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<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE A - SIGNIFICANT ACCOUNTING POLICIES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Principles of Consolidation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our consolidated financial statements include the accounts of Boston Scientific Corporation and our wholly-owned subsidiaries. Through December 31, 2009, we assessed the terms of our investment interests to determine if any of our investees met the definition of a variable interest entity (VIE) in accordance with accounting standards effective through that date, and would have consolidated any VIEs in which we were the primary beneficiary. Our evaluation considered both qualitative and quantitative factors and various assumptions, including expected losses and residual returns. In December 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification™ (ASC) Update No. 2009-17, <i>Consolidations (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, </i>which formally codifies FASB Statement No. 167, <i>Amendments to FASB Interpretation No. 46(R). </i>Update No. 2009-17 and Statement No. 167 amend Interpretation No. 46(R), <i>Consolidation of Variable Interest Entities, </i>to require that an enterprise perform an analysis to determine whether the enterprise’s variable interests give it a controlling financial interest in a VIE. The analysis identifies the primary beneficiary of a VIE as the enterprise that has both 1) the power to direct activities of a VIE that most significantly impact the entity’s economic performance and 2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. Update No. 2009-17 eliminated the quantitative approach previously required for determining the primary beneficiary of a VIE and requires ongoing reassessments of whether an enterprise is the primary beneficiary. We adopted Update No. 2009-17 for our first quarter ended March 31, 2010. Based on our assessments under the applicable guidance, we did not consolidate any VIEs during the years ended December 31, 2010, 2009, or 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We account for investments in entities over which we have the ability to exercise significant influence under the equity method if we hold 50 percent or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary. We record these investments initially at cost, and adjust the carrying amount to reflect our share of the earnings or losses of the investee, including all adjustments similar to those made in preparing consolidated financial statements. We account for investments in entities in which we have less than a 20 percent ownership interest under the cost method of accounting if we do not have the ability to exercise significant influence over the investee. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In the first quarter of 2008, we completed the divestiture of certain non-strategic businesses. Our operating results for the year ended December 31, 2008 include the results of these businesses through the date of separation, as these divestitures did not meet the criteria for discontinued operations. On January 3, 2011, we closed the sale of our Neurovascular business to Stryker Corporation. We are providing transitional services to Stryker through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of up to 24 months, subject to extension. Due to our continuing involvement in the operations of the Neurovascular business, the divestiture does not meet the criteria for presentation as a discontinued operation and, therefore, the results of the Neurovascular business are included in our results of operations for all periods presented. Refer to <i>Note C – Divestitures and Assets Held for Sale </i>for a description of these business divestitures. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Basis of Presentation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The accompanying consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-K and Article 10 of Regulation S-X. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We have reclassified certain prior year amounts to conform to the current year’s presentation, including those to reclassify certain balances to ‘assets held for sale’ classification. See <i>Note C – Divestitures and Assets Held for Sale</i>, <i>Note D – Goodwill and Other Intangible Assets, Note J – Supplemental Balance Sheet Information</i>, and <i>Note P – Segment Reporting </i>for further details. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Subsequent Events</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We evaluate events occurring after the date of our accompanying consolidated balance sheets for potential recognition or disclosure in our financial statements. We did not identify any material subsequent events requiring adjustment to our accompanying consolidated financial statements (recognized subsequent events). Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to <i>Note C – Divestitures and Assets Held for Sale, <i>Note G – Borrowings and Credit Arrangements,</i> Note L – Commitments and Contingencies, </i>and <i>Note R – Subsequent Events </i>for more information. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Accounting Estimates</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">To prepare our consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities, the disclosure of contingent liabilities as of the date of our financial statements and the reported amounts of our revenues and expenses during the reporting period. Our actual results may differ from these estimates. Refer to <i>Critical Accounting Estimates </i>included in Item 7 of this Annual Report for further discussion. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Cash and Cash Equivalents</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We record cash and cash equivalents in our consolidated balance sheets at cost, which approximates fair value. Our policy is to invest excess cash in short-term marketable securities earning a market rate of interest without assuming undue risk to principal, and we limit our direct exposure to securities in any one industry or issuer. We consider all highly liquid investments purchased with a remaining maturity of three months or less at the time of acquisition to be cash equivalents. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We record available-for-sale investments at fair value and exclude unrealized gains and temporary losses on available-for-sale securities from earnings, reporting such gains and losses, net of tax, as a separate component of stockholders’ equity, until realized. We compute realized gains and losses on sales of available-for-sale securities based on the average cost method, adjusted for any other-than-temporary declines in fair value. We record held-to-maturity securities at amortized cost and adjust for amortization of premiums and accretion of discounts through maturity. We classify investments in debt securities or equity securities that have a readily determinable fair value that we purchase and hold principally for selling them in the near term as trading securities. All of our cash investments as of December 31, 2010 and 2009 had maturity dates at date of purchase of less than three months and, accordingly, we have classified them as cash and cash equivalents in our accompanying consolidated balance sheets. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Concentrations of Credit Risk</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, derivative financial instrument contracts and accounts and notes receivable. Our investment policy limits exposure to concentrations of credit risk and changes in market conditions. Counterparties to financial instruments expose us to credit-related losses in the event of nonperformance. We transact our financial instruments with a diversified group of major financial institutions and actively monitor outstanding positions to limit our credit exposure. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We provide credit, in the normal course of business, to hospitals, healthcare agencies, clinics, doctors’ offices and other private and governmental institutions and generally do not require collateral. We perform on-going credit evaluations of our customers and maintain allowances for potential credit losses, based on historical information and management’s best estimates. Amounts determined to be uncollectible are written off against this reserve. We recorded write-offs of uncollectible accounts receivable of $15 million in 2010, $14 million in 2009, and $11 million in 2008. We are not dependent on any single institution and no single customer accounted for more than ten percent of our net sales in 2010, 2009 or 2008. We closely monitor outstanding receivables for potential collection risks, including those that may arise from economic conditions, in both the U.S. and international economies. The credit and economic conditions within Greece, Italy, Spain, Portugal and Ireland, among other members of the European Union, have deteriorated throughout 2010. These conditions have resulted in, and may continue to result in, an increase in the average length of time that it takes to collect on our accounts receivable outstanding in these countries and, in some cases, write-offs of uncollectible amounts. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We generate revenue primarily from the sale of single-use medical devices, and present revenue net of sales taxes in our consolidated statements of operations. We consider revenue to be realized or realizable and earned when all of the following criteria are met: persuasive evidence of a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectibility is reasonably assured. We generally meet these criteria at the time of shipment, unless a consignment arrangement exists or we are required to provide additional services. We recognize revenue from consignment arrangements based on product usage, or implant, which indicates that the sale is complete. For our other transactions, we recognize revenue when our products are delivered and risk of loss transfers to the customer, provided there are no substantive remaining performance obligations required of us or any matters requiring customer acceptance, and provided we can form an estimate for sales returns. Many of our Cardiac Rhythm Management (CRM) product offerings combine the sale of a device with our LATITUDE® Patient Management System, which represents a future service obligation. In accordance with accounting guidance regarding multiple-element arrangements applicable through December 31, 2010, we deferred revenue on the undelivered service element based on verifiable objective evidence of fair value, using the residual method of allocation, and recognized the associated revenue over the related service period. On January 1, 2011, we adopted ASC Update No. 2009-13, <i>Revenue Recognition (Topic 605)- Multiple-Deliverable Revenue Arrangements. </i>The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, <i>Multiple-Element Arrangements</i>). Update No. 2009-13 provides principles and application guidance to determine whether multiple deliverables exist, how the individual deliverables should be separated and how to allocate the revenue in the arrangement among those separate deliverables, including requiring the use of the relative selling price method. The adoption of Update No. 2009-13 did not have a material impact on our results of operations or financial position. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We generally allow our customers to return defective, damaged and, in certain cases, expired products for credit. We base our estimate for sales returns upon historical trends and record the amount as a reduction to revenue when we sell the initial product. In addition, we may allow customers to return previously purchased products for next-generation product offerings. For these transactions, we defer recognition of revenue on the sale of the earlier generation product based upon an estimate of the amount of product to be returned when the next-generation products are shipped to the customer. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We also offer sales rebates and discounts to certain customers. We treat sales rebates and discounts as a reduction of revenue and classify the corresponding liability as current. We estimate rebates for products where there is sufficient historical information available to predict the volume of expected future rebates. If we are unable to estimate the expected rebates reasonably, we record a liability for the maximum rebate percentage offered. We have entered certain agreements with group purchasing organizations to sell our products to participating hospitals at negotiated prices. We recognize revenue from these agreements following the same revenue recognition criteria discussed above. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Warranty Obligations</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We offer warranties on certain of our product offerings. Approximately 85 percent of our warranty liability as of December 31, 2010 related to implantable devices offered by our CRM business, which include defibrillator and pacemaker systems. Our CRM products come with a standard limited warranty covering the replacement of these devices. We offer a full warranty for a portion of the period post-implant, and a partial warranty over the remainder of the useful life of the product. We estimate the costs that we may incur under our warranty programs based on the number of units sold, historical and anticipated rates of warranty claims and cost per claim, and record a liability equal to these estimated costs as cost of products sold at the time the product sale occurs. We assess the adequacy of our recorded warranty liabilities on a quarterly basis and adjust these amounts as necessary. Changes in our product warranty accrual during 2010, 2009 and 2008 consisted of the following (in millions): </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="margin-left: 4%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="50%">  <tr valign="bottom"> <td width="35%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="15%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="15%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="15%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Beginning balance</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>55</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>62</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>66</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Provision </div></td> <td> </td> <td> </td> <td align="right">15</td> <td> </td> <td> </td> <td> </td> <td align="right">29</td> <td> </td> <td> </td> <td> </td> <td align="right">35</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Settlements/ reversals </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(27</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(36</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(39</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Ending balance</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>43</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>55</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>62</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Inventories</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We state inventories at the lower of first-in, first-out cost or market. We base our provisions for excess, expired and obsolete inventory primarily on our estimates of forecasted net sales. A significant change in the timing or level of demand for our products as compared to forecasted amounts may result in recording additional provisions for excess, expired and obsolete inventory in the future. Further, the industry in which we participate is characterized by rapid product development and frequent new product introductions. Uncertain timing of next-generation product approvals, variability in product launch strategies, product recalls and variation in product utilization all affect our estimates related to excess, expired and obsolete inventory. Approximately 40 percent of our finished goods inventory as of December 31, 2010 and 2009 was at customer locations pursuant to consignment arrangements. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Property, Plant and Equipment</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We state property, plant, equipment, and leasehold improvements at historical cost. We charge expenditures for maintenance and repairs to expense and capitalize additions and improvements that extend the life of the underlying asset. We generally provide for depreciation using the straight-line method at rates that approximate the estimated useful lives of the assets. We depreciate buildings and improvements over a 20 to 40 year life; equipment, furniture and fixtures over a three to ten year life; and leasehold improvements over the shorter of the useful life of the improvement or the term of the related lease. Depreciation expense was $303 million in 2010, $323 million in 2009, and $321 million in 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Valuation of Business Combinations</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their fair values at the dates of acquisition, including identifiable intangible assets and purchased research and development which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination, including purchased research and development, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired to goodwill. The use of alternative valuation assumptions, including estimated revenue projections; growth rates; cash flows and discount rates and alternative estimated useful life assumptions, or probabilities surrounding the achievement of clinical, regulatory or revenue-based milestones could result in different purchase price allocations and amortization expense in current and future periods. Transaction costs associated with these acquisitions are expensed as incurred through selling, general and administrative costs. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of January 1, 2009, we adopted FASB Statement No. 141(R), <i>Business Combinations </i>(codified within ASC Topic 805, <i>Business Combinations</i>). Pursuant to the guidance in Statement No. 141(R) (Topic 805), in those circumstances where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the estimated discounted fair value of the contingent payments we expect to make as of the acquisition date. We re-measure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of revenue estimates. For acquisitions consummated prior to January 1, 2009, we will continue to record contingent consideration as an additional element of cost of the acquired entity when the contingency is resolved and consideration is issued or becomes issuable. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Purchased Research and Development</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our purchased research and development represents intangible assets acquired in a business combination that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use. The primary basis for determining the technological feasibility of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region. Through December 31, 2008, we expensed the value attributable to these in-process projects at the time of the acquisition in accordance with accounting standards effective through that date. As discussed above, as of January 1, 2009, we adopted FASB Statement No. 141(R), <i>Business Combinations </i>(codified within ASC Topic 805, <i>Business Combinations</i>), a replacement for Statement No. 141. Statement No. 141(R) also superseded FASB Interpretation No. 4, <i>Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method</i>, which required research and development assets acquired in a business combination that had no alternative future use to be measured at their fair values and expensed at the acquisition date. Topic 805 requires that purchased research and development acquired in a business combination be recognized as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. For our 2010 business combinations, we have recognized purchased research and development as an intangible asset. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In addition, we expense certain costs associated with strategic alliances outside of business combinations as purchased research and development as of the acquisition date. Our adoption of Statement No. 141(R) (Topic 805) did not change this policy with respect to asset purchases. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We use the income approach to determine the fair values of our purchased research and development at the date of acquisition. This approach calculates fair value by estimating the after-tax cash flows attributable to an in-process project over its useful life and then discounting these after-tax cash flows back to a present value. We base our revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected levels of market share. In arriving at the value of the in-process projects, we consider, among other factors: the in-process projects’ stage of completion; the complexity of the work completed as of the acquisition date; the costs already incurred; the projected costs to complete; the contribution of core technologies and other acquired assets; the expected regulatory path and introduction dates by region; and the estimated useful life of the technology. We apply a market-participant risk-adjusted discount rate to arrive at a present value as of the date of acquisition. We believe that the estimated in-process research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the projects. However, if the projects are not successful or completed in a timely manner, we may not realize the financial benefits expected for these projects or for the acquisition as a whole. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We test our purchased research and development intangible assets acquired in a business combination for impairment at least annually, and more frequently if events or changes in circumstances indicate that the assets may be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with their carrying amount. If the carrying amount exceeds its fair value, we would record an impairment loss in an amount equal to the excess. Upon completion of the associated research and development efforts, we will determine the useful life of the technology and begin amortizing the assets to reflect their use over their remaining lives; upon permanent abandonment we would write-off the remaining carrying amount of the associated purchased research and development intangible asset. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Amortization and Impairment of Intangible Assets</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We record intangible assets at historical cost and amortize them over their estimated useful lives. We use a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. The approximate useful lives for amortization of our intangible assets is as follows: patents and licenses, two to 20 years; definite-lived core and developed technology, five to 25 years; customer relationships, five to 25 years; other intangible assets, various. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), we will write the carrying value down to the fair value in the period identified. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We generally calculate fair value of our intangible assets as the present value of estimated future cash flows we expect to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). The use of alternative assumptions, including estimated cash flows, discount rates, and alternative estimated remaining useful lives could result in different calculations of impairment. However, we believe our assumptions and estimates are accurate and represent our best estimates. See <i>Note D - Goodwill and Other Intangible Assets </i>for more information related to impairments of intangible assets during 2010, 2009, and 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">For patents developed internally, we capitalize costs incurred to obtain patents, including attorney fees, registration fees, consulting fees, and other expenditures directly related to securing the patent. Legal costs incurred in connection with the successful defense of both internally-developed patents and those obtained through our acquisitions are capitalized and amortized over the remaining amortizable life of the related patent. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Goodwill Valuation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination to goodwill. We test our April 1 goodwill balances during the second quarter of each year for impairment, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. In performing the assessment, we utilize the two-step approach prescribed under ASC Topic 350, <i>Intangibles-Goodwill and Other </i>(formerly FASB Statement No. 142, <i>Goodwill and Other Intangible Assets). </i>The first step requires a comparison of the carrying value of the reporting units, as defined, to the fair value of these units. We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. We determine our reporting units by first identifying our operating segments, and then assess whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. We aggregate components within an operating segment that have similar economic characteristics. For our April 1, 2010 annual impairment assessment, we identified our reporting units to be our seven U.S. operating segments, which in aggregate make up the U.S. reportable segment, and our four international operating segments. When allocating goodwill from business combinations to our reporting units, we assign goodwill to the reporting units that we expect to benefit from the respective business combination at the time of acquisition. In addition, for purposes of performing our annual goodwill impairment test, assets and liabilities, including corporate assets, which relate to a reporting unit’s operations, and would be considered in determining its fair value, are allocated to the individual reporting units. We allocate assets and liabilities not directly related to a specific reporting unit, but from which the reporting unit benefits, based primarily on the respective revenue contribution of each reporting unit. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, 2009, and 2008, we used only the income approach, specifically the discounted cash flow (DCF) method, to derive the fair value of each of our reporting units in preparing our goodwill impairment assessment. This approach calculates fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting these after-tax cash flows to a present value using a risk-adjusted discount rate. We selected this method as being the most meaningful in preparing our goodwill assessments because we believe the income approach most appropriately measures our income producing assets. We have considered using the market approach and cost approach but concluded they are not appropriate in valuing our reporting units given the lack of relevant market comparisons available for application of the market approach and the inability to replicate the value of the specific technology-based assets within our reporting units for application of the cost approach. Therefore, we believe that the income approach represents the most appropriate valuation technique for which sufficient data is available to determine the fair value of our reporting units. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In applying the income approach to our accounting for goodwill, we make assumptions about the amount and timing of future expected cash flows, terminal value growth rates and appropriate discount rates. The amount and timing of future cash flows within our DCF analysis is based on our most recent operational budgets, long range strategic plans and other estimates. The terminal value growth rate is used to calculate the value of cash flows beyond the last projected period in our DCF analysis and reflects our best estimates for stable, perpetual growth of our reporting units. We use estimates of market-participant risk-adjusted weighted-average costs of capital (WACC) as a basis for determining the discount rates to apply to our reporting units’ future expected cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">If the carrying value of a reporting unit exceeds its fair value, we then perform the second step of the goodwill impairment test to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the estimated fair value of a reporting unit’s goodwill to its carrying value. If we were unable to complete the second step of the test prior to the issuance of our financial statements and an impairment loss was probable and could be reasonably estimated, we would recognize our best estimate of the loss in our current period financial statements and disclose that the amount is an estimate. We would then recognize any adjustment to that estimate in subsequent reporting periods, once we have finalized the second step of the impairment test. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Investments in Publicly Traded and Privately Held Entities</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We account for our publicly traded investments as available-for-sale securities based on the quoted market price at the end of the reporting period. We compute realized gains and losses on sales of available-for-sale securities based on the average cost method, adjusted for any other-than-temporary declines in fair value. We account for our investments in privately held entities, for which fair value is not readily determinable, in accordance with ASC Topic 323, <i>Investments – Equity Method and Joint Ventures</i>. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We account for investments in entities over which we have the ability to exercise significant influence under the equity method if we hold 50 percent or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary. We record these investments initially at cost, and adjust the carrying amount to reflect our share of the earnings or losses of the investee, including all adjustments similar to those made in preparing consolidated financial statements. We account for investments in entities in which we have less than a 20 percent ownership interest under the cost method of accounting if we do not have the ability to exercise significant influence over the investee. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Each reporting period, we evaluate our investments to determine if there are any events or circumstances that are likely to have a significant adverse effect on the fair value of the investment. Examples of such impairment indicators include, but are not limited to: a significant deterioration in earnings performance; recent financing rounds at reduced valuations; a significant adverse change in the regulatory, economic or technological environment of an investee; or a significant doubt about an investee’s ability to continue as a going concern. If we identify an impairment indicator, we will estimate the fair value of the investment and compare it to its carrying value. Our estimation of fair value considers all available financial information related to the investee, including valuations based on recent third-party equity investments in the investee. If the fair value of the investment is less than its carrying value, the investment is impaired and we make a determination as to whether the impairment is other-than-temporary. We deem impairment to be other-than-temporary unless we have the ability and intent to hold an investment for a period sufficient for a market recovery up to the carrying value of the investment. Further, evidence must indicate that the carrying value of the investment is recoverable within a reasonable period. For other-than-temporary impairments, we recognize an impairment loss equal to the difference between an investment’s carrying value and its fair value. Impairment losses on our investments are included in other, net in our consolidated statements of operations. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Income Taxes</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We utilize the asset and liability method of accounting for income taxes. Under this method, we determine deferred tax assets and liabilities based on differences between the financial reporting and tax bases of our assets and liabilities. We measure deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will not realize some portion or all of the deferred tax assets. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We do not provide income taxes on unremitted earnings of our foreign subsidiaries where we have indefinitely reinvested such earnings in our foreign operations. It is not practical to estimate the amount of income taxes payable on the earnings that are indefinitely reinvested in foreign operations. Unremitted earnings of our foreign subsidiaries that we have indefinitely reinvested in foreign operations are $9.193 billion as of December 31, 2010 and $9.355 billion as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We provide for potential amounts due in various tax jurisdictions. In the ordinary course of conducting business in multiple countries and tax jurisdictions, there are many transactions and calculations where the ultimate tax outcome is uncertain. Judgment is required in determining our worldwide income tax provision. In our opinion, we have made adequate provisions for income taxes for all years subject to audit. Although we believe our estimates are reasonable, the final outcome of open tax matters may be different from that which we have reflected in our historical income tax provisions and accruals. Such differences could have a material impact on our income tax provision and operating results. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Legal, Product Liability Costs and Securities Claims</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We are involved in various legal and regulatory proceedings, including intellectual property, breach of contract, securities litigation and product liability suits. In some cases, the claimants seek damages, as well as other relief, which, if granted, could require significant expenditures or impact our ability to sell our products. We are also the subject of certain governmental investigations, which could result in substantial fines, penalties, and administrative remedies. We are substantially self-insured with respect to product liability and intellectual property infringement claims. We maintain insurance policies providing limited coverage against securities claims. We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. In accordance with ASC Topic 450, <i>Contingencies </i>(formerly FASB Statement No. 5, <i>Accounting for Contingencies), </i>we accrue anticipated costs of settlement, damages, losses for general product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. We analyze litigation settlements to identify each element of the arrangement. We allocate arrangement consideration to patent licenses received based on estimates of fair value, and capitalize these amounts as assets if the license will provide an on-going future benefit. See <i>Note L - Commitments and Contingencies </i>for discussion of our individual material legal proceedings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Costs Associated with Exit Activities</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We record employee termination costs in accordance with ASC Topic 712, <i>Compensation - Nonretirement and Postemployment Benefits </i>(formerly FASB Statement No. 112, <i>Employer’s Accounting for Postemployment Benefits</i>), if we pay the benefits as part of an on-going benefit arrangement, which includes benefits provided as part of our domestic severance policy or that we provide in accordance with international statutory requirements. We accrue employee termination costs associated with an on-going benefit arrangement if the obligation is attributable to prior services rendered, the rights to the benefits have vested and the payment is probable and we can reasonably estimate the liability. We account for employee termination benefits that represent a one-time benefit in accordance with ASC Topic 420, <i>Exit or Disposal Cost Obligations </i>(formerly FASB Statement No. 146, <i>Accounting for</i> <i>Costs Associated with Exit or Disposal Activities). </i>We record such costs into expense over the employee’s future service period, if any. In addition, in conjunction with an exit activity, we may offer voluntary termination benefits to employees. These benefits are recorded when the employee accepts the termination benefits and the amount can be reasonably estimated. Other costs associated with exit activities may include contract termination costs, including costs related to leased facilities to be abandoned or subleased, and impairments of long-lived assets. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Translation of Foreign Currency</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We translate all assets and liabilities of foreign subsidiaries from local currency into U.S. dollars using the year-end exchange rate, and translate revenues and expenses at the average exchange rates in effect during the year. We show the net effect of these translation adjustments in our consolidated financial statements as a component of accumulated other comprehensive loss. For any significant foreign subsidiaries located in highly inflationary economies, we would re-measure their financial statements as if the functional currency were the U.S. dollar. We did not record any highly inflationary economy translation adjustments in 2010, 2009 or 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Foreign currency transaction gains and losses are included in other, net in our consolidated statements of operations, net of losses and gains from any related derivative financial instruments. We recognized net foreign currency transaction losses of $9 million in 2010, $5 million in 2009, and gains of $5 million in 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Financial Instruments</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We recognize all derivative financial instruments in our consolidated financial statements at fair value in accordance with ASC Topic 815, <i>Derivatives and Hedging </i>(formerly FASB Statement No. 133, <i>Accounting for Derivative Instruments and Hedging Activities</i>). In accordance with Topic 815, for those derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Our derivative instruments do not subject our earnings or cash flows to material risk, as gains and losses on these derivatives generally offset losses and gains on the item being hedged. We do not enter into derivative transactions for speculative purposes and we do not have any non-derivative instruments that are designated as hedging instruments pursuant to Topic 815. Refer to <i>Note E – Fair Value Measurements </i>for more information on our derivative instruments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Shipping and Handling Costs</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We generally do not bill customers for shipping and handling of our products. Shipping and handling costs of $88 million in 2010, $82 million in 2009, and $72 million in 2008 are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Research and Development</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We expense research and development costs, including new product development programs, regulatory compliance and clinical research as incurred. Refer to <i>Purchased Research and Development </i>for our policy regarding in-process research and development acquired in connection with our business combinations and strategic alliances. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Employee Retirement Plans</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In connection with our 2006 acquisition of Guidant Corporation, we now sponsor the Guidant Retirement Plan, a frozen noncontributory defined benefit plan covering a select group of current and former employees. The funding policy for the plan is consistent with U.S. employee benefit and tax-funding regulations. Plan assets, which are maintained in a trust, consist primarily of equity and fixed-income instruments. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We maintain an Executive Retirement Plan, a defined benefit plan covering executive officers and division presidents. Participants may retire with unreduced benefits once retirement conditions have been satisfied. Further, we sponsor the Guidant Supplemental Retirement Plan, a frozen, nonqualified defined benefit plan for certain former officers and employees of Guidant. The Guidant Supplemental Retirement Plan was funded through a Rabbi Trust that contains segregated company assets used to pay the benefit obligations related to the plan. In addition, certain current and former U.S. and Puerto Rico employees of Guidant are eligible to receive a portion of their healthcare retirement benefits under a frozen defined benefit plan. We also maintain retirement plans covering certain international employees. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We use a December 31 measurement date for these plans and record the underfunded portion as a liability, recognizing changes in the funded status through other comprehensive income. The outstanding obligation as of December 31, 2010 and 2009 is as follows: </div> <div align="left"> <table style="font-size: 7.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="90%">  <tr valign="bottom" style="font-size: 10pt"> <td width="34%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 7.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>As of December 31, 2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>As of December 31, 2009</b></td> </tr> <tr style="font-size: 7.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Projected</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Projected</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefit</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Underfunded</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefit</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Underfunded</b></td> <td> </td> </tr> <tr style="font-size: 7.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Obligation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fair value of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>PBO</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Obligation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fair value of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>PBO</b></td> <td> </td> </tr> <tr style="font-size: 7.5pt" valign="bottom"> <td nowrap="nowrap" align="left">(<i>in millions)</i></td> <td nowrap="nowrap">        </td> <td nowrap="nowrap" align="center" colspan="2"><b>(PBO)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Plan Assets</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Recognized</b></td> <td nowrap="nowrap">       </td> <td nowrap="nowrap">       </td> <td nowrap="nowrap" align="center" colspan="2"><b>(PBO)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Plan Assets</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Recognized</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Executive Retirement Plan </div></td> <td> </td> <td align="left">  $</td> <td align="right">11</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">11</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">14</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">14</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Guidant Retirement Plan (frozen) </div></td> <td> </td> <td> </td> <td align="right">101</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">77</td> <td> </td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> <td> </td> <td> </td> <td align="right">98</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">68</td> <td> </td> <td> </td> <td> </td> <td align="right">30</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Guidant Supplemental Retirement Plan (frozen) </div></td> <td> </td> <td> </td> <td align="right">30</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">30</td> <td> </td> <td> </td> <td> </td> <td align="right">29</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">29</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Guidant Healthcare Retirement Benefit Plan (frozen) </div></td> <td> </td> <td> </td> <td align="right">10</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">10</td> <td> </td> <td> </td> <td> </td> <td align="right">14</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">14</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">International Retirement Plans </div></td> <td> </td> <td> </td> <td align="right">72</td> <td> </td> <td> </td> <td> </td> <td align="right">36</td> <td> </td> <td> </td> <td> </td> <td align="right">36</td> <td> </td> <td> </td> <td> </td> <td align="right">59</td> <td> </td> <td> </td> <td> </td> <td align="right">28</td> <td> </td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>224</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>113</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>111</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>214</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>96</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>118</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 14pt">The value of the Rabbi Trust assets used to pay the Guidant Supplemental Retirement Plan benefits included in our accompanying consolidated financial statements was approximately $30 million as of December 31, 2010 and 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The assumptions associated with our employee retirement plans as of December 31, 2010 are as follows: </div> <div align="left"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="90%">  <tr valign="bottom" style="font-size: 10pt"> <td width="40%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Long-Term</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Healthcare</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Rate of</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Discount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Expected Return</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Cost</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Compensation</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Rate</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>on Plan Assets</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Trend Rate</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Increase</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Executive Retirement Plan </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2">5.00%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2">3.50%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Guidant Retirement Plan (frozen) </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2">6.00%</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2">7.75%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Guidant Supplemental Retirement Plan (frozen) </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2">5.50%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Healthcare Retirement Benefit Plan (frozen) </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2">4.75%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2">5.00%</td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">International Retirement Plans </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2" nowrap="nowrap">1.25% - 5.00%</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2" nowrap="nowrap">2.50% - 4.10%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="center" colspan="2" nowrap="nowrap">3.00% </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 14pt">We base our discount rate on the rates of return available on high-quality bonds with maturities approximating the expected period over which benefits will be paid. The rate of compensation increase is based on historical and expected rate increases. We review external data and historical trends in healthcare costs to determine healthcare cost trend rate assumptions. We base our rate of expected return on plan assets on historical experience, our investment guidelines and expectations for long-term rates of return. A rollforward of the changes in the fair value of plan assets for our funded retirement plans during 2010 and 2009 is as follows: </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="margin-left: 5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="45%">  <tr valign="bottom"> <td width="66%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Beginning fair value</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>96</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>76</b>  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:15px; text-indent:-15px">Actual return on plan assets </div></td> <td> </td> <td> </td> <td align="right">8</td> <td> </td> <td> </td> <td> </td> <td align="right">18  </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Employer contributions </div></td> <td> </td> <td> </td> <td align="right">19</td> <td> </td> <td> </td> <td> </td> <td align="right">6  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:15px; text-indent:-15px">Benefits paid </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(14</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(6) </td> <td nowrap="nowrap"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net transfers in (out) </div></td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td> </td> <td align="right">3  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 0 0"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign currency exchange </div></td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1) </td> <td nowrap="nowrap"> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Ending fair value</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>113</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>96  </b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt">Our investment policy with respect to these plans is to maximize the ability to meet plan liabilities while minimizing the need to make future contributions to the plans. Plan assets are invested primarily in equity securities and debt securities. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We also sponsor a voluntary 401(k) Retirement Savings Plan for eligible employees. We match employee contributions equal to 200 percent for employee contributions up to two percent of employee compensation, and fifty percent for employee contributions greater than two percent, but not exceeding six percent, of pre-tax employee compensation. Total expense for our matching contributions to the plan was $64 million in 2010, $71 million in 2009, and $63 million in 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In connection with our acquisition of Guidant, we previously sponsored the Guidant Employee Savings and Stock Ownership Plan, which allowed for employee contributions of a percentage of pre-tax earnings, up to established federal limits. Our matching contributions to the plan were in the form of shares of stock, allocated from the Employee Stock Ownership Plan (ESOP). Refer to <i>Note N – Stock Ownership Plans </i>for more information on the ESOP. Effective June 1, 2008, this plan was merged into our 401(k) Retirement Savings Plan, described above. Prior to this merger, expense for our matching contributions to the plan was $12 million in 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Net Income (Loss) per Common Share</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We base net income (loss) per common share upon the weighted-average number of common shares and common stock equivalents outstanding during each year. Potential common stock equivalents are determined using the treasury stock method. We exclude stock options whose effect would be anti-dilutive from the calculation. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE B – ACQUISITIONS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, we paid approximately $200 million in cash to acquire Asthmatx, Inc. and certain other strategic assets. We did not consummate any material acquisitions during 2009. During 2008, we paid approximately $40 million in cash to acquire CryoCor, Inc. and Labcoat, Ltd. Each of these acquisitions is described in further detail below. The purchase price allocations presented for our 2010 acquisitions are preliminary, pending finalization of the valuation surrounding deferred tax assets and liabilities, and will be finalized in 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our consolidated financial statements include the operating results for each acquired entity from its respective date of acquisition. We do not present pro forma information for these acquisitions given the immateriality of their results to our consolidated financial statements. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>2010 Acquisitions</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Asthmatx, Inc.</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 26, 2010, we completed the acquisition of 100 percent of the fully diluted equity of Asthmatx, Inc. Asthmatx designs, manufactures and markets a less-invasive, catheter-based bronchial thermoplasty procedure for the treatment of severe persistent asthma. The acquisition was intended to broaden and diversify our product portfolio by expanding into the area of endoscopic pulmonary intervention. We are integrating the operations of the Asthmatx business into our Endoscopy division. We paid approximately $194 million at the closing of the transaction using cash on hand, and may be required to pay future consideration up to $250 million that is contingent upon the achievement of certain revenue-based milestones. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of the acquisition date, we recorded a contingent liability of $54 million, representing the estimated fair value of the contingent consideration we currently expect to pay to the former shareholders of Asthmatx upon the achievement of certain revenue-based milestones. The acquisition agreement provides for payments on product sales using technology acquired from Asthmatx of up to $200 million through December 2016 and, in addition, we may be obligated to pay a one-time revenue-based milestone payment of $50 million, no later than 2019, for a total of $250 million in maximum future consideration. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value of the contingent consideration liability associated with the $200 million of potential payments was estimated by discounting, to present value, the contingent payments expected to be made based on our estimates of the revenues expected to result from the acquisition. We used a risk-adjusted discount rate of 20 percent to reflect the market risks of commercializing this technology, which we believe is appropriate and representative of market participant assumptions. For the $50 million milestone payment, we used a probability-weighted scenario approach to determine the fair value of this obligation using internal revenue projections and external market factors. We applied a rate of probability to each scenario, as well as a risk-adjusted discount factor, to derive the estimated fair value of the contingent consideration as of the acquisition date. This fair value measurement is based on significant unobservable inputs, including management estimates and assumptions and, accordingly, is classified as Level 3 within the fair value hierarchy prescribed by ASC Topic 820, <i>Fair Value Measurements and Disclosures </i>(formerly FASB Statement No. 157, <i>Fair Value Measurements</i>)<i>. </i> In accordance with ASC Topic 805, <i>Business Combinations </i>(formerly FASB Statement No. 141(R), <i>Business Combinations</i>), we will re-measure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of revenue estimates. During the fourth quarter of 2010, we recorded expense of $2 million in the accompanying statements of operations representing the increase in fair value of this obligation between the acquisition date and December 31, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The components of the preliminary purchase price as of the acquisition date for our 2010 acquisitions are as follows: </div> <div align="left" style="margin-left:5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="55%">  <tr valign="bottom"> <td width="55%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>All</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Asthmatx</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash </div></td> <td> </td> <td align="left">  $</td> <td align="right">194</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">199  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 0 0"> <td> <div style="margin-left:15px; text-indent:-15px">Fair value of contingent consideration </div></td> <td> </td> <td> </td> <td align="right">54</td> <td> </td> <td> </td> <td> </td> <td align="right">15</td> <td> </td> <td> </td> <td> </td> <td align="right">69  </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>248</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>20</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>268  </b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We accounted for these acquisitions as business combinations and, in accordance with Topic 805, we have recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following summarizes the preliminary purchase price allocations: </div> <div align="left" style="margin-left:9%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="51%">  <tr valign="bottom"> <td width="55%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>All</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Asthmatx</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td align="left">  $</td> <td align="right">68</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">73  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:15px; text-indent:-15px">Amortizable intangible assets </div></td> <td> </td> <td> </td> <td align="right">176</td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td align="right">179  </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Indefinite-lived intangible assets </div></td> <td> </td> <td> </td> <td align="right">45</td> <td> </td> <td> </td> <td> </td> <td align="right">12</td> <td> </td> <td> </td> <td> </td> <td align="right">57  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:15px; text-indent:-15px">Other net assets </div></td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">2  </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Deferred income taxes </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(43</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(43) </td> <td nowrap="nowrap"> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>248</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>20</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>268</b>  </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Transaction costs associated with these acquisitions were expensed as incurred through selling, general and administrative costs in the statement of operations and were not material in 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We allocated the preliminary purchase price to specific intangible asset categories as follows: </div> <div align="center"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom" style="font-size: 20pt"> <td width="35%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Range of Risk-</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Adjusted Discount</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amortization</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Rates used in</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10"><b>Amount Assigned</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Period</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Purchase Price</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000">(in millions)</td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(in years)</td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Allocation</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Asthmatx</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>All Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Amortizable intangible assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:30px; text-indent:-15px">Technology - core </div></td> <td> </td> <td align="left">  $</td> <td align="right">168</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">168</td> <td> </td> <td> </td> <td> </td> <td align="right">12.0</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">28.0</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Technology - developed </div></td> <td> </td> <td> </td> <td align="right">8</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td align="right">11</td> <td> </td> <td> </td> <td> </td> <td align="right">5.5</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td nowrap="nowrap" align="right">27.0% - 35.5</td> <td nowrap="nowrap">%</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="14" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>176</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>179</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>11.6</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Indefinite-lived intangible assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 0 0"> <td> <div style="margin-left:30px; text-indent:-15px">Purchased research and development </div></td> <td> </td> <td> </td> <td align="right">45</td> <td> </td> <td> </td> <td> </td> <td align="right">12</td> <td> </td> <td> </td> <td> </td> <td align="right">57</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td nowrap="nowrap" align="right">29.0% - 36.0</td> <td nowrap="nowrap">%</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>221</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>15</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>236</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Core technology consists of technical processes, intellectual property, and institutional understanding with respect to products and processes that we will leverage in future products or processes and will carry forward from one product generation to the next. Developed technology represents the value associated with marketed products that have received regulatory approval, primarily the Alair<sup style="font-size: 85%; vertical-align: text-top">®</sup> Bronchial Thermoplasty System acquired from Asthmatx, which is approved for distribution in CE Mark countries and received FDA approval in April 2010. The amortizable intangible assets are being amortized on a straight-line basis over their assigned useful lives. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Purchased research and development represents the estimated fair value of acquired in-process research and development projects, including the second generation of the Alair<sup style="font-size: 85%; vertical-align: text-top">®</sup> product, which have not yet reached technological feasibility. The indefinite-lived intangible assets will be tested for impairment on an annual basis, or more frequently if impairment indicators are present, in accordance with our accounting policies described in <i>Note A- Significant Accounting Policies</i>, and amortization of the purchased research and development will begin upon completion of the project. As of the acquisition date, we estimate that the total cost to complete the in-process research and development programs acquired from Asthmatx is between $10 million and $15 million. We currently expect to launch the second generation of the Alair<sup style="font-size: 85%; vertical-align: text-top">®</sup> product in the U.S. in 2014, in our Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries in 2016, and Japan in 2017, subject to regulatory approvals. We expect material net cash inflows from such products to commence in 2014, following the launch of this technology in the U.S. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We believe that the estimated intangible asset values so determined represent the fair value at the date of each acquisition and do not exceed the amount a third party would pay for the assets. We used the income approach, specifically the discounted cash flow method, to derive the fair value of the amortizable intangible assets and purchased research and development. These fair value measurements are based on significant unobservable inputs, including management estimates and assumptions and, accordingly, are classified as Level 3 within the fair value hierarchy prescribed by Topic 820. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We recorded the excess of the purchase price over the estimated fair values of the identifiable assets as goodwill, which is non-deductible for tax purposes. Goodwill was established due primarily to revenue and cash flow projections associated with future technology, as well as synergies expected to be gained from the integration of these businesses into our existing operations, and has been allocated to our reportable segments as follows based on the relative expected benefit from the business combinations, as follows: </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="margin-left:5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="40%">  <tr valign="bottom"> <td width="40%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Asthmatx</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>All<br /> Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">U.S. </div></td> <td> </td> <td align="left">  $</td> <td align="right">17</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">22  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:15px; text-indent:-15px">EMEA </div></td> <td> </td> <td> </td> <td align="right">44</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">44  </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Inter-Continental </div></td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">4  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 0 0"> <td> <div style="margin-left:15px; text-indent:-15px">Japan </div></td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">3  </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>68</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>73  </b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>2009 Acquisitions</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our policy is to expense certain costs associated with strategic investments outside of business combinations as purchased research and development as of the acquisition date. Our adoption of Statement No. 141(R) (Topic 805) did not change this policy with respect to asset purchases. In accordance with this policy, we recorded purchased research and development charges of $21 million in 2009, associated with entering certain licensing and development arrangements. Since the technology purchases did not involve the transfer of processes or outputs as defined by Statement No. 141(R) (Topic 805), the transactions did not qualify as business combinations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>2008 Acquisitions</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Labcoat, Ltd.</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In December 2008, we completed the acquisition of the assets of Labcoat, Ltd., a development-stage drug-coating company, for a purchase price of $17 million, net of cash acquired. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>CryoCor, Inc.</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In May 2008, we completed our acquisition of 100 percent of the fully diluted equity of CryoCor, Inc., and paid a cash purchase price of $21 million, net of cash acquired. CryoCor was developing products using cryogenic technology for use in treating atrial fibrillation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In 2008, in accordance with accounting guidance applicable at the time, we consummated the acquisitions of Labcoat and CryoCor and recorded $43 million of purchased research and development charges, including $17 million associated with Labcoat and $8 million attributable to CryoCor, as well as $18 million associated with entering certain licensing and development arrangements. During 2010, we suspended the Labcoat and CryoCor in-process research and development projects. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Payments Related to Prior Period Acquisitions</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Certain of our acquisitions involve contingent consideration arrangements. Payment of additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels, achieving product development targets or obtaining regulatory approvals. In August 2007, we entered an agreement to amend our 2004 merger agreement with the principal former shareholders of Advanced Bionics Corporation. Previously, we were obligated to pay future consideration contingent primarily on the achievement of future performance milestones. The amended agreement provided a new schedule of consolidated, fixed payments, consisting of $650 million that was paid in 2008, and a final $500 million payment, paid in 2009. We received cash proceeds of $150 million in 2008 related to our sale of a controlling interest in the Auditory business acquired with Advanced Bionics, and received additional proceeds of $40 million in 2009 related to the sale of our remaining interest in this business. Refer to <i>Note C – Divestitures and Assets Held for Sale </i>for a discussion of this transaction. During 2010, we made total payments of $12 million related to prior period acquisitions. During 2009, including the $500 million payment to the former shareholders of Advanced Bionics, we made total payments of $523 million related to prior period acquisitions. During 2008, we paid $675 million related to prior period acquisitions, consisting primarily of the $650 million payment made to the principal former shareholders of Advanced Bionics. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of December 31, 2010, the estimated maximum potential amount of future contingent consideration (undiscounted) that we could be required to make associated with acquisitions consummated prior to 2010 is approximately $260 million. In accordance with accounting guidance applicable at the time we consummated these acquisitions, we do not recognize a liability until the contingency is resolved and consideration is issued or becomes issuable. Topic 805 now requires the recognition of a liability equal to the expected fair value of future contingent payments at the acquisition date for all acquisitions consummated after January 1, 2009. In connection with our 2010 business combinations, we recorded liabilities of $69 million representing the estimated fair value of contingent payments expected to be made, including $54 million associated with Asthmatx and $15 million attributable to other acquisitions. The maximum amount of future contingent consideration (undiscounted) that we could be required to make associated with our 2010 acquisitions is approximately $275 million. Included in the accompanying consolidated balance sheets is accrued contingent consideration of $71 million as of December 31, 2010 and $6 million as of December 31, 2009. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE C – DIVESTITURES AND ASSETS HELD FOR SALE</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Neurovascular Divestiture</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On January 3, 2011, we closed the sale of our Neurovascular business to Stryker Corporation for a purchase price of $1.5 billion, payable in cash. We received $1.450 billion at closing, including an upfront payment of $1.426 billion, and $24 million which was placed into escrow to be released upon the completion of local closings in certain foreign jurisdictions, and will receive $50 million contingent upon the transfer or separation of certain manufacturing facilities, which we expect will be completed over a period of approximately 24 months. We are providing transitional services to Stryker through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of up to 24 months, subject to extension. Due to our continuing involvement in the operations of the Neurovascular business, the divestiture does not meet the criteria for presentation as a discontinued operation. We acquired the Neurovascular business in 1997 with our acquisition of Target Therapeutics. The 2010 revenues generated by the Neurovascular business were $340 million, or approximately four percent of our consolidated net sales. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In accordance with ASC Topic 360-10-45, <i>Impairment or Disposal of Long-lived Assets</i>, we reclassified as of the October 28, 2010 announcement date, and have presented separately, the assets of the Neurovascular business as ‘assets held for sale’ in the accompanying consolidated balance sheets. As of the announcement date, we ceased amortization and depreciation of the assets to be transferred. Pursuant to the divestiture agreement, Stryker did not assume any liabilities recorded as of the closing date associated with the Neurovascular business. The assets held for sale included in the accompanying consolidated balance sheets attributable to the divestiture consist of the following: </div> <div align="left" style="margin-left: 5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="50%">  <tr valign="bottom"> <td width="60%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>As of December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Inventories </div></td> <td> </td> <td align="left">  $</td> <td align="right">30</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">29  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:15px; text-indent:-15px">Property, plant and equipment, net </div></td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td align="right">4  </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">478</td> <td> </td> <td> </td> <td> </td> <td align="right">468  </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 0 0"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangible assets, net </div></td> <td> </td> <td> </td> <td align="right">59</td> <td> </td> <td> </td> <td> </td> <td align="right">64  </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>571</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>565  </b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We also reclassified to ‘assets held for sale’ certain property, plant and equipment that we intend to sell within the next twelve months having a net book value of $5 million as of December 31, 2010 and $13 million as of December 31, 2009. The assets classified as ‘held for sale’ in our accompanying consolidated balance sheets, excluding goodwill and intangible assets, which we do not allocate to our reportable segments, are primarily located in the U.S. and Ireland, and were previously included in our U.S. and EMEA reportable segments. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Other Divestitures</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In 2008, we completed the sale of certain non-strategic businesses for gross proceeds of approximately $1.3 billion. We sold a controlling interest in our Auditory business and drug pump development program, acquired with Advanced Bionics Corporation in 2004, to entities affiliated with the principal former shareholders of Advanced Bionics for an aggregate purchase price of $150 million in cash. Under the terms of the agreement, we retained an equity interest in the limited liability company formed for purposes of operating the Auditory business and, in 2009, received proceeds of $40 million from the subsequent sale of this investment. In addition, we sold our Cardiac Surgery and Vascular Surgery businesses to the Getinge Group for net cash proceeds of approximately $700 million. We acquired the Cardiac Surgery business in April 2006 with our acquisition of Guidant Corporation and acquired the Vascular Surgery business in 1995. Further, we sold our Fluid Management and Venous Access businesses to Navilyst Medical (affiliated with Avista Capital Partners) for net cash proceeds of approximately $400 million, and recorded a gain of $234 million during 2008 associated with the transaction. We acquired the Fluid Management business as part of our acquisition of Schneider Worldwide in 1998. Further, we sold our Endovascular Aortic Repair program obtained in connection with our 2005 acquisition of TriVascular, Inc. for $30 million in cash, and recorded a gain of $16 million during 2008 associated with the transaction. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE D – GOODWILL AND OTHER INTANGIBLE ASSETS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated write-offs of goodwill as of December 31, 2010 and 2009 is as follows: </div> <div align="left"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="95%">  <tr valign="bottom" style="font-size: 10pt"> <td width="35%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td nowrap="nowrap">    </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>As of December 31, 2010</b></td> <td nowrap="nowrap">    </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>As of December 31, 2009</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Gross Carrying</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amortization/</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Gross Carrying</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amortization/</b></td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Write-offs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Write-offs</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Amortizable intangible assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:30px; text-indent:-15px">Technology - core </div></td> <td> </td> <td align="left">  $</td> <td align="right">6,658</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(1,424</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">  $</td> <td align="right">6,490</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">(1,107</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Technology - developed </div></td> <td> </td> <td> </td> <td align="right">1,026</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(966</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1,013</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(798</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:30px; text-indent:-15px">Patents </div></td> <td> </td> <td> </td> <td align="right">527</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(309</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">543</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(304</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other intangible assets </div></td> <td> </td> <td> </td> <td align="right">808</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(325</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">805</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(266</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>9,019</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right"><b>(3,024</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td align="right"><b>8,851</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right"><b>(2,475</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Unamortizable intangible assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:30px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">14,616</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4,430</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">14,549</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2,613</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Technology - core </div></td> <td> </td> <td> </td> <td align="right">291</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">291</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 0 0"> <td> <div style="margin-left:30px; text-indent:-15px">In-process research and development </div></td> <td> </td> <td> </td> <td align="right">57</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>14,964</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>(4,430</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>14,840</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>(2,613</b></td> <td nowrap="nowrap"><b>)</b></td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>2010 Goodwill Impairment Charge</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We test our April 1 goodwill balances during the second quarter of each year for impairment, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The ship hold and product removal actions associated with our U.S. implantable cardioverter defibrillator (ICD) and cardiac resynchronization therapy defibrillator (CRT-D) products, which we announced on March 15, 2010, described in Item 7 of this Annual Report, and the expected corresponding financial impact on our operations created an indication of potential impairment of the goodwill balance attributable to our U.S. Cardiac Rhythm Management (CRM) reporting unit. Therefore, we performed an interim impairment test in accordance with our accounting policies described in <i>Note A </i>– <i>Significant Accounting Policies</i>, and recorded a $1.848 billion, on both a pre-tax and after-tax basis, goodwill impairment charge associated with our U.S. CRM reporting unit. Due to the timing of the product actions and the procedures required to complete the two step goodwill impairment test, the goodwill impairment charge was an estimate, which we finalized in the second quarter of 2010. During the second quarter of 2010, we recorded a $31 million reduction of the charge, resulting in a final goodwill impairment charge of $1.817 billion. This charge does not impact our compliance with our debt covenants or our cash flows. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">At the time we performed our interim goodwill impairment test, we estimated that our U.S. defibrillator market share would decrease approximately 400 basis points exiting 2010 as a result of the ship hold and product removal actions, as compared to our market share exiting 2009, and that these actions would negatively impact our 2010 U.S. CRM revenues by approximately $300 million. In addition, we expected that our on-going U.S. CRM net sales and profitability would likely continue to be adversely impacted as a result of the ship hold and product removal actions. Therefore, as a result of these product actions, as well as lower expectations of market growth in new areas and increased competitive and other pricing pressures, we lowered our estimated average U.S. CRM net sales growth rates within our 15-year discounted cash flow (DCF) model, as well as our terminal value growth rate, by approximately a couple of hundred basis points to derive the fair value of the U.S. CRM reporting unit. The reduction in our forecasted 2010 U.S. CRM net sales, the change in our expected sales growth rates thereafter and the reduction in profitability as a result of the recently enacted excise tax on medical device manufacturers, discussed in Item 7 of this Annual Report, were several key factors contributing to the impairment charge. Partially offsetting these factors was a 50 basis point reduction in our estimated market-participant risk-adjusted weighted-average cost of capital (WACC) used in determining our discount rate. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In the second quarter of 2010, we performed our annual goodwill impairment test for all of our reporting units. We updated our U.S. CRM assumptions to reflect our market share position at that time, our most recent operational budgets and long range strategic plans. In conjunction with our annual test, the fair value of each reporting unit exceeded its carrying value, with the exception of our U.S. CRM reporting unit. Based on the remaining book value of our U.S. CRM reporting unit following the goodwill impairment charge, the carrying value of our U.S. CRM reporting unit continues to exceed its fair value, due primarily to the book value of amortizable intangible assets allocated to this reporting unit. The remaining book value of our amortizable intangible assets which have been allocated to our U.S. CRM reporting unit is approximately $3.5 billion as of December 31, 2010. We tested these amortizable intangible assets for impairment on an undiscounted cash flow basis as of March 31, 2010, and determined that these assets were not impaired, and there have been no impairment indicators related to these assets subsequent to the performance of that test. The assumptions used in our annual goodwill impairment test related to our U.S. CRM reporting unit were substantially consistent with those used in our first quarter interim impairment test. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In the fourth quarter of 2010, we performed an interim impairment test on our international reporting units as a result of the announced divestiture of our Neurovascular business, discussed in <i>Note C – Divestitures and Assets Held for Sale</i>. As part of the divestment, we allocated a portion of our goodwill from our international reporting units to the Neurovascular business being sold. We then tested each of our international reporting units for impairment in accordance with ASC Topic 350, <i>Intangibles – Goodwill and Other</i>. Our testing did not identify any reporting units whose carrying values exceeded the calculated fair values. However, the level of excess fair value over carrying value for our EMEA region is approximately six percent, a decrease from 14 percent in the second quarter. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Goodwill Impairment Monitoring</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We have identified a total of four reporting units with a material amount of goodwill that are at higher risk of potential failure of the first step of the impairment test in future reporting periods. These reporting units include our U.S. CRM unit, which holds $1.5 billion of allocated goodwill, our U.S. Cardiovascular unit, which holds $2.2 billion of allocated goodwill, our U.S. Neuromodulation unit, which holds $1.2 billion of allocated goodwill, and our EMEA region, which holds $3.9 billion of allocated goodwill. The level of excess fair value over carrying value for these reporting units identified as being at higher risk (with the exception of the U.S. CRM reporting unit, whose carrying value continues to exceed its fair value) ranged from approximately six percent to 23 percent. On a quarterly basis, we monitor the key drivers of fair value for these reporting units to detect events or other changes that would warrant an interim impairment test. The key variables that drive the cash flows of our reporting units are estimated revenue growth rates, levels of profitability and perpetual growth rate assumptions, as well as the WACC. These assumptions are subject to uncertainty, including our ability to grow revenue and improve profitability levels. For each of these reporting units, relatively small declines in the future performance and cash flows of the reporting unit or small changes in other key assumptions may result in the recognition of significant goodwill impairment charges. For example, keeping all other variables constant, a 50 basis point increase in the WACC applied would require that we perform the second step of the goodwill impairment test for our U.S. CRM, U.S. Neuromodulation, and EMEA reporting units. In addition, keeping all other variables constant, a 100 basis point decrease in perpetual growth rates would require that we perform the second step of the goodwill impairment test for all four of the reporting units with higher risk of impairment. The estimates used for our future cash flows and discount rates are our best estimates and we believe they are reasonable, but future declines in the business performance of our reporting units may impair the recoverability of our goodwill. Future events that could have a negative impact on the fair value of the reporting units include, but are not limited to: </div> <div style="margin-top: 10pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">decreases in estimated market sizes or market growth rates due to greater-than-expected pricing pressures, product actions, product sales mix, disruptive technology developments, government cost containment initiatives and healthcare reforms, and/or other economic conditions; </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">declines in our market share and penetration assumptions due to increased competition, an inability to develop or launch new products, and market and/or regulatory conditions that may cause significant launch delays or product recalls; </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">declines in revenue as a result of loss of key members of our sales force and other key personnel; </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">negative developments in intellectual property litigation that may impact our ability to market certain products or increase our costs to sell certain products; </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">adverse legal decisions resulting in significant cash outflows; </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">increases in the research and development costs necessary to obtain regulatory approvals and launch new products, and the level of success of on-going and future research and development efforts; </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">decreases in our profitability due to an inability to successfully implement and achieve timely and sustainable cost improvement measures consistent with our expectations, increases in our market-participant tax rate, and/or changes in tax laws; </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">increases in our market-participant risk-adjusted WACC; and </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">changes in the structure of our business as a result of future reorganizations or divestitures of assets or businesses. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Negative changes in one or more of these factors could result in additional impairment charges. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>2008 Goodwill Impairment Charge</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During the fourth quarter of 2008, the decline in our stock price and our market capitalization created an indication of potential impairment of our goodwill balance. Therefore, we performed an interim impairment test and recorded a $2.613 billion goodwill impairment charge associated with our U.S. CRM reporting unit. As a result of economic conditions and the related increase in volatility in the equity and credit markets, which became more pronounced starting in the fourth quarter of 2008, our estimated risk-adjusted WACC increased 150 basis points from 9.5 percent during our 2008 second quarter annual goodwill impairment assessment to 11.0 percent during our 2008 fourth quarter interim impairment assessment. This change, along with reductions in market demand for products in our U.S. CRM reporting unit relative to our assumptions at the time of the Guidant acquisition, were the key factors contributing to the impairment charge. At the time we acquired the CRM business from Guidant Corporation in 2006, we expected average U.S. CRM net sales growth rates in the mid-teens; however, due to changes in end market demand, we reduced our estimates of average U.S. CRM sales growth rates to the mid-to-high single digits. Our estimated risk-adjusted market-participant WACC decreased 50 basis points from 11.0 percent during our 2008 fourth quarter interim impairment assessment to 10.5 percent during our 2009 second quarter annual goodwill impairment assessment, and our other significant assumptions remained largely consistent. Our 2009 goodwill impairment test did not identify any reporting units whose carrying values exceeded estimated fair values. See <i>Note A – Significant Accounting Policies </i>for further discussion of our policies and methodologies related to goodwill impairment testing. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Other Intangible Asset Impairment Charges</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, due to lower than anticipated net sales of one of our Peripheral Interventions technology offerings, as well as changes in our expectations of future market acceptance of this technology, we lowered our sales forecasts associated with the product. In addition, as part of our initiatives to reprioritize and diversify our product portfolio, we discontinued one of our internal research and development programs to focus on those with a higher likelihood of success. As a result of these factors, and in accordance with our accounting policies described in <i>Note A</i>, we tested the related intangible assets for impairment and recorded intangible asset impairment charges of $65 million to write down the balance of these intangible assets to their fair values. We have recorded these amounts in the intangible asset impairment charges caption in our accompanying consolidated statements of operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2009, we recorded $12 million of intangible asset impairment charges to write down the value of certain intangible assets to their fair value, due primarily to lower than anticipated market penetration of one of our Urology technology offerings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2008, we reduced our future revenue and cash flow forecasts associated with certain of our Peripheral Interventions-related intangible assets, primarily as a result of a recall of one of our products. Therefore, we tested these intangible assets for impairment, and determined that these assets were impaired, resulting in a $131 million charge to write down these intangible assets to their fair value. Further, as a result of significantly lower than forecasted sales of certain of our Urology products, due to lower than anticipated market penetration, we determined that certain of our Urology-related intangible assets were impaired, resulting in a $46 million impairment charge to write down these intangible assets to their fair value. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The intangible asset category and associated write downs recorded in 2010, 2009 and 2008 were as: </div> <div align="left" style="margin-left: 5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">  <tr valign="bottom"> <td width="52%"> </td> <td width="3%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2008</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Technology - developed </div></td> <td> </td> <td align="left">  $</td> <td align="right">18</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td> <div style="margin-left:15px; text-indent:-15px">Technology - core </div></td> <td> </td> <td> </td> <td align="right">47</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">10</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">126</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangible assets </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">51</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>65</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>12</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>177</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Estimated amortization expense for each of the five succeeding fiscal years based upon our intangible asset portfolio as of December 31, 2010 is as follows: </div> <div align="left" style="margin-left: 10%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="30%">  <tr valign="bottom"> <td width="60%"> </td> <td width="10%"> </td> <td width="4%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Estimated</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amortization</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Expense</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="center"><b>Fiscal Year</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2">(in millions)</td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="5" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td align="center"> <div style="margin-left:15px; text-indent:-15px">2011 </div></td> <td> </td> <td align="left">$</td> <td align="right">430</td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td align="center"> <div style="margin-left:15px; text-indent:-15px">2012 </div></td> <td> </td> <td> </td> <td align="right">385</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td align="center"> <div style="margin-left:15px; text-indent:-15px">2013 </div></td> <td> </td> <td> </td> <td align="right">371</td> <td> </td> </tr> <tr valign="bottom" style="padding:2 0 2 0"> <td align="center"> <div style="margin-left:15px; text-indent:-15px">2014 </div></td> <td> </td> <td> </td> <td align="right">367</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td align="center"> <div style="margin-left:15px; text-indent:-15px">2015 </div></td> <td> </td> <td> </td> <td align="right">366</td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our core technology that is not subject to amortization represents technical processes, intellectual property and/or institutional understanding acquired through business combinations that is fundamental to the on-going operations of our business and has no limit to its useful life. Our core technology that is not subject to amortization is comprised primarily of certain purchased stent and balloon technology, which is foundational to our continuing operations within the Cardiovascular market and other markets within interventional medicine. We test our indefinite-lived intangible assets at least annually for impairment and reassess their classification as indefinite-lived assets. Our 2009 impairment test did not identify any indefinite-lived intangible assets whose carrying value exceeded its estimated fair value. We amortize all other core technology over its estimated useful life. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Goodwill as of December 31, 2010 as allocated to our U.S., EMEA, Japan, and Inter-Continental reportable segments for purposes of our goodwill impairment testing is presented below. Our U.S. goodwill is further allocated to our U.S. reporting units for our goodwill testing in accordance with Topic 350. The following is a rollforward of our goodwill balance by reportable segment: </div> <div align="center"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom" style="font-size: 20pt"> <td width="39%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Inter-</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>United States</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>EMEA</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Japan</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Continental</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of January 1, 2009</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>7,160</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>4,073</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>597</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>591</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>12,421</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Purchase price adjustments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(21</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(6</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(27</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill acquired </div></td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Contingent consideration </div></td> <td> </td> <td> </td> <td align="right">6</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill reclassified to assets held for sale* </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(164</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(193</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(48</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(63</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(468</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2009</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>6,983</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>3,875</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>549</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>529</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>11,936</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Purchase price adjustments </div></td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill acquired </div></td> <td> </td> <td> </td> <td align="right">22</td> <td> </td> <td> </td> <td> </td> <td align="right">44</td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td align="right">73</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Contingent consideration </div></td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill written off </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,817</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,817</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Adjustments to goodwill classified as held for sale </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(7</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(10</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2010</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>5,189</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>3,915</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>551</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>531</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>10,186</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-top: 10pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="1%" nowrap="nowrap" align="left">*</td> <td width="1%"> </td> <td> <div style="text-align: justify">As of December 31, 2010, in conjunction with the January 2011 sale of our Neurovascular business, we present separately the assets of the disposal group, including the related goodwill, as ‘assets held for sale’ within our accompanying consolidated balance sheets. The 2009 reclassification and balances as of December 31, 2009 are presented are for comparative purposes and were not classified as held for sale at that date. Refer to <i>Note C – Divestitures and Assets Held for Sale </i>for more information regarding this transaction, and for the major classes of assets, including goodwill, classified as held for sale. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The 2009 and 2010 purchase price adjustments related primarily to adjustments in taxes payable and deferred income taxes, including changes in the liability for unrecognized tax benefits. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The following is a rollforward of accumulated goodwill write-offs by reportable segment: </div> <div align="center"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom" style="font-size: 20pt"> <td width="39%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Inter-</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>United States</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>EMEA</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Japan</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Continental</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Accumulated write-offs as of January 1, 2009</b> </div></td> <td> </td> <td nowrap="nowrap" align="left">  <b>$</b></td> <td align="right"><b>(2,613</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(2,613</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill written off </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">–   </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Accumulated write-offs as of December 31, 2009</b> </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right"><b>(2,613</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right"><b>(2,613</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill written off </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,817</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right"><b>(1,817</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Accumulated write-offs as of December 31, 2010</b> </div></td> <td> </td> <td nowrap="nowrap" align="left">  <b>$</b></td> <td align="right"><b>(4,430</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(4,430</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="19" nowrap="nowrap" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE E – FAIR VALUE MEASUREMENTS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Derivative Instruments and Hedging Activities</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We develop, manufacture and sell medical devices globally and our earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments, and operate the program pursuant to documented corporate risk management policies. We recognize all derivative financial instruments in our consolidated financial statements at fair value in accordance with FASB ASC Topic 815, <i>Derivatives and Hedging </i>(formerly FASB Statement No. 133, <i>Accounting for Derivative Instruments and Hedging Activities</i>). In accordance with Topic 815, for those derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Our derivative instruments do not subject our earnings or cash flows to material risk, as gains and losses on these derivatives generally offset losses and gains on the item being hedged. We do not enter into derivative transactions for speculative purposes and we do not have any non-derivative instruments that are designated as hedging instruments pursuant to Topic 815. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Currency Hedging</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We are exposed to currency risk consisting primarily of foreign currency denominated monetary assets and liabilities, forecasted foreign currency denominated intercompany and third-party transactions and net investments in certain subsidiaries. We manage our exposure to changes in foreign currency on a consolidated basis to take advantage of offsetting transactions. We use both derivative instruments (currency forward and option contracts), and non-derivative transactions (primarily European manufacturing and distribution operations) to reduce the risk that our earnings and cash flows associated with these foreign currency denominated balances and transactions will be adversely affected by currency exchange rate changes. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Designated Foreign Currency Hedges</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">All of our designated currency hedge contracts outstanding as of December 31, 2010 and December 31, 2009 were cash flow hedges under Topic 815 intended to protect the U.S. dollar value of our forecasted foreign currency denominated transactions. We record the effective portion of any change in the fair value of foreign currency cash flow hedges in other comprehensive income (OCI) until the related third-party transaction occurs. Once the related third-party transaction occurs, we reclassify the effective portion of any related gain or loss on the foreign currency cash flow hedge to earnings. In the event the hedged forecasted transaction does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. We had currency derivative instruments designated as cash flow hedges outstanding in the contract amount of $2.679 billion as of December 31, 2010 and $2.760 billion as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We recognized net losses of $30 million in earnings on our cash flow hedges during 2010, as compared to net gains of $4 million during 2009 and net losses of $67 million during 2008. All currency cash flow hedges outstanding as of December 31, 2010 mature within 36 months. As of December 31, 2010, $71 million of net losses, net of tax, were recorded in accumulated other comprehensive income (AOCI) to recognize the effective portion of the fair value of any currency derivative instruments that are, or previously were, designated as foreign currency cash flow hedges, as compared to net losses of $44 million as of December 31, 2009. As of December 31, 2010, $47 million of net losses, net of tax, may be reclassified to earnings within the next twelve months. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The success of our hedging program depends, in part, on forecasts of transaction activity in various currencies (primarily Japanese yen, Euro, British pound sterling, Australian dollar and Canadian dollar). We may experience unanticipated currency exchange gains or losses to the extent that there are differences between forecasted and actual activity during periods of currency volatility. In addition, changes in currency exchange rates related to any unhedged transactions may impact our earnings and cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2009, we directed our EMEA sales offices to converge differing operating structures to a consistent limited risk distribution sales structure beginning in the third quarter of 2010. This change impacted our EMEA transaction flow and effectively moved our foreign exchange risk from third-party sales to intercompany sales. While the convergence has not had a significant impact on the magnitude of foreign currency exposure, we de-designated certain cash flow hedges of third-party sales. We reclassified net losses of $5 million from AOCI to current earnings during 2009 related to these de-designated cash flow hedges. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Non-designated Foreign Currency Contracts</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We use currency forward contracts as a part of our strategy to manage exposure related to foreign currency denominated monetary assets and liabilities. These currency forward contracts are not designated as cash flow, fair value or net investment hedges under Topic 815; are marked-to-market with changes in fair value recorded to earnings; and are entered into for periods consistent with currency transaction exposures, generally one to six months. We had currency derivative instruments not designated as hedges under Topic 815 outstanding in the contract amount of $2.398 billion as of December 31, 2010 and $1.982 billion as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Interest Rate Hedging</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our interest rate risk relates primarily to U.S. dollar borrowings, partially offset by U.S. dollar cash investments. We use interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates by converting floating-rate debt into fixed-rate debt or fixed-rate debt into floating-rate debt. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We designate these derivative instruments either as fair value or cash flow hedges under Topic 815. We record changes in the value of fair value hedges in interest expense, which is generally offset by changes in the fair value of the hedged debt obligation. Interest payments made or received related to our interest rate derivative instruments are included in interest expense. We record the effective portion of any change in the fair value of derivative instruments designated as cash flow hedges as unrealized gains or losses in OCI, net of tax, until the hedged cash flow occurs, at which point the effective portion of any gain or loss is reclassified to earnings. We record the ineffective portion of our cash flow hedges in interest expense. In the event the hedged cash flow does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time. During 2009, our interest rate derivative instruments either matured as scheduled or were terminated in connection with the prepayment of our bank term loan, discussed further in <i>Note G – Borrowings and Credit Arrangements</i>. We recognized $27 million of losses within interest expense during 2009 due to the early termination of these interest rate contracts. We had no interest rate derivative instruments outstanding as of December 31, 2010 or December 31, 2009. In the first quarter of 2011, we entered interest rate derivative contracts having a notional amount of $850 million to convert fixed-rate debt into floating-rate debt, which we have designated as fair value hedges. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In prior years we terminated certain interest rate derivative instruments, including fixed-to-floating interest rate contracts, designated as fair value hedges, and floating-to-fixed treasury locks, designated as cash flow hedges. In accordance with Topic 815, we are amortizing the gains and losses of these derivative instruments upon termination into earnings over the term of the hedged debt. The carrying amount of certain of our senior notes included unamortized gains of $2 million as of December 31, 2010 and $3 million as of December 31, 2009, and unamortized losses of $5 million as of December 31, 2010 and $8 million as of December 31, 2009, related to the fixed-to-floating interest rate contracts. We recognized approximately $2 million of interest expense during 2010 and 2009 related to these derivative instruments. In addition, we had pre-tax net gains within AOCI related to terminated floating-to-fixed treasury locks of $8 million as of December 31, 2010 and $11 million as of December 31, 2009. We recognized approximately $3 million as a reduction of interest expense during 2010 and $2 million as a reduction in interest expense related to these derivative instruments during 2009. As of December 31, 2010, $5 million of net gains, net of tax, are recorded in AOCI to recognize the effective portion of these instruments, as compared to $7 million of net gains as of December 31, 2009. As of December 31, 2010, an immaterial amount of net gains, net of tax, may be reclassified to earnings within the next twelve months from amortization of our previously terminated interest rate derivative instruments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, we recognized in earnings an immaterial amount of net gains related to our previously terminated interest rate derivative contracts. During 2009, we recognized in earnings $70 million of net losses, inclusive of the $27 million of interest rate contract termination losses described above, related to our interest rate derivative instruments, including previously terminated interest rate derivative contracts. During 2008, we recognized in earnings $20 million of net losses related to our interest rate contracts. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Counterparty Credit Risk</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We do not have significant concentrations of credit risk arising from our derivative financial instruments, whether from an individual counterparty or a related group of counterparties. We manage our concentration of counterparty credit risk on our derivative instruments by limiting acceptable counterparties to a diversified group of major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to each counterparty, and by actively monitoring their credit ratings and outstanding fair values on an on-going basis. Furthermore, none of our derivative transactions are subject to collateral or other security arrangements and none contain provisions that are dependent on our credit ratings from any credit rating agency. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We also employ master netting arrangements that reduce our counterparty payment settlement risk on any given maturity date to the net amount of any receipts or payments due between us and the counterparty financial institution. Thus, the maximum loss due to credit risk by counterparty is limited to the unrealized gains in such contracts net of any unrealized losses should any of these counterparties fail to perform as contracted. Although these protections do not eliminate concentrations of credit, as a result of the above considerations, we do not consider the risk of counterparty default to be significant. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Fair Value of Derivative Instruments</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The following presents the effect of our derivative instruments designated as cash flow hedges under Topic 815 on our accompanying consolidated statements of operations during 2010 and 2009: </div> <div align="center"> <table style="font-size: 7pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="35%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%">   </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%">     </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%">     </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount of Pre-</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount of Pre-</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>tax Gain (Loss)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount of Pre-tax Gain</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>tax Gain (Loss)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Reclassified from</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>(Loss) Recognized in</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Recognized in</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>AOCI into</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Earnings on Ineffective</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>OCI</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Earnings</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Portion and Amount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>(Effective</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>(Effective</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Location in Statement of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Excluded from</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Location in Statement of</b></td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td>     </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Portion)</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Portion)</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Operations</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Effectiveness Testing*</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Operations</b></td> <td> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><u><b>Year Ended December 31, 2010</b></u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="line-height: 3pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest rate contracts </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">3</td> <td> </td> <td> </td> <td colspan="3" align="center">Interest expense</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="line-height: 3pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(74</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(30</td> <td nowrap="nowrap">)</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Cost of products sold</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="left"><b>  $</b></td> <td align="right"><b>(74</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="left"><b>  $</b></td> <td align="right"><b>(27</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><u><b>Year Ended December 31, 2009</b></u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="line-height: 3pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest rate contracts </div></td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(24</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(41</td> <td nowrap="nowrap">)</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Interest expense</td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(27</td> <td nowrap="nowrap">)</td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Interest expense</td> <td>**</td> </tr> <tr valign="bottom" style="line-height: 3pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(57</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">9</td> <td> </td> <td> </td> <td colspan="3" align="center" nowrap="nowrap">Cost of products sold</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(5</td> <td nowrap="nowrap">)</td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Cost of products sold</td> <td>***</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="left"><b>  $</b></td> <td align="right"><b>(81</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="left"><b>  $</b></td> <td align="right"><b>(32</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"><b>  $</b></td> <td align="right"><b>(32</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 7pt; margin-top: 6pt; margin-left:10px; text-indent:-10px; margin-right: 15%">* Other than described in **, the amount of gain (loss) recognized in earnings related to the ineffective portion of hedging relationships was de minimis in 2010 and 2009. </div> <div align="justify" style="font-size: 7pt; margin-top: 1pt; margin-left:12px; text-indent:-12px; margin-right: 15%">** We prepaid $2.825 billion of our term loan debt in 2009 and recognized ineffectiveness of $27 million on interest rate swaps for which there was no longer an underlying exposure. </div> <div align="justify" style="font-size: 7pt; margin-top: 1pt; margin-left:15px; text-indent:-15px; margin-right: 15%">*** Represents amount reclassified from AOCI to earnings in 2009 related to de-designated cash flow hedges. </div> <div style="margin-right: 23%; margin-left: 7%"> <table style="font-size: 8.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="70%">  <tr valign="bottom" style="font-size: 15pt"> <td width="60%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Amount of Gain (Loss) Recognized</b></td> <td> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Location</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>in Earnings</b> (in millions)</td> <td style="border-bottom: 1px solid #000000"> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td nowrap="nowrap" align="center"><b>Derivatives Not Designated as</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>in Statement of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Hedging Instruments</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Operations</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr>   <tr valign="bottom" style="line-height: 8.5pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="center">Other, net</td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(77</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="center" nowrap="nowrap">Cost of products sold</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"><b>  $</b></td> <td align="right"><b>(77</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(1</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Losses and gains on currency hedge contracts not designated as hedged instruments were substantially offset by net gains from foreign currency transaction exposures of $68 million during 2010, and $5 million during 2009. As a result, we recorded net foreign currency losses of $9 million during 2010 and $5 million during 2009, within other, net in our accompanying consolidated financial statements. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Topic 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative instruments using the framework prescribed by ASC Topic 820, <i>Fair Value Measurements and Disclosures </i>(formerly FASB Statement No. 157, <i>Fair Value Measurements</i>), by considering the estimated amount we would receive to sell or transfer these instruments at the reporting date and by taking into account current interest rates, currency exchange rates, the creditworthiness of the counterparty for assets, and our creditworthiness for liabilities. In certain instances, we may utilize financial models to measure fair value. Generally, we use inputs that include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; other observable inputs for the asset or liability; and inputs derived principally from, or corroborated by, observable market data by correlation or other means. As of December 31, 2010, we have classified all of our derivative assets and liabilities within Level 2 of the fair value hierarchy prescribed by Topic 820, as discussed below, because these observable inputs are available for substantially the full term of our derivative instruments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The following are the balances of our derivative assets and liabilities as of December 31, 2010 and December 31, 2009: </div> <div align="center"> <table style="font-size: 8.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="35%"> </td> <td width="1%">     </td> <td width="1%"> </td> <td width="35%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="1%">  </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>As of December 31,</b></td> <td> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="left" colspan="2"><b>Location in Balance Sheet (1)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 2px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Derivative Assets:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Designated Hedging Instruments</u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="left" nowrap="nowrap">Prepaid expenses and other current assets</td> <td> </td> <td align="left">  $</td> <td align="right">32</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">20</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="left" nowrap="nowrap">Other long-term assets</td> <td> </td> <td> </td> <td align="right">27</td> <td> </td> <td> </td> <td> </td> <td align="right">12</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">59</td> <td> </td> <td> </td> <td> </td> <td align="right">32</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Non-Designated Hedging Instruments</u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="left" nowrap="nowrap">Prepaid expenses and other current assets</td> <td> </td> <td> </td> <td align="right">23</td> <td> </td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="padding-top: 5"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Total Derivative Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>82</b></td> <td> </td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>56</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Derivative Liabilities:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="padding-top: 8"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Designated Hedging Instruments</u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="left">Other current liabilities</td> <td> </td> <td align="left">  $</td> <td align="right">87</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">64</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="left">Other long-term liabilities</td> <td> </td> <td> </td> <td align="right">71</td> <td> </td> <td> </td> <td> </td> <td align="right">29</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">158</td> <td> </td> <td> </td> <td> </td> <td align="right">93</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Non-Designated Hedging Instruments</u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="left">Other current liabilities</td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> <td> </td> <td> </td> <td align="right">17</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="padding-top: 5"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Total Derivative Liabilities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>189</b></td> <td> </td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>110</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-right: 0%; margin-left: 5%; margin-top: 20pt"> <table width="95%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%">      </td> <td width="96%"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td> <div style="text-align: justify">We classify derivative assets and liabilities as current when the remaining term of the derivative contract is one year or less. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Other Fair Value Measurements</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Recurring Fair Value Measurements</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices, where available. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows: </div> <div style="margin-top: 10pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">Level 1 – Inputs to the valuation methodology are quoted market prices for identical assets or liabilities. </div></td> </tr> <tr> <td style="font-size: 10pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">Level 2 – Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs. </div></td> </tr> <tr> <td style="font-size: 10pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">Level 3 – Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our investments in money market funds are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Our money market funds are classified as cash and cash equivalents within our accompanying consolidated balance sheets, in accordance with our accounting policies. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Assets and liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2010 and 2009: </div> <div align="center"> <table style="font-size: 7.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="20%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%">     </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 7.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>As of December 31, 2010</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>As of December 31, 2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr> <tr style="font-size: 7.5pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Level 1</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Level 2</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Level 3</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Level 1</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Level 2</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Level 3</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><u><b>Assets</b></u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Money market funds </div></td> <td> </td> <td align="left">  $</td> <td align="right">105</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">105</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">405</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">405</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">82</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">82</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">56</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">56</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>105</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>82</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>187</b></td> <td> </td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>405</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>56</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>461</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><u><b>Liabilities</b></u> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">189</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">189</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">110</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">110</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued contingent consideration </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">71</td> <td> </td> <td> </td> <td> </td> <td align="right">71</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>189</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>71</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>260</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>110</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>110</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In addition to $105 million invested in money market and government funds as of December 31, 2010, we had $16 million of cash invested in short-term time deposits, and $92 million in interest bearing and non-interest bearing bank accounts. In addition to $405 million invested in money market and government funds as of December 31, 2009, we had $346 million of cash invested in short-term time deposits, and $113 million in interest bearing and non-interest bearing bank accounts. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Changes in the fair value of recurring fair value measurements using significant unobservable inputs (Level 3) during the year ended December 31, 2010 were as follows (in millions): </div> <div style="margin-right: 23%; margin-left: 7%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="62%">  <tr valign="bottom"> <td width="80%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2009</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Contingent consideration liability recorded </div></td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(69</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Fair value adjustment </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2010</b> </div></td> <td> </td> <td nowrap="nowrap" align="left"><b>  $</b></td> <td align="right"><b>(71</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Non-Recurring Fair Value Measurements</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We hold certain assets and liabilities that are measured at fair value on a non-recurring basis in periods subsequent to initial recognition. The fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. The aggregate carrying amount of our cost method investments was $43 million as of December 31, 2010 and $58 million as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, we recorded $1.882 billion of impairment charges to adjust our goodwill and certain intangible assets to their fair values, and $16 million of losses to write down certain cost method investments to their fair values, because we deemed the decline in the values of the investments to be other-than-temporary. We wrote down goodwill attributable to our U.S. CRM reporting unit, discussed in <i>Note D – Goodwill and Other Intangible Assets, </i>with a carrying amount of $3.296 billion to its estimated fair value of $1.479 billion, resulting in a write-down of $1.817 billion. In addition, we recorded a loss of $60 million to write down certain of our Peripheral Interventions intangible assets, discussed in <i>Note D, </i>to their estimated fair values of $14 million; and a loss of $5 million, discussed in <i>Note D, </i>to write off the remaining value associated with certain other intangible assets. These adjustments fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our most recent operational budgets, long range strategic plans and other estimates. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value of our outstanding debt obligations was $5.654 billion as of December 31, 2010 and $6.111 billion as of December 31, 2009, which was determined by using primarily quoted market prices for our publicly registered senior notes, classified as Level 1 within the fair value hierarchy. Refer to <i>Note G – Borrowings and Credit Arrangements </i>for a discussion of our debt obligations. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE F – INVESTMENTS AND NOTES RECEIVABLE</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We have historically entered a significant number of alliances with publicly traded and privately held entities in order to broaden our product technology portfolio and to strengthen and expand our reach into existing and new markets. During 2007, we announced our intent to sell the majority of our investment portfolio in order to monetize those investments determined to be non-strategic. In June 2008, we signed definitive agreements with Saints Capital and Paul Capital Partners to sell the majority of our investments in, and notes receivable from, certain publicly traded and privately held entities for gross proceeds of approximately $140 million. In connection with these agreements, we received proceeds of $95 million in 2008, and an additional $45 million in 2009. In addition, we received proceeds of $46 million in 2009 and $54 million in 2008 from other transactions to monetize certain other non-strategic investments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In 2010, we recorded gains of $4 million and other-than-temporary impairments of $16 million associated with our investment portfolio. Gains and losses associated with our investments and notes receivable are recorded in other, net within our consolidated statements of operations. As of December 31, 2010, we held investments with a book value of $7 million that we accounted for under the equity method of accounting. The aggregate carrying amount of our cost method investments was $43 million as of December 31, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In 2009, we recorded gains of $23 million and other-than-temporary impairments of $14 million associated with our investment portfolio. In addition, we recorded losses of $6 million associated with our equity method investments. As of December 31, 2009, we held investments with a book value of $8 million that we accounted for under the equity method of accounting. The aggregate carrying amount of our cost method investments was $58 million as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In 2008, we recorded other-than-temporary impairments of $130 million associated with our investment portfolio, and gains of $52 million related to the sale of non-strategic investments. The other-than-temporary impairments included $127 million related to non-strategic investments and notes receivable which we had sold or intended to sell, and $3 million related to our strategic equity investments. We also recognized other costs of $5 million associated with the Saints and Paul agreements. We recorded losses of $10 million, reported in other, net, in our accompanying consolidated statements of operations associated with our equity method investments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We had notes receivable from certain portfolio companies of approximately $40 million as of December 31, 2010 and 2009. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE G – BORROWINGS AND CREDIT ARRANGEMENTS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We had total debt of $5.438 billion as of December 31, 2010 and $5.918 billion as of December 31, 2009. During the second quarter of 2010, we refinanced the majority of our 2011 debt obligations, including the establishment of a new $1.0 billion three-year, senior unsecured term loan facility, and used $900 million of the proceeds to prepay in full our loan due to Abbott Laboratories without any premium or penalty. During 2010, we also prepaid all $600 million of our senior notes due June 2011. The following are the components of our debt obligations as of December 31, 2010 and 2009: </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-right: 25%; margin-left: 5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="70%">  <tr valign="bottom"> <td width="50%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>As of December 31,</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> </tr>   <tr valign="bottom" style="line-height: 8pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Term loan </div></td> <td> </td> <td align="left">  $</td> <td align="right">250</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Senior notes </div></td> <td> </td> <td> </td> <td align="right">250</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Current debt obligations </div></td> <td> </td> <td> </td> <td align="right">504</td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Term loan </div></td> <td> </td> <td> </td> <td align="right">750</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Abbott loan </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">900</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Senior notes </div></td> <td> </td> <td> </td> <td align="right">4,200</td> <td> </td> <td> </td> <td> </td> <td align="right">5,050</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Fair value adjustment (1) </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(5</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Discounts </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(17</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(32</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Long-term debt obligations </div></td> <td> </td> <td> </td> <td align="right">4,934</td> <td> </td> <td> </td> <td> </td> <td align="right">5,915</td> <td> </td> </tr> <tr valign="bottom" style="line-height: 8pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>5,438</b></td> <td> </td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>5,918</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-right: 6%; margin-left: 3%; mwrgin-top: 2pt"> <table width="90%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%">     </td> <td width="96%"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td> <div style="text-align: justify">Represents net unamortized losses related to interest rate contracts to hedge the fair value of certain of our senior notes. See<br /> <i>Note E - Fair Value Measurements </i>for further discussion regarding the accounting treatment for these contracts. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The debt maturity schedule for the significant components of our debt obligations as of December 31, 2010 is as follows: </div> <div style="margin-right: 2%; margin-left: 3%; mwrgin-top: 2pt"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="95%">  <tr valign="bottom"> <td width="23%"> </td> <td width="1%">   </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%">  </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%">  </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%">  </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%">  </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%">  </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2012</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2013</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2014</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2015</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Thereafter</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Term loan </div></td> <td> </td> <td align="left">  $</td> <td align="right">250</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">50</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">700</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,000</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Senior notes </div></td> <td> </td> <td> </td> <td align="right">250</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">600</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,250</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,350</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>4,450</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>500</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>50</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>700</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>600</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,250</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>2,350</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>5,450</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="margin-top: 20pt; margin-left: 5%"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt; background: transparent; color: #000000; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">Note:</td> <td>  </td> <td> <div style="text-align: justify">The table above does not include discounts associated with our senior notes, or amounts related to interest rate contracts used to hedge the fair value of certain of our senior notes. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Term Loan and Revolving Credit Facility</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our term loan facility requires quarterly principal payments of $50 million commencing in the third quarter of 2011, with the remaining principal amount due at the credit facility maturity date, currently June 2013, with up to two one-year extension options subject to certain conditions. However, in January 2011, we prepaid $250 million of these obligations using borrowings from our credit and security facility discussed below, and, accordingly, have presented the full prepayment within 2011 above, as well as within ‘current debt obligations’ in our accompanying consolidated balance sheets. As a result, quarterly principal payments of $50 million will commence in the fourth quarter of 2012. Term loan borrowings bear interest at LIBOR plus an interest margin of between 1.75 percent and 3.25 percent, based on our corporate credit ratings (currently 2.75 percent). </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In the second quarter of 2010, we syndicated a new $2.0 billion revolving credit facility, maturing in June 2013, with up to two one-year extension options subject to certain conditions, to replace our existing $1.75 billion revolving credit facility maturing in April 2011. Any revolving credit facility borrowings bear interest at LIBOR plus an interest margin of between 1.55 percent and 2.625 percent, based on our corporate credit ratings (currently 2.25 percent). In addition, we are required to pay a facility fee based on our credit ratings and the total amount of revolving credit commitments, regardless of usage, under the agreement (currently 0.50 percent per year). Any borrowings under the revolving credit facility are unrestricted and unsecured. There were no amounts borrowed under our revolving credit facilities as of December 31, 2010 or December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In connection with our 2009 patent litigation settlement with Johnson & Johnson discussed in <i>Note L – Commitments and Contingencies</i>, we borrowed $200 million against our revolving credit facility during the first quarter of 2010 to fund a portion of the settlement, and subsequently repaid these borrowings during the quarter without any premium or penalty. Further, in February 2010, we posted a $745 million letter of credit under our credit facility as collateral for the remaining Johnson & Johnson obligation. In August 2010, we prepaid the remaining Johnson & Johnson obligation of $725 million, plus interest, using cash on hand and cancelled the related letter of credit. We now have full access to our $2.0 billion revolving credit facility to support operational needs. As of December 31, 2010, we had outstanding letters of credit of $120 million, as compared to $123 million as of December 31, 2009, which consisted primarily of bank guarantees and collateral for workers’ compensation insurance arrangements. As of December 31, 2010 and 2009, none of the beneficiaries had drawn upon the letters of credit or guarantees; accordingly, we have not recognized a related liability for our outstanding letters of credit in our consolidated balance sheets as of December 31, 2010 or 2009. We believe we will generate sufficient cash from operations to fund these payments and intend to fund these payments without drawing on the letters of credit. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our revolving credit facility agreement requires that we maintain certain financial covenants, as follows: </div> <div style="margin-right: 24%; margin-left: 6%"> <table style="font-size: 9.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="70%">  <tr valign="bottom"> <td width="70%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="5%">      </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 9.5pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Actual as of</b></td> </tr> <tr style="font-size: 9.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Covenant</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>December 31,</b></td> </tr> <tr style="font-size: 9.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">  <b>Requirement</b>  </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Maximum leverage ratio (1) </div></td> <td> </td> <td colspan="3" align="center">3.85 times</td> <td> </td> <td colspan="3" align="center">2.3 times</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Minimum interest coverage ratio (2) </div></td> <td> </td> <td colspan="3" align="center">3.0 times</td> <td> </td> <td colspan="3" align="center">6.1 times</td> </tr>  </table> </div> <div style="margin-right: 3%; margin-left: 9%"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="88%">  <tr valign="bottom"> <td width="3%"> </td> <td width="3%">  </td> <td width="92%"> </td> </tr>   <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">(1) </div></td> <td> </td> <td align="left" valign="top">Ratio of total debt to consolidated EBITDA, as defined by the agreement, for the preceding four consecutive fiscal quarters. Requirement decreases to 3.5 times after March 31, 2011.</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">(2) </div></td> <td> </td> <td align="left" valign="top">Ratio of consolidated EBITDA, as defined by the agreement, to interest expense for the preceding four consecutive fiscal quarters.</td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The credit agreement provides for an exclusion from the calculation of consolidated EBITDA, as defined by the agreement, through the credit agreement maturity, of up to $258 million in restructuring charges and restructuring-related expenses related to our previously-announced restructuring plans, plus an additional $300 million for any future restructuring initiatives. As of December 31, 2010, we had $470 million of the restructuring charge exclusion remaining. In addition, any litigation-related charges and credits are excluded from the calculation of consolidated EBITDA until such items are paid or received; as well as up to $1.5 billion of any future cash payments for future litigation settlements or damage awards (net of any litigation payments received); and litigation-related cash payments (net of cash receipts) of up to $1.310 billion related to amounts that were recorded in the financial statements as of March 31, 2010. As of December 31, 2010, we had $2.154 billion of the legal payment exclusion remaining. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of and through December 31, 2010, we were in compliance with the required covenants. Our inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facilities or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would grant such waivers. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Abbott Loan</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In April 2006, we borrowed $900 million from Abbott Laboratories. During 2010, we prepaid this loan in full with no penalty or premium. The loan from Abbott bore interest at a fixed 4.0 percent rate, payable semi-annually. We determined that an appropriate fair market interest rate on the loan from Abbott was 5.25 percent per annum. We recorded the loan at a discount of approximately $50 million at the inception of the loan and recorded interest at an imputed rate of 5.25 percent over the term of the loan. Upon repayment of the loan, we accelerated the recognition of the remaining unamortized discount of $10 million through interest expense. There was no remaining unamortized discount as of December 31, 2010, and $14 million as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Senior Notes</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We had senior notes outstanding of $4.450 billion as of December 31, 2010 and $5.050 billion as of December 31, 2009. These notes are publicly registered securities, are redeemable prior to maturity and are not subject to any sinking fund requirements. Our senior notes are unsecured, unsubordinated obligations and rank on a parity with each other. These notes are effectively junior to borrowings under our credit and security facility and liabilities of our subsidiaries. In December 2010, we prepaid $600 million of senior notes maturing in June 2011 and, at maturity in January 2011, paid $250 million of our senior notes. Our senior notes consist of the following as of December 31, 2010: </div> <div style="margin-right: 5%; margin-left: 5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="90%">  <tr valign="bottom"> <td width="25%"> </td> <td width="2%">   </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%">   </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%">   </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%">   </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Amount</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Issuance</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Semi-annual</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">(in millions)</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Date</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Maturity Date</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Coupon Rate</b></td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">January 2011 Notes </div></td> <td> </td> <td align="left">  $</td> <td align="right">250</td> <td> </td> <td> </td> <td colspan="3" align="center" nowrap="nowrap">  November 2004  </td> <td> </td> <td colspan="3" align="center">January 2011</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">4.250</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">June 2014 Notes </div></td> <td> </td> <td> </td> <td align="right">600</td> <td> </td> <td> </td> <td colspan="3" align="center">June 2004</td> <td> </td> <td colspan="3" align="center">June 2014</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">5.450</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px">January 2015 Notes      </div></td> <td> </td> <td> </td> <td align="right">850</td> <td> </td> <td> </td> <td colspan="3" align="center">December 2009</td> <td> </td> <td colspan="3" align="center">January 2015</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">4.500</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">November 2015 Notes </div></td> <td> </td> <td> </td> <td align="right">400</td> <td> </td> <td> </td> <td colspan="3" align="center">November 2005</td> <td> </td> <td colspan="3" align="center" nowrap="nowrap">  November 2015  </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">5.500</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">June 2016 Notes </div></td> <td> </td> <td> </td> <td align="right">600</td> <td> </td> <td> </td> <td colspan="3" align="center">June 2006</td> <td> </td> <td colspan="3" align="center">June 2016</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">6.400</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">January 2017 Notes </div></td> <td> </td> <td> </td> <td align="right">250</td> <td> </td> <td> </td> <td colspan="3" align="center">November 2004</td> <td> </td> <td colspan="3" align="center">January 2017</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">5.125</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">January 2020 Notes </div></td> <td> </td> <td> </td> <td align="right">850</td> <td> </td> <td> </td> <td colspan="3" align="center">December 2009</td> <td> </td> <td colspan="3" align="center">January 2020</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">6.000</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">November 2035 Notes </div></td> <td> </td> <td> </td> <td align="right">350</td> <td> </td> <td> </td> <td colspan="3" align="center">November 2005</td> <td> </td> <td colspan="3" align="center">November 2035</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">6.250</td> <td nowrap="nowrap">%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">January 2040 Notes </div></td> <td> </td> <td> </td> <td align="right">300</td> <td> </td> <td> </td> <td colspan="3" align="center">December 2009</td> <td> </td> <td colspan="3" align="center">January 2040</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">7.375</td> <td nowrap="nowrap">%</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>4,450</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Rating changes throughout 2010, 2009 and 2008 had no impact on the interest rates associated with our senior notes. Our $2.0 billion of senior notes issued in 2009 contain a change-in-control provision, which provides that each holder of the senior notes may require us to repurchase all or a portion of the notes at a price equal to 101 percent of the aggregate repurchased principal, plus accrued and unpaid interest, if a rating event, as defined in the indenture, occurs as a result of a change-in-control, as defined in the indenture. Any other credit rating changes may impact our borrowing cost, but do not require us to repay any borrowings. Subsequent rating improvements may result in a decrease in the adjusted interest rate to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2015 and November 2035 Notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Other Arrangements</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We also maintain a $350 million credit and security facility secured by our U.S. trade receivables, maturing in August 2011, subject to extension. Use of any borrowed funds is unrestricted. Borrowing availability under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. Certain significant changes in the quality of our receivables may require us to repay borrowings immediately under the facility. The credit agreement required us to create a wholly-owned entity, which we consolidate. This entity purchases our U.S. trade accounts receivable and then borrows from two third-party financial institutions using these receivables as collateral. The receivables and related borrowings remain on our consolidated balance sheets because we have the right to prepay any borrowings and effectively retain control over the receivables. Accordingly, pledged receivables are included as trade accounts receivable, net, while the corresponding borrowings are included as debt on our consolidated balance sheets. There were no amounts borrowed under this facility as of December 31, 2010 or 2009. In January 2011, we borrowed $250 million under this facility and used the proceeds to prepay $100 million of term loan borrowings maturing in 2011 and $150 million of term loan borrowings maturing in 2012. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In addition, we have accounts receivable factoring programs in certain European countries that we account for as sales under ASC Topic 860, <i>Transfers and Servicing</i>. These agreements provide for the sale of accounts receivable to third parties, without recourse, of up to approximately 300 million Euro (translated to approximately $400 million as of December 31, 2010). We have no retained interests in the transferred receivables, other than collection and administrative responsibilities and, once sold, the accounts are no longer available to satisfy creditors in the event of bankruptcy. We de-recognized $363 million of receivables as of December 31, 2010 at an average interest rate of 2.0 percent, and $318 million as of December 31, 2009 at an average interest rate of 2.0 percent. Further, we have uncommitted credit facilities with two commercial Japanese banks that provide for borrowings and promissory notes discounting of up to 18.5 billion Japanese yen (translated to approximately $226 million as of December 31, 2010). We discounted $197 million of notes receivable as of December 31, 2010 at an average interest rate of 1.7 percent, and $194 million of notes receivable as of December 31, 2009 at an average interest rate of 1.6 percent. Discounted and de-recognized accounts and notes receivable are excluded from trade accounts receivable in the accompanying consolidated balance sheets. The purpose of each of these programs is to provide us with additional liquidity. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE H – LEASES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Rent expense amounted to $92 million in 2010, $102 million in 2009, and $92 million in 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our obligations under noncancelable capital leases were not material as of December 31, 2010 and 2009. Future minimum rental commitments as of December 31, 2010 under other noncancelable lease agreements are as follows (in millions): </div> <div style="margin-right: 60%; margin-left: 6%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="35%">  <tr valign="bottom"> <td width="70%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="15%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2011 </div></td> <td> </td> <td align="left">  $</td> <td align="right">83</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2012 </div></td> <td> </td> <td> </td> <td align="right">69</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2013 </div></td> <td> </td> <td> </td> <td align="right">46</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2014 </div></td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2015 </div></td> <td> </td> <td> </td> <td align="right">15</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Thereafter </div></td> <td> </td> <td> </td> <td align="right">45</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>  $</b></td> <td align="right"><b>282</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE I – RESTRUCTURING-RELATED ACTIVITIES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On an on-going basis, we monitor the dynamics of the economy, the healthcare industry, and the markets in which we compete; and we continue to assess opportunities for improved operational effectiveness and efficiency, and better alignment of expenses with revenues, while preserving our ability to make the investments in research and development projects, capital and our people that are essential to our long-term success. As a result of these assessments, we have undertaken various restructuring initiatives in order to enhance our growth potential and position us for long-term success. These initiatives are described below. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In October 2007, our Board of Directors approved, and we committed to, an expense and head count reduction plan (the 2007 Restructuring plan). The plan was intended to bring expenses in line with revenues as part of our initiatives to enhance short- and long-term shareholder value. Key activities under the plan included the restructuring of several businesses, corporate functions and product franchises in order to better utilize resources, strengthen competitive positions, and create a more simplified and efficient business model; the elimination, suspension or reduction of spending on certain research and development projects; and the transfer of certain production lines among facilities. We initiated these activities in the fourth quarter of 2007. The transfer of certain production lines contemplated under the 2007 Restructuring plan was completed as of December 31, 2010; all other major activities under the plan, with the exception of final production line transfers, were completed as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The execution of this plan resulted in total pre-tax expenses of $427 million and required cash outlays of $380 million, of which we have paid $370 million to date. We recorded a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of total costs associated with the plan by major type of cost: </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="margin-left: 15%"> <table style="font-size: 8.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="63%">  <tr valign="bottom"> <td width="45%"> </td> <td width="5%"> </td> <td width="30%"> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Type of cost</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Total amount incurred</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring charges:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Termination benefits </div></td> <td> </td> <td align="center" valign="top">  $204 million</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Fixed asset write-offs </div></td> <td> </td> <td align="center" valign="top">  $31 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Other (1) </div></td> <td> </td> <td align="center" valign="top">  $67 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Retention incentives </div></td> <td> </td> <td align="center" valign="top">  $66 million</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Accelerated depreciation </div></td> <td> </td> <td align="center" valign="top">  $16 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Transfer costs (2) </div></td> <td> </td> <td align="center" valign="top">  $43 million</td> </tr> <tr valign="bottom" style="font-size: 6pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"><b>  $427 million</b></td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-right: 3%; margin-left: 7%"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="90%">  <tr valign="bottom" style="font-size: 5pt"> <td width="5%"> </td> <td width="1%"> </td> <td width="94%"> </td> </tr>   <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">(1) </div></td> <td> </td> <td align="left" valign="top">Consists primarily of consulting fees, contractual cancellations, relocation costs and other costs.</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">(2) </div></td> <td> </td> <td align="left" valign="top">Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight and product line validations.</td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In addition, in January 2009, our Board of Directors approved, and we committed to, a Plant Network Optimization program, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The program is a complement to our 2007 Restructuring plan, and is intended to improve overall gross profit margins. Activities under the Plant Network Optimization program were initiated in the first quarter of 2009 and are expected to be substantially complete by the end of 2012. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We expect that the execution of the Plant Network Optimization program will result in total pre-tax charges of approximately $135 million to $150 million, and that approximately $115 million to $125 million of these charges will result in cash outlays, of which we have made payments of $40 million to date. We have recorded related costs of $79 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of our estimates of costs associated with the Plant Network Optimization program by major type of cost: </div> <div align="center"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="70%">  <tr valign="bottom"> <td width="45%"> </td> <td width="5%"> </td> <td width="30%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Total estimated amount expected to</b></td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Type of cost</b><b></b></td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>be incurred</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring charges:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Termination benefits </div></td> <td> </td> <td align="center" valign="top">  $30 million to $35 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Accelerated depreciation </div></td> <td> </td> <td align="center" valign="top">  $20 million to $25 million</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Transfer costs (1) </div></td> <td> </td> <td align="center" valign="top">  $85 million to $90 million</td> </tr> <tr valign="bottom" style="font-size: 6pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"><b>  $135 million to $150 million</b></td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div style="margin-right: 3%; margin-left: 7%"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="90%">  <tr valign="bottom" style="font-size: 5pt"> <td width="5%"> </td> <td width="1%"> </td> <td width="94%"> </td> </tr>   <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">(1) </div></td> <td> </td> <td align="left" valign="top">Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight, idle facility and product line validations.</td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Further, on February 6, 2010, our Board of Directors approved, and we committed to, a series of management changes and restructuring initiatives (the 2010 Restructuring plan) designed to focus our business, drive innovation, accelerate profitable growth and increase both accountability and shareholder value. Key activities under the plan include the integration of our Cardiovascular and CRM businesses, as well as the restructuring of certain other businesses and corporate functions; the centralization of our research and development organization; the re-alignment of our international structure to reduce our administrative costs and invest in expansion opportunities including significant investments in emerging markets; and the reprioritization and diversification of our product portfolio. Activities under the 2010 Restructuring plan were initiated in the first quarter of 2010 and are expected to be substantially complete by the end of 2012. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We estimate that the 2010 Restructuring plan will result in total pre-tax charges of approximately $180 million to $200 million, and that approximately $165 million to $175 million of these charges will result in cash outlays, of which we have made payments of $69 million to date. We have recorded related costs of $110 million since inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. We expect the execution of the plan will result in the elimination of approximately 1,000 to 1,300 positions by the end of 2012. The following provides a summary of our expected total costs associated with the plan by major type of cost: </div> <div align="center" style="margin-left:5%"> <table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="7%"> </td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Total estimated amount expected to</b></td> </tr> <tr style="font-size: 9pt" valign="bottom"> <td nowrap="nowrap" align="center"><b>Type of cost</b></td> <td> </td> <td nowrap="nowrap" align="center"><b>be incurred</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="3" valign="top" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"> <b>Restructuring charges:</b> </div></td> <td> </td> <td align="left" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"> Termination benefits </div></td> <td> </td> <td align="center" valign="top">$95 million to $100 million</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"> Fixed asset write-offs </div></td> <td> </td> <td align="center" valign="top">$10 million to $15 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"> Other (1) </div></td> <td> </td> <td align="center" valign="top">$55 million to $60 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="left" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"> <b>Restructuring-related expenses:</b> </div></td> <td> </td> <td align="left" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"> Other (2) </div></td> <td> </td> <td align="center" valign="top">$20 million to $25 million</td> </tr> <tr valign="bottom" style="line-height:6pt"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="left" valign="top"> </td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="left" valign="top" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"><b>$180 million to $200 million</b></td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="left" valign="top" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">  </div> </div> <div style="margin-left:8%"> <table width="90%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt; text-align: left"> <tr> <td width="3%"></td> <td width="3%"></td> <td width="93%"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td> <div style="text-align: justify">Includes primarily consulting fees and costs associated with contractual cancellations. </div></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(2)</td> <td> </td> <td> <div style="text-align: justify">Comprised of other costs directly related to restructuring plan, including accelerated depreciation and<br /> infrastructure-related costs. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We recorded restructuring charges pursuant to our restructuring plans of $116 million during 2010, $63 million during 2009, and $78 million during 2008. In addition, we recorded expenses within other lines of our accompanying consolidated statements of operations related to our restructuring initiatives of $53 million during 2010, $67 million during 2009, and $55 million during 2008. The following presents these costs by major type and line item within our accompanying consolidated statements of operations, as well as by program: </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Year Ended December 31, 2010</b></u> </div> <div align="left"> <table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="98%">  <tr valign="bottom"> <td width="44%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Retention</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accelerated</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Transfer</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fixed Asset</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Costs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Write-offs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring charges</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>70</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>11</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>35</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>116</b></td> <td> </td> </tr> <tr style="font-size: 6pt"> <td> </td> <td> </td> <td colspan="27"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring-related expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">7</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">41</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">48</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>7</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>41</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>53</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>70</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>7</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>41</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>11</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>40</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>169</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000">           </td> </tr>  </table> </div> <div align="left"> <table style="font-size: 8.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="98%">  <tr valign="bottom" style="font-size: 18pt"> <td width="44%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Retention</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accelerated</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Transfer</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fixed Asset</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Costs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Write-offs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">2010 Restructuring plan </div></td> <td> </td> <td align="left">  $</td> <td align="right">66</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">11</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">33</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">110</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Plant Network Optimization program </div></td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">7</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">28</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">39</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">2007 Restructuring plan </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">13</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> <td> </td> <td> </td> <td align="right">20</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 2px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>70</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>7</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>41</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>11</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>40</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>169</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000">           </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><u><b>Year Ended December 31, 2009</b></u> </div> <div align="left"> <table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="98%">  <tr valign="bottom"> <td width="44%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Retention</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accelerated</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Transfer</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Fixed Asset</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Costs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Write-offs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring charges</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>34</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>13</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>16</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>63</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring-related expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">8</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">37</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">50</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">10</td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td> </td> <td align="right">14</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>18</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>11</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>37</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>67</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"> <b>$</b></td> <td align="right"><b>34</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>18</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>11</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>37</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>13</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>17</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>130</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000">             </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left"> <table style="font-size: 8.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="98%">  <tr valign="bottom"> <td width="44%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Retention</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accelerated</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Transfer</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fixed Asset</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8.5pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Costs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Write-offs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Plant Network Optimization program </div></td> <td> </td> <td align="left">  $</td> <td align="right">22</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">6</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">12</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">40</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">2007 Restructuring plan </div></td> <td> </td> <td> </td> <td align="right">12</td> <td> </td> <td> </td> <td> </td> <td align="right">18</td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td align="right">25</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">13</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">17</td> <td> </td> <td> </td> <td> </td> <td align="right">90</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>34</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>18</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>11</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>37</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>13</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>17</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>130</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000">             </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><u><b>Year Ended December 31, 2008</b></u> </div> <div align="left"> <table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="98%">  <tr valign="bottom"> <td width="44%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Retention</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accelerated</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Transfer</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Fixed Asset</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Costs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Write-offs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring charges</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>34</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>10</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>34</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>78</b></td> <td> </td> </tr> <tr valign="bottom" style="font-size:6pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring-related expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">9</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">4</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">17</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">27</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>43</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>8</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>4</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>55</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>34</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>43</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>8</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>4</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>10</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>34</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>133</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000">             </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Restructuring and restructuring-related costs recorded in 2008 related entirely to our 2007 Restructuring plan. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Termination benefits represent amounts incurred pursuant to our on-going benefit arrangements and amounts for one-time involuntary termination benefits, and have been recorded in accordance with ASC Topic 712, <i>Compensation – Non-retirement Postemployment Benefits </i>(formerly FASB Statement No. 112, <i>Employer’s Accounting for Postemployment Benefits</i>) and ASC Topic 420, <i>Exit or Disposal Cost Obligations </i>(formerly FASB Statement 146, <i>Accounting for Costs Associated with Exit or Disposal Activities</i>). We expect to record additional termination benefits related to our Plant Network Optimization program and 2010 Restructuring plan in 2011 and 2012 when we identify with more specificity the job classifications, functions and locations of the remaining head count to be eliminated. Retention incentives represent cash incentives, which were recorded over the service period during which eligible employees remained employed with us in order to retain the payment. Other restructuring costs, which represent primarily consulting fees, are being recorded as incurred in accordance with Topic 420. Accelerated depreciation is being recorded over the adjusted remaining useful life of the related assets, and production line transfer costs are being recorded as incurred. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We have incurred cumulative restructuring charges of $433 million and restructuring-related costs of $183 million since we committed to each plan. The following presents these costs by major type and by plan: </div> <div align="left" style="margin-left: 5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="84%">  <tr valign="bottom"> <td width="59%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Plant</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2007</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Restructuring</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Network</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Restructuring</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>plan</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Optimization</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>plan</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2">   <b>Total</b>   </td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Termination benefits </div></td> <td> </td> <td align="left">  $</td> <td align="right">66</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">26</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">204</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">296</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Fixed asset write-offs </div></td> <td> </td> <td> </td> <td align="right">11</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> <td> </td> <td> </td> <td align="right">42</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">28</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">67</td> <td> </td> <td> </td> <td> </td> <td align="right">95</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring charges</b> </div></td> <td> </td> <td> </td> <td align="right"><b>105</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>26</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>302</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>433</b></td> <td> </td> </tr> <tr valign="bottom" style="font-size:12pt"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Retention incentives </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">66</td> <td> </td> <td> </td> <td> </td> <td align="right">66</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Accelerated depreciation </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">13</td> <td> </td> <td> </td> <td> </td> <td align="right">16</td> <td> </td> <td> </td> <td> </td> <td align="right">29</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Transfer costs </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">40</td> <td> </td> <td> </td> <td> </td> <td align="right">43</td> <td> </td> <td> </td> <td> </td> <td align="right">83</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000">   </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Restructuring-related expenses</b> </div></td> <td> </td> <td> </td> <td align="right">  <b>5</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>53</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>125</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>183</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>110</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>79</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>427</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>616</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000">       </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The following is a rollforward of the restructuring liability associated with each of these initiatives, since the inception of the respective plan, which is reported as a component of accrued expenses included in our accompanying consolidated balance sheets: </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left"> <table style="font-size: 7pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="99%">  <tr valign="bottom"> <td width="28%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Plant</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Network</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2010 Restructuring plan</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Optimization</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2007 Restructuring plan</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Subtotal</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Subtotal</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Charges </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">158</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">10</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">168</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">168</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Cash payments </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(23</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(31</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(31</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Accrued as of December 31, 2007</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>135</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>137</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>137</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Charges </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">34</td> <td> </td> <td> </td> <td> </td> <td align="right">34</td> <td> </td> <td> </td> <td> </td> <td align="right">68</td> <td> </td> <td> </td> <td> </td> <td align="right">68</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Cash payments </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(128</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(35</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(163</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(163</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Accrued as of December 31, 2008</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>41</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>42</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>42</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Charges </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">22</td> <td> </td> <td> </td> <td> </td> <td align="right">12</td> <td> </td> <td> </td> <td> </td> <td align="right">17</td> <td> </td> <td> </td> <td> </td> <td align="right">29</td> <td> </td> <td> </td> <td> </td> <td align="right">51</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Cash payments </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(28</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(18</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(46</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(46</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Accrued as of December 31, 2009</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>22</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>-</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>47</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Charges </div></td> <td> </td> <td align="left">  $</td> <td align="right">66</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">28</td> <td> </td> <td> </td> <td align="left">  $</td> <td align="right">94</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td align="right">6</td> <td> </td> <td> </td> <td> </td> <td align="right">9</td> <td> </td> <td> </td> <td> </td> <td align="right">107</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Other adjustments to accruals </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Cash payments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(45</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(20</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(65</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(16</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(5</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(21</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(86</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Accrued as of December 31, 2010</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>21</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>8</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>29</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>26</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>9</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>10</b></td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>65</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="3" align="right" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We made total cash payments associated with restructuring initiatives pursuant to these plans of $133 million during 2010 and have made total cash payments of $479 million since committing to each plan. Each of these payments was made using cash generated from operations, and are comprised of the following: </div> <div align="left" style="margin-left: 5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="86%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Plant</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2007</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Restructuring</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Network</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Restructuring</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>plan</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Optimization</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>plan</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2">   <b>Total</b>   </td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b><u>Year Ended December 31, 2010</u></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Termination benefits </div></td> <td> </td> <td align="left">  $</td> <td align="right">45</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">16</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">61</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Retention incentives </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Transfer costs </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">28</td> <td> </td> <td> </td> <td> </td> <td align="right">13</td> <td> </td> <td> </td> <td> </td> <td align="right">41</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td align="right">29</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>69</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>28</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>36</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>133</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000">       </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b><u>Program to Date</u></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Termination benefits </div></td> <td> </td> <td align="left">  $</td> <td align="right">45</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">195</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">240</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Retention incentives </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">66</td> <td> </td> <td> </td> <td> </td> <td align="right">66</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Transfer costs </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">40</td> <td> </td> <td> </td> <td> </td> <td align="right">43</td> <td> </td> <td> </td> <td> </td> <td align="right">83</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">66</td> <td> </td> <td> </td> <td> </td> <td align="right">90</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>69</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>40</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>370</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>479</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000">       </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE J – SUPPLEMENTAL BALANCE SHEET INFORMATION</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Components of selected captions in our accompanying consolidated balance sheets are as follows: </div> <div align="left" style="margin-left:5%; margin-top:0pt"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">  <tr valign="bottom"> <td width="65%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>As of December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2009</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b><u>Trade accounts receivable, net</u></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Accounts receivable </div></td> <td> </td> <td align="left">  $</td> <td align="right">1,445</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,485</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Less: allowances </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(125</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(110</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1,320</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,375</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> </tr>  </table> </div> <div align="left" style="margin-left:5%; margin-top:0pt"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">  <tr valign="bottom"> <td width="65%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b><u>Inventories</u></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Finished goods </div></td> <td> </td> <td align="left">  $</td> <td align="right">622</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">642</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Work-in-process </div></td> <td> </td> <td> </td> <td align="right">95</td> <td> </td> <td> </td> <td> </td> <td align="right">69</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Raw materials </div></td> <td> </td> <td> </td> <td align="right">177</td> <td> </td> <td> </td> <td> </td> <td align="right">180</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>894</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>891</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> </tr>  </table> </div> <div align="left" style="margin-left:5%; margin-top:0pt"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">  <tr valign="bottom"> <td width="65%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b><u>Property, plant and equipment, net</u></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Land </div></td> <td> </td> <td align="left">  $</td> <td align="right">119</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">118</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Buildings and improvements </div></td> <td> </td> <td> </td> <td align="right">919</td> <td> </td> <td> </td> <td> </td> <td align="right">923</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Equipment, furniture and fixtures </div></td> <td> </td> <td> </td> <td align="right">1,889</td> <td> </td> <td> </td> <td> </td> <td align="right">1,934</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Capital in progress </div></td> <td> </td> <td> </td> <td align="right">241</td> <td> </td> <td> </td> <td> </td> <td align="right">271</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">3,168</td> <td> </td> <td> </td> <td> </td> <td align="right">3,246</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Less: accumulated depreciation </div></td> <td> </td> <td> </td> <td align="right">1,471</td> <td> </td> <td> </td> <td> </td> <td align="right">1,524</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1,697</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,722</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="7" align="right" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="margin-left:5%; margin-top:10pt"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">  <tr valign="bottom"> <td width="65%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <i>(in millions)</i> </div></td> <td> </td> <td colspan="7" align="center"><b>As of December 31,</b></td> </tr> <tr style="font-size: 1px"> <td style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="center"><b>2010</b></td> <td> </td> <td> </td> <td> </td> <td align="center"><b>2009</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b><u>Accrued expenses</u></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Legal reserves </div></td> <td> </td> <td align="left">  $</td> <td align="right">441</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,453</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Payroll and related liabilities </div></td> <td> </td> <td> </td> <td align="right">436</td> <td> </td> <td> </td> <td> </td> <td align="right">472</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Accrued contingent consideration </div></td> <td> </td> <td> </td> <td align="right">9</td> <td> </td> <td> </td> <td> </td> <td align="right">6</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Other </div></td> <td> </td> <td> </td> <td align="right">740</td> <td> </td> <td> </td> <td> </td> <td align="right">678</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1,626</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>2,609</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left" style="margin-left:5%; margin-top:0pt"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">  <tr valign="bottom"> <td width="65%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b><u>Other long-term liabilities</u></b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Legal reserves </div></td> <td> </td> <td align="left">  $</td> <td align="right">147</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">863</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Accrued income taxes </div></td> <td> </td> <td> </td> <td align="right">1,062</td> <td> </td> <td> </td> <td> </td> <td align="right">857</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Accrued contingent consideration </div></td> <td> </td> <td> </td> <td align="right">62</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Other long-term liabilities </div></td> <td> </td> <td> </td> <td align="right">374</td> <td> </td> <td> </td> <td> </td> <td align="right">344</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1,645</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>2,064</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b>NOTE K – INCOME TAXES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our (loss) income before income taxes consisted of the following: </div> <div align="left" style="margin-left:5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">  <tr valign="bottom"> <td width="44%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="14%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="14%"> </td> <td width="2%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> Domestic </div></td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(1,910</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(1,102</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(3,018</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> Foreign </div></td> <td> </td> <td> </td> <td align="right">847</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(206</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">987</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="left">  <b>$</b></td> <td align="right"><b>(1,063</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(1,308</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(2,031</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 3px double #000000">     </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The related provision (benefit) for income taxes consisted of the following: </div> <div align="left" style="margin-left:5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="58%">  <tr valign="bottom"> <td width="44%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="13%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="13%"> </td> <td width="1%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="13%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Current</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Federal </div></td> <td> </td> <td nowrap="nowrap" align="left">  $</td> <td align="right">(83)</td> <td nowrap="nowrap"> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(173)</td> <td nowrap="nowrap"> </td> <td> </td> <td align="left">$</td> <td align="right">110</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">State </div></td> <td> </td> <td> </td> <td align="right">9</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(18)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">27</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Foreign </div></td> <td> </td> <td> </td> <td align="right">125</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">189</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">51</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(193)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">326</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Deferred</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Federal </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(25)</td> <td nowrap="nowrap"> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(115)</td> <td nowrap="nowrap"> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(279)</td> <td nowrap="nowrap"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">State </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4)</td> <td nowrap="nowrap"> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(15)</td> <td nowrap="nowrap"> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(20)</td> <td nowrap="nowrap"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Foreign </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(20)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">40</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(22)</td> <td nowrap="nowrap"> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(49)</td> <td nowrap="nowrap"> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(90)</td> <td nowrap="nowrap"> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(321)</td> <td nowrap="nowrap"> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">     </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(283)</b></td> <td nowrap="nowrap"><b> </b></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>5</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000">     </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The reconciliation of income taxes at the federal statutory rate to the actual provision (benefit)  for income taxes is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="90%">  <tr valign="bottom"> <td width="45%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>2008</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="23" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">U.S. federal statutory income tax rate </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(35.0)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(35.0)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(35.0)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">State income taxes, net of federal benefit </div></td> <td> </td> <td> </td> <td align="right">0.3</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">0.4</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">State law changes on deferred tax </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2.4)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Effect of foreign taxes </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(20.4)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(20.0)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(5.9)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Non-deductible acquisition expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">0.5</td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">0.5</td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">%</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Research credit </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(6.0)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1.3)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(0.5)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Valuation allowance </div></td> <td> </td> <td> </td> <td align="right">2.5</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td> </td> <td align="right">5.1</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td> </td> <td align="right">2.9</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Divestitures </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4.8)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(9.9)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill impairment charges </div></td> <td> </td> <td> </td> <td align="right">59.8</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">45.0</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Intangible asset impairment charges </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">1.5</td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">%</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Legal settlement </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">33.3</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other, net </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1.0)</td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">3.0</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> <td> </td> <td> </td> <td align="right">1.2</td> <td> </td> <td> </td> <td> </td> <td align="right">%</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="23" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>0.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>%</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right"><b>(21.6)</b></td> <td nowrap="nowrap"><b> </b></td> <td> </td> <td> </td> <td align="right"><b>%</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>0.2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>%</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="23" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We had net deferred tax liabilities of $1.198 billion as of December 31, 2010 and $1.281 billion as of December 31, 2009. Gross deferred tax liabilities of $2.281 billion as of December 31, 2010 and $2.382 billion as of December 31, 2009 relate primarily to intangible assets acquired in connection with our prior acquisitions. Gross deferred tax assets of $1.083 billion as of December 31, 2010 and $1.101 billion as of December 31, 2009 relate primarily to the establishment of inventory and product-related reserves, litigation and product liability reserves, purchased research and development, investment write-downs, net operating loss carryforwards and tax credit carryforwards. In light of our historical financial performance and the extent of our deferred tax liabilities, we believe we will recover substantially all of these assets. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will not realize some portion or all of the deferred tax assets. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Significant components of our deferred tax assets and liabilities are as follows: </div> <div align="left" style="margin-left:2%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="94%">  <tr valign="bottom"> <td width="72%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>As of December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left"> <i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Deferred Tax Assets:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Inventory costs, intercompany profit and related reserves </div></td> <td> </td> <td align="left">  $</td> <td align="right">207</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">176</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Tax benefit of net operating loss and credits </div></td> <td> </td> <td> </td> <td align="right">593</td> <td> </td> <td> </td> <td> </td> <td align="right">385</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Reserves and accruals </div></td> <td> </td> <td> </td> <td align="right">253</td> <td> </td> <td> </td> <td> </td> <td align="right">260</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Restructuring-related charges and purchased research and development </div></td> <td> </td> <td> </td> <td align="right">17</td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Litigation and product liability reserves </div></td> <td> </td> <td> </td> <td align="right">66</td> <td> </td> <td> </td> <td> </td> <td align="right">323</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Unrealized gains and losses on derivative financial instruments </div></td> <td> </td> <td> </td> <td align="right">39</td> <td> </td> <td> </td> <td> </td> <td align="right">25</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Investment write-down </div></td> <td> </td> <td> </td> <td align="right">32</td> <td> </td> <td> </td> <td> </td> <td align="right">33</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Stock-based compensation </div></td> <td> </td> <td> </td> <td align="right">90</td> <td> </td> <td> </td> <td> </td> <td align="right">92</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Federal benefit of uncertain tax positions </div></td> <td> </td> <td> </td> <td align="right">132</td> <td> </td> <td> </td> <td> </td> <td align="right">129</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">11</td> <td> </td> <td> </td> <td> </td> <td align="right">6</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">1,440</td> <td> </td> <td> </td> <td> </td> <td align="right">1,430</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Less valuation allowance </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(357</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(329</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">1,083</td> <td> </td> <td> </td> <td> </td> <td align="right">1,101</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Deferred Tax Liabilities:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Property, plant and equipment </div></td> <td> </td> <td> </td> <td align="right">47</td> <td> </td> <td> </td> <td> </td> <td align="right">57</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Intangible assets </div></td> <td> </td> <td> </td> <td align="right">2,227</td> <td> </td> <td> </td> <td> </td> <td align="right">2,298</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Litigation settlement </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">2,281</td> <td> </td> <td> </td> <td> </td> <td align="right">2,382</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Net Deferred Tax Liabilities</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1,198</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,281</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our deferred tax assets and liabilities are included in the following locations within our accompanying consolidated balance sheets (in millions): </div> <div align="left" style="margin-left:5%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="81%">  <tr valign="bottom"> <td width="48%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="19%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="8%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Location in</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>As of December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="center"><b>Component</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Balance Sheet</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Current deferred tax asset </div></td> <td> </td> <td colspan="3" align="center">Deferred income taxes</td> <td> </td> <td align="left">  $</td> <td align="right">429</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">572</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Non-current deferred tax asset </div></td> <td> </td> <td colspan="3" align="center">Other long-term assets</td> <td> </td> <td> </td> <td align="right">19</td> <td> </td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Deferred Tax Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">448</td> <td> </td> <td> </td> <td> </td> <td align="right">596</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:25px; text-indent:-15px">Current deferred tax liability </div></td> <td> </td> <td colspan="3" align="center">Other current liabilities</td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:25px; text-indent:-15px">Non-current deferred tax liability </div></td> <td> </td> <td colspan="3" align="center">Deferred income taxes</td> <td> </td> <td> </td> <td align="right">1,644</td> <td> </td> <td> </td> <td> </td> <td align="right">1,875</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Deferred Tax Liabilities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1,646</td> <td> </td> <td> </td> <td> </td> <td align="right">1,877</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"> <b>Net Deferred Tax Liabilities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1,198</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,281</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of December 31, 2010, we have U.S. tax net operating loss, capital loss and tax credits, the tax effect of which was $252 million, as compared to $261 million as of December 31, 2009. In addition, we have foreign tax net operating loss carryforwards and tax credits, the tax effect of which was $341 million as of December 31, 2010, as compared to $334 million as of December 31, 2009. These tax attributes will expire periodically beginning in 2011. After consideration of all positive and negative evidence, we believe that it is more likely than not that a portion of the deferred tax assets will not be realized. As a result, we established a valuation allowance of $357 million as of December 31, 2010 and $329 million as of December 31, 2009. The increase in the valuation allowance as of December 31, 2010, as compared to December 31, 2009, is attributable primarily to foreign net operating losses generated during the year. The income tax impact of the unrealized gain or loss component of other comprehensive income was a benefit of $16 million in 2010, a benefit of $4 million in 2009, and a provision of $1 million in 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We do not provide income taxes on unremitted earnings of our foreign subsidiaries where we have indefinitely reinvested such earnings in our foreign operations. We do not believe it is practical to estimate the amount of income taxes payable on the earnings that are indefinitely reinvested in foreign operations. Unremitted earnings of our foreign subsidiaries that we have indefinitely reinvested in foreign operations are $9.193 billion as of December 31, 2010 and $9.355 billion as of December 31, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of December 31, 2010, we had $965 million of gross unrecognized tax benefits, of which net $859 million, if recognized, would affect our effective tax rate. As of December 31, 2009, we had $1.038 billion of gross unrecognized tax benefits, of which net $908 million, exclusive of interest and penalties, if recognized, would affect our effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions): </div> <div align="left" style="margin-left:3%"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="88%">  <tr valign="bottom"> <td width="64%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Year Ended December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>2008</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Beginning Balance</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>1,038</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,107</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,180</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Additions based on positions related to the current year </div></td> <td> </td> <td> </td> <td align="right">55</td> <td> </td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> <td> </td> <td> </td> <td align="right">128</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Additions based on positions related to the prior year </div></td> <td> </td> <td> </td> <td align="right">44</td> <td> </td> <td> </td> <td> </td> <td align="right">17</td> <td> </td> <td> </td> <td> </td> <td align="right">48</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Reductions for tax positions of prior years </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(124</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(32</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(161</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Settlements with taxing authorities </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(35</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(65</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(82</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Statute of limitation expirations </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(13</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(20</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(6</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Ending Balance</b> </div></td> <td> </td> <td align="left">  <b>$</b></td> <td align="right"><b>965</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,038</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,107</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. We have concluded all U.S. federal income tax matters through 2000 and substantially all material state, local, and foreign income tax matters through 2001. We resolved a number of foreign examinations during 2010. As a result of these activities, we decreased our reserve for uncertain tax positions by $9 million, inclusive of $3 million of interest and penalties. In addition, as a result of the expiration of statutes of limitations in various foreign and state jurisdictions, we decreased our reserve for uncertain tax positions by $20 million, inclusive of $7 million of interest and penalties. Further, during 2010, we concluded the appeals process for the federal tax examination covering years 2002 through 2005 and decreased our reserve for uncertain tax positions by $72 million, inclusive of $21 million of interest and penalties, net of payments. We also re-measured an uncertain tax position due to a favorable court ruling issued in a similar third-party case and resolved another uncertain tax position resulting from a favorable taxpayer motion issued in a similar third-party case, which resulted in a decrease of $91 million inclusive of $25 million of interest and penalties. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2009, we received favorable foreign court decisions and resolved certain foreign matters. As a result of these activities, we decreased our reserve for uncertain tax positions by $20 million, inclusive of $7 million of interest and penalties. In addition, statutes of limitations expired in various foreign and state jurisdictions, as a result, decreased our reserve for uncertain tax positions by $29 million, inclusive of interest and penalties. We also resolved certain litigation-related matters, described our 2009 Annual Report filed on Form 10-K. Based on the outcome of the settlements, we reassessed the reserve for uncertain tax positions previously recorded on certain positions and decreased our reserve by $22 million, inclusive of $1 million of interest. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">During 2008, we resolved certain matters in federal, state, and foreign jurisdictions for Guidant and Boston Scientific for the years 1998- 2005. We settled multiple federal issues at the Internal Revenue Service (IRS) examination and Appellate levels, including issues related to Guidant’s acquisition of Intermedics, Inc., and various litigation settlements. We also received favorable foreign court decisions and a favorable outcome related to our foreign research credit claims. As a result of these audit activities, we decreased our reserve for uncertain tax positions, excluding tax payments, by $156 million, inclusive of $37 million of interest and penalties during 2008. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 17, 2010, we received Notices of Deficiency from the IRS reflecting proposed audit adjustments for Guidant Corporation for the 2001-2003 tax years. The incremental tax liability asserted by the IRS is $525 million plus interest. The primary issue in dispute is the transfer pricing in connection with the technology license agreements between domestic and foreign subsidiaries of Guidant. We believe we have meritorious defenses for our tax filing and we intend to file a petition to the U.S. Tax Court in early 2011. No payments will be made on the issue until it is resolved, which may take several years. We believe that our income tax reserves associated with this matter are adequate and the final resolution will not have a material impact on our financial condition or results of operations. However, final resolution is uncertain and could have a material impact on our financial condition or results of operation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We recognize interest and penalties related to income taxes as a component of income tax expense. We had $285 million accrued for gross interest and penalties as of December 31, 2010 and $299 million as of December 31, 2009. The decrease in gross interest and penalties was the result of a $72 million reduction, due primarily to the conclusion of the appeals process for the federal tax examination covering years 2002-2005, payments related to audit settlements, re-measurement and resolution of uncertain tax positions due to favorable court rulings and favorable taxpayer motion issued in similar third-party cases, and statute expirations, offset by $58 million recognized in our consolidated statements of operations. We released $14 million of total interest and penalties related to income taxes in 2010, and recognized $31 million in 2009 and $4 million in 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">It is reasonably possible that within the next 12 months we will resolve multiple issues including transfer pricing, research and development credit and transactional related issues, with foreign, federal and state taxing authorities, in which case we could record a reduction in our balance of unrecognized tax benefits of up to approximately $14 million. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE L – COMMITMENTS AND CONTINGENCIES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The medical device market in which we primarily participate is largely technology driven. Physician customers, particularly in interventional cardiology, have historically moved quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation is inherently complex and unpredictable. Furthermore, appellate courts can overturn lower court patent decisions. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only for individual cases, but also for a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies. Several third parties have asserted that certain of our current and former product offerings infringe patents owned or licensed by them. We have similarly asserted that other products sold by our competitors infringe patents owned or licensed by us. Adverse outcomes in one or more of the proceedings against us could limit our ability to sell certain products in certain jurisdictions, or reduce our operating margin on the sale of these products and could have a material adverse effect on our financial position, results of operations or liquidity. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In particular, although we have resolved multiple litigation matters with Johnson & Johnson, described herein, we continue to be involved in patent litigation with them, particularly relating to drug-eluting stent systems. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operation or liquidity. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In the normal course of business, product liability, securities and commercial claims are asserted against us. Similar claims may be asserted against us in the future related to events not known to management at the present time. We are substantially self-insured with respect to product liability claims and intellectual property infringement, and maintain an insurance policy providing limited coverage against securities claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, securities and commercial litigation, and other legal proceedings in the future, regardless of their outcome, could have a material adverse effect on our financial position, results of operations and liquidity. In addition, the medical device industry is the subject of numerous governmental investigations often involving regulatory, marketing and other business practices. These investigations could result in the commencement of civil and criminal proceedings, substantial fines, penalties and administrative remedies, divert the attention of our management and have an adverse effect on our financial position, results of operations and liquidity. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. In accordance with ASC Topic 450<i>, Contingencies </i>(formerly FASB Statement No. 5, <i>Accounting for Contingencies</i>), we accrue anticipated costs of settlement, damages, losses for general product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Our accrual for legal matters that are probable and estimable was $588 million as of December 31, 2010 and $2.316 billion as of December 31, 2009, and includes estimated costs of settlement, damages and defense. The decrease in our accrual is due primarily to the payment of $1.725 billion to Johnson & Johnson in connection with the patent litigation settlement discussed below. We continue to assess certain litigation and claims to determine the amounts, if any, that management believes will be paid as a result of such claims and litigation and, therefore, additional losses may be accrued and paid in the future, which could materially adversely impact our operating results, cash flows and our ability to comply with our debt covenants. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In management’s opinion, we are not currently involved in any legal proceedings other than those specifically identified below, which, individually or in the aggregate, could have a material effect on our financial condition, operations and/or cash flows. Unless included in our legal accrual or otherwise indicated below, a range of loss associated with any individual material legal proceeding cannot be estimated. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Patent Litigation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Litigation with Johnson & Johnson (including its subsidiary, Cordis Corporation)</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On April 13, 1998, Cordis Corporation filed suit against Boston Scientific Scimed, Inc. and us in the U.S. District Court for the District of Delaware, alleging that our former NIR<sup style="font-size: 85%; vertical-align: text-top">®</sup> stent infringed three claims of two patents (the Fischell patents) owned by Cordis and seeking damages and injunctive relief. On May 2, 2005, the District Court entered judgment that none of the three asserted claims was infringed, although two of the claims were not invalid. The District Court also found the two patents unenforceable for inequitable conduct. Cordis appealed the non-infringement finding of one claim in one patent and the unenforceability of that patent. We cross appealed the finding that one of the two claims was not invalid. Cordis did not appeal as to the second patent. On June 29, 2006, the Court of Appeals upheld the finding that the claim was not invalid, remanded the case to the District Court for additional factual findings related to inequitable conduct, and did not address the finding that the claim was not infringed. On August 10, 2009, the District Court reversed its finding that the two patents were unenforceable for inequitable conduct. On August 24, 2009, we asked the District Court to reconsider and on March 31, 2010, the District Court denied our request for reconsideration. On April 2, 2010, Cordis filed an appeal and on April 9, 2010, we filed a cross appeal. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On each of May 25, June 1, June 22 and November 27, 2007, Boston Scientific Scimed, Inc. and we filed a declaratory judgment action against Johnson & Johnson and Cordis Corporation in the U.S. District Court for the District of Delaware seeking a declaratory judgment of invalidity of four U.S. patents (the Wright and Falotico patents) owned by them and of non-infringement of the patents by the PROMUS® coronary stent system, supplied to us by Abbott Laboratories. On February 21, 2008, Johnson & Johnson and Cordis filed counterclaims for infringement seeking an injunction and a declaratory judgment of validity. On June 25, 2009, we amended our complaints to allege that the four patents owned by Johnson & Johnson and Cordis are unenforceable. On January 20, 2010, the District Court found the four patents owned by Johnson & Johnson and Cordis invalid. On February 17, 2010, Johnson & Johnson and Cordis appealed the District Court’s decision. The oral argument on appeal occurred on January 11, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On February 1, 2008, Wyeth Corporation and Cordis Corporation filed an amended complaint against Abbott Laboratories, adding us and Boston Scientific Scimed, Inc. as additional defendants to the complaint. The suit alleges that the PROMUS® coronary stent system, supplied to us by Abbott, infringes three U.S. patents (the Morris patents) owned by Wyeth and licensed to Cordis. The suit was filed in the U.S. District Court for the District of New Jersey seeking monetary and injunctive relief. A Markman hearing was held on July 15, 2010. On November 3, 2010, the District Court granted a motion to bifurcate damages from liability in the case. A liability trial is scheduled to begin September 12, 2011. On January 7, 2011, Wyeth and Cordis withdrew their infringement claim as to one of the patents. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On September 22, 2009, Cordis Corporation, Cordis LLC and Wyeth Corporation filed a complaint for patent infringement against Abbott Laboratories, Abbott Cardiovascular Systems, Inc., Boston Scientific Scimed, Inc. and us alleging that the PROMUS® coronary stent system, supplied to us by Abbott, infringes a patent (the Llanos patent) owned by Cordis and Wyeth that issued on September 22, 2009. The suit was filed in the U.S. District Court for the District of New Jersey seeking monetary and injunctive relief. On September 22, 2009, we filed a declaratory judgment action in the U.S. District Court for the District of Minnesota against Cordis and Wyeth seeking a declaration that the patent is invalid and not infringed by the PROMUS® coronary stent system, supplied to us by Abbott. On January 19, 2010, the Minnesota District Court transferred our suit to the U.S. District Court for the District of New Jersey and on February 17, 2010, the Minnesota case was dismissed. On July 13, 2010, Cordis filed a motion to amend the complaint to add an additional patent, which the New Jersey District Court granted on August 2, 2010. Cordis filed an amended complaint on August 9, 2010. On September 3, 2010 we filed an answer to the amended complaint along with counterclaims of invalidity and non-infringement. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 4, 2009, Boston Scientific Corporation and Boston Scientific Scimed, Inc. filed a complaint for patent infringement against Cordis Corporation alleging that its Cypher Mini™ stent product infringes a U.S. patent (the Jang patent) owned by us. The suit was filed in the U.S. District Court for the District of Minnesota seeking monetary and injunctive relief. On January 19, 2010, Cordis filed its answer as well as a motion to transfer the suit to the U.S. District Court for the District of Delaware. On April 16, 2010, the Minnesota District Court granted Cordis’ motion to transfer the case to Delaware. A trial has been scheduled to begin on May 5, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On January 15, 2010, Cordis Corporation filed a complaint against us and Boston Scientific Scimed, Inc. alleging that the PROMUS® coronary stent system, supplied to us by Abbott, infringes three patents (the Fischell patents) owned by Cordis. The suit was filed in the U.S. District Court for the District of Delaware and seeks monetary and injunctive relief. A trial is scheduled to begin on April 9, 2012. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Litigation with Medtronic, Inc.</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 17, 2007, Medtronic, Inc. filed a declaratory judgment action in the U.S. District Court for the District of Delaware against us, Guidant Corporation, and Mirowski Family Ventures L.L.C., challenging its obligation to pay royalties to Mirowski on certain cardiac resynchronization therapy devices by alleging non-infringement and invalidity of certain claims of two patents owned by Mirowski and exclusively licensed to Guidant and sublicensed to Medtronic. On November 21, 2008, Medtronic filed an amended complaint adding unenforceability of the patents. A trial was held in January 2010 and a decision has not yet been rendered. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Other Stent System Patent Litigation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On May 19, 2005, G. David Jang, M.D. filed suit against us alleging breach of contract relating to certain patent rights covering stent technology. The suit was filed in the U.S. District Court for the Central District of California seeking monetary damages and rescission of the contract. After a Markman ruling relating to the Jang patent rights, Dr. Jang stipulated to the dismissal of certain claims alleged in the complaint with a right to appeal. In February 2007, the parties agreed to settle the other claims of the case. On May 23, 2007, Jang filed an appeal with respect to the remaining patent claims. On July 11, 2008, the Court of Appeals vacated the District Court’s consent judgment and remanded the case back to the District Court for further clarification. On June 11, 2009, the District Court ordered a stay of the action pursuant to the parties’ joint stipulation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 5, 2009, Dr. Jang served a lien notice on us seeking a portion of any recovery from Johnson & Johnson for infringement of the Jang patent, and on May 25, 2010, Dr. Jang filed a formal suit in the U.S. District Court for the Central District of California. On June 5, 2010, we answered denying the allegations and on July 2, 2010, we filed a motion to transfer the action to the U.S. District Court for the District of Delaware. On August 9, 2010, the Central California District Court ordered the case transferred to Delaware. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On March 16, 2009, OrbusNeich Medical, Inc. filed suit against us in the U.S. District Court for the Eastern District of Virginia alleging that our VeriFLEX™ (Liberté®) bare-metal coronary stent system infringes two U.S. patents (the Addonizio and Pazienza patents) owned by it. The complaint also alleges breach of contract and misappropriation of trade secrets and seeks monetary and injunctive relief. On April 13, 2009, we answered denying the allegations and filed a motion to transfer the case to the U.S. District Court for the District of Minnesota as well as a motion to dismiss the state law claims. On June 8, 2009, the case was transferred to the U.S. District Court for the District of Massachusetts. On September 11, 2009, OrbusNeich filed an amended complaint against us. On October 2, 2009, we filed a motion to dismiss the non-patent claims and, on October 20, 2009, we filed an answer to the amended complaint. On March 18, 2010, the Massachusetts District Court dismissed OrbusNeich’s unjust enrichment and fraud claims, but denied our motion to dismiss the remaining state law claims. On April 14, 2010, OrbusNeich filed a motion to amend its complaint to add another patent (another Addonizio patent). On January 21, 2011, OrbusNeich moved for leave to amend its complaint to drop its misappropriation of trade secret, violation of Massachusetts Business Practices Act and unfair competition claims from the case. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On November 17, 2009, Boston Scientific Scimed, Inc. filed suit against OrbusNeich Medical, Inc. and certain of its subsidiaries in the Hague District Court in the Netherlands alleging that OrbusNeich’s sale of the Genous stents infringes a patent owned by us (the Keith patent) and seeking monetary damages and injunctive relief. A hearing was held on June 18, 2010. In December 2010, the case was stayed pending the outcome of an earlier case on the same patent. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On September 27, 2010, Boston Scientific Scimed, Inc., Boston Scientific Ltd., Endovascular Technologies, Inc. and we filed suit against Taewoong Medical, Co., Ltd., Standard Sci-Tech, Inc., EndoChoice, Inc. and Sewoon Medical Co., Ltd for infringement of three patents on stents for use in the GI system (the Pulnev and Hankh patents) and against Cook Medical Inc. (and related entities) for infringement of the same three patents and an additional patent (the Thompson patent). The suit was filed in the U.S. District Court for the District of Massachusetts seeking monetary damages and injunctive relief. On December 2, 2010, we amended our complaint to add infringement of six additional Pulnev patents, bringing the total number of asserted patents to ten. In January 2011, the defendants answered the complaint, denying infringement and counterclaiming for invalidity and unenforceability of the asserted patents. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Other Patent Litigation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On August 24, 2010, EVM Systems, LLC filed suit against us, Cordis Corporation, Abbott Laboratories Inc. and Abbott Vascular, Inc. in the U.S. District Court for the Eastern District of Texas alleging that our vena cava filters, including the Escape Nitinol Stone Retrieval Device, infringe two patents (the Sachdeva patents) and seeking monetary damages. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On May 17, 2010, Dr. Luigi Tellini filed suit against us and certain of our subsidiaries, Guidant Italia S.r.l. and Boston Scientific S.p.A., in the Civil Tribunal in Milan, Italy alleging certain of our Cardiac Rhythm Management (CRM) products infringe an Italian patent (the Tellini patent) owned by Dr. Tellini and seeking monetary damages. We filed our response on October 26, 2010. During a hearing on November 16, 2010, Dr. Tellini’s claims were dismissed with a right to refile amended claims. Dr. Tellini refiled amended claims on January 10, 2011. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Product Liability Related Litigation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Cardiac Rhythm Management</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Two product liability class action lawsuits and more than 37 individual lawsuits involving approximately 37 individual plaintiffs remain pending in various state and federal jurisdictions against Guidant alleging personal injuries associated with defibrillators or pacemakers involved in certain 2005 and 2006 product communications. The majority of the cases in the United States are pending in federal court but approximately seven cases are currently pending in state courts. On November 7, 2005, the Judicial Panel on Multi-District Litigation established MDL-1708 (MDL) in the U.S. District Court for the District of Minnesota and appointed a single judge to preside over all the cases in the MDL. In April 2006, the personal injury plaintiffs and certain third-party payors served a Master Complaint in the MDL asserting claims for class action certification, alleging claims of strict liability, negligence, fraud, breach of warranty and other common law and/or statutory claims and seeking punitive damages. The majority of claimants do not allege physical injury, but sue for medical monitoring and anxiety. On July 12, 2007, we reached an agreement to settle certain claims, including those associated with the 2005 and 2006 product communications, which was amended on November 19, 2007. Under the terms of the amended agreement, subject to certain conditions, we would pay a total of up to $240 million covering up to 8,550 patient claims, including almost all of the claims that have been consolidated in the MDL as well as other filed and unfiled claims throughout the United States. On June 13, 2006, the Minnesota Supreme Court appointed a single judge to preside over all Minnesota state court lawsuits involving cases arising from the product communications. At the conclusion of the MDL settlement in 2010, 8,180 claims had been approved for participation. As a result, we made all required settlement payments of approximately $234 million, and no other payments are due under the MDL settlement agreement. On April 6, 2009, September 24, 2009, April 16, 2010 and August 30, 2010, the MDL Court issued orders dismissing with prejudice the claims of most plaintiffs participating in the settlement; the claims of settling plaintiffs whose cases were pending in state courts have been or will be dismissed by those courts. On April 22, 2010, the MDL Court certified an order from the Judicial Panel on Multidistrict Litigation remanding the remaining cases to their trial courts of origin. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We are aware of more than 33 Guidant product liability lawsuits pending internationally associated with defibrillators or pacemakers, including devices involved in the 2005 and 2006 product communications, generally seeking monetary damages. Six of those suits pending in Canada are putative class actions, four of which are stayed pending the outcome of two lead class actions. On April 10, 2008, the Justice of Ontario Court certified a class of persons in whom defibrillators were implanted in Canada and a class of family members with derivative claims. On May 8, 2009, the Court certified a class of persons in whom pacemakers were implanted in Canada and a class of family members with derivative claims. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Guidant or its affiliates have been defendants in five separate actions brought by private third-party providers of health benefits or health insurance (TPPs). In these cases, plaintiffs allege various theories of recovery, including derivative tort claims, subrogation, violation of consumer protection statutes and unjust enrichment, for the cost of healthcare benefits they allegedly paid in connection with the devices that have been the subject of Guidant’s product communications. Two of the TPP actions were previously dismissed without prejudice, but have now been revived as a result of the MDL Court’s January 15, 2010 order, and are pending in the U.S. District Court for the District of Minnesota, although they are proceeding separately from the MDL. A third action was recently remanded by the MDL Court to the U.S. District Court for the Southern District of Florida. Two other TPP actions were pending in state court in Minnesota, but were settled and dismissed with prejudice by court order dated June 3, 2010. The settled cases were brought by Blue Cross & Blue Shield plans and United Healthcare and its affiliates. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>ANCURE Endograft System</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of June 2003, Guidant had outstanding 14 suits alleging product liability-related causes of action relating to the ANCURE Endograft System for the treatment of abdominal aortic aneurysms. Subsequently, Guidant was notified of additional claims and served with additional complaints relating to the ANCURE System. From time to time, Guidant has settled certain of the individual claims and suits for amounts that were not material to us. As of January 17, 2011, there were three pending suits alleging product liability-related causes of action relating to the ANCURE Endograft System, one is pending in the U.S. District Court for the District of Minnesota and the other two are pending in state court in California. In 2009, the California state court dismissed four suits on summary judgment. On February 9, 2010, the California Court of Appeals upheld the dismissal of two of these cases, and on June 9, 2010, the California Supreme Court declined to review the dismissals of those two cases. On December 12, 2010, the U.S. Supreme Court also declined to review the dismissals in those two cases. On November 18, 2010, the California Court of Appeals upheld the dismissal of the other two cases. It is not yet known whether the plaintiffs in those two cases will pursue further appeals. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Additionally, as of January 17, 2011 Guidant had been notified of over 130 potential unfiled claims alleging product liability relating to the ANCURE System. The claimants generally allege that they or their relatives suffered injuries, and in certain cases died, as a result of purported defects in the device or the accompanying warnings and labeling. It is uncertain how many of these claims will ultimately be pursued against Guidant. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Securities Related Litigation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On September 23, 2005, Srinivasan Shankar, individually and on behalf of all others similarly situated, filed a purported securities class action suit in the U.S. District Court for the District of Massachusetts on behalf of those who purchased or otherwise acquired our securities during the period March 31, 2003 through August 23, 2005, alleging that we and certain of our officers violated certain sections of the Securities Exchange Act of 1934. Four other plaintiffs, individually and on behalf of all others similarly situated, each filed additional purported securities class action suits in the same court on behalf of the same purported class. On February 15, 2006, the District Court ordered that the five class actions be consolidated and appointed the Mississippi Public Employee Retirement System Group as lead plaintiff. A consolidated amended complaint was filed on April 17, 2006. The consolidated amended complaint alleges that we made material misstatements and omissions by failing to disclose the supposed merit of the Medinol litigation and U.S. Department of Justice (DOJ) investigation relating to the 1998 NIR ON® Ranger with Sox stent recall, problems with the TAXUS® drug-eluting coronary stent systems that led to product recalls, and our ability to satisfy U.S. Food and Drug Administration (FDA) regulations concerning medical device quality. The consolidated amended complaint seeks unspecified damages, interest, and attorneys’ fees. The defendants filed a motion to dismiss the consolidated amended complaint on June 8, 2006, which was granted by the District Court on March 30, 2007. On April 16, 2008, the U.S. Court of Appeals for the First Circuit reversed the dismissal of only plaintiff’s TAXUS® stent recall-related claims and remanded the matter for further proceedings. On February 25, 2009, the District Court certified a class of investors who acquired our securities during the period November 30, 2003 through July 15, 2004. The defendants filed a motion for summary judgment and a hearing on the motion was held on April 21, 2010. On April 27, 2010, the District Court granted defendants’ motion and on April 28, 2010, the District Court entered judgment in defendants’ favor and dismissed the case. The plaintiffs filed a notice of appeal on May 27, 2010. The oral argument in the First Circuit Court of Appeals is scheduled for February 10, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On April 9, 2010, the City of Roseville Employees’ Retirement System individually and on behalf of purchasers of our securities during the period from April 20, 2009 to March 12, 2010, filed a purported securities class action suit in the U.S. District Court for the District of Massachusetts. The suit alleges that we and certain of our current and former officers violated certain sections of the Securities Exchange Act of 1934 and seeks unspecified monetary damages. The suit claims that our stock price was artificially inflated because we failed to disclose certain matters with respect to our CRM business. An order was issued on July 12, 2010 appointing KBC Asset Management NV and Steelworkers Pension Trust as co-lead plaintiffs and the selection of lead class counsel. The plaintiffs filed an amended class action complaint on September 14, 2010. In the amended complaint, the plaintiffs narrowed the alleged class period from October 20, 2009 to February 10, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On April 14, 2010, we received a letter from the United Union of Roofers, Waterproofers and Allied Workers Local Union No. 8 (Local 8) demanding that our Board of Directors seek to remedy any legal violations committed by current and former officers and directors during the period beginning April 20, 2009 and continuing through March 12, 2010. The letter alleges that our officers and directors caused us to issue false and misleading statements and failed to disclose material adverse information regarding serious issues with our CRM business. The matter was referred to a special committee of the Board to investigate and then make a recommendation to the full Board. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On June 21, 2010, we received a shareholder derivative complaint filed by Rick Barrington individually and on behalf of all others similarly situated against all of our current directors, certain former directors and certain current and former officers seeking to remedy their alleged breaches of fiduciary duties that allegedly caused losses to us during the purported relevant period of April 20, 2009 to March 12, 2010. The allegations in this matter are largely the same as those asserted in the City of Roseville case. The case was filed in the U.S. District Court for the District of Massachusetts on behalf of purchasers of our securities during the period from April 20, 2009 through March 12, 2010. On October 7, 2010, Mr. Barrington filed an amended complaint. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On August 19, 2010, the Iron Workers District Council Southern Ohio and Vicinity Pension Trust filed a putative shareholder derivative class action lawsuit against us and our Board of Directors in the U.S. District Court for the District of Delaware. The allegations and remedies sought in the complaint are largely the same as those in the original complaint filed by the City of Roseville Employees’ Retirement System on April 9, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 22, 2010, Sanjay Israni filed a shareholder derivative complaint against us and against certain directors and officers purportedly seeking to remedy alleged breaches of fiduciary duties that allegedly caused losses to us. The relevant period defined in the complaint is from April 20, 2009 to March 30, 2010. The allegations in the complaint are largely the same as those contained in the shareholder derivative action filed by Rick Barrington. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Governmental Proceedings</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Boston Scientific Corporation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In December 2007, we were informed by the U.S. Attorney’s Office for the Northern District of Texas that it was conducting an investigation of allegations related to improper promotion of biliary stents for off-label uses. The allegations were set forth in a <i>qui tam </i>whistle-blower complaint, which named us and certain of our competitors. The complaint remained under confidential seal until January 11, 2010 when, following the federal government’s decision not to intervene in the case, the U.S. District Court for the Northern District of Texas unsealed the complaint. We filed a motion to dismiss on July 16, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On June 26, 2008, the U.S. Attorney’s Office for the District of Massachusetts issued a separate subpoena to us under the Health Insurance Portability & Accountability Act of 1996 (HIPAA) pursuant to which the U.S. Department of Justice requested the production of certain documents and information related to our biliary stent business. We continue to cooperate with the subpoena request and related investigation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On June 27, 2008, the Republic of Iraq filed a complaint against our wholly-owned subsidiary, BSSA France, and 92 other defendants in the U.S. District Court of the Southern District of New York. The complaint alleges that the defendants acted improperly in connection with the sale of products under the United Nations Oil for Food Program. The complaint alleges Racketeer Influenced and Corrupt Organizations Act (RICO) violations, conspiracy to commit fraud and the making of false statements and improper payments, and seeks monetary and punitive damages. On July 31, 2009, the plaintiff filed an amended complaint, which has been opposed by the defendants. On August 10, 2010, defendants filed additional procedural motions regarding its notice of supplemental authority, initially filed by the defendants on July 6, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On July 14, 2008, we received a subpoena from the Attorney General for the State of New Hampshire requesting information in connection with our refusal to sell medical devices or equipment intended to be used in the administration of spinal cord stimulation trials to practitioners other than practicing medical doctors. We have responded to the New Hampshire Attorney General’s request. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Guidant / Cardiac Rhythm Management</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On November 2, 2005, the Attorney General of the State of New York filed a civil complaint against Guidant pursuant to the consumer protection provisions of New York’s Executive Law, alleging that Guidant concealed from physicians and patients a design flaw in its VENTAK PRIZM® 2 1861 defibrillator from approximately February 2002 until May 23 2005 and by Guidant’s concealment of this information, it engaged in repeated and persistent fraudulent conduct in violation of the law. The New York Attorney General sought permanent injunctive relief, restitution for patients in whom a VENTAK PRIZM® 2 1861 defibrillator manufactured before April 2002 was implanted, disgorgement of profits, and all other proper relief. The case was removed from New York State Court in 2005 and transferred to the MDL Court in the U.S. District Court for the District of Minnesota in 2006. On April 26, 2010, the MDL Court certified an order remanding the remaining cases to the trial courts. On or about May 7, 2010, the New York Attorney General’s lawsuit was remanded to the U.S. District Court for the Southern District of New York. In December 2010, Guidant and the New York Attorney General reached an agreement in principle to resolve this matter. Under the terms of the settlement Guidant agreed to pay less than $1 million and to continue in effect certain patient safety, product communication and other administrative procedure terms of the multistate settlement reached with other state Attorneys General in 2007. On January 6, 2011, the District Court entered a consent order and judgment concluding the matter. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In October 2005, Guidant received an administrative subpoena from the U.S. Department of Justice (DOJ), acting through the U.S. Attorney’s office in Minneapolis, issued under the Health Insurance Portability & Accountability Act of 1996 (HIPAA). The subpoena requested documents relating to alleged violations of the Food, Drug, and Cosmetic Act occurring prior to our acquisition of Guidant involving Guidant’s VENTAK PRIZM® 2, CONTAK RENEWAL® and CONTAK RENEWAL 2 devices. Guidant cooperated with the request. On November 3, 2009, Guidant and the DOJ reached an agreement in principle to resolve the matters raised in the Minneapolis subpoena. Under the terms of the agreement, Guidant would plead to two misdemeanor charges related to failure to include information in reports to the FDA and we will pay approximately $296 million in fines and forfeitures on behalf of Guidant. We recorded a charge of $294 million in the third quarter of 2009 as a result of the agreement in principle, which represents the $296 million charge associated with the agreement, net of a $2 million reversal of a related accrual. On February 24, 2010, Guidant entered into a plea agreement and sentencing stipulations with the Minnesota U.S. Attorney and the Office of Consumer Litigation of the DOJ documenting the agreement in principle. On April 5, 2010, Guidant formally pled guilty to the two misdemeanor charges. On April 27, 2010, the District Court declined to accept the plea agreement between Guidant and the DOJ. On January 12, 2011, following a review of the case by the U.S. Probation office for the District of Minnesota, the District Court accepted Guidant’s plea agreement with the DOJ resolving this matter. The Court placed Guidant on probation for three years, with annual reviews to determine if early discharge from probation will be ordered. During the probationary period, Guidant will provide the probation office with certain reports on its operations. In addition, Boston Scientific voluntarily committed to contribute a total of $15 million to its Close the Gap and Science, Technology, Engineering and Math (STEM) education programs over the next three years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Shortly after reaching the plea agreement with the Criminal division of the U.S. Department of Justice (DOJ) in November 2009 described above, the Civil division of the DOJ notified us that it has opened an investigation into whether there were civil violations under the False Claims Act related to these products. On January 27, 2011, the Civil division of the DOJ filed a civil False Claims Act complaint against us and Guidant (and other related entities) in the Allen <i>qui tam </i>case described herein. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In January 2006, Guidant was served with a civil False Claims Act <i>qui tam </i>lawsuit filed in the U.S. District Court for the Middle District of Tennessee in September 2003 by Robert Fry, a former employee alleged to have worked for Guidant from 1981 to 1997. The lawsuit claims that Guidant violated federal law and the laws of the States of Tennessee, Florida and California by allegedly concealing limited warranty and other credits for upgraded or replacement medical devices, thereby allegedly causing hospitals to file reimbursement claims with federal and state healthcare programs for amounts that did not reflect the providers’ true costs for the devices. On December 20, 2010 the District Court granted the parties’ motion to suspend further proceedings following the parties advising the Court that they had reached a settlement in principle. The parties are scheduled to report to the District Court on the status of a final settlement agreement no later than February 28, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On July 1, 2008, Guidant Sales Corporation received a subpoena from the Maryland office of the U.S. Department of Health and Human Services, Office of Inspector General seeking information concerning payments to physicians, primarily related to the training of sales representatives. We are cooperating with this request. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 17, 2008, we received a subpoena from the U.S. Department of Health and Human Services, Office of the Inspector General requesting information related to the alleged use of a skin adhesive in certain of our CRM products. In early 2010, we learned that this subpoena was related to the James Allen <i>qui tam</i> action. After the U.S. Department of Justice (DOJ) declined to intervene in the original complaint in the Allen <i>qui tam </i>action, Mr. Allen filed an amended complaint in the U.S. District Court for the District of Buffalo New York alleging that Guidant violated the False Claims Act by selling certain PRIZM 2 devices and seeking monetary damages. On July 23, 2010, we were served with the amended and recently unsealed <i>qui tam </i>complaint filed by James Allen, an alleged device recipient. In September 2010, we filed a motion to dismiss the complaint. On December 14, 2010, the federal government filed unopposed motions to intervene and to transfer the litigation to the U.S. District Court for the District of Minnesota. Both motions were granted. The case has been assigned to Judge Donovan Frank, as a related case to <i>In re: Guidant Corp. Implantable Defibrillators Products Liability Litigation, MDL No. 05-1708 (DWF/AJB)</i>. As described herein on January 27, 2011, the Civil division of the DOJ filed a civil False Claims Act complaint against us and Guidant (and other related entities) in the Allen <i>qui tam </i>action. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 24, 2008, we received a letter from the Department of Justice informing us of an investigation relating to alleged off-label promotion of surgical cardiac ablation system devices to treat atrial fibrillation. We divested the surgical cardiac ablation business, and the devices at issue are no longer sold by us. On July 13, 2009, we became aware that a judge in Texas partially unsealed a <i>qui tam </i>whistleblower complaint which is the basis for the Department of Justice investigation. In August 2009, the federal government, which has the right to intervene and take over the conduct of the <i>qui tam </i>case, filed a notice indicating that it has elected not to intervene in this matter at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Following the unsealing of the whistleblower complaint, in August 2009 we received shareholder letters demanding that our Board of Directors take action against certain directors and executive officers as a result of the alleged off-label promotion of surgical cardiac ablation system devices to treat atrial fibrillation. On March 19, 2010, the same shareholders filed purported derivative lawsuits in the Massachusetts Superior Court of Middlesex County against the same directors and executive officers named in the demand letters, alleging breach of fiduciary duty in connection with the alleged off-label promotion of surgical cardiac ablation system devices and seeking unspecified damages, costs, and equitable relief. The parties have agreed to defer action on these suits until after the Board of Director’s determination whether to pursue the matter. On July 26, 2010, the Board determined to reject the shareholders’ demand. In October 2010, we and those of our present officers and directors who were named as defendants in these actions moved to dismiss the lawsuits. On December 16, 2010 the Massachusetts Superior Court granted the motion to dismiss and issued a final judgment dismissing all three cases with prejudice. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On September 25, 2009, we received a subpoena from the U.S. Department of Health and Human Services, Office of Inspector General, requesting certain information relating to contributions made by us to charities with ties to physicians or their families. We are currently working with the government to understand the scope of the subpoena. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On March 12, 2010, we received a Civil Investigative Demand (CID) from the Civil Division of the U.S. Department of Justice requesting documents and information relating to reimbursement advice offered by us relating to certain CRM devices. We are cooperating with the request. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On March 22, 2010, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking documents relating to our March 15, 2010 announcement regarding the ship hold and product removal actions associated with our ICD and cardiac resynchronization therapy defibrillator (CRT-D) systems, and relating to earlier recalls of our ICD and CRT-D devices. We are cooperating with the request. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On March 22, 2010, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking documents relating to the former Market Development Sales Organization that operated within our CRM business. We are cooperating with the request. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Other Proceedings</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On September 25, 2006, Johnson & Johnson filed a lawsuit against us, Guidant and Abbott Laboratories in the U.S. District Court for the Southern District of New York. The complaint alleges that Guidant breached certain provisions of the amended merger agreement between Johnson & Johnson and Guidant (Merger Agreement) as well as the implied duty of good faith and fair dealing. The complaint further alleges that Abbott and we tortiously interfered with the Merger Agreement by inducing Guidant’s breach. The complaint seeks certain factual findings, damages in an amount no less than $5.5 billion and attorneys’ fees and costs. On August 29, 2007, the judge dismissed the tortious interference claims against us and Abbott and the implied duty of good faith and fair dealing claim against Guidant. On February 20, 2009, Johnson & Johnson filed a motion to amend its complaint to reinstate its tortious interference claims against us and Abbott and to add additional breach allegations against Guidant. On February 17, 2010, Johnson & Johnson’s motion to amend the complaint was denied. A trial date has not yet been scheduled. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On July 28, 2000, Dr. Tassilo Bonzel filed a complaint naming certain of our Schneider Worldwide subsidiaries and Pfizer Inc. and certain of its affiliates as defendants, alleging that Pfizer failed to pay Dr. Bonzel amounts owed under a license agreement involving Dr. Bonzel’s patented Monorail® balloon catheter technology. This and similar suits were dismissed in state and federal courts in Minnesota. On April 24, 2007, we received a letter from Dr. Bonzel’s counsel alleging that the 1995 license agreement with Dr. Bonzel may have been invalid under German law. On October 5, 2007, Dr. Bonzel filed a complaint against us and Pfizer in the District Court in Kassel, Germany alleging that the 1995 license agreement is invalid under German law and seeking monetary damages. On June 12, 2009, the District Court dismissed all but one of Dr. Bonzel’s claims. On October 16, 2009, Dr. Bonzel made an additional filing in support of his remaining claim and added new claims. On December 23, 2009, we filed our response opposing the addition of the new claims. A hearing was held September 24, 2010. On November 5, 2010, the Court ordered Bonzel to select which claims he would pursue in the case. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 16, 2010, Kilts Resources LLC filed a <i>qui tam </i>suit against us in the U.S. District Court for the Eastern District of Texas alleging that we marked and distributed our Glidewire product with an expired patent in violation of the false marking statute and seeking monetary damages. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 17, 2010, we received Notices of Deficiency from the Internal Revenue Service assessing additional taxes for Guidant Corporation for the 2001 — 2003 tax years. We intend to file a petition to the U.S. Tax Court in early 2011 contesting the assessments. Refer to <i>Note K — Income Taxes </i>for more information. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Matters Concluded Since January 1, 2010</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On January 13, 2003, Cordis Corporation filed suit for patent infringement against Boston Scientific Scimed, Inc. and us alleging that our Express 2<sup style="font-size: 85%; vertical-align: text-top">®</sup> coronary stent infringes a U.S. patent (the Palmaz patent) owned by Cordis. The suit was filed in the U.S. District Court for the District of Delaware seeking monetary and injunctive relief. We filed a counterclaim alleging that certain Cordis products infringe a patent owned by us (the Jang patent). On August 4, 2004, the Court granted a Cordis motion to add our VeriFLEX™ (Liberté<sup style="font-size: 85%; vertical-align: text-top">®</sup>) bare-metal coronary stent system and two additional patents to the complaint (the Gray patents). On June 21, 2005, a jury found that our TAXUS<sup style="font-size: 85%; vertical-align: text-top">®</sup> Express 2<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Express 2<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Express<sup style="font-size: 85%; vertical-align: text-top">®</sup> Biliary, and VeriFLEX™ (Liberté<sup style="font-size: 85%; vertical-align: text-top">®</sup>) stents infringe the Palmaz patent and that the VeriFLEX™ (Liberté<sup style="font-size: 85%; vertical-align: text-top">®</sup>) stent infringes a Gray patent. With respect to our counterclaim, on July 1, 2005 a jury found that Johnson & Johnson’s Cypher<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Bx Velocity<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Bx Sonic<sup style="font-size: 85%; vertical-align: text-top">®</sup> and Genesis™ stents infringe our Jang patent. On March 31, 2009, the Court of Appeals upheld the District Court’s decision that Johnson & Johnson’s Cypher<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Bx Velocity<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Bx Sonic<sup style="font-size: 85%; vertical-align: text-top">®</sup> and Genesis™ stent systems infringe our Jang patent and that the patent is valid. The Court of Appeals also instructed the District Court to dismiss with prejudice any infringement claims against our TAXUS Liberté<sup style="font-size: 85%; vertical-align: text-top">®</sup> stent. The Court of Appeals affirmed the District Court’s ruling that our TAXUS<sup style="font-size: 85%; vertical-align: text-top">®</sup> Express 2<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Express 2<sup style="font-size: 85%; vertical-align: text-top">®</sup>, Express<sup style="font-size: 85%; vertical-align: text-top">®</sup> Biliary, and VeriFLEX™ (Liberté<sup style="font-size: 85%; vertical-align: text-top">®</sup>) stents infringe the Palmaz patent and that the patent is valid. The Court of Appeals also affirmed that our VeriFLEX™ (Liberté<sup style="font-size: 85%; vertical-align: text-top">®</sup>) stent infringes a Gray patent and that the patent is valid. Both parties filed a request for a rehearing and a rehearing en banc with the Court of Appeals, and on June 26, 2009, the Court of Appeals denied both petitions. On September 24, 2009, both parties filed Petitions for Writ of Certiorari before the U.S. Supreme Court which were denied on November 30, 2009. On January 29, 2010, the parties entered into a settlement agreement which resolved these matters. As a result of the settlement, we agreed to pay Johnson & Johnson $1.725 billion, plus interest. We paid $1.0 billion of this obligation during the first quarter of 2010 and paid the remaining $725 million obligation in August 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 17, 2008, Cordis Corporation filed a complaint for patent infringement against us alleging that our TAXUS<sup style="font-size: 85%; vertical-align: text-top">®</sup> Liberté<sup style="font-size: 85%; vertical-align: text-top">®</sup> stent product, when launched in the United States, infringed a U.S. patent (the Gray patent) owned by it. The suit was filed in the U.S. District Court for the District of Delaware seeking monetary and injunctive relief. On November 10, 2008, Cordis filed a motion for summary judgment and on May 1, 2009, we filed a motion to dismiss the case. On May 26, 2009, Cordis dismissed its request for injunctive relief. On July 21, 2009, the District Court denied both parties’ motions. This matter was resolved as part of the January 29, 2010 settlement agreement described in the prior paragraph. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Guidant Sales Corp., Cardiac Pacemakers, Inc. and Mirowski Family Ventures L.L.C. (Mirowski) were plaintiffs in a suit originally filed against St. Jude Medical, Inc. and its affiliates in November 1996 in the U.S. District Court for the Southern District of Indiana alleging that certain ICD systems marketed by St. Jude infringe a patent (the Mirowski patent) licensed to us. On March 1, 2006, the District Court granted St. Jude’s motion to limit damages to a subset of the accused products but denied their motion to limit damages to only U.S. sales. On March 26, 2007, the District Court found the patent infringed but invalid. On December 18, 2008, the Court of Appeals upheld the District Court’s ruling of infringement and overturned the invalidity ruling. On January 21, 2009, St. Jude and we filed requests for rehearing and rehearing en banc with the Court of Appeals. On March 6, 2009, the Court of Appeals granted St. Jude’s request for a rehearing en banc on a damages issue and denied our requests. On August 19, 2009, the en banc Court of Appeals held that damages were limited to U.S. sales only. On November 16, 2009, Mirowski and we filed a Petition for Writ of Certiorari to the U.S Supreme Court and on January 11, 2010 the Supreme Court denied the petition. The case was remanded back to the District Court for a trial on damages. On April 13, 2010, Mirowski and St. Jude reached a settlement in principle. On May 6, 2010, Mirowski and St. Jude reached a final settlement and the District Court dismissed the case with prejudice. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On November 3, 2005, a securities class action complaint was filed on behalf of purchasers of Guidant stock between December 1, 2004 and October 18, 2005 in the U.S. District Court for the Southern District of Indiana, against Guidant and several of its officers and directors. The complaint alleges that the defendants concealed adverse information about Guidant’s defibrillators and pacemakers and sold stock in violation of federal securities laws. The complaint seeks a declaration that the lawsuit can be maintained as a class action, monetary damages, and injunctive relief. Several additional, related securities class actions were filed in November 2005 and January 2006. The Court issued an order consolidating the complaints and appointed the Iron Workers of Western Pennsylvania Pension Plan and David Fannon as lead plaintiffs. In August 2006, the defendants moved to dismiss the complaint. On February 27, 2008, the District Court granted the motion to dismiss and entered final judgment in favor of all defendants. On March 13, 2008, the plaintiffs filed a motion seeking to amend the final judgment to permit the filing of a further amended complaint. On May 21, 2008, the District Court denied plaintiffs motion to amend the judgment. On June 6, 2008, plaintiffs appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit. On October 21, 2009, the Court of Appeals affirmed the decision of the District Court granting our motion to dismiss the case with prejudice. Plaintiffs filed a motion to reconsider, and on November 20, 2009, the Court of Appeals denied the motion. The plaintiffs did not seek review by the U.S. Supreme Court within the time allotted. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In January 2006, we received a corporate warning letter from the Food and Drug Administration (FDA) notifying us of serious regulatory problems at three of our facilities and advising us that our corporate-wide corrective action plan relating to three site-specific warning letters issued to us in 2005 was inadequate. We identified solutions to the quality system issues cited by the FDA and implemented those solutions throughout our organization. During 2008, the FDA reinspected a number of our facilities and, in October 2008, informed us that our quality system was in substantial compliance with its Quality System Regulations. In November 2009 and January 2010, the FDA reinspected two of our sites to follow up on observations from the 2008 FDA inspections. Both of these FDA inspections confirmed that all issues at the sites have been resolved and all restrictions related to the corporate warning letter were removed. On August 11, 2010, we were notified by the FDA that the corporate warning letter had been lifted. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 11, 2007, Wall Cardiovascular Technologies LLC filed suit against us and Cordis Corporation alleging that our TAXUS® Express® coronary stent system, and other products and services related to coronary, carotid and peripheral stents, infringe a patent owned by it (the Wall patent) and that Cordis’ drug-eluting stent system infringes the patent. The suit was filed in the U.S. District Court for the Eastern District of Texas and sought monetary and injunctive relief. Wall Cardiovascular Technologies later amended its complaint to add Medtronic, Inc. and Abbott Laboratories to the suit with respect to their drug-eluting stent systems. The parties entered into a settlement agreement resolving the matter for an amount not material to us and the District Court granted a motion to dismiss with prejudice on September 9, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In July 2005, a purported class action complaint was filed on behalf of participants in Guidant’s employee pension benefit plans in the U.S. District Court for the Southern District of Indiana against Guidant and its directors. The complaint alleged breaches of fiduciary duty under the Employee Retirement Income Security Act of 1974, as amended (ERISA), specifically that Guidant fiduciaries concealed adverse information about Guidant’s defibrillators and imprudently made contributions to Guidant’s 401(k) plan and employee stock ownership plan in the form of Guidant stock. The complaint sought class certification, declaratory and injunctive relief, monetary damages, the imposition of a constructive trust, and costs and attorneys’ fees. In September 2007, we filed a motion to dismiss the complaint for failure to state a claim. In June 2008, the District Court dismissed the complaint in part, but ruled that certain of the plaintiffs’ claims may go forward to discovery. On October 29, 2008, the Magistrate Judge ruled that discovery should be limited, in the first instance, to alleged damages-related issues. On October 8, 2009, we reached a resolution with the plaintiffs in this matter for an amount not material to us. On May 19, 2010, the District Court granted preliminary approval of the proposed settlement. On September 9, 2010, the District Court held a settlement fairness hearing and on September 10, 2010, the District Court entered the final order and judgment approving the settlement. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On January 19, 2006, George Larson filed a purported class action complaint in the U.S. District Court for the District of Massachusetts on behalf of participants and beneficiaries of our 401(k) Retirement Savings Plan (401(k) plan) and Global Employee Stock Ownership Plan (GESOP) alleging that we and certain of our officers and employees violated certain provisions under the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Department of Labor regulations. Other similar actions were filed in early 2006. On April 3, 2006, the District Court issued an order consolidating the actions. On August 23, 2006, plaintiffs filed a consolidated purported class action complaint on behalf of all participants and beneficiaries of our 401(k) plan during the period May 7, 2004 through January 26, 2006 alleging that we, our 401(k) Administrative and Investment Committee (the Committee), members of the Committee, and certain directors violated certain provisions of ERISA (the Consolidated ERISA Complaint). The Consolidated ERISA Complaint alleged, among other things, that the defendants breached their fiduciary duties to the 401(k) plan’s participants because they knew or should have known that the value of our common stock was artificially inflated and was not a prudent investment for the 401(k) plan (the First ERISA Action). The Consolidated ERISA Complaint sought equitable and monetary relief. On June 30, 2008, Robert Hochstadt (who previously had withdrawn as an interim lead plaintiff) filed a motion to intervene to serve as a proposed class representative. On November 3, 2008, the District Court denied the plaintiffs’ motion to certify a class, denied Hochstadt’s motion to intervene, and dismissed the action. On December 2, 2008, the plaintiffs filed a notice of appeal. Following the settlement of the Second ERISA Action described in the paragraph below, the First Circuit Court of Appeals entered judgment dismissing the appeal in the First ERISA Action on October 12, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 24, 2008, Robert Hochstadt and Edward Hazelrig, Jr. filed a purported class action complaint in the U.S. District Court for the District of Massachusetts on behalf of all participants and beneficiaries of our 401(k) Retirement Savings Plan during the period May 7, 2004 through January 26, 2006 (the Second ERISA Action). The new complaint repeated the allegations of the August 23, 2006, Consolidated ERISA Complaint. On September 30, 2009, we and certain of the proposed class representatives in the First and Second ERISA Actions entered into a memorandum of understanding reflecting an agreement in principle to settle the First and Second ERISA Actions in their entirety for an amount not material to us. The proposed settlement received preliminary approval from the District Court. On August 5, 2010, the District Court held a settlement fairness hearing and on August 11, 2010, the District Court entered an Order and Final Judgment approving the settlement of the Second ERISA Action and dismissing that action. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On November 7, 2008, Guidant/Boston Scientific received a request from the U.S. Department of Defense, Defense Criminal Investigative Service and the Department of the Army, Criminal Investigation Command seeking information concerning sales and marketing interactions with physicians at Madigan Army Medical Center in Tacoma, Washington. We resolved this matter in November 2010 for an amount not material to us. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In March 2005, we acquired Advanced Stent Technologies, Inc. (AST), a stent development company. On November 25, 2008, representatives of the former stockholders of AST filed two arbitration demands against us with the American Arbitration Association. AST claimed that we failed to exercise commercially reasonable efforts to develop products using AST’s technology in violation of the acquisition agreement. The demands sought monetary and equitable relief. We answered denying any liability. The parties selected arbitrators and preliminary matters were presented to the panel. On May 13, 2010, the panel ruled that AST was not entitled to monetary relief at that time. Arbitration was scheduled for November 2010. The parties settled the case on December 3, 2010 for an amount not material to us. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On December 12, 2008, we submitted a request for arbitration against Medinol Ltd. with the American Arbitration Association in New York seeking enforcement of a contract between Medinol and us which would require Medinol to contribute to any final damage award owed by us to Johnson & Johnson for damages related to the sales of the NIR® stent supplied to us by Medinol. A panel of three arbitrators was constituted to hear the arbitration. On February 9, 2010, the arbitration panel found the contract enforceable against Medinol. On February 17, 2010, Medinol filed a motion for reconsideration, and on April 28, 2010, the Arbitration panel reaffirmed its February 9, 2010 ruling. A hearing on the merits was held in September 2010. On December 27, 2010, the parties reached a settlement resolving this matter. Under the terms of the settlement, Medinol paid us approximately $104 million on December 30, 2010, and the parties canceled and terminated certain provisions of their September 21, 2005 Settlement Agreement and mutually released each other of all claims in the arbitration. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Litigation-related Net Charges</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We record certain significant litigation-related activity as a separate line item in our consolidated statements of operations. In 2010, we reached a settlement agreement with Medinol, Ltd. under which we received approximately $104 million in proceeds, and recorded a pre-tax gain of $104 million in the accompanying consolidated statements of operations. In 2009, we recorded litigation-related charges of $2.022 billion, associated primarily with an agreement to settle three patent disputes with Johnson & Johnson for $1.725 billion, plus interest. In addition, in November 2009, we reached an agreement in principle with the U.S. Department of Justice to pay $296 million in order resolve the U.S. Government investigation of Guidant Corporation related to product advisories issued in 2005. Further, during 2009, we recorded charges of $50 million associated with the settlement of all outstanding litigation with Bruce Saffran, and reduced previously recorded reserves associated with certain litigation-related matters following certain favorable court rulings, resulting in a credit of $60 million. In 2008, we recorded litigation-related charges of $334 million as a result of a ruling by a federal judge in a patent infringement case brought against us by Johnson & Johnson. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>NOTE M – STOCKHOLDERS’ EQUITY</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Preferred Stock</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We are authorized to issue 50 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by our stockholders. As of December 31, 2010 and 2009, we had no shares of preferred stock issued or outstanding. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Common Stock</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">We are authorized to issue 2.0 billion shares of common stock, $.01 par value per share. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by the Board of Directors, and to share ratably in our assets legally available for distribution to our stockholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption, or conversion rights. The holders of common stock do not have cumulative voting rights. The holders of a majority of