2.02.

Section 2.05.  Regarding OEM Activities. The licenses granted or to be granted under this Article II shall not be used in such a way as to manufacture CRM Products on an original equipment manufacturer (“OEM”) basis for any person or entity other than St. Jude and its Affiliates or BSC and its Affiliates. The licenses granted or to be granted under this Article II shall apply to and for the benefit of CRM Products manufactured by a party to this Agreement for a third party who is licensed under the appropriate patents of the other party to this Agreement where, and to the extent that, the third party’s license permits such third party to “have made” such CRM Products for such third party. Nothing in this Agreement shall preclude the use of the licenses granted or to be granted under this Article II by a party or its Affiliate for the purpose of having CRM Products manufactured by a third party on an OEM basis for such party or its Affiliate; provided, however, that such CRM Products must bear the trademark or trade name of such party or its Affiliate. Notwithstanding the foregoing, such CRM Products may bear third-party trade names or trademarks for materials or components used in such CRM Products.

Section 2.06.  Option To Sublicense Mirowski-Owned Patents. BSC grants (and will cause its Affiliates to grant) to St. Jude and its Affiliates an irrevocable, perpetual right and option to obtain a sublicense under the Mirowski-Owned Patents. Upon written notice by St. Jude to BSC of St. Jude’s election to exercise the option granted in this Section 2.06, St. Jude and its Affiliates shall have a non-exclusive, non-transferable (except as permitted by Section 9.02, below) worldwide license under the Mirowski-Owned Patents effective as of the date such written notice is deemed to have been given under Article 6 of this Agreement. Any sublicense granted as a result of this Section 2.06 shall afford St. Jude the most favorable terms and conditions permissible to sublicensees under the MFV Exclusive License (but shall in no event require BSC or its Affiliates to make any payments on behalf of St. Jude or its Affiliates).

Section 2.07.  ** and ** Patents. It is the intent of each party to afford the other party and its Affiliates the rights provided below regarding the ** Patents and the ** Patents. Accordingly:

(a)    BSC grants (and will cause its Affiliates to grant) to St. Jude and its Affiliates the right and option for a period of thirty (30) months from the Effective Date to obtain a non-exclusive, worldwide, non-transferable, royalty-bearing license under the ** Patents. Should St. Jude opt to acquire such license, St. Jude shall pay to BSC on no less than a quarterly basis a royalty of ** percent (**%) of the net revenue received for the sale of each St. Jude product that utilizes the ** Patents. St. Jude’s royalty obligation under this Section 2.07(a) shall commence as of the date of the first sale of a St. Jude product that utilizes the ** Patents and shall continue for a period of five (5) years thereafter, at which point St. Jude’s license under the ** Patents will convert to a non-exclusive, non-transferable, irrevocable, perpetual, fully-paid up, worldwide license.

(b)    If, and only if, St. Jude exercises its option for a license under the ** Patents pursuant to Section 2.07 (a), above, St. Jude shall grant (and will cause its Affiliates to grant) to BSC and its Affiliates the right and option until the expiration of thirty (30) months from the Effective Date or ninety (90) days from the date St. Jude exercises its option under Section 2.07, whichever is later in time, to obtain a non-exclusive, worldwide, non-transferable, royalty-bearing license under the ** Patents. Such sublicense to the ** Patents shall, if requested by BSC, include a sublicense to the patents and patent applications of ** listed in Exhibit D, and shall be subject to the terms of the license agreement between ** and **. Should BSC opt to acquire such license, BSC shall pay to St. Jude on no less than a quarterly basis a royalty of ** percent (**%) of the net revenue received for the sale of each BSC product that utilizes the ** Patents. BSC’s royalty obligation under this Section 2.07(b) shall commence as of the date of the first sale of a BSC product that utilizes the ** Patents and shall continue for a period of five (5) years thereafter, at which point BSC’s license under the ** Patents will convert to a non-exclusive, non-transferable, irrevocable, perpetual, fully-paid up, worldwide license.

(c)    Should St. Jude not exercise its option for a license under the ** Patents pursuant to Section 2.07(a), above, St. Jude agrees that it will enter into good faith negotiations with BSC for the grant of a license to BSC and its Affiliates under the ** patents should BSC desire such a license.

Section 2.08.  Certain Conditions, Limitations and Understandings. The licenses and sublicenses granted under this Agreement are expressly made subject to the following conditions, limitations and understandings:

(a)    The licenses are personal to the parties hereto, and are nonassignable and nontransferable, except as set forth in Section 9.02 below.

(b)    The parties and their Affiliates shall have the right, in their sole and absolute discretion, to control the maintenance, abandonment, extension, and licensing of their own patents including the Licensed Patents and Sublicensable Patents; provided however, that no such license or other transfer of interest shall in any manner abridge the rights of the other party granted under this Agreement.

(c)    The owner or exclusive licensee of a Licensed Patent or Sublicensable Patent shall have the right to enforce, or not to enforce, its Licensed Patents or Sublicensable Patents in its sole and absolute discretion against all persons and organizations other than a party or Affiliate of a party hereto.

(d)    The licenses granted herein shall not extend to any technical know-how or design information, manufacturing, marketing, and/or processing information or know-how, designs, drawings, mask works, specifications, software source code, algorithms, clinical data, or other documents directly or indirectly pertinent to the use of the Licensed Patents or Sublicensable Patents, or to the use of any trademarks or trade names, service marks, or software copyrights or other copyrights (including copyright registrations) of any party, and the parties acknowledge that there is no obligation upon any party or its Affiliates to provide such information, know-how, designs, drawings, mask works, specifications, software source code, algorithms, clinical data, or other documents.

(e)    Except as otherwise expressly provided in this Agreement, all licenses are granted for the life of the covered patents.

(f)    Licenses and sublicenses under Sublicensable Patents will only be granted to the extent the grantor has the right to grant such licenses and sublicenses.

(g)    All licenses and sublicenses required to be granted by Affiliates under this Agreement shall be subject to the terms and conditions set forth in this Agreement, except as may be otherwise provided in Section 2.02 relating to Option to Obtain Sublicense on Sublicensable Patents.

(h)    Any assignment or other transfer by a party or its Affiliate of that entity’s interest in (i) a Licensed Patent or (ii) a Sublicensable Patent in which the other party and its Affiliates has exercised the option to obtain a sublicense as provided in Section 2.02 above shall be made subject to the rights of the other party and its Affiliates under this Agreement.

(i)     Any license extended to an Affiliate shall continue only so long as “Affiliate” status is maintained, or as permitted pursuant to the other party’s consent.

Section 2.09.  Covenant Not to Sue.

(a)    St. Jude and its Affiliates hereby covenant not to sue BSC and its Affiliates, their respective successors, assigns, affiliated entities, directors, officers, shareholders, and legal representatives, distributors, resellers, customers, and end users for the alleged infringement of patent or other intellectual property rights that are acquired or licensed by St. Jude and/or its Affiliates after the Effective Date with respect to any CRM Products that are commercially marketed or sold anywhere in the world as of the Effective Date.

(b)    BSC and its Affiliates hereby covenant not to sue St. Jude and its Affiliates, their respective successors, assigns, affiliated entities, directors, officers, shareholders, and legal representatives, distributors, resellers, customers, and end users for the alleged infringement of patent or other intellectual property rights that are acquired or licensed by BSC and/or its Affiliates after the Effective Date with respect to any CRM Products that are commercially marketed or sold anywhere in the world as of the Effective Date.

(c)    This Section 2.09 shall not apply to the Mirowski-Owned Patents, the ** Patents, the ** Patents, or the patents listed on Exhibit A.

ARTICLE III

Representations, Warranties and Limitations

Section 3.01.  Certain Representations and Warranties.

(a)    Each party represents and warrants to the other party as follows and acknowledges that each of the following representations and warranties has been relied upon by the other party and is material to the other party’s decision to enter into the Agreement: each party hereto has the requisite power and authority, corporate and otherwise, to execute and perform the Agreement, to grant the licenses, sublicenses, and option to obtain licenses and sublicenses provided for herein, and, except as provided in this Section 3.01, to cause such party’s Affiliates to execute and perform the Agreement and to grant the licenses, sublicenses, and option to obtain licenses and sublicenses provided for herein.

(b)    To the extent that a party shall lack the requisite authority to cause an Affiliate of such party to execute or perform this Agreement or to grant the licenses or option to obtain sublicenses as provided in this Agreement, then such party shall defend, indemnify, and hold harmless the other party and its Affiliates, and all officers, directors, employees, attorneys, agents, successors, and assigns of the other party and its Affiliates, against any and all legal expenses, costs, and judgments arising from claims, controversies, demands, rights, disputes, grievances, or causes of action that would have been avoided had such party caused such Affiliate to execute or perform the Agreement or to grant the licenses or option to obtain sublicenses as provided in this Agreement.

(c) BSC (and its Affiliates) represents and warrants that Eli Lilly and Company does not hold any rights in the Licensed Patents, the Sublicensable Patents or the Mirowski-Owned Patents, and has no claims or causes of action against St. Jude and its Affiliates arising therefrom. BSC shall defend, indemnify, and hold harmless St. Jude and its Affiliates, and all officers, directors, employees, attorneys, agents, successors, and assigns of St. Jude and its Affiliates, against any and all legal expenses, costs, and judgments arising from any claims, controversies, demands, rights, disputes, grievances, or causes of action that Eli Lilly and Company asserts relating to the Licensed Patents, the Sublicensable Patents or the Mirowski-Owned Patents.

(d)    Neither party hereto is a party to any license, agreement or other instrument which would prohibit the granting of the licenses or option to obtain sublicenses granted herein.

Section 3.02.  Disclaimers. Nothing contained in this Agreement shall be construed as:

(a)    A warranty or representation by any party hereto as to the validity, scope, or enforceability of any Licensed Patents or Sublicensable Patents; or

(b)    A warranty or representation by any party hereto that anything made, used, sold, or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents of third parties; or

(c)    An obligation to bring or prosecute actions or suits against third parties for patent infringement, or as an agreement by the parties to assist each other in any manner in the defense of any claim of infringement brought by a third party; or

(d)    An obligation to file or prosecute any patent application, to secure the grant of any patent or any reissue or extension thereof, or to pay any maintenance fee or annuity or tax or take any other steps to maintain any patent; or

(e)    A representation, warranty, or extension of warranties of any kind, expressed or implied, or an assumption of responsibility by any party with respect to the use, sale, or other disposition by the other party or its agents, representatives, distributors, or users of products incorporating or made by use of inventions licensed under this Agreement.

Section 3.03.  Limitations. Each party shall be responsible for its design, manufacture, instructions for use, quality control, and all safety-related activities relating to its own products, whether or not manufactured under license from the other party’s Licensed Patents or Sublicensable Patents, and shall not be responsible for the products of the other party, the other party’s Affiliates, or any other party or person.

ARTICLE IV

Termination of Agreement

Section 4.01.  Termination of Agreement. This Agreement shall be effective as of the Effective Date and shall continue in force and effect until the expiration of the last to expire of the patents licensed and sublicensed pursuant to the provisions of this Agreement.

ARTICLE V

Confidentiality/Publicity Concerning Agreement

Section 5.01.  Confidentiality/Publicity Concerning Agreement. It is intended that, to the extent possible, the terms of this Agreement remain confidential. No party or any Affiliate of a party shall originate any publicity, news release, or other such general public announcement or make any other disclosure to any third party regarding the terms of this Agreement without the express written consent of the other party (without limitation, the foregoing provision is not intended to limit communications deemed reasonably necessary or appropriate by a party or its Affiliate to its employees, shareholders, directors, officers, accountants, auditors and legal counsel). Notwithstanding the foregoing provision, the parties and their respective Affiliates shall not be prohibited from making any disclosure or release that is required by law, court order, or applicable regulation, or is considered necessary by counsel to fulfill an obligation under securities laws or the rules of the New York Stock Exchange or other applicable stock exchange or to protect any intellectual property right in any territory so long as the disclosing party provides notice to the other party at least five (5) business days prior to such disclosure. However, the parties agree that, with regard to any required disclosure to the Securities and Exchange Commission regarding this Agreement or the fact that it has been executed that is made on or around the Effective Date, prior notice to the other party shall not be required.

ARTICLE VI

Notice

Section 6.01.  Notice. Any notice or other communication to be made pursuant to this Agreement shall be sent to the other party at its address listed below or at such other address such party may hereinafter designate to the other party in writing:

If to BSC:

President and CEO

Boston Scientific Corporation

One Boston Scientific Place

Natick, MA 01760-1537

with a copy to:

General Counsel

Boston Scientific Corporation

One Boston Scientific Place

Natick, MA 01760-1537

Facsimile No.: (508) 650-8956

If to St. Jude:

President and CEO

St. Jude Medical, Inc.

One Lillehei Plaza

St. Paul, MN 55117

Facsimile No.: (651) 481-7690

with a copy to:

General Counsel

St. Jude Medical, Inc.

One Lillehei Plaza

St. Paul, MN 55117

Facsimile No.: (651) 481-7690

Notice shall be deemed to have been given (i) at the expiration of two (2) business days from the date of delivery by a facsimile transmission, provided a copy is deposited postage prepaid for delivery with the postal service or given for delivery to an express courier service on the same date as the sending of the facsimile, or (ii) ten (10) business days from the date the communication is deposited postage prepaid with the postal service or given to an express courier service, unless actual receipt of the notice at an earlier date is established. Without limitation of the foregoing, a written receipt signed by the addressee or its duly appointed representative situated at the addresses set forth hereinabove shall constitute sufficient evidence of service. Either party may change its address and facsimile information by written notice given in accordance with the provisions of this Section.

ARTICLE VII

Loss of Patents

Section 7.01.  Loss of Patents. The loss of any patent(s) or patent application(s) embraced by the term “Licensed Patents” or “Sublicensable Patents” by any party hereto, through abandonment, failure to renew, declaration of invalidity, or otherwise, shall not be cause to terminate this Agreement or the licenses granted hereunder with respect to all other Licensed Patents or Sublicensable Patents and such loss, or any declaration of noninfringement, invalidity, or unenforceability, shall not be deemed a failure of consideration.

ARTICLE VIII

Alternative Dispute Resolution

Section 8.01.  Alternative Dispute Resolution.

(a)    Any dispute concerning whether any party’s actions are licensed under Article II of this Agreement, that is not resolved by negotiation as provided in subsection (c) of this Section 8.01 shall be resolved by binding Alternative Dispute Resolution (“ADR”) in the manner described in Exhibit E.

(b)    Any dispute that arises out of or relates to this Agreement, including an alleged breach of this Agreement but excluding any dispute within the scope of subsection (a) of this Section 8.01, between (i) St. Jude or a St. Jude Affiliate and (ii) BSC or a BSC Affiliate that is not resolved by negotiation as provided in subsection (c) of this Section 8.01 shall be resolved by binding Alternative Dispute Resolution (“ADR”) in the manner described in Exhibit F.

(c)    The parties recognize that a bonafide dispute may arise from time to time as to certain matters that relate to this Agreement. In all such instances, any party may, by written notice to the other party, have such dispute referred to their respective employees designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. Such designated employees are as follows:

For BSC:

General Counsel

Boston Scientific Corporation

One Boston Scientific Place

Natick, MA 01760-1537

Facsimile No.: (508) 650-8956

For St. Jude:

General Counsel

St. Jude Medical, Inc.

One Lillehei Plaza

St. Paul, MN 55117

Facsimile No.: (651) 481-7690

Any settlement reached by the parties under this Section 8.01 (c) shall not be binding until reduced to writing and signed by authorized officers of BSC and St. Jude. If the designated employees are unable to resolve such dispute within such sixty-day period, any party may invoke the other ADR provisions of this Section 8.01.

ARTICLE IX

General Provisions

Section 9.01.  Modification. The Agreement may not be modified, changed, or terminated orally. No change, modification, addition, or amendment shall be valid unless given in a writing expressly indicating an intent to modify the Agreement and duly executed by the parties.

Section 9.02.  Assignment and Transfer. The licenses and other rights granted in this Agreement shall be nonassignable and nontransferable except in connection with the sale of a party’s CRM Products business (whether by the sale of all or substantially all of a party’s assets or its subsidiaries’ assets related to CRM Products, sale of stock of one or more subsidiary companies, merger, or otherwise). Except as permitted herein, a purported transfer of the license or other rights granted herein shall be null and void and shall give the other party hereto the right to terminate the licenses granted to the transferring party without terminating the licenses granted by the transferring party. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of St. Jude, BSC, and their respective Affiliates and successors.

Section 9.03.  Assurances. BSC shall in all events remain fully responsible for, and shall assure its own and its Affiliates’ performance of, all of their respective obligations under this Agreement, and St. Jude shall in all events remain fully responsible for, and shall assure its own and its Affiliates’ performance of, all of their respective obligations under this Agreement.

Section 9.04.  Entire Agreement.

Other than for the agreements listed in Exhibit G, hereto, which shall still remain in full force and effect in accordance with their terms and conditions, this Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any and all negotiations, correspondence, understandings and agreements, whether written or oral, between the parties respecting the subject matter hereof. Except for those license agreements listed in Exhibit G, any license agreement covering any Licensed Patents in existence between the parties prior to the Effective Date shall be deemed terminated as of the Effective Date and superseded by this Agreement.

Section 9.05.  Governing Law. Recognizing that the laws within the United States and international jurisdictions vary in their content and effect with respect to similar subject matter, and that the parties desire uniformity and predictability in interpretation and enforcement of this Agreement, the parties have agreed to the following provisions regarding applicable law to govern this Agreement: All matters affecting the interpretation, form, validity, and performance of this Agreement shall be decided under the laws of the State of Minnesota (without regard to principles of conflicts of laws), including its procedural laws; provided, however, that (a) nothing in Minnesota state procedural law shall be deemed to alter or affect the applicability of the Federal Arbitration Act as governing arbitration of disputes as provided in this Agreement, and (b) no Minnesota state arbitration laws or arbitration rules shall be applicable.

Section 9.06.  Force Majeure. No party (including any of its Affiliates) shall be liable in damages for, nor shall this Agreement be terminable or cancelable by reason of, any delay or default in any party’s performance hereunder if such default or delay is caused by events beyond such party’s reasonable control including, but not limited to, acts of God, action of any government or agency thereof, war or insurrection, civil commotion, destruction of facilities or materials by earthquake, fire, flood or storm, labor disturbances, epidemic, or failure of public utilities or common carriers. The party (or Affiliates) so affected shall give prompt notice to the other parties of such cause, and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as possible. All parties (or Affiliates) agree to endeavor to resume their performance hereunder if such performance is delayed or interrupted by reason of force majeure.

Section 9.07.  Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original.

Section 9.08.  Captions. The captions in this Agreement are intended solely as a matter of convenience and are for reference only, and shall be given no effect in the construction or interpretation of this Agreement.

Section 9.09.  Severability of Provisions. Should any part or provision of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding.

Section 9.10.  No Agency. At no time shall any party or its Affiliate hold itself out to be the agent, employee, lessee, sublessee, partner, or joint venture partner of the other party or its Affiliates. Nothing in this Agreement shall be construed to create any relationship between the parties other than that of licensor/licensee (or sublicensor/sublicensee) as provided in this Agreement. No party or its Affiliates shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other party or its Affiliates or to bind the other party or its Affiliates with regard to any other contract, agreement, or undertaking with a third party.

Section 9.11.  Further Assurances. At such time and from time to time on and after the Effective Date upon request by a party, the other party will execute and deliver or will cause to be executed and delivered, all such further acts, acknowledgments, and assurances that may be reasonably required for carrying out the purposes of this Agreement. Such further assurances may include, but not be limited to, an acknowledgment by Affiliates of a party that such Affiliates are bound by the terms and provisions of this Agreement or an acknowledgment that a particular patent is a Licensed Patent or a Sublicensable Patent.

Section 9.12.  Construction Against Waiver. No waiver of any term, provision, or condition of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such term, provision, or condition of this Agreement; nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate and duly attested by their corporate officers duly authorized for this purpose.

BOSTON SCIENTIFIC CORPORATION.

By:

/s/ Paul W. Sandman

Executive Vice President, Secretary and
General Counsel

ATTEST:

By: /s/ Lawrence J. Knopf

ST. JUDE MEDICAL, INC.

By:

/s/ Pamela S. Krop

Vice President, General Counsel and Secretary

ATTEST:

By: /s/ James W.A. Ladner

Exhibit A

Exclusions from “Licensed Patents” Pursuant to Section 1.03(d)

U.S. Patents:

**

U.S. Patent Applications:

**

Exhibit B

Sublicensable Patents

BSC Sublicensable Patents:

St. Jude Sublicensable Patents:

**

U.S. Patents:

**

U.S. Patent Applications:

**

**

U.S. Patents:

**

U.S. Patent Applications:

**

**

U.S. Patent No. **

**

U.S. Patent Applications:

**

**

U.S. Patent No. **

**

U.S. Patents:

**

**

U.S. Patents:

**

**

U.S. Patents:

**

**

U.S. Patents:

**

Exhibit C

** Patents

Exhibit D

** Patents

U.S. Patent Applications:

**

**

U.S. Patents:

**

U.S. Patent Applications:

**

Exhibit E

ADR Procedure Pursuant to Section 8.01(a)

1.     Upon the expiration of the 60-day period for good faith negotiations pursuant to Section 8.01(c), any party may initiate arbitration with the American Arbitration Association (“AAA”) by filing a Notice of Arbitration pursuant to the then-existing AAA rules for commercial arbitration. Should any provision of the applicable AAA rules conflict in any way with any provision of this Agreement, this Agreement shall govern.

2.     Within twenty (20) days after filing the Notice of Arbtiration, the parties shall appoint a single, neutral arbitrator. The arbitrator shall have substantial experience in patent infringement litigation and in determining whether a product embodies patent claims. If the parties are unable to agree on the arbitrator within the time specified above, AAA will select a so-qualified arbitrator within three (3) business days thereafter.

3.     The parties shall not be entitled to any discovery.

4.     Fifty (50) days after filing the Notice of Arbitration, each party will submit to the arbitrator an opening brief, not to exceed 40 pages in length, setting forth its position on the merits of the dispute. The text must be spaced at least 24 points vertically and the font must be at least 12 points. Claim charts regarding infringement, non-infringement, or invalidity, attached to the brief as exhibits for the convenience of the arbitrator, will not count towards the page limit.

5.     Eighty (80) days after filing the Notice of Arbitration, each party will submit to the arbitrator a reply brief, not to exceed 40 pages in length, setting forth its responses to the other party’s opening brief. The reply brief may not raise any issues not already raised in the parties’ opening briefs and must conform to the same spacing/font requirements as the opening briefs.

6.     No more than one-hundred twenty (120) days after filing the Notive of Arbitration, the arbitrator shall provide a written, reasoned decision to the parties.

Exhibit F

ADR Procedure Pursuant to Section 8.01(b)

1.     Upon the expiration of the 60-day period for good faith negotiations pursuant to Section 8.01(c), any party may initiate arbitration with the American Arbitration Association (“AAA”) by filing a Notice of Arbitration pursuant to the then-existing AAA rules for commercial arbitration. Should any provision of the applicable AAA rules conflict in any way with any provision of this Agreement, this Agreement shall govern.

2.     Within twenty (20) days after filing the Notice of Arbtiration, the parties shall appoint a single, neutral arbitrator. The arbitrator shall have substantial experience in commercial licensing, preferably in the medical devices industry. If the parties are unable to agree on the arbitrator within the time specified above, AAA will select a so-qualified arbitrator within three (3) business days thereafter.

3.     The parties shall be entitled to discovery as ordered by the arbitrator; however, it is the intention of the parties that any such discovery be limited in scope in order to reduce the cost and burden to the parties. The arbitrator shall take this intention into account when ordering discovery so that any discovery so ordered is narrowly-tailored to lead to relevant information while minimizing the burden and cost of such discovery on the parties.

4.     The arbitrator will be empowered to award specific performance of the Agreement, as well as compensatory damages, costs, and attorneys’ fees to the prevailing party, as the arbitrator deems appropriate. No punitive damages of any kind shall be awarded.

5.     The arbitration shall be conducted in such a way that the arbitrator issues a decision and award no later than six (6) months after commencement of the arbitration.

Exhibit G

Additional Agreements Still in Effect

“Agreement” between Pacesetter, Inc. and Intermedics, Inc. effective October 22, 1996

“License Agreement” between Pacesetter, Inc. and Sulzer Intermedics, Inc. having an Effective Date of December 3, 1996

EXHIBIT B

2004 Exclusive License Agreement

AMENDED AND RESTATED

EXCLUSIVE LICENSE AGREEMENT

MADE this 28th day of January, 2004, by and between Mirowski Family Ventures, LLC, a Limited Liability Company organized and existing under the laws of the State of Maryland (hereinafter called “MIROWSKI”) and Guidant Corporation, a corporation organized under the laws of the State of Indiana (hereinafter called “GUIDANT”).

WHEREAS, MIROWSKI is the owner of United States Letters Patents as more fully set forth on Exhibit A hereto;

WHEREAS, MIROWSKI is the owner of United States Patent Applications as more fully set forth on Exhibit B hereto;

WHEREAS, MIROWSKI is the owner of each of the corresponding foreign patents and patent applications set forth on Exhibit C hereto;

WHEREAS, MIROWSKI and GUIDANT desire to amend and restate the relationship between the parties that currently exists by virtue of the Exclusive License Agreement dated the 30th day of January 1973 between MEDRAD, Inc. and Mieczyslaw Mirowski as amended, as assigned to Eli Lilly and Company, and sub-licensed on October 18, 1994 to Cardiac Pacemakers, Inc. (“the Prior Agreements”), and further, to restate the grant to GUIDANT of the sole and exclusive worldwide license for the use of said patents, patent applications, and inventions set forth on Exhibits A, B, and C hereto, together with any improvements or modifications thereto, developed by MIROWSKI;

WHEREAS, Eli Lilly and Company is not a party to this Exclusive License Agreement, has no rights or obligations under this Exclusive License Agreement, and will have no further rights or obligations under the Prior Agreements; and MIROWSKI and GUIDANT understand that Eli Lilly and Company has consented by separate agreement to this Exclusive License Agreement and the changes and terminations effected thereby;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants hereinafter set forth, and of the good and valuable consideration flowing from each party to the other, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:

ARTICLE I

Definitions

For the purpose of this Exclusive License Agreement the following terms shall have the following meanings:

Section 1.  Patent Rights. The term “Patent Rights” means the rights to the subject matter of all inventions which are contained in or are disclosed by, and which are covered by valid, unexpired claims of:

(i) United States Letters Patents set forth on Exhibit A hereto;

(ii) United States Reissue Application No. 10/214,474 and any patent that may issue therefrom;

(iii) United States Patent Applications reflected on Exhibit B hereto and any patent or patents that may issue therefrom;

(iv) the corresponding foreign patents and patent applications set forth on Exhibit C hereto;

(v) any and all divisions, continuations, reissues and extensions of any of the foregoing patents and patent applications; and

(vi) such other U.S. or foreign patent applications or patents as may be designated by mutual agreement of the parties hereto.

Section 2.  Improvement. The term “Improvement” means any future inventions, plans, drawings, specifications, techniques, data and technical information directly relevant to the development, engineering, design, installation, use, or sale, of any device included in the Patent Rights, whether or not such information includes patentable subject matter.

Section 3.  Implantable defibrillator. The term “Implantable Defibrillator” means any implantable or semi-implantable defibrillator or cardioverter or any other device or method which is covered by any of the Patent Rights of the Exclusive License Agreement.

Section 4.  Net Sales, Rental or Lease. The term “Net Sales, Rental or Lease” means the total aggregate selling price received by GUIDANT for the initial sale of a device, its parts or components, and the total aggregate rental or lease price received by GUIDANT for a device, its parts or components after the deduction of all discounts, sales, use and similar taxes, and delivery

costs.

Section 5.  Sold. The term “Sold” means billed out, or paid for if paid for before delivery.

ARTICLE II

Grant and Extent of Exclusive License

Section 1. MIROWSKI hereby grants to GUIDANT the sole and exclusive license and right to manufacture, use, sell, rent and lease or otherwise dispose of any and all devices under the Patent Rights and or any Improvements thereof throughout the United States, its territories and possessions, and in any and all foreign countries, subject to the terms and conditions set forth in this Exclusive License Agreement.

Section 2. GUIDANT shall have the right to grant sub-licenses to others and to collect royalties therefrom; provided, however, that GUIDANT shall continue to be responsible to MIROWSKI for royalties as provided for in Article III hereof to the same extent as if all manufacture, use, sale, rental, lease or other disposition by a GUIDANT sub-licensee were manufacture, use, sale, rental, lease or other disposition made by GUIDANT.

Section 3. GUIDANT shall, and shall so obligate its sub-licensees, to mark all devices manufactured, used, sold, rented or leased under the Patent Rights in accordance with the patent notice requirements of the country in which such devices are manufactured, used, sold, rented or leased.

Section 4. GUIDANT agrees, during the term of this Exclusive License Agreement, to diligently exert its best efforts to prosecute any pending or mutually agreed to future applications within the patent Rights. Guidant also agrees to diligently exert its best efforts to create a demand for each device included in the Patent Rights, to increase and extend its business, and to make every effort to supply the demand for each such device, provided, however, that Guidant may elect as to any patent in Patent Rights at any time prior to the earlier of two years after issuance of such patent or six (6) years after such patent’s filing date not to exercise its best efforts to commercialize devices included in such patent. Such election will be by written notice to MIROWSKI, and MIROWSKI may, at any time after receiving such notice by written notice to GUIDANT, terminate this Agreement as to the patent identified in the notice, whereupon GUIDANT shall have no right or interest thereunder in such identified patent. If, on such termination, no unexpired Patent Rights remain, MIROWSKI or GUIDANT may elect to terminate the Agreement.

Section 5. Unless previously terminated as hereinafter provided, the term of the exclusive license under the Patent Rights shall be from and after the date of this Exclusive License Agreement until the expiration date of the last to expire of the Patent Rights.

Section 6. GUDIANT may assign any license granted herein to any corporation in which it holds a majority interest, or to any corporate entity which is the successor to GUIDANT.

Section 7. GUIDANT shall as promptly as may be practicable inform MIROWSKI of any Improvement which it may make or acquire and vice versa.

ARTICLE III

Payments and Royalties

Section 1. In consideration for the exclusive license granted herein, GUIDANT shall:

A. Pay to MIROWSKI during the term of this Exclusive License Agreement as follows:

(i) three percent (3%) of the Net Sales, Rental or Lease received by GUIDANT for Implantable Defibrillators, their parts and components sold by GUIDANT.

(ii) three percent (3%) of the Net Sales, Rental or Lease received by GUIDANT for lead devices even though not covered under patent rights if the lead devices are sold by GUIDANT with an Implantable Defibrillator.

(iii) four percent (4%) of the Net Sales, Rental or Lease received by GUIDANT for any other device sold by GUIDANT with an Implantable Defibrillator, and for use with the Implantable Defibrillator during the implant procedure, even though not covered under Patent Rights, including, without limitation, Rapido dual catheters but excluding devices subject to Article III, Section 1, Subparagraph A(ii).

B. Pay to MIROWSKI during the term of this Exclusive License Agreement an annual minimum royalty of $10,000.

Section 2. Payments and Royalties under Article III, Section 1, Subparagraph A(i), shall be payable only on devices which are covered, in the country of manufacture, use, sale, rental or lease, by one or more valid claims of a patent application or an unexpired patent included in the Patent Rights.

Section 3. All royalty payments due MIROWSKI by GUIDANT under Article III, Section 1, Subparagraph A, shall become due thirty (30) days following the end of each fiscal quarter of GUIDANT for all sales, rental or lease during such fiscal quarter.

Section 4. All minimum royalty payments due MIROWSKI by GUIDANT under Article III, Section 1, Subparagraph B, shall be paid in equal quarterly installments and shall become due thirty (30) days following the end of each fiscal quarter of GUIDANT.

Section 5. GUIDANT shall have the right to credit minimum royalty payments under Article III, Section 1, Subparagraph B against royalties payable under Article III, Section 1, Subparagraph A, and GUIDANT shall have the right to credit payments made under Article III, Section 1, Subparagraph A against minimum royalty payments regardless of the year in which such payments are made.

Section 6. All sums payable by GUIDANT to MIROWSKI under the terms of this Exclusive License Agreement shall be payable to MIROWSKI in United States dollars without deduction for any taxes or any other charges.

ARTICLE IV

Books, Reports and Records

GUIDANT shall maintain full and complete books and records of all sales, rentals and leases upon which royalties are payable under this Exclusive License Agreement. Within thirty (30) days after the end of each fiscal quarter of GUIDANT, GUIDANT shall furnish to MIROWSKI a full written report setting forth the Net Sales, Rental or Leases of all devices upon which royalties are payable. MIROWSKI and its designated accountants or attorneys shall have the right to examine such books and records of GUIDANT during normal business hours, after first giving reasonable written notice.

ARTICLE V

Breach of Contract, Termination

Section 1. If GUIDANT shall, at any time during the term of this Exclusive License Agreement:

(i) default in the making of any report required in Article IV to be made by GUIDANT to MIROWSKI under the terms of this Exclusive License Agreement, and such default shall continue for a period of thirty (30) days after MIROWSKI gives written notice of such default to GUIDANT; or

(ii) default in the performance of any other obligation or undertaking contained in this Exclusive License Agreement on the part of GUIDANT, and such default shall continue for a period of thirty (30) days after MIROWSKI gives written notice of such default to GUIDANT, MIROWSKI may, at its option, terminate the exclusive portion of this Exclusive License Agreement by thirty (30) days written notice to GUIDANT and GUIDANT shall retain a royalty bearing Non-exclusive License to manufacture, sell, use or otherwise dispose of products developed by GUIDANT under the terms of this License Agreement and GUIDANT shall pay royalties in accordance with Article III.

Section 2. MIROWSKI shall have the right, by thirty (30) days written notice to GUIDANT, to terminate this Exclusive License Agreement at any time upon or after:

(i) an adjudication that GUIDANT is bankrupt or insolvent; or

(ii) the filing by GUIDANT of a petition in bankruptcy or a petition or answer seeking reorganization, readjustment or rearrangement of its business or affairs, under any law or governmental regulation relating to bankruptcy or insolvency; or

(iii)   the appointment of a receiver of the business for all or substantially all the property of GUIDANT;

(iv) the making by GUIDANT of an assignment or attempted assignment of assets for the benefit of its creditors; or

(v) the institution by GUIDANT of any proceedings for the liquidation or termination of its business or affairs or for the termination of its corporate character.

Section 3. Termination of this Exclusive License Agreement pursuant to the terms hereof shall not in any way operate to impair or destroy any of MIROWSKI’S rights or remedies either by law or in equity, or to relieve GUIDANT of any of its obligations to pay royalties, or to comply with any other of its agreements hereunder, accrued prior to the effective date of termination. However, GUIDANT shall have the right to complete orders on hand or work in progress at the time of termination.

Section 4. Failure or delay by MIROWSKI to exercise its right of termination hereunder by reason of any default of GUIDANT in carrying out any obligation imposed upon it by this Exclusive License Agreement shall not operate to prejudice MIROWSKI’S right of termination for any other or subsequent default by GUIDANT.

ARTICLE VI

Warranties and Representations

Section 1. MIROWSKI represents and warrants, which representations and warranties shall be continuous, that:

It has the full and complete right to give and grant to GUIDANT the sole and exclusive License hereinbefore set forth.

Section 2. GUIDANT represents and warrants, which representations and warranties shall be continuous, that it has all appropriate corporate authority to enter into this Agreement.

ARTICLE VII

Infringement Actions

Section 1. If any action or suit shall be brought against GUIDANT for alleged infringement of any patent or patent right in connection with devices licensed under this Exclusive License Agreement, GUIDANT shall control the defense of such action or suit and shall pay all costs and expenses of defending such action or suit and shall pay any judgment, award, or decree that may be rendered against GUIDANT as a result of such action or suit. In the event that, as a result of such action or suit, either by judgment of a court or by reasonable voluntary settlement of the action or suit, GUIDANT shall be required to pay a royalty to another on any device or devices covered by the Patent Rights, the amount of such royalty to another shall be deductible from the royalty otherwise payable to MIROWSKI, under Article III, Section 1, Subparagraph A, for such device or devices, parts or components, provided, however, that such deduction shall not exceed 50% of the royalty otherwise payable to MIROWSKI.

Section 2. GUIDANT shall have the right to bring and conduct suit or actions in its name against others for infringement of any patent subject to this Exclusive License Agreement, the same as if such patent were the exclusive property of GUIDANT; and GUIDANT shall, subject to mutual agreement between GUIDANT and MIROWSKI, bring and conduct suit or actions against any infringer whose annual sales, rentals and leases of infringing devices exceed $75,000. MIROWSKI agrees to join as a party plaintiff in any infringement suit or action brought by GUIDANT under the terms of this Exclusive License Agreement; and MIROWSKI shall have the right to participate in any infringement suit or action brought by GUIDANT under the terms of this Exclusive License Agreement. GUIDANT shall pay all costs and expenses of such suit or action, and shall be entitled to the proceeds thereof. However, the proceeds of such suit or action, less all costs and expenses incurred by GUIDANT in connection therewith, shall be divided equally between GUIDANT and MIROWSKI.

Section 3. MIROWSKI shall have the right to notify GUIDANT of any infringement of any patent subject to this Exclusive License Agreement. If GUIDANT declines to initiate an infringement suit or action against any infringer, after thirty (30) days written notice from MIROWSKI, then MIROWSKI shall have the right to bring an infringement suit or action against such infringer, at its own expense and to the exclusion of GUIDANT, and shall be entitled to the full recovery derived from such suit or action.

Section 4. For purposes of this Exclusive License Agreement, GUIDANT agrees not to challenge the validity of any claim of U.S. Patent No. RE38,119 unless there is a non-appealable final judgment of invalidity for each such claim.

GUIDANT agrees not to cause or participate in (unless required by law) reexamination of U.S. Patents reflected in Exhibit A hereto, and, except as provided in the immediately preceding paragraph, further agrees not to cause its Affiliates, agents, attorneys or representatives to challenge the validity or enforceability of the U.S. Patents reflected in Exhibit A hereto, or assist a third party to do so unless required by law.

With respect to this Exclusive License, if GUIDANT commences sale for the first time after the execution of this Exclusive License Agreement of a new GUIDANT device (“New Device”) or a GUIDANT device that has different functionality from devices sold before execution of this Exclusive License Agreement (“Modified Device”), and, if GUIDANT is not paying royalties on such New Device or Modified Device and MIROWSKI believes that such New Device or Modified Device infringes one or more of the Patent Rights, MIROWSKI shall notify GUIDANT of such infringement. GUIDANT shall have ninety days to cure the nonpayment of royalties. If GUIDANT fails to pay such royalties within the cure period and continue payment thereunder, MIROWSKI shall have the right to terminate the Exclusive License Agreement as to that Patent Right.

GUIDANT, while maintaining its Exclusive License Agreement, shall have the right to challenge the validity and enforceability of any Patent Right as it pertains to the sale of any New Device or Modified Device, and shall have the right to challenge MIROWSKI’S assertion of infringement of any Patent Right with respect to the sale of any New Device or Modified Device through a Declaratory Judgment action in the Delaware federal district court if GUIDANT pays the royalty that would otherwise be due into an escrow fund mutually agreed to between the parties for such purpose. In such action, MIROWSKI shall not make claims for willful infringement or punitive damages and MIROWSKI shall not seek injunctive relief. In any such litigation, each party shall bear its own attorney’s fees and costs. The determination of the royalty obligations with respect to the products in dispute and the disbursement of the funds in the escrow fund shall be determined by a final non-appealable judgment of the Delaware federal district court or an appellate court thereto.

ARTICLE VIII

Other Products

Subject to the provisions of Article III, Section 1, Subparagraph A(ii), GUIDANT shall not be precluded or estopped by this Exclusive License Agreement from manufacturing, using, selling, renting, leasing or otherwise dealing in other products which are not recovered by the exclusive license granted in Article II, Section 1, herein, and at all times GUIDANT shall have the same right and liberty of manufacturing, using, selling, renting, leasing or otherwise dealing in products not covered by the exclusive license granted in Article II, Section 1, herein, as others not parties hereto.

ARTICLE IX

Patents, Future Inventions, Modifications and Improvements

Section 1. Any and all inventions, modifications, improvements, developments or discoveries (hereinafter termed “future developments”) which MIROWSKI shall hereafter and during the term of this Exclusive License Agreement make, come upon, invent, discover or otherwise acquire, relevant to any device included in the license granted in Article II, Section 1, herein, shall at the option of GUIDANT immediately become subject to each and every of the provisions of this Exclusive License Agreement, thereby being included in the sole and exclusive license to GUIDANT under Article II, Section 1, and royalty bearing under Article III, Section 1, Subparagraph A. GUIDANT may avail itself of the option granted in this Article IX, Section 1, by giving written notice to MIROWSKI within four (4) months of becoming aware of such future developments. MIROWSKI shall promptly advise GUIDANT of all such future developments, and shall retain the full right, title and interest in and to such future developments, shall apply for patent on such future developments, in his own name and through patent counsel mutually agreed upon. GUIDANT shall pay all costs and expenses relating to the filing, prosecution, grant and maintenance of any application for patent on such future developments. If GUIDANT fails to exercise its option by giving MIROWSKI such notice of interest within four (4) months, or if GUIDANT selects not to pay such costs and expenses relating to any such application for patent, then MIROWSKI shall have the right to pursue such application in its own name, and GUIDANT shall have no rights thereto or thereunder which are not otherwise granted by this Exclusive License Agreement. In any event, GUIDANT shall cooperate with MIROWSKI, if so requested, in the filing and prosecution of any such application for patent.

Section 2. Immediately upon execution of this Exclusive License Agreement, GUIDANT shall continue the payment of all future costs and expenses relating to obtaining and maintaining, including filing fees, prosecution charges and issue and printing fees, or all of the patents and patent applications recited in Article 1, Patent Rights, in this Exclusive License Agreement. MIROWSKI shall control the prosecution of each such patent and patent application in consultation with GUIDANT, through mutually acceptable patent counsel, and GUIDANT shall cooperate with MIROWSKI, if so requested, in the filing and prosecution of any such application for patent. GUIDANT shall be entitled, at its option, to receive copies of all papers generated in connection with the filing and prosecution of any such patent and patent application.

Section 3. Upon issuance by the U.S. Patent and Trademark Office of any new patent, pursuant to Article IX, GUDIANT shall, within the appropriate statutory time period, file for a foreign patent in all foreign jurisdictions mutually agreed to by GUIDANT and MIROWSKI and shall continue the payment of all future costs and expenses relating to obtaining and maintaining such foreign patent(s).

ARTICLE X

License to Other

Except as specifically permitted in this License Agreement, MIROWSKI shall not, during the term of the exclusive license granted herein, make, use or sell any device falling within the claims of any patent subject thereto, or any future development, or grant any other license, with respect to any subject matter to which GUIDANT has a sole and exclusive license.

ARTICLE XI

Return of Improvements

Upon termination of this Exclusive License Agreement pursuant to Article V, all rights and licenses of the parties hereunder shall immediately terminate, and GUIDANT shall immediately return to MIROWSKI information relating to any Improvements obtained from MIROWSKI hereunder.

ARTICLE XII

Parties in Interest

All the terms and conditions hereof shall inure to and be binding upon, the parties hereto and their respective successors and assigns.

ARTICLE XIII

Notices

All notices or other communications required or permitted hereunder shall be in writing and shall be deemed to have been sufficiently given if mailed first class, postage pre-paid, registered or certified mail as follows:

If to GUIDANT: Guidant Corporation

111 Monument Circle

29th Floor

Indianapolis, IN 46204

Attn: General Counsel

If to MIROWSKI: Mirowski Family Ventures, LLC

10440 High Grove Drive

Carmel, IN 46032

Attn: Ginat W. Mirowski, D.M.D., M.D.

ARTICLE XIV

Miscellaneous

Section 1. Any titles to Articles, Sections or Subsections of this Exclusive License Agreement have been inserted merely for convenience of reference, and shall in no way restrict or modify any of the terms or provisions of this Exclusive License Agreement.

Section 2. This Exclusive License Agreement has been executed and will be consummated in the State of Indiana, and is to be governed and interpreted by the laws of the State of Indiana.

Section 3. This Exclusive License Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original, but such counterparts together shall constitute but one and the same agreement.

Section 4. This Exclusive License Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof, merges all prior discussions therebetween, merges the Prior Agreements into this agreement, and may be amended only by a written agreement executed by the parties hereto.

IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day and year first above written.

ATTEST: GUIDANT CORPORATION

/s/ Richard R. Clapp By /s/ Ronald W. Dollens

RONALD W. DOLLENS

President and Chief Executive Officer

WITNESS: MIROWSKI FAMILY VENTURES, LLC

/s/ Richard R. Clapp By /s/ Ginat W. Mirowski, D.M.D., M.D.

GINAT W. MIROWSKI, D.M.D., M.D.

General Manager and President

EXHIBIT A

4,592,367

4,603,705

4,662,377

4,667,328

4,705,043

4,726,024

4,768,512

4,796,620

4,817,608

4,819,643

4,928,688

4,969,463

5,052,407

5,063,932

5,191,901

5,476,497

RE38,119

D316,145

EXHIBIT B

U.S. Application No. 10/625,126

U.S. Application No. 10/654,959

U.S. Application No. 10/656,222

EXHIBIT C

1) All foreign applications and patents that correspond to the patents listed in Exhibit A, including but not limited to:

AU580979 B2	AU571404 B2	CA1309468C	CA1272292 A1
AU3852185 A	AU4193985 A	DE3637822 A1	DE3790186 C2
CA1260547 A1	CA1261405 A1	FR2589740 A1	DE3790186 T
DE3505280 A1	DE3515984 A1	FR2589740 B1	EP0240428 A2
DE3505280 C2	DE3515984 C2	GB2182852 A	EP0240428 A3
FR2559908 A1	FR2563736 A1	GB2182852 B	EP0240428 B1
FR2559908 B1	FR2563736 B1	GB8626681 D0	EP0240428 B2
GB2154771 A	GB2157954 A	JP1705453 C	GB2197511 A
GB2154771 B	GB2157954 B	JP3070981 B	GB2197511 B
GB8502287 D0	GB8507324D0	JP62117569 A	GB8726113 D0
IL74281 A	IL74722 A	NL191082 C	JP63501178 T
IL74281 D0	IL74722 D0	NL191082 B	JP63501178 W
JP1801679 C	JP1653677 C	NL8602828A	NL193005 B
JP5010108 B	JP3018469 B		NL8720169 A
JP60193474 A	JP60249972 A		NL8720169 T
NL192027 B	NL191671 B		NL193005 C
NL192027 C	NL191671 C		WO8706038 A1
NL8500486 A	NL8501260 A
CA1318942 C	CA1304136 C	CA1323071 C	CA1310703 C
DE3715822 A1	DE3715823 A1	DE3818136 A1	DE3739014 A1
DE3715822 C2	DE3715823 C2	FR2615740 A1	DE3739014 C2
FR2606645 A1	FR2598920 A1	FR2615740 B1	FR2606644 A1
FR2606645 B1	FR2598920 B1	GB2205044 A	FR2606644 B1
GB2190296 A	GB2190505 A	GB2205044 B	GB2198044 A
GB2190296 B	GB2190505 B	GB8811814 D0	GB2198044 B
GB8710771 D0	GB8710447 D0	JP1076877 A	GB8726531 D0
JP1725911 C	JP1842035 C	JP1728005 C	JP1706037C
JP4012148 B	JP5054976 B	JP4012994 B	JP3071908 B
JP63029664 A	JP63035229 A	NL188560 B	JP63212375 A
NL191672 B	NL191831 B	NL188560 C	NL191698 B
NL191672 C	NL191831 C	NL8801352 A	NL191698 C
NL8701123 A	NL8701140 A		NL8702741 A
AU631088 B2	AU613481 B2	AU643458 B2
AU5823990 A	AU3372989 A	AU6326090 A
CA2064751 A1	BE1004208 A5	CA2026853 A1
CA2064751 C	CA1334030 C	CA2026853 C
DE69030767 D1	DE3912377 A1	DE4030642 A1
DE69030767 T2	DE3912377 C2	DE4030642 C2
DE69030767 E	FR2630013 A1	FR2652505 A1
EP0476017 A1	FR2630013 B1	FR2652505 B1
EP0476017 A4	GB2217993 A	GB2236484 A
EP0476017 B1	GB2217993 B	GB2236484 B
ES2103742 T3	GB89008506 D0	GB9020914 D0
HK1007972 A1	JP1769388 C	GB2265551 A
JP2625032 B2	JP2063478 A	GB2265551 B
JP5504489 T	JP4058347 B	GB9311914 D0
JP5504489 W	NL194068 B	IT1241713 B
WO9014860 A1	NL194068 C	IT9067751 D0
	NL8900925 A	JP2873069B2 B2
		JP3133467 A
		NL 195035 C
		NL 9002142 A

2) All foreign applications and patents that will correspond to the applications Listed in Exhibit B.

None currently filed.

EXHIBIT C

MFV Patent Rights

United States Patents

**

 

All foreign applications and patents that correspond to the patents listed above, including but not limited to:

**

Exhibit D

Executed Consent to License and Mutual Release

CONSENT TO LICENSE AND MUTUAL RELEASE

This Consent to License and Mutual Release (the “Consent Agreement”), effective as of the 25th day of June, 2007 (the “Effective Date”), is entered into by and between Guidant Corporation, a corporation organized under the laws of the State of Delaware (“Guidant”), Cardiac Pacemakers, Inc., a corporation organized and existing under the laws of the State of Minnesota (“CPI”), and Guidant Sales Corporation, a corporation organized and existing under the laws of the State of Indiana (“GSC”) (collectively, Guidant, CPI and GSC shall hereafter be referred to as the “Guidant Parties”) on the one hand, and St. Jude Medical, Inc., a corporation organized and existing under the laws of the State of Minnesota (“St. Jude”), Pacesetter, Inc., a corporation organized and existing under the laws of the State of Delaware (“Pacesetter”), and St. Jude Medical S.C., Inc., a corporation organized and existing under the laws of the State of Minnesota (“SJMSC”) (collectively, St. Jude, Pacesetter and SJMSC are hereafter referred to as the “St. Jude Parties”), on the other hand. (The Guidant Parties and the St. Jude Parties are sometimes hereafter collectively referred to as the “Parties”.)

RECITALS

WHEREAS, Guidant and Mirowski Family Ventures, LLC (“MFV”) are currently plaintiffs in an action against the St. Jude Parties captioned Guidant Corp. et al. v. St. Jude Medical, Inc. et al., Civil Action No. 04-0067-SLR, pending in the United States District Court for the District of Delaware (the “Delaware Case”);

WHEREAS, Guidant is the exclusive licensee of certain patent rights owned by MFV, pursuant to a January 28, 2004 Amended and Restated Exclusive License Agreement;

WHEREAS, the Guidant Parties and the St. Jude Parties previously entered into a Settlement Agreement on July 29, 2006, that limited the scope of the issues to be tried in the Delaware Case;

WHEREAS, the Guidant Parties and the St. Jude Parties now wish to completely settle and resolve the Delaware Case;

WHEREAS, MFV and the St. Jude Parties are entering into a separate Settlement Agreement dated as of the Effective Date of this Consent Agreement, under which MFV is granting a license to certain patent rights to the St. Jude Parties;

AND WHEREAS, the Guidant Parties consent to the grant of this license and the St. Jude Parties and the Guidant Parties wish to release, on a mutual basis, all claims and counterclaims that were or could have been brought as part of the Delaware Case;

NOW, THEREFORE, in consideration of the promises and of the mutual covenants hereinafter set forth, and of the good and valuable consideration flowing from each party to the other, the Parties hereto, intending to be legally bound hereby, covenant and agree as follows:

ARTICLE I

Definitions

Section 1.01.  Affiliates.  “Affiliates” as used herein shall mean any person or entity that controls or is controlled by or is under common control with a party on the Effective Date or at any time thereafter. For purposes of this Section 1.01, ownership, directly or indirectly, of more than fifty percent (50%) of the capital stock or other comparable ownership interest of the corporation or entity carrying the right to vote for or appoint directors or their equivalent (if not a corporation) shall constitute control thereof. “Affiliate” of a third party means a person or entity that controls, is controlled by, or under common control, with such third party. Without in any way limiting the foregoing, “Affiliates” of St. Jude Medical, Inc. include Pacesetter, Inc., St. Jude Medical AB, and St. Jude Medical S.C., Inc.

Section 1.03.  2006 Settlement Agreement.  “2006 Settlement Agreement” as used herein shall mean the settlement agreement entered into by and between Boston Scientific Corporation, Guidant Corporation, Cardiac Pacemakers, Inc., Guidant Sales Corporation, and Advance Bionics, on the one hand, and St. Jude Medical, Inc., Pacesetter, Inc., and Advanced Neuromodulation Systems, Inc., on the other hand, dated July 29, 2006, an executed copy of which is attached hereto as Exhibit A.

Section 1.04.  2007 Settlement Agreement.  “2007 Settlement Agreement” as used herein shall mean the Settlement Agreement entered into by and between Mirowski Family Ventures, LLC and the St. Jude Parties, with an effective date of June 26, 2007.

Section 1.06.  MFV Patent Rights.  “MFV Patent Rights” shall have the meaning as set forth in the 2007 Settlement Agreement.

ARTICLE II

Consent to License from and Covenants of MFV; Effect of Stipulated Dismissal

Section 2.01.  The Guidant Parties hereby consent and agree to the granting to the St. Jude Parties by MFV of a license under the MFV Patent Rights as set forth in Section 2.01 of the 2007 Settlement Agreement on the terms contained therein. In addition, the Guidant Parties hereby consent to the covenants not to sue contained in Section 5.01 of the 2007 Settlement Agreement.

Section 2.02.  Conduct of the Indiana Case. The Parties further agree that nothing in this Consent Agreement shall in any way affect the conduct of the Indiana Case (as defined in the 2007 Settlement Agreement), which, without foreclosing the possibility of a settlement being effectuated in the future, the Parties intend at the present time to continue to litigate. The Parties further covenant and agree that they will not seek to offer into evidence, cite as authority, or otherwise use or construe either the stipulation and agreements referred to in Section 3.01 of the 2007 Settlement Agreement, the 2007 Settlement Agreement itself, or this Consent Agreement against the other party in any other case, litigation, or other proceeding other than as necessary to enforce the terms of this Consent Agreement. The Guidant Parties also covenant and agree to maintain the confidentiality, to the extent possible, of the stipulation filed under seal pursuant to Section 3.01 of the 2007 Settlement Agreement, except that copies of the stipulation may be disclosed to Medtronic, or other third parties (so long as such parties are informed of the confidential nature of the stipulation) solely for purposes of enforcing United States Reissue Patent No. RE 38,119, or any continuation thereof, against Medtronic, or other third parties.

ARTICLE III

Mutual Release

Section 3.01.  The Guidant Parties and the St. Jude Parties hereby covenant and agree that all claims and counterclaims in the Delaware case shall be dismissed with prejudice, and each party, for itself and its successors and assigns, hereby releases, acquits, and forever discharges the other party and its Affiliates, successors, and assigns, and all their respective officers, directors, employees, agents, and representatives, distributors, resellers, customers, and end users from all such claims and counterclaims.

Section 3.02.  Each party, for itself and its successors and assigns, and its Affiliates and their respective successors and assigns, hereby expressly waives any right that it may have under the laws or statutes of any jurisdiction that limits the extension of a release to certain types of claims, including, but not limited to, California Civil Code § 1542, which provides that: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

ARTICLE IV

Representations and Warranties

Section 4.01.  Each of the Parties represents and warrants that it has the power and authority to execute, deliver, enter into and perform this Agreement and that it is legally permitted to grant the rights granted and to make all covenants and perform all obligations required by this Agreement, including all of the exhibits hereto.

Section 4.02.  Each party shall defend, indemnify, and hold harmless the other party and its Affiliates, and all officers, directors, employees, attorneys, agents, successors, and assigns of the other party and its Affiliates (collectively, the “Indemnified Parties”), against any and all legal expenses, costs, settlements, judgments, claims, controversies, demands, rights, disputes, grievances, causes of action, damages, enhanced damages, injunctions, attorneys’ fees or prejudgment interest imposed on or incurred by any of the Indemnified Parties by reason of any failure, inaccuracy, or breach of any of the representations and warranties of such party pursuant to this Article IV.

ARTICLE V

General Provisions

Section 5.01.  Modification. This Agreement may not be modified, changed, or terminated orally. No change, modification, addition, or amendment shall be valid unless given in a writing expressly indicating an intent to modify the Agreement and duly executed by the Parties.

Section 5.02.  Entire Agreement. This Agreement, along with 2006 Settlement Agreement and its exhibits, and all of the other agreements and stipulations that are to be executed by the Parties as contemplated herein, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes any and all negotiations, correspondence, understandings and agreements, whether written or oral, between the Parties respecting the subject matter hereof.

Section 5.03.  Governing Law. Recognizing that the laws within the United States and international jurisdictions vary in their content and effect with respect to similar subject matter, and that the Parties desire uniformity and predictability in interpretation and enforcement of this Agreement, the Parties have agreed to the following provisions regarding applicable law to govern this Agreement: All matters affecting the interpretation, form, validity, and performance of this Agreement shall be decided under the laws of the State of Minnesota (without regard to principles of conflicts of laws), including its procedural laws; provided, however, that (a) nothing in Minnesota state procedural law shall be deemed to alter or affect the applicability of the Federal Arbitration Act as governing arbitration of disputes as provided in this Agreement, and (b) no Minnesota state arbitration laws or arbitration rules shall be applicable.

Section 5.04.  Force Majeure. No party (including any of its Affiliates) shall be liable in damages for, nor shall this Agreement be terminable or cancelable by reason of, any delay or default in any party’s performance hereunder if such default or delay is caused by events beyond such party’s reasonable control including, but not limited to, acts of God, action of any government or agency thereof, war or insurrection, civil commotion, destruction of facilities or materials by earthquake, fire, flood or storm, labor disturbances, epidemic, or failure of public utilities or common carriers. The party (or Affiliates) so affected shall give prompt notice to the other Parties of such cause, and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as possible. All Parties (or Affiliates) agree to endeavor to resume their performance hereunder if such performance is delayed or interrupted by reason of force majeure.

Section 5.05.  Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original.

Section 5.06.  Captions. The captions in this Agreement are intended solely as a matter of convenience and are for reference only, and shall be given no effect in the construction or interpretation of this Agreement.

Section 5.07.  Severability of Provisions. Should any part or provision of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding.

Section 5.08.  No Agency. At no time shall any party or its Affiliate hold itself out to be the agent, employee, lessee, sublessee, partner, or joint venture partner of the other party or its Affiliates. No party or its Affiliates shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other party or its Affiliates or to bind the other party or its Affiliates with regard to any other contract, agreement, or undertaking with a third party.

Section 5.09.  Further Assurances. At such time and from time to time on and after the Effective Date upon request by a party, the other party will execute and deliver or will cause to be executed and delivered, all such further acts, acknowledgments, and assurances that may be reasonably required for carrying out the purposes of this Agreement.

Section 5.10.  Construction Against Waiver. No waiver of any term, provision, or condition of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such term, provision, or condition of this Agreement; nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision.

Section 5.11.  Protective Orders. The court-entered confidentiality agreements and protective orders shall remain in full force and effect after dismissal of the Delaware case, and the Parties shall remain bound by their terms.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed and duly attested by their corporate officers authorized for this purpose.

GUIDANT CORPORATION,

CARDIAC PACEMAKERS, INC., AND

GUIDANT SALES CORPORATION

By:

/s/ William F. McConnell, Jr.

ATTEST:

By: /s/ Richard R. Clapp

ST. JUDE MEDICAL, INC., PACESETTER, INC.,

AND ST. JUDE MEDICAL S.C., INC.

By:

/s/ Pamela S. Krop

ATTEST:

By:

Exhibit E

Form of Stipulated Dismissal of Delaware Case

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

GUIDANT CORPORATION, CARDIAC PACEMAKERS, INC., GUIDANT SALES CORPORATION, and MIROWSKI FAMILY VENTURES, L.L.C, Plaintiffs,
v.	C. A. No. 04-67 (SLR)
ST. JUDE MEDICAL, INC., PACESETTER, INC., and ST. JUDE MEDICAL, S.C., INC., Defendants.

STIPULATION OF DISMISSAL UNDER FRCP 41(a)(1)(ii) & 41(c)

The Mirowski plaintiff and the defendants, having entered into a confidential settlement of their dispute, it is now stipulated and agreed by and among the parties to this action, represented by their attorneys, as follows:

1. The Second Amended Complaint is hereby dismissed with prejudice to all plaintiffs.

2. The counterclaims of the Answer to the Second Amended Complaint are hereby dismissed with prejudice to the defendants.

3. Any and all pending motions or requests for relief by any of the parties are hereby withdrawn.

4. Each party is to bear its own costs and attorneys’ fees.

So agreed and stipulated.

DATED: June ___, 2007
Frederick L. Cottrell, III (No. 2555), cottrell@rlf.com Anne Shea Gaza (No. 4093), gaza@rlf.com RICHARDS, LAYTON & FINGER One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 (302) 651-7700	Jack B. Blumenfeld (No. 1014), jblumenfeld@mnat.com Leslie A. Polizoti (No. 4299), lpolizoti@mnat.com MORRIS, NICHOLS, ARSHT & TUNNELL LLP 1201 N. Market Street Wilmington, Delaware 19899 (302) 658-9200
Attorneys for Plaintiffs	Attorneys for Plaintiffs
Of Counsel:	Of Counsel:
J. Michael Jakes, mike.jakes@finnegan.com Kathleen A. Daley, kathleen.daley@finnegan.com FINNEGAN HENDERSON FARABOW GARRETT & DUNNER, L.L.P. 901 New York Avenue, N.W. Washington, D.C. 20001-4413	Denis R. Salmon, dsalmon@gibsondunn.com H. Mark Lyon, mlyon@gibsondunn.com Frederick S. Chung, fchung@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 1881 Page Mill Road Palo Alto, CA 94304
Counsel for Plaintiffs Guidant Corporation, Cardiac Pacemakers, Inc., and Guidant Sales Corproration
Arthur I. Neustadt, aneustadt@oblon.com OBLON, SPIVAK, MCCLELLAND, MAIER & NEUSTADT, P.C. 1940 Duke Street Alexandria, VA 22314	Morgan Chu, mchu@irell.com Scott Baskin, sbaskin@irell.com Gary N. Frischling, gfrischling@irell.com IRELL & MANELLA LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, CA 90067
Counsel for Plaintiff Mirowski Family Ventures, L.L.C.

So ordered :

U.S. District Judge Date

Exhibit F

Form of Confidential Stipulation for Filing in Delaware Case

**

EXHIBIT G

ADR Procedure Pursuant to Section 9.01

1.     Upon the expiration of the 60-day period for good faith negotiations pursuant to Section 9.01(b), any party may initiate arbitration with the American Arbitration Association (“AAA”) by filing a Notice of Arbitration pursuant to the then-existing AAA rules for commercial arbitration. Should any provision of the applicable AAA rules conflict in any way with any provision of this Agreement, this Agreement shall govern.

2.     Within twenty (20) days after filing the Notice of Arbitration, the parties shall appoint a single, neutral arbitrator. The arbitrator shall have substantial experience in commercial licensing, preferably in the medical devices industry. If the parties are unable to agree on the arbitrator within the time specified above, AAA will select a so-qualified arbitrator within three (3) business days thereafter.

3.     The parties shall be entitled to discovery as ordered by the arbitrator; however, it is the intention of the parties that any such discovery be limited in scope in order to reduce the cost and burden to the parties. The arbitrator shall take this intention into account when ordering discovery so that any discovery so ordered is narrowly-tailored to lead to relevant information while minimizing the burden and cost of such discovery on the parties.

4.     The arbitrator will be empowered to award specific performance of the Agreement, as well as compensatory damages, costs, and attorneys’ fees to the prevailing party, as the arbitrator deems appropriate. No punitive damages of any kind shall be awarded.

5.     The arbitration shall be conducted in such a way that the arbitrator issues a decision and award no later than six (6) months after commencement of the arbitration.

EXHIBIT H

(Excluded) Exhibit B Patent Rights

**

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel J. Starks, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of St. Jude Medical, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007

/s/   DANIEL J. STARKS

Daniel J. Starks
Chairman, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, John C. Heinmiller, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of St. Jude Medical, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007

/s/   JOHN C. HEINMILLER

John C. Heinmiller
Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of St. Jude Medical, Inc. (the Company) on Form 10-Q for the period ended June 30, 2007 as filed with the Securities and Exchange Commission (the Report), I, Daniel J. Starks, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/   DANIEL J. STARKS

Daniel J. Starks
Chairman, President and Chief Executive Officer
August 9, 2007

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of St. Jude Medical, Inc. (the Company) on Form 10-Q for the period ended June 30, 2007 as filed with the Securities and Exchange Commission (the Report), I, John C. Heinmiller, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/   JOHN C. HEINMILLER

John C. Heinmiller
Executive Vice President and Chief Financial Officer
August 9, 2007