10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

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

For the fiscal year ended December 31, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 000-09165

STRYKER CORPORATION

(Exact name of registrant as specified in its charter)

Michigan	38-1239739
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2825 Airview Boulevard, Kalamazoo, Michigan	49002
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (269) 385-2600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.10 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES  x             NO  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

YES  ¨             NO  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  x             NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  x             NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large “accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x	Accelerated filer  ¨
Non-accelerated filer  ¨	Smaller reporting company  ¨

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

YES  ¨             NO  x

Based on the closing sales price of June 30, 2010, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $18,806,045,091.

The number of shares outstanding of the registrant’s common stock, $.10 par value, was 391,246,163 at January 31, 2011.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement to be filed with the U.S Securities and Exchange Commission relating to the 2011 Annual Meeting of Shareholders (the 2011 proxy statement) are incorporated by reference into Part III.

FORWARD-LOOKING STATEMENTS

This report contains information that includes or is based on forward-looking statements within the meaning of the federal securities law that are subject to various risks and uncertainties that could cause actual results of Stryker Corporation (the Company) to differ materially from those expressed or implied in such statements. Such factors include, but are not limited to: weakening of economic conditions that could adversely affect the level of demand for the Company’s products; pricing pressures generally, including cost-containment measures that could adversely affect the price of or demand for the Company’s products; changes in foreign exchange markets; legislative and regulatory actions; unanticipated issues arising in connection with clinical studies and otherwise that affect U.S. Food and Drug Administration approval of new products; changes in reimbursement levels from third-party payors; a significant increase in product liability claims; unfavorable resolution of tax audits; changes in financial markets; changes in the competitive environment; and the Company’s ability to integrate acquisitions.

While the Company believes the assumptions underlying such forward-looking statements are reasonable, there can be no assurance that future events or developments will not cause such statements to be inaccurate. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement.

REGISTERED TRADEMARKS AND TRADEMARKS

Stryker Corporation or its divisions or other corporate affiliated entities own, use or have applied for the following trademarks in this Report: 3-Chip, ABG, Accolade, ADM, Ascent Healthcare Solutions, Asnis, AxSOS, AVS, BackSmart, Big Wheel, CentPillar, CerviCore, Chaperone, Colorado, Dall-Miles, Dynatran, Exeter, FlexiCore, Formula, Flyte, Gamma3, GMRS, Hoffmann, Howmedica, HydroSet, iBed, IDEAL EYES, iSuite, Leibinger, LFIT, Maestro, Mantis, Mobile Bearing Hip, Monotube, NRG, OASYS, Omnifit, OP-1, OtisKnee, PainPump, Power-PRO, PureFix, Radius, Reflex, Rejuvenate, RemB, Restoration, S3, Scorpio, Scorpio ClassiQ, Secur-Fit, Sightline, Simplex, Sonopet, SpineCore, Stair-PRO, Stair-TREAD, Stryker, Stryker Orthopaedics, Switchpoint Infinity, System 6, T2, TenXor, THOR, TMZF, Triathlon, Trident, Tritanium, UHR, VariAx, VLIFT, WiSe, X3, Xia, Zoom. Cormet is a registered trademark of Corin Limited. All other trademarks or service marks are trademarks or service marks of their respective owners or holders.

Not all products referenced in this report are approved or cleared for sale, distribution or use in the United States.

TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	15
Item 3.	Legal Proceedings	16
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 8.	Financial Statements and Supplementary Data	36
	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	36
	Consolidated Balance Sheets	37
	Consolidated Statements of Earnings	38
	Consolidated Statements of Shareholders’ Equity	39
	Consolidated Statements of Cash Flows	40
	Notes to Consolidated Financial Statements	41
	Summary of Quarterly Data (Unaudited)	70
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	71
Item 9A.	Controls and Procedures	71
Item 9B.	Other Information	73
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	73
Item 11.	Executive Compensation	74
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	75
Item 13.	Certain Relationships and Related Transactions, and Director Independence	75
Item 14.	Principal Accounting Fees and Services	75
PART IV
Item 15.	Exhibits, Financial Statement Schedules	76

PART I

ITEM 1. BUSINESS.

GENERAL

Stryker Corporation (the Company or Stryker) is one of the world’s leading medical technology companies and is dedicated to helping healthcare professionals perform their jobs more efficiently while enhancing patient care. The Company provides innovative orthopaedic implants as well as state-of-the-art medical and surgical equipment to help people lead more active and more satisfying lives. The Company’s products include implants used in joint replacement, trauma and spinal surgeries; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment as well as other medical device products used in a variety of medical specialties. Stryker was incorporated in Michigan in 1946 as the successor company to a business founded in 1941 by Dr. Homer H. Stryker, a leading orthopaedic surgeon and the inventor of several orthopaedic products.

Stryker’s filings with the U.S. Securities and Exchange Commission (SEC), including its annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, are accessible free of charge at www.stryker.com within the “Investor—SEC Filings & Ownership Reports” link.

In 2010 the Company completed several acquisitions in all cash transactions, including the Sonopet Ultrasonic Aspirator assets from Mutoh Co., Ltd. and Synergetics USA, Inc., Gaymar Industries, Inc. and the bioimplantable implants product line and related assets from Porex Surgical, Inc. In December 2009 the Company acquired Ascent Healthcare Solutions, Inc. (Ascent), also in an all cash transaction.

In December 2010 the Company announced a definitive agreement to sell its OP-1 product family for use in orthopaedic bone applications and its manufacturing facility based in West Lebanon, NH. This transaction was completed on February 1, 2011 for total consideration of $60.0 million.

In October 2010 the Company announced a definitive agreement to acquire the assets of the Neurovascular division of Boston Scientific Corporation (Neurovascular) in an all cash transaction of up to $1.5 billion. This transaction was completed on January 3, 2011 for $1.45 billion in cash plus an additional $50.0 million to be paid upon the completion of certain milestones. The acquisition of Neurovascular is expected to substantially enhance the Company’s presence in the neurovascular market, allowing it to offer a comprehensive portfolio of products in both neurosurgical and neurovascular devices.

PRODUCT SALES

The Company segregates its operations into two reportable business segments: Orthopaedic Implants and MedSurg Equipment. The Orthopaedic Implants segment sells orthopaedic reconstructive (hip and knee), trauma and spinal implant systems and other related products. The MedSurg Equipment segment sells surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; as well as other medical device products used in a variety of medical specialties.

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The following amounts and percentages represent domestic/international and business segment net sales during each of the three years ended December 31 (dollars in millions):

	2010					2009					2008
	$		%			$		%			$		%
Domestic/international sales:
Domestic	$	4,792.8		65	%	$	4,317.4		64	%	$	4,282.2		64	%
International		2,527.2		35	%		2,405.7		36	%		2,436.0		36	%
Total net sales	$	7,320.0		100	%	$	6,723.1		100	%	$	6,718.2		100	%
Business segment sales:
Orthopaedic Implants	$	4,308.4		59	%	$	4,119.7		61	%	$	3,967.5		59	%
MedSurg Equipment		3,011.6		41	%		2,603.4		39	%		2,750.7		41	%
Total net sales	$	7,320.0		100	%	$	6,723.1		100	%	$	6,718.2		100	%

Additional financial information regarding the Company’s operating segments and geographic areas can be found under the caption Results of Operations in Item 7 of this report and Note 13 to the Consolidated Financial Statements in Item 8 of this report.

Approximately 76% of the Company’s sales in 2010, 77% in 2009 and 74% in 2008 consisted of products with short lives, such as reconstructive, trauma, craniomaxillofacial (CMF) and spinal implant systems (while implants have a long useful life to the patient, they have a one-time use to the hospital); disposables and expendable tools; and parts and service revenues, including service and repair charges. The balance of sales in each of the years came from products that could be considered capital equipment, having useful lives in excess of one year.

The Company’s backlog of firm orders is not considered material to an understanding of its business.

Orthopaedic Implants

Orthopaedic Implants consist of such products as implants used in joint replacement, trauma, craniomaxillofacial and spinal surgeries; bone cement; and the bone growth factor OP-1. Artificial joints are made of cobalt chromium, titanium alloys, ceramics or ultrahigh molecular weight polyethylene and are implanted in patients whose natural joints have been damaged by arthritis, osteoporosis, other diseases or injury. Many of Stryker’s technologically advanced reconstructive implants are suited to minimally invasive surgery (MIS) procedures that are intended to reduce soft-tissue damage and pain while hastening return to function. The Company supports surgeons with technology, procedural development and specialized instrumentation as they develop new MIS techniques.

Hip Implant Systems

The Company offers a variety of hip implant systems for the global reconstructive market. Total hip replacement surgeries involve the replacement of both the head of the femur as well as the acetabulum (socket) of the pelvis. Stryker offers hip replacement products to address first time (primary) hip surgeries as well as revision systems. The ABG Hip System, Partnership Hip System, Secur-Fit Hip System, Omnifit Hip System, Accolade Hip System, CentPillar Hip System, Trident Acetabular Hip System, ADM Mobile Bearing Hip System, Rejuvenate Modular Primary Hip System, Cormet Hip Resurfacing System and Restoration Hip System are all comprehensive systems of hip implants and associated instrumentation designed to provide physicians and patients with reliable clinical results across the continuum of care, while enhancing value and operating room efficiency for the hospital.

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Stryker is committed to following clinical outcomes and recognizes that long-term clinical results are an important factor in the Company’s ability to market hip implants. Significant clinical milestones for the Company include more than 40 years of clinical history with the Exeter Hip System, more than 25 years of clinical history with the Dall-Miles Cable System, more than 20 years of clinical history with the Omnifit HA stem and more than 10 years clinical history with the Accolade TMZF Hip System.

Stryker was the first company to receive clearance from the U.S. Food and Drug Administration (the FDA) to commercially release for sale in the United States a hip implant with hydroxylapatite (HA) surface treatment. HA is a naturally occurring calcium phosphate material that demonstrates a high level of biocompatibility due to its resemblance to bone. The Company’s global clinical experience with HA-coated hip stems now extends over 20 years, and reported clinical performance continues to equal or exceed that of comparable hip stems reported in the scientific literature.

Primary Femoral Hip Systems:

In 2009 Stryker introduced the Rejuvenate Modular Primary Hip System, the latest evolution in the Company’s OmniFit and Secur-Fit hip systems. The Rejuvenate Modular Primary Hip System offers surgeons unparalleled options for personalizing the implant to each patient’s anatomy. The Rejuvenate System is designed to optimize anatomic restoration by providing options that offer enhanced stability, proven modularity and intraoperative flexibility. The modular design enables the surgeon to independently manage stem size, leg length and offset to recreate the patient’s anatomy, restore biomechanics and, consequently, minimize the risk of dislocation.

The Accolade TMZF Hip System has demonstrated strong clinical results for more than 10 years, with 2009 marking the first introduction of the product into Japan. The Accolade TMZF System is a tapered wedge implant, based on a broach only technique and is recognized for its simplicity and flexibility to accommodate all surgical approaches and navigation.

The ABG II Modular Hip System represents the next generation of design based on the ABG monolithic stem that has had positive clinical experience for more than 10 years. This modular primary hip stem provides the opportunity to recreate patient anatomy through independent sizing of the stem and neck. Versatile instrumentation also accommodates surgeon preference for a navigated procedure or direct anterior surgical approach.

The Company’s Exeter Total Hip System is based on a collarless, highly polished, double-tapered femoral design that reduces shear stresses and increases compression at the cement/bone interface.

Primary Acetabular Systems:

The Company’s advanced bearing system, Low Friction Ion Treatment (LFIT) Anatomic Femoral Heads with X3 polyethylene liners represents a significant advance in hip-bearing technology through the combination of Stryker’s LFIT technology and X3 advanced bearing technology. The femoral heads are anatomically sized for more natural hip performance. In 2010 the Company introduced the ADM X3 Mobile Bearing Acetabular System, a next-generation technology for hip replacement surgery designed to minimize the risk associated with total hip replacement surgery by offering a large diameter bearing without a metal-on-metal articulation. X3 advanced bearing technology is based on the Company’s highly crosslinked polyethylene, which demonstrates enhanced material characteristics in laboratory testing, including improved strength, reduced wear and oxidation resistance. This second generation bearing option offers a significant technological advance for both hip and knee replacements. The Company also offers the Biolox Delta Ceramic Anatomic head for further options to reduce wear and potentially increase implant longevity.

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The Company has a premarket approval (PMA) from the FDA for its ceramic-on-ceramic hip replacement system, the Trident Ceramic Acetabular Insert, for patients in the United States. Stryker Orthopaedics has successfully launched the Trident ceramic insert in the United States, Europe, Australia and Canada. The Trident insert has demonstrated low wear clinically, and it is protected and strengthened by a patented titanium sleeve.

In 2009 the Company introduced the Tritanium Primary Acetabular System in Latin America, Australia, and Europe following a U.S. launch in 2008. This system is the only Advanced Fixation Technology manufactured from a commercially-pure Titanium matrix. Introduction of this highly porous surface into the primary hip market provides a biologically-inspired enhanced fixation acetabular solution that was previously not available for primary use.

Hip Fracture Hip Systems:

Stryker offers a broad array of femoral stem options and bearings to accommodate the hip fracture patient including the Accolade HFx stem and the UHR bipolar head.

Revision Hip Systems:

The Restoration Modular Revision Hip System offers surgeons performing revision surgeries flexibility in treating complex hip stem revisions and restoring patient biomechanics. The Restoration Modular Revision Hip System also takes advantage of Stryker’s long clinical history with HA by incorporating PureFix HA coating on many components. The Restoration Modular Revision Hip System complements the Company’s existing Restoration HA and Restoration plasma spray (PS) monolithic revision systems.

The Company’s Trident Tritanium Acetabular Shell contains a highly porous surface that closely resembles the structure of bone. This shell is designed for revision surgery and contains multiple screw holes to achieve bone fixation and initial stability.

Knee Implant Systems

The Company offers three major knee implant systems: Triathlon, Scorpio and the Global Modular Replacement System (GMRS).

The Triathlon Knee System utilizes the Company’s evolutionary design that more closely reproduces natural knee motion and provides mobility with stability through more than 150 degrees of flexion. In 2008, Stryker continued to expand the Triathlon brand with the Triathlon Partial Knee Resurfacing (PKR) offering in the uni-condylar market segment and the Triathlon Total Stabilizer (TS) offering in the fast growing revision knee market. Both products incorporate the single radius design to provide the potential for better ligament balancing. The Company also offers the X3 advanced bearing technology for use with the Triathlon Knee System.

The Scorpio knee implant design is based on Stryker’s patented single radius; this approach to total knee replacement addresses significant clinical issues, such as improved patient rehabilitation and midflexion stability. The Scorpio NRG is the high flexion evolution to the Scorpio line. This design includes increased rotational allowance, an articulating design for deeper flexion and greater extension allowance without impingement. The Scorpio NRG with X3 advanced bearing technology is designed to lower wear rates compared to standard inserts. Scorpio ClassiQ was developed for the emerging global markets and is based on the Scorpio System to offer a high-quality and clinically proven affordable technology.

The GMRS is a global product that offers a comprehensive solution for severe bone loss in oncology, trauma and revision surgery patients. GMRS has tibial and femoral components, including a total femur, and a modular rotating hinge knee. The system employs both titanium and cobalt chrome alloys for strength and lightness of weight, together with the superior flexibility of the hinge.

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Bone Cement

Simplex bone cement, a material used to secure cemented implants to bone, was first approved for orthopaedic use in the United States in 1971 and is the most widely used bone cement in the world. The Company manufactures and provides several variations of Simplex bone cement to meet specific patient needs. Simplex has nearly 50 years of clinical history, the longest of any bone cement, with more than 600 published clinical papers.

Trauma Implant Systems

The Company develops, manufactures and markets trauma, extremities and deformity correction systems. These systems include Intramedullary (IM) and cephlomedullary nails, locked and non-locked plating, hip fracture solutions and external fixation systems, as well as bone substitutes that are used primarily for the treatment of traumatic injuries.

The Company’s internal fixation portfolio includes a full array of IM & cephlomedullary nails; hip fracture solutions, including compression hip screws, cannulated screws as well as anatomically designed plates and screws in both titanium and stainless steel. These products provide a possible restorative option prior to joint reconstruction. These products are marketed worldwide as: Gamma3, Asnis III, AxSOS, VariAx, HydroSet, and T2.

The Company’s external fixation portfolio includes products such as Hoffmann II MRI, Hoffmann Xpress, Monotube Triax mono-lateral, as well as the Hoffmann II Hybrid (TenXor) circular fixation systems. These systems are used to construct frames for bone stabilization that are either definitive or as a temporary step in the treatment process associated with damage control orthopaedics. Hoffmann systems have been defined by their ease of assembly with “snap-fit” couplers. The use of a proprietary Vectran coating on the bars makes Hoffmann II MRI an MRI conditional solution.

The Company also offers a product portfolio for the treatment of fractures and injuries of the extremities. These products include fracture specific locked plating for the wrist, shoulder, elbow, fibula and foot, as well as bone substitutes and external fixation systems. These are all designed to treat the unique nature of upper extremity and foot and ankle injuries. These products are marketed worldwide under the brands VariAx, AxSOS and Hoffmann. New products launched in 2010 include the VariAx Fibula and VariAx Elbow Systems.

Spinal Implant Systems

The Company develops, manufactures and markets spinal implant products including cervical, thoracolumbar and interbody systems used in spinal injury, deformity and degenerative therapies. Spinal implant products include plates, rods, screws, connectors, spacers and cages, along with proprietary implant instrumentation.

In 2009 the Company introduced the Xia 3 Sacral Iliac system that completes the thoracolumbar system and makes it one of the most comprehensive platforms on the market. Also in 2009, the Company introduced the Dynatran-Dynamic/Translational Anterior Cervical Plate, which expands the Company’s presence in the cervical space with its unique locking mechanism. In 2008 the Company introduced the Radius Thoracolumbar Spinal Implant System. The Radius system provides a non-threaded wedgelock locking mechanism designed to reduce the potential for false locking and cross-threading and to increase the speed, ease and reliability of connecting rods to screws. Also in 2008, the Company launched Xia 3, the next generation of its thoracolumbar spinal implant system, and THOR, its anterior lumbar plating system that incorporates a proprietary screw locking technology. The Company also offers the Mantis minimally invasive access system for posterior instrumented spinal fusion and the Reflex Zero Profile anterior cervical plating system. In addition the Company offers the VLIFT vertebral body replacement system consisting of a preassembled, cylindrically shaped titanium

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cage with a distractible or retractable center. The hollow core of the cage allows for packing bone graft. The Company’s AVS AS and AL Spacers are used as vertebral body support devices in anterior procedures. Other product lines include the OASYS fixation system that serves the posterior cervical fusion market, the Reflex Hybrid anterior cervical plate and the AVS PL and TL vertebral spacer systems.

Craniomaxillofacial (CMF) Implant Systems

The Company develops, manufactures and markets plating systems and related implants and products for craniomaxillofacial surgery, including dura substitutes, bone substitutes, electrosurgical microdissection needles and surgical instruments. They are primarily used in the fixation of fractures due to sudden injury as well as in the correction of congenital deformities. These products are marketed under such names as the Universal Fixation System, Colorado Needle, DuraMatrix-Onlay, Leibinger Instruments and HydroSet.

In 2010 the Company acquired the bioimplantable porous polyethylene (PPE) product line from Porex Surgical, Inc. for use primarily in reconstructive surgery of the head and face. These PPE products have a long history with considerable clinical data that is supported by over 350 references in peer-reviewed journals.

OP-1/BMP-7

Stryker’s OP-1 Implant is composed of recombinant human OP-1 and a bioresorbable collagen matrix. Stryker has received two approvals for a Humanitarian Device Exemption (HDE) from the FDA. An HDE, as defined by the FDA, is for a product intended to benefit patients by treating or diagnosing a disease or condition that affects fewer than 4,000 individuals per year in the United States. OP-1 is currently used for orthopaedic bone applications, including the use of OP-1 Implant as an alternative to autograft in recalcitrant long-bone nonunions where use of autograft is not feasible and alternative treatments have failed. A second application is for revision posterolateral spine fusion using a new formulation of OP-1 known as OP-1 Putty. In 2010 the Company announced that it had entered into a definitive agreement with Olympus Corporation for the sale of its OP-1 product family as used in orthopaedic bone applications and completed this transaction on February 1, 2011.

The Company continues to conduct research and development efforts directed toward exploring the cartilage regeneration properties of BMP-7 for potential use in osteoarthritis as well as other non-orthopaedic applications. The Company has successfully completed preclinical studies showing that BMP-7 can stimulate new cartilage formation and increase disc height in animal models of degenerative disc disease. In 2008 the Company completed enrollment in a Phase I dose-ranging clinical safety study for the first time use of BMP-7 to treat the disc. Stryker has also filed an Investigational New Drug application with the FDA to treat osteoarthritis in the knee with the injectable form of BMP-7. Following FDA concurrence in 2007, the Company proceeded with patient enrollment in the Phase I clinical study, which was completed in 2008. Based on the results of that study, a Phase II protocol was submitted to and approved by the FDA. The Company began enrollment in the Phase II study in 2010. Given the early stage of these clinical efforts and the expected scope of data to be required by the FDA, commercialization of BMP-7 is not expected for at least five years.

MedSurg Equipment

MedSurg Equipment products include surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; as well as other medical device products used in a variety of medical specialties.

Surgical Equipment and Surgical Navigation Systems

The Company offers a broad line of surgical, neurologic, ENT and interventional spine equipment that is used in surgical specialties for drilling, burring, rasping or cutting bone in small-bone orthopaedic, neurosurgical, spine and ENT procedures; wiring or pinning bone fractures; and preparing hip or knee surfaces for the placement of artificial implants. Stryker also manufactures an array of different attachments and cutting accessories for use by orthopaedic, neurologic and small-bone specialists.

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In 2010 the Company acquired the assets used to produce the Sonopet Ultrasonic Aspirator control consoles, handpieces and accessories. The Sonopet Ultrasonic Aspirator is used in the fields of neurosurgery as well as for orthopedic, general, laparoscopic and plastic surgeries. The device is used by surgeons to fragment soft and hard tissue and for tumor removal and bone cutting.

The System 6 heavy duty, large-bone power system represents the Company’s primary heavy-duty, cordless product offering. The System 6 Rotary Handpieces provide multiple options to surgeons by allowing both high-speed drilling and high-torque reaming in one handpiece.

In 2009 Stryker introduced the RemB micro electric system, combining the Company’s Consolidated Operating Room Equipment (CORE) platform with lightweight, specialized handpieces, allowing surgeons to work effectively with greater precision and control. This versatile system is an evolution in the Company’s offering of powered surgical instruments designed to remove and reshape bone in a wide variety of medical specialties including hand surgery, podiatry, orthopaedic foot and ankle surgery and extremity trauma surgery. The Maestro drill represents Stryker’s line of micro powered instruments for spine, neurology and ENT applications. The Maestro drill leverages the Company’s Total Performance System (TPS) and CORE platforms by using the same cutting attachments. The Stryker Bone Mill, launched in 2008, further leverages the CORE platform and is designed for use in spine, orthognathic and orthopaedic primary and revision joint procedures.

To promote safety for patients and medical staff, Stryker works closely with hospitals and other healthcare organizations to develop a broad product portfolio. In 2009 the Company introduced the Flyte personal protection system, the latest version of Stryker’s Sterishield line of personal protection products combining improved comfort and support with higher levels of protection against contamination, exposure to infectious bodily fluids and transfer of microorganisms and particulate matter. Additionally, Flyte’s integrated helmet with illumination represents enhancements aimed towards improving the surgical environment.

The Company also offers a broad line of surgical navigation systems that give surgeons in several specialties the ability to use electronic imaging to see more clearly, better align instruments and more accurately track where the instruments are relative to a patient’s anatomy during surgical procedures. The Company offers the Navigation System II Cart, the eNlite suitcase system and the Navigation iSuite. All of these product offerings are either image based or imageless platforms, incorporating intuitive Smart hardware and software functionality, and a highly accurate digital infrared camera that result in greater ease of use and less invasive procedures.

Endoscopic and Communications Systems

The Company develops, manufactures and markets medical video and communications equipment and instruments for arthroscopy, general surgery and urology. Stryker has established a position of leadership in the production of medical video technology and accessories for minimally invasive surgery, as well as communications equipment to facilitate local and worldwide sharing of medical information among operating rooms, doctors’ offices and teaching institutions. Products include medical video cameras, digital documentation equipment, arthroscopes, laparoscopes, powered surgical instruments, radio frequency ablation systems, irrigation fluid management systems, i-Suite operating room solutions and state-of-the-art equipment for telemedicine and enterprise-wide connectivity. Stryker’s line of rigid scopes, which range in diameter from 1.9 millimeters to 10 millimeters, contains a series of precision lenses as well as fiber optics that, when combined with Stryker’s high-definition (HD) camera systems, allow the physician to view internal anatomy with a high degree of clarity.

In 2010 Stryker continued to expand its wireless platform by launching the WiSe 1:3 Transmitter, which allows simultaneous transmission to three high-definition wireless WiSe monitors. The Switchpoint Infinity 3 video router provides surgeons and operating room staff with an integrated platform tailored specifically to each individual operating room. This router increases efficiency and flexibility during procedures.

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In 2009 Stryker introduced the 1288 HD Camera, the next generation Stryker 3-Chip HD medical video camera. This latest version has HD 1080p resolution with wireless high definition transmission to the new Stryker WiSe wide screen monitor system. This new camera system provides superior image quality compared to previous camera systems and ease of use through customized programmable buttons. This product provides surgical teams with improved visibility during endoscopic procedures, which can improve overall surgical and patient outcomes. In conjunction with the launch of the 1288 HD Camera, Stryker also introduced the L-9000 lightsource. This new lightsource includes proprietary LED technology that provides the customer with a cooler and longer lasting bulb. Also introduced in 2009 was the IDEAL EYES line of HD arthroscopes and laparoscopes. To accommodate the recording of HD images, the Company offers the SDC HD digital documentation system. The Company also offers its Formula shaver system, which is small, light and equipped with radio frequency identification (RFID), facilitating communication between the blade and console.

Patient Handling and Emergency Medical Equipment

Stryker is a leader in the patient handling equipment segment, offering a wide variety of stretchers customized to fit the needs of acute care and specialty surgical care facilities with a focus on providing a safe and comfortable surface for patients while reducing the risk of back injury for hospital staff.

In 2010 the Company acquired Gaymar Industries, which specializes in support surfaces and pressure ulcer management solutions as well as the temperature management segment of the healthcare industry. The acquisition expands the Company’s product offerings while also providing a complementary product offering to its existing customer base through its temperature management technology platform.

In 2010 Stryker introduced the Prime series of stretchers, designed to ensure caregiver safety and efficiency while enhancing patient comfort. Patients can adjust their own positions without calling a caregiver for assistance. The Prime stretchers incorporate Glideaway siderails with Zero Transfer Gap; the Zoom Motorized Drive System, virtually eliminating push force; Big Wheel technology, reducing start-up force by up to 50 percent and increasing maneuverability; and a 700-pound weight capacity.

Stryker also develops and manufactures beds and accessories that are designed to meet the unique needs of specialty departments within the acute care environment. In 2008 the Company introduced the redesigned S3 Med/Surg Hospital Bed, the first redesign since its original 1994 introduction, combining a retractable frame with the Company’s BackSmart ergonomically designed side rails and featuring an open architecture to accept any standard support surface. The S3 offers the Chaperone center-of-gravity bed-exit system with Zone Control to help prevent patient falls, as well as iBed Awareness, an exclusive technology that monitors safe patient bed positions and alerts caregivers in the event that the desired safe bed configuration is altered. In 2009 the Company introduced the Impression non-powered support surface designed to improve pressure redistribution, enhance patient comfort and provide enhanced moisture management similar to that achieved by powered support surfaces. Stryker has a complete line of intensive care unit (ICU) beds for critical care and step-down units. The beds incorporate advanced features that facilitate patient care, such as in-bed scales that accurately weigh the patient regardless of bed position and a radiolucent surface that facilitates chest x-rays without moving the patient from the bed. Stryker’s XPRT support surface, with low air loss, percussion and rotational therapy, aids in the prevention and treatment of certain skin ulcers and pulmonary care.

To serve the worldwide pre-hospital market, the Company offers a line of manually operated and powered ambulance cots and cot-to-ambulance fastening systems. In addition, Stryker offers the Stair-PRO stair chairs with Stair-TREAD track systems that facilitate patient transport up and down stairs. The Company’s Power-PRO ambulance cot incorporates an advanced battery-powered hydraulic lift system that enables emergency medical professionals to raise and lower the cot with the press of a button. The use of Stair-PRO and the Power-PRO helps prevent caregiver back injuries. Stryker expanded the Power-PRO line with a version customized for streamlined incubator transport on both inter-facility and intra-facility transports and with a version customized for ambulances that use hydraulic tail lifts or ramps that are popular in the United Kingdom.

8

Medical Device Reprocessing

In December 2009 the Company acquired Ascent, the market leader in the medical device reprocessing industry. Ascent’s reprocessing of medical devices includes collecting recyclable medical devices from hospitals and cleaning, function testing and sterilizing the medical devices for reuse in subsequent procedures. The reprocessed medical device is equivalent to a new medical device in terms of function, quality and effectiveness. Extending the life of these medical devices beyond a single use enables the Company to partner with health care providers in managing costs without compromising the quality of patient care and diverts thousands of pounds of medical waste from landfills.

PRODUCT DEVELOPMENT

Most of the Company’s products and product improvements have been developed internally. The Company maintains close working relationships with physicians and medical personnel in hospitals and universities who assist in product research and development. New and improved products play a critical role in the Company’s sales growth. The Company continues to place emphasis on the development of proprietary products and product improvements to complement and expand its existing product lines. The Company has a decentralized research and development focus, with manufacturing locations responsible for new product development and product improvements. Research, development and engineering personnel at the various manufacturing locations maintain relationships with staff at distribution locations and with customers to understand changes in the market and product needs.

Total expenditures for product research, development and engineering were $393.9 million in 2010, $336.2 million in 2009 and $367.8 million in 2008. Research, development and engineering expenses represented 5.4% of sales in 2010, compared to 5.0% in 2009 and 5.5% in 2008. The spending level in 2010 increased due to the Company’s increased focus on new product development for anticipated future product launches and investments in new technologies. Recent new product introductions in the Orthopaedic Implants and MedSurg Equipment segments are more fully described under the caption Product Sales.

In addition to internally developed products, the Company invests in technologies developed by third parties that have the potential to expand the markets in which the Company operates. In 2010 the Company acquired the Sonopet Ultrasonic Aspirator control consoles, handpieces and accessories from Mutoh Co., Ltd. and Synergetics USA, Inc., Gaymar Industries, a manufacturer of specialized support surface and pressure ulcer management solutions, and the bioimplantable porous polyethylene (PPE) product line from Porex Surgical, Inc. for use primarily in reconstructive surgery of the head and face. In December 2009 the Company acquired Ascent, the market leader in the reprocessing and remanufacturing of medical devices in the U.S. During 2010 and 2009, the Company acquired certain additional companies all of which are expected to enhance the Company’s product offerings to its customers within its Orthopaedic Implants and MedSurg Equipment business segments.

MARKETING

Domestic sales accounted for 65% of total revenues in 2010. Most of the Company’s products are marketed directly to doctors, hospitals and other healthcare facilities through dedicated sales forces for each of its principal product lines to provide focus and a high level of expertise to each medical specialty served. International sales accounted for 35% of total revenues in 2010. The Company’s products are sold in approximately 100 countries through local dealers and direct sales efforts. Additional information regarding the Company’s international and domestic operations and sales appears in Note 13 to the Consolidated Financial Statements in Item 8 of this report.

The Company’s business is generally not seasonal in nature; however, the number of orthopaedic implant surgeries is lower during the summer months.

9

COMPETITION

The Company is one of five leading competitors in the United States for orthopaedic reconstructive products. The four other leading competitors are DePuy Orthopaedics, Inc. (a subsidiary of Johnson & Johnson), Zimmer Holdings, Inc., Biomet, Inc., and Smith & Nephew plc. While competition abroad varies from area to area, the Company believes it is also a leading player in the international markets with these same companies as its principal competitors.

In the trauma implant segment, Stryker is one of five leaders competing principally with Synthes, Inc., Smith & Nephew Orthopaedics (a division of Smith & Nephew plc), Zimmer Holdings, Inc., and DePuy Orthopaedics, Inc.

In the spinal implant segment, the Company is one of four leaders, competing principally with Medtronic Sofamor Danek, Inc. (a subsidiary of Medtronic, Inc.), DePuy Spine, Inc. (a subsidiary of Johnson & Johnson), and Synthes, Inc.

In the craniomaxillofacial implant segment, Stryker is one of four leaders, competing principally with Synthes, Inc., Biomet Microfixation, LLC (a subsidiary of Biomet, Inc.), and KLS Martin L.P.

In the surgical equipment segment, Stryker is one of three leaders, competing principally with Medtronic, Inc. and Conmed Linvatec, Inc. (a subsidiary of CONMED Corporation). These companies are also competitors in the international segments, along with Aesculap-Werke AG (a division of B. Braun Melsungen AG), a large European manufacturer.

In the surgical navigation segment, Stryker is one of six principal competitors, including Medtronic Surgical Navigation Technologies (a division of Medtronic, Inc.), BrainLAB Inc. (a subsidiary of BrainLAB AG), AESCULAP AG & Co. KG (a division of B. Braun Melsungen AG), Radionics, Inc. (a subsidiary of Integra LifeSciences Corporation), and GE Medical Systems Navigation and Visualization, Inc. (a subsidiary of General Electric Company).

In the arthroscopy segment, the Company is one of four leaders, together with Smith & Nephew Endoscopy (a division of Smith & Nephew plc), ConMed Linvatec, Inc., and Arthrex, Inc. In the laparoscopic imaging products segment, the Company is one of three leaders, together with Karl Storz GmbH & Co. (a German company) and Olympus Optical Co. Ltd. (a Japanese company).

The Company’s primary competitor in the patient handling segment is Hill-Rom Holdings, Inc. In the specialty stretcher segment, the primary competitors are Hausted, Inc. (a subsidiary of STERIS Corporation), Hill-Rom Holdings, Inc., and Midmark Hospital Products Group (a subsidiary of Ohio Medical Instrument Company, Inc.). In the emergency medical services segment, Ferno-Washington, Inc. is the Company’s principal competitor.

The Company’s primary competitor in the U.S. market for reprocessing and remanufacturing of medical devices is SteriMed Inc.

The principal factors that the Company believes differentiate it in the highly competitive market segments in which it operates and enable it to compete effectively are innovation, reliability, service and reputation. The Company believes that its competitive position in the future will depend to a large degree on its ability to develop new products and make improvements to existing products. While the Company does not consider patents a major factor in its overall competitive success, patents and trademarks are significant to the extent that a product or an attribute of a product represents a unique design or process. Patent protection of such products restricts competitors from duplicating these unique designs and features. Stryker seeks to obtain patent protection on its products whenever appropriate for protecting its competitive advantage. As of December 31, 2010, the Company owns approximately 1,125 United States patents and 1,945 international patents.

10

MANUFACTURING AND SOURCES OF SUPPLY

The Company’s manufacturing processes consist primarily of precision machining, metal fabrication and assembly operations; the forging and investment casting of cobalt chrome; and the finishing of cobalt chrome and titanium. Approximately 12% of the Company’s cost of sales in 2010 represented finished products that were purchased complete from outside suppliers. The Company also purchases parts and components, such as forgings, castings, gears, bearings, casters and electrical components, and uses outside sources for certain finishing operations, such as plating, hardening and coating of machined components and sterilization of certain products. The principal raw materials used by the Company are stainless steel, aluminum, cobalt chrome and titanium alloys. In all, purchased parts and components from outside sources were approximately 38% of the total cost of sales in 2010.

While the Company relies on single sources for certain purchased materials and services, it believes alternate sources are available if needed. The Company has not experienced any significant difficulty in the past in obtaining the materials necessary to meet its production schedules.

Substantially all products manufactured by the Company are stocked in inventory, while certain products manufactured within the Company’s MedSurg Equipment segment are assembled to order.

REGULATION AND PRODUCT QUALITY

The Medical Device Amendments of 1976 to the federal Food, Drug and Cosmetic Act and the Safe Medical Devices Act of 1990, together with regulations issued or proposed thereunder, provide for regulation by the FDA of the design, manufacture and marketing of medical devices, including most of the Company’s products.

The FDA’s Quality System regulations set forth standards for the Company’s product design and manufacturing processes, require the maintenance of certain records and provide for inspections of the Company’s facilities by the FDA. There are also certain requirements of state, local and foreign governments that must be complied with in the manufacturing and marketing of the Company’s products.

In 2009 the Company received a warning letter from the FDA related to compliance issues for one of its CMF implant products that was previously sold through its CMF distribution facility in Portage, Michigan. In 2008 the Company received a warning letter from the FDA related to quality systems and compliance issues at its OP-1 implant manufacturing facility in Hopkinton, Massachusetts. In 2007 the Company received two warning letters from the FDA regarding compliance with certain quality system specifications at its reconstructive implant manufacturing facilities: one letter for its facility in Cork, Ireland and another for its facility in Mahwah, New Jersey. In October 2009, the FDA informed the Company that the warning letter related to its OP-1 implant manufacturing facility had been resolved following a productive reinspection earlier in 2009. In March 2010, the FDA informed the Company that the warning letter related to its Mahwah manufacturing facility had been resolved following a re-inspection in 2009 and additional corrective actions. In May 2010, the FDA informed the Company that the warning letters related to its Cork, Ireland and CMF facilities had been resolved following FDA re-inspection of the Cork, Ireland facility and additional corrective actions at both the Cork and CMF facilities.

Most of the Company’s new products fall into FDA classifications that require notification of and review by the FDA before marketing, submitted as a 510(k). Certain of the Company’s products require extensive clinical testing, consisting of safety and efficacy studies, followed by PMA applications for specific surgical indications.

Stryker also is subject to the laws that govern the manufacture and distribution of medical devices of each country in which the Company manufactures or sells products. The member states of the European Union (EU) have adopted the European Medical Device Directives, which create a single set of medical device regulations

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for all EU member countries. These regulations require companies that wish to manufacture and distribute medical devices in EU member countries to obtain CE Marking for their products. Stryker has authorization to apply the CE Marking to substantially all of its products. The Company’s OP-1 product has been considered a drug under the regulations for Europe, Australia and Japan.

Initiatives sponsored by government agencies, legislative bodies and the private sector to limit the growth of healthcare expenses generally and hospital costs in particular, including price regulation and competitive pricing, are ongoing in markets where the Company does business. It is not possible to predict at this time the long-term impact of such cost-containment measures on the Company’s future business.

EMPLOYEES

At December 31, 2010, the Company had 20,036 employees worldwide. Certain international employees are covered by collective bargaining agreements that are updated annually. The Company believes that its employee relations are satisfactory.

EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the executive officers of the Company appears under the caption “Directors, Executive Officers and Corporate Governance” in Item 10 of this report.

ITEM 1A. RISK FACTORS.

The following information discusses specific risks that could potentially impact the Company’s business, financial condition or operating results. The Company may be subject to additional risks that are not currently known to the Company or those which the Company deems immaterial that may also impact its business operations.

The Company’s operating results could be negatively impacted by economic, political or other developments in countries in which the Company does business.

The Company distributes its products throughout the world. As a result, the Company’s future operating results could be negatively impacted by unstable economic, political and social conditions, including but not limited to fluctuations in foreign currency exchange rates, political instability or changes in the interpretation or creation of laws and regulations, including tax laws and regulations, in each of the countries where the Company conducts business, including the United States.

Stricter pricing guidelines for the medical technology industry could have a negative impact on the Company’s future operating results.

Initiatives sponsored by government agencies, legislative bodies and the private sector to limit the growth of healthcare costs, including price regulation and competitive pricing, are ongoing in markets where the Company does business. The Company could experience a negative impact on its operating results due to increased pricing pressure in the United States, Europe, Japan and certain other markets. Governments, hospitals and other third party payers could reduce the amount of approved reimbursements for the Company’s products. Reductions in reimbursement levels or coverage or other cost-containment measures could unfavorably affect the Company’s future operating results.

The Company’s operating results could be negatively impacted by future product liability claims, unfavorable court decisions, regulatory compliance or legal settlements.

The Company is a defendant in various proceedings, legal actions and claims arising in the normal course of business, including product liability and other matters. Such matters are subject to many uncertainties and

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outcomes are not predictable with assurance. In addition, the Company may incur significant legal expenses regardless of whether it is found to be liable. To partially mitigate losses arising from unfavorable outcomes in such matters, the Company purchases third-party insurance coverage subject to certain deductibles and loss limitations. While the Company believes its current insurance coverage is adequate to mitigate losses arising from such matters, its future operating results may be unfavorably impacted by any settlement payments or losses beyond the amounts of insurance carried. In addition, such product liability matters may negatively impact the Company’s ability to obtain cost-effective third-party insurance coverage in future periods.

Substantially all of the Company’s products are subject to regulation by the FDA and other governmental authorities both inside and outside of the United States. If the Company were to fail to comply with the applicable regulatory requirements, it may be subject to a range of sanctions including, but not limited to, warning letters, monetary fines, product recalls and the suspension of product manufacturing. Such sanctions, if implemented, could have a material unfavorable impact on the Company’s future operating results.

The Company’s inability to maintain adequate working relationships with healthcare professionals could have a negative impact on the Company’s future operating results.

The Company maintains close working relationships with respected physicians and medical personnel in hospitals and universities who assist in product research and development. The Company continues to place emphasis on the development of proprietary products and product improvements to complement and expand its existing product lines. If the Company is unable to maintain these good relationships, its ability to develop, market and sell new and improved products could decrease and future operating results could be unfavorably affected.

The Company’s operating results could be negatively impacted by future changes in the allocation of income to each of the income tax jurisdictions in which the Company operates.

The Company operates in multiple income tax jurisdictions both inside and outside the United States. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions based on current interpretations of complex income tax regulations. Income tax authorities in these jurisdictions regularly perform audits of the Company’s income tax filings. Income tax audits associated with the allocation of this income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments. If changes to the income allocation are required between jurisdictions with different income tax rates, such adjustments could have a material unfavorable impact on the Company’s income tax expense and net earnings in future periods.

The Company’s operating results could be negatively impacted if it is unable to capitalize on research and development spending.

The Company has spent a significant amount of time and resources on research and development projects in order to develop and validate new and innovative products. The Company believes these projects will result in the commercialization of new products and will create additional future sales. However, factors including regulatory delays, safety concerns or patent disputes could delay the introduction or marketing of new products. Additionally, unanticipated issues may arise in connection with current and future clinical studies that could delay or terminate a product’s development prior to regulatory approval. The Company may experience an unfavorable impact on its operating results if it is unable to capitalize on those efforts by attaining the proper FDA approval or to successfully market new products.

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The Company’s operating results could be negatively impacted by changes in its excess and obsolete inventory reserves.

The Company maintains reserves for excess and obsolete inventory resulting from the potential inability to sell its products at prices in excess of current carrying costs. The markets in which the Company operates are highly competitive, and new products and surgical procedures are introduced on an ongoing basis. Such marketplace changes may cause some of the Company’s products to become obsolete. The Company makes estimates regarding the future recoverability of the costs of these products and records a provision for excess and obsolete inventories based on historical experience, expiration of sterilization dates and expected future trends. If actual product life cycles, product demand or acceptance of new product introductions are less favorable than projected by management, additional inventory write-downs may be required, which could unfavorably affect future operating results.

The Company’s operating results could be negatively impacted if it is unable to capitalize on previous or future acquisitions.

In addition to internally developed products, the Company relies upon investment in new technologies through acquisitions. Investments in medical technology are inherently risky and the Company cannot guarantee that any of its previous or future acquisitions will be successful or will not have a material unfavorable impact on the Company’s future operating results. Such risks include the activities required to integrate new businesses into the Company and may result in the need to allocate more resources to integration and product development activities than originally anticipated and involve significant amounts of management’s time, which could adversely affect management’s ability to focus on other projects and could have a material unfavorable impact on the Company’s financial condition, consolidated results of operations or cash flows. In addition, the Company cannot be certain that the businesses it acquires will become profitable or remain so, which may result in unexpected impairment charges.

The Company’s inability to continue to hire and retain key employees could have a negative impact on the Company’s future operating results.

The talent and drive of the Company’s employees are key factors in the success of its business. The Company’s sales, technical and other key personnel play an integral role in the development, marketing and selling of new and existing products. If the Company is unable to recruit, hire, develop and retain a talented, competitive work force, it may not be able to meet its strategic business objectives.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

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ITEM 2. PROPERTIES.

The Company has the following properties as of December 31, 2010:

Location	Segment	Use	Square Feet		Owned/ Leased
Mahwah, New Jersey	Orthopaedic Implants	Manufacturing of reconstructive implants		531,000		Owned
Limerick, Ireland	Orthopaedic Implants	Manufacturing of reconstructive implants and OP-1		130,000		Owned
Kiel, Germany	Orthopaedic Implants	Manufacturing of trauma implants		174,000		Owned
Selzach, Switzerland	Orthopaedic Implants	Manufacturing of trauma implants		78,000		Owned
Neuchâtel, Switzerland	Orthopaedic Implants	Manufacturing of spinal implants		88,000		Owned
Bordeaux, France	Orthopaedic Implants	Manufacturing of spinal implants		79,000		Owned
Bordeaux, France	Orthopaedic Implants	Manufacturing of spinal implants		35,000		Leased
Carrigtwohill, Ireland	Orthopaedic Implants and MedSurg Equipment	Manufacturing of reconstructive implants and surgical equipment		154,000		Owned
Freiburg, Germany	Orthopaedic Implants and MedSurg Equipment	Manufacturing of craniomaxillofacial implants and surgical navigation systems		106,000		Owned
Stetten, Germany	Orthopaedic Implants	Manufacturing of craniomaxillofacial implants		33,000		Owned
West Lebanon, New Hampshire	Orthopaedic Implants	Manufacturing of OP-1		140,000		Owned
Hopkinton, Massachusetts	Orthopaedic Implants	Manufacturing of OP-1		69,000		Leased
Suzhou, China	Orthopaedic Implants	Manufacturing of reconstructive, trauma and spinal implants		155,000		Owned
Newnan, Georgia	Orthopaedic Implants	Manufacturing of reconstructive implants		54,000		Leased
Portage, Michigan	MedSurg Equipment	Manufacturing of surgical equipment and patient-handling and emergency medical equipment		1,034,000		Owned
Arroyo, Puerto Rico	MedSurg Equipment	Manufacturing of surgical equipment and endoscopic systems		220,000		Leased
San Jose, California	MedSurg Equipment	Manufacturing of endoscopic systems		165,000		Leased
Flower Mound, Texas	MedSurg Equipment	Manufacturing of communications systems		114,000		Leased
Lakeland, Florida	MedSurg Equipment	Reprocessing and remanufacturing of medical devices		112,000		Leased
Phoenix, Arizona	MedSurg Equipment	Reprocessing and remanufacturing of medical devices		51,000		Leased
Buffalo, New York	MedSurg Equipment	Manufacturing of pressure ulcer and temperature management products		112,000		Owned
Kalamazoo, Michigan	Other	Corporate headquarters		75,000		Owned

In addition to the above, the Company maintains administrative and sales offices and warehousing and distribution facilities in multiple countries. The Company believes that its properties are suitable and adequate for the manufacture and distribution of the Company’s products.

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ITEM 3. LEGAL PROCEEDINGS.

The Company is involved in various proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor and intellectual property, and other matters that are more fully described in Note 17 to the Consolidated Financial Statements in Item 8 of this report. The outcomes of these matters will generally not be known for prolonged periods of time. In certain of the legal proceedings, the claimants seek damages, as well as other compensatory relief, which could result in the payment of significant claims and settlements. In legal matters for which management has sufficient information to reasonably estimate the Company’s future obligations, a liability representing management’s best estimate of the probable cost, or the minimum of the range of probable losses when a best estimate within the range is not known, for the resolution of these legal matters is recorded. The estimates are based on consultation with legal counsel, previous settlement experience and settlement strategies.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The Company’s common stock is traded on the New York Stock Exchange under the symbol SYK. Quarterly stock prices and dividend information for the years ended December 31, 2010 and 2009 were as follows:

	2010 Quarter Ended								2009 Quarter Ended
	Mar. 31		June 30		Sept. 30		Dec. 31		Mar. 31		June 30		Sept. 30		Dec. 31
Dividends declared per share of common stock	$	0.15	$	0.15	$	0.15	$	0.18	$	0.0	$	0.0	$	0.0	$	0.25
Market price of common stock:
High		58.49		59.72		53.29		55.00		44.46		41.73		48.10		52.66
Low		49.85		48.76		42.74		48.13		30.96		32.34		37.14		42.74

The Company’s Board of Directors considers payment of a cash dividend at each of its quarterly meetings.

In the fourth quarter of 2010, the Company issued 230 shares of common stock as performance incentive awards to certain employees. The shares were not registered under the Securities Act of 1933 (the Act) based on the conclusion that the awards would not be events of sale within the meaning of Section 2(a)(3) of the Act.

On January 31, 2011, there were 4,748 shareholders of record of the Company’s common stock.

In December 2010 the Company announced that its Board of Directors had authorized the Company to purchase up to $500.0 million of its common stock from time to time in the open market, in privately negotiated transactions or otherwise. The Company did not make any repurchase pursuant to the $500.0 million repurchase program in 2010.

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In December 2009 the Company announced that its Board of Directors had authorized the Company to repurchase up to $750.0 million of its common stock from time to time in the open market, in privately negotiated transactions or otherwise. During the fourth quarter of 2010, the Company repurchased 6.1 million shares of its common stock in the open market at a cost of $314.5 million, as follows (in millions, except per share amounts):

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans		(d) Maximum Dollar Value of Shares that may yet be Purchased Under the Plans
$750.0 million repurchase program
Month #1
October 1, 2010—October 31, 2010		—	$	—		—	$	—
Month #2
November 1, 2010—November 30, 2010		3.9	$	51.53		3.9	$	478.7
Month #3
December 1, 2010—December 31, 2010		2.2	$	51.19		2.2	$	324.4
Total		6.1	$	51.41		6.1
$500.0 million repurchase program
Month #3
December 1, 2010—December 31, 2010		—	$	—		—	$	500.0
Total		—	$	—		—

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PERFORMANCE GRAPH (UNAUDITED)

Set forth below is a graph comparing the total returns (including reinvestments of dividends) of the Company, the Standard & Poor’s (S&P) 500 Composite Stock Price Index and the S&P Health Care (Medical Products and Supplies) Index. The graph assumes $100 invested on December 31, 2005 in the Company’s Common Stock and each of the indices.

Company / Index	2005		2006		2007		2008		2009		2010
Stryker Corporation		100		124.53		169.59		91.58		116.04		125.20
S&P 500 Index		100		115.79		122.16		76.96		97.33		111.99
S&P 500 Health Care Index		100		107.53		115.22		88.94		106.46		109.55

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ITEM 6. SELECTED FINANCIAL DATA.

The financial information for each of the five years in the period ended December 31, 2010 is set forth below (dollars in millions, except per share amounts):

	2010			2009		2008		2007		2006
Net sales	$	7,320.0		$	6,723.1	$	6,718.2	$	6,000.5	$	5,147.2
Cost of sales		2,285.7			2,183.7		2,131.4		1,865.2		1,616.6
Gross profit		5,034.3			4,539.4		4,586.8		4,135.3		3,530.6
Research, development and engineering expenses		393.9			336.2		367.8		375.3		324.6
Selling, general and administrative expenses		2,707.3			2,506.3		2,625.1		2,391.5		2,047.0
Intangibles amortization		58.2			35.5		40.0		41.4		42.7
Other (a)		123.5			67.0		34.9		19.8		52.7
		3,282.9			2,945.0		3,067.8		2,828.0		2,467.0
Operating income		1,751.4			1,594.4		1,519.0		1,307.3		1,063.6
Other income (expense)		(21.8	)		29.5		61.2		62.8		30.2
Earnings from continuing operations before income taxes		1,729.6			1,623.9		1,580.2		1,370.1		1,093.8
Income taxes		456.2			516.5		432.4		383.4		322.4
Net earnings from continuing operations		1,273.4			1,107.4		1,147.8		986.7		771.4
Net earnings and gain on sale of discontinued operations		—			—		—		30.7		6.3
Net earnings	$	1,273.4		$	1,107.4	$	1,147.8	$	1,017.4	$	777.7
Net earnings from continuing operations per share of common stock:
Basic	$	3.21		$	2.79	$	2.81	$	2.41	$	1.90
Diluted	$	3.19		$	2.77	$	2.78	$	2.37	$	1.87
Net earnings per share of common stock:
Basic	$	3.21		$	2.79	$	2.81	$	2.48	$	1.91
Diluted	$	3.19		$	2.77	$	2.78	$	2.44	$	1.89
Dividends declared per share of common stock	$	0.63		$	0.25	$	0.40	$	0.33	$	0.22
Average number of shares outstanding—in millions:
Basic		396.4			397.4		408.1		409.7		406.5
Diluted		399.5			399.4		413.6		417.2		411.8

(a) Includes restructuring charges, property, plant and equipment impairment, intangible asset impairment and purchased in-process research and development charges.

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FINANCIAL AND STATISTICAL DATA

	2010			2009			2008			2007			2006
Cash and current marketable securities		4,380.1			2,954.8			2,195.6			2,410.8			1,414.8
Working capital		6,026.4			4,410.2			3,517.2			3,571.9			2,182.8
Current ratio		4.8			4.1			3.4			3.7			2.6
Property, plant and equipment—net		798.3			947.6			963.8			991.6			914.9
Capital expenditures		182.1			131.3			155.2			187.7			209.4
Depreciation and amortization		410.2			385.3			387.6			366.6			324.1
Total assets		10,895.1			9,071.3			7,603.3			7,354.0			5,873.8
Long-term debt, including current maturities		1,021.8			18.0			20.5			16.8			14.8
Shareholders’ equity		7,173.6			6,595.1			5,406.7			5,378.5			4,191.0
Return on average equity		18.5	%		18.5	%		21.3	%		21.3	%		20.8	%
Net cash provided by operating activities		1,547.4			1,460.7			1,175.9			1,028.3			867.3
Number of shareholders of record		4,586			4,607			4,500			4,373			4,091
Number of employees		20,036			18,582			17,594			16,026			18,806

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Throughout this discussion, references are made to the following financial measures: “constant currency,” “adjusted net earnings,” “adjusted basic net earnings per share,” and “adjusted diluted net earnings per share.” These financial measures are an alternative representation of Stryker Corporation’s (the Company or Stryker) past and potential future operational performance and do not replace the presentation of the Company’s reported financial results under U.S. generally accepted accounting principles (GAAP). The Company has provided these supplemental non-GAAP financial measures because they provide meaningful information regarding the Company’s results on a consistent and comparable basis for the periods presented. Management uses these non-GAAP financial measures for reviewing the operating results of its business segments, for analyzing potential future business trends in connection with its budget process and bases certain annual bonus plans on these non-GAAP financial measures. In order to measure the Company’s sales performance on a constant currency basis, it is necessary to remove the impact of changes in foreign currency exchange rates which affects the comparability and trend of sales. Constant currency results are calculated by translating current year results at prior year average foreign currency exchange rates. In order to measure earnings performance on a consistent and comparable basis, the Company excludes the impairment of property, plant and equipment and gain on sale of certain assets recorded in 2010, the patent litigation gain recorded in 2009, the income tax effect associated with the repatriation of foreign earnings recorded in 2010 and 2009 and the restructuring charges recorded in 2009 and 2008, each of which affects the comparability of operating results and the trend of earnings. Additional details regarding the nature, determination and financial statement impact of these items are included in Results of Operations. In addition, the Company believes investors will utilize this information to evaluate period-to-period results on a comparable basis and to better understand potential future operating results. The Company encourages investors and other users of these financial statements to review its Consolidated Financial Statements and other publicly filed reports in their entirety and not to rely solely on any single financial measure.

Executive Level Overview

Stryker is one of the world’s leading medical technology companies and is dedicated to helping healthcare professionals perform their jobs more efficiently while enhancing patient care. The Company provides innovative orthopaedic implants as well as state-of-the-art medical and surgical equipment to help people lead more active and more satisfying lives. The Company’s products include implants used in joint replacement, trauma and spinal surgeries; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment as well as other medical device products used in a variety of medical specialties.

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Domestic sales accounted for 65% of total revenues in 2010. Most of the Company’s products are marketed directly to doctors, hospitals and other healthcare facilities by approximately 4,600 sales and marketing personnel in the United States. Stryker primarily maintains separate and dedicated sales forces for each of its principal product lines to provide focus and a high level of expertise to each medical specialty served.

International sales accounted for 35% of total revenues in 2010. The Company’s products are sold in approximately 100 countries through Company-owned sales subsidiaries and branches as well as third-party dealers and distributors.

The Company’s business is generally not seasonal in nature; however, the number of orthopaedic implant surgeries is lower during the summer months.

In 2010 the Company completed several acquisitions in all cash transactions, including the Sonopet Ultrasonic Aspirator control consoles, handpieces and accessories from Mutoh Co., Ltd. and Synergetics USA, Inc., Gaymar Industries Inc, and the bioimplantable implants product line and related assets from Porex Surgical, Inc.

In December 2010 the Company announced a definitive agreement to sell its OP-1 product family for use in orthopaedic bone applications and its manufacturing facility based in Lebanon, NH and the transaction was completed on February 1, 2011. Additional details, including the financial statement impact of this transaction, are included in Results of Operations.

In October 2010 the Company announced a definitive agreement to acquire the assets of the Neurovascular division of Boston Scientific Corporation (Neurovascular) in an all cash transaction of up to $1.5 billion. The transaction was completed on January 3, 2011. The acquisition of Neurovascular is expected to substantially enhance the Company’s presence in the neurovascular market, allowing it to offer a comprehensive portfolio of products in both neurosurgical and neurovascular devices.

During the third quarter of 2010, the Company sold its Orthopaedics Implants manufacturing facility based in Caen, France. In addition, during the third quarter of 2010, the Company recorded a favorable income tax adjustment of $7.4 million to reduce the income tax liability originally recorded in the fourth quarter of 2009 associated with the repatriation of foreign earnings to the United States. Additional details, including the financial statement impact of these transactions, are included in Results of Operations.

In August 2010 the Company refinanced its credit facility with a new $1,000.0 million Senior Unsecured Revolving Credit Facility due August 2013 (the 2010 Facility). The 2010 Facility replaced the previously outstanding $1,000.0 million Unsecured Credit Facility due in November 2010 (the 2005 Facility). Additional details are included in Liquidity and Capital Resources.

In January 2010 the Company sold $500.0 million of senior unsecured notes due January 15, 2015 (the 2015 Notes) and $500.0 million of senior unsecured notes due January 15, 2020 (the 2020 Notes). The net proceeds from the offering have been and will continue to be available for working capital and other general corporate purposes, including acquisitions, stock repurchases and other business opportunities. Additional details are included in Liquidity and Capital Resources.

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Results of Operations

The table below outlines the components of net earnings from continuing operations from the Consolidated Statements of Earnings as a percentage of net sales and the year-to-year percentage change in dollar amounts:

	Percentage of Net Sales									Percentage Change
	2010			2009			2008			2010/2009			2009/2008
Net sales		100.0	%		100.0	%		100.0	%		9	%		0	%
Cost of sales		31.2			32.5			31.7			5			2
Gross profit		68.8			67.5			68.3			11			(1	)
Research, development and engineering expenses		5.4			5.0			5.5			17			(9	)
Selling, general and administrative expenses		37.0			37.3			39.1			8			(5	)
Intangibles amortization		0.8			0.5			0.6			64			(11	)
Property, plant and equipment impairment		1.7			—			—			—			—
Restructuring charges		—			1.0			0.5			(100	)		92
Operating income		23.9			23.7			22.6			10			5
Other income (expense)		(0.3	)		0.4			0.9			—			(52	)
Earnings before income taxes		23.6			24.2			23.5			7			3
Income taxes		6.2			7.7			6.4			(12	)		19
Net earnings		17.4	%		16.5	%		17.1	%		15			(4	)

The Company segregates its operations into two reportable business segments: Orthopaedic Implants and MedSurg Equipment. The Orthopaedic Implants segment includes orthopaedic reconstructive (hip and knee), trauma and spinal implant systems and other related products. The MedSurg Equipment segment includes surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; as well as other medical device products used in a variety of medical specialties.

The table below sets forth domestic/international and business segment net sales information (in millions):

							Percentage Change
	Net Sales						2010/2009						2009/2008
							Reported			Constant Currency			Reported			Constant Currency
	2010		2009		2008
Domestic/international sales:
Domestic	$	4,792.8	$	4,317.4	$	4,282.2		11	%		11	%		1	%		1	%
International		2,527.2		2,405.7		2,436.0		5			2			(1	)		3
Total net sales	$	7,320.0	$	6,723.1	$	6,718.2		9			8			0			2
Business segment sales:
Orthopaedic Implants	$	4,308.4	$	4,119.7	$	3,967.5		5			3			4			6
MedSurg Equipment		3,011.6		2,603.4		2,750.7		16			15			(5	)		(4	)
Total net sales	$	7,320.0	$	6,723.1	$	6,718.2		9			8			0			2

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The tables below set forth additional geographical sales growth information for significant products within the Company’s Orthopaedic Implants and MedSurg Equipment segments on both a reported basis and a constant currency basis:

	Year Ended December 31, 2010
	Percentage Change
	Domestic			International						Total
	Reported			Reported			Constant Currency			Reported			Constant Currency
Orthopaedic Implants sales:
Hips		5			5			1			5			3
Knees		6			1			(2	)		4			3
Trauma		11			5			5			8			7
Spine		(1	)		8			6			2			1
Total Orthopaedic Implants		5			4			1			5			3
MedSurg Equipment sales:
Surgical equipment and surgical navigation systems		9			5			3			8			8
Endoscopic and communications systems		6			9			7			7			6
Patient handling and emergency medical equipment		24			5			0			20			18
Total MedSurg Equipment		19			7			4			16			15
	Year Ended December 31, 2009
	Percentage Change
	Domestic			International						Total
	Reported			Reported			Constant Currency			Reported			Constant Currency
Orthopaedic Implants sales:
Hips		6			(2	)		4			2			5
Knees		10			(5	)		0			4			6
Trauma		10			2			4			5			6
Spine		11			9			12			10			11
Total Orthopaedic Implants		7			(1	)		3			4			6
MedSurg Equipment sales:
Surgical equipment and surgical navigation systems		2			(2	)		3			1			2
Endoscopic, communications and digital imaging systems		(5	)		6			11			(2	)		(1	)
Patient handling and emergency medical equipment		(23	)		(17	)		(12	)		(22	)		(20	)
Total MedSurg Equipment		(7	)		(2	)		3			(5	)		(4	)

2010 Compared to 2009

The Company’s net sales increased 9% to $7,320.0 million in 2010 from $6,723.1 million in 2009. Net sales grew by 7% as a result of increased unit volume and changes in product mix, 1% due to the favorable impact of foreign currency exchange rates on net sales and 3% due to acquisitions, which were partially offset by an unfavorable impact of 2% due to changes in price.

The Company’s domestic sales were $4,792.8 million for 2010, representing an increase of 11%, as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment. International sales were $2,527.2 million for 2010, representing an increase of 5%. The impact of foreign currency exchange rate movements to the dollar value of international sales was favorable by $69.7 million for 2010. On a constant currency basis, international sales increased 2% in 2010 as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment.

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Worldwide sales of Orthopaedic Implants were $4,308.4 million for 2010, representing an increase of 5%. On a constant currency basis, sales of Orthopaedic Implants increased 3% in 2010 as a result of higher shipments of hips, knees, trauma and spinal implant systems.

Hip Implant Systems: Sales of hip implant systems increased 5% in 2010 (3% on a constant currency basis). In the United States, sales growth of hip products was driven by sales of X3 Polyethylene, Rejuvenate hip products, Accolade cementless hip products and Restoration Modular Hip System revision hip products. Sales growth in X3 Polyethylene hip products in Europe, Canada, the Pacific and Latin America regions as well as sales growth in Trident hip products in Japan and the Pacific and Latin America regions also contributed to the Company’s constant currency sales growth in 2010. Sales growth in Accolade cementless hip products in Europe, Japan and the Latin America region also contributed to the Company’s constant currency sales growth in 2010.

Knee Implant Systems: Sales of knee implant systems increased 4% in 2010 (3% on a constant currency basis) due to due to worldwide sales growth in the Triathlon knee system as well as sales growth in Scorpio knee products in the Latin America region.

Trauma Implant Systems: Sales of trauma implant systems increased 8% in 2010 (7% on a constant currency basis) as a result of sales growth in the Gamma3 Hip Fracture System in the United States, Europe, Canada and the Pacific region as well as sales growth in the Company’s T2 Nailing System in the United States, Europe and the Pacific region. Sales growth in VariAx distal radius products in the United States, Europe, Canada, Japan and the Latin America region also contributed to the Company’s constant currency sales growth.

Spinal Implant Systems: Sales of spinal implant systems increased 2% in 2010 (1% on a constant currency basis). The increase was driven by sales growth of thoracolumbar implant systems in the United States, Europe, Japan, Canada and the Latin America region, interbody device products in Japan and Canada as well as cervical implants in the United States and Canada.

Worldwide sales of MedSurg Equipment were $3,011.6 million in 2010, representing an increase of 16%. On a constant currency basis, sales of MedSurg Equipment increased 15% in 2010 as a result of higher shipments of surgical equipment and surgical navigation systems, endoscopic and communications systems as well as patient handling and emergency medical equipment. Sales of MedSurg Equipment were also positively impacted by 7% from acquisitions and 1% from a one-time shipment of patient handling equipment.

Surgical Equipment and Surgical Navigation Systems: Sales of surgical equipment and surgical navigation systems increased 8% in 2010 (8% on a constant currency basis) due to worldwide sales growth in operating room equipment as well as sales growth in powered surgical products in the United States, Europe, Canada, the Pacific and Latin America regions and sales growth in interventional pain products in the United States, Japan, Canada and the Latin America region.

Endoscopic and Communications Systems: Sales of endoscopic and communications systems increased 7% in 2010 (6% on a constant currency basis) due to worldwide sales growth in general surgery products and sales growth in communications products in Europe, Japan and the Latin America region. Sales growth in medical video equipment in the United States, Japan, Canada, and the Pacific and Latin America regions also contributed to the Company’s constant currency sales growth.

Patient Handling and Emergency Medical Equipment: Sales of patient handling and emergency medical equipment increased 20% in 2010 (18% on a constant currency basis) due to higher sales of hospital bed products and stretchers in the United States and the Latin America region. Strong sales growth of EMS products in the United States and the Pacific region also contributed to the Company’s constant currency sales growth. Sales of patient handling and emergency medical equipment in 2010 were also positively impacted by 3% from acquisitions and 3% from a one-time shipment of patient handling equipment.

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Cost of sales represented 31.2% of sales in 2010 compared to 32.5% in 2009. The decrease in the cost of sales percentage is primarily due to lower excess and obsolete inventory charges, higher absorption due to higher production levels as well as a favorable impact from the effect of foreign currency exchange rates on costs from the Company’s Euro based manufacturing sites.

Research, development and engineering expenses represented 5.4% of sales in 2010 compared to 5.0% in 2009. The spending level in 2010 increased by 17% to $393.9 million. The higher spending level is the result of the Company’s increased focus on new product development for anticipated future product launches and continued investments in new technologies. New product introductions in 2010 for the Orthopaedic Implants segment included the ADM X3 Mobile Bearing Acetabular system. Within the MedSurg equipment segment, new product introductions in 2010 included the Prime series of stretchers and the WiSe 1:3 Transmitter.

Selling, general and administrative expenses increased 8% in 2010 and represented 37.0% of sales compared to 37.3% in 2009. In 2010 the Company sold its Orthopaedic Implant manufacturing facility in Caen, France and recorded a gain of $24.3 million, which is included in selling, general and administrative expenses. In 2009 the Company settled an outstanding patent infringement lawsuit and received $62.5 million pursuant to a confidential settlement agreement. This gain also represented a reduction to selling, general and administrative expenses. The remaining decrease in selling, general and administrative expenses as a percentage of sales in 2010 is primarily due to management of discretionary spending levels.

In 2010 the Company announced a definitive agreement to sell its OP-1 product family for use in orthopaedic bone applications and its manufacturing facility based in Lebanon, NH. As a result of the announcement, the Company recorded a $76.6 million (net of $46.9 million income tax expense) non-cash impairment charge to reflect the reduction of the carrying amount of the associated assets to their fair value.

Interest and marketable securities income, which is included in other income (expense), decreased to $48.7 million in 2010 from $53.9 million in 2009 primarily as a result of lower average yields on the Company’s investments. Interest expense, which is also included in other income (expense), increased to $77.5 million in 2010 from $23.2 million in 2009 primarily as a result of the interest cost on the debt issued in January 2010.

The Company’s effective income tax rate on earnings for the year ended December 31, 2010 was 26.4% compared to an effective income tax rate for the year ended December 31, 2009 of 31.8%. The effective income tax rate for the year ended December 31, 2010 reflects the property, plant and equipment impairment charge of $76.6 million (net of $46.9 million income tax benefit), the gain on sale of the Caen facility of $13.4 million (net of $10.9 million income tax expense) and the impact of the favorable income tax expense adjustment of $7.4 million associated with the repatriation of foreign earnings to the United States completed in the fourth quarter of 2009. The effective income tax rate for the year ended December 31, 2009 reflects the impact of restructuring charges of $48.4 million (net of $18.6 million income tax benefits), the patent litigation gain of $42.9 million (net of $19.6 million income tax expenses) and the impact of the $67.1 million income tax expenses associated with the repatriation of foreign earnings of $787.0 million. The Company’s effective income tax rate on earnings for the fourth quarter of 2010 was 22.2% compared to the fourth quarter of 2009 of 41.5%. The effective income tax rate for the fourth quarter of 2010 reflects the property, plant and equipment impairment charge of $76.6 million (net of $46.9 million income tax benefit). The effective income tax rate for the fourth quarter of 2009 reflects the patent litigation gain of $42.9 million (net of $19.6 million income tax expenses) and the impact of the $67.1 million income tax expenses associated with the repatriation of foreign earnings of $787.0 million. In addition to these factors, the Company’s reported effective income tax rates for the years ended December 31, 2010 and 2009 are lower than the U.S. statutory income tax rate primarily as a result of manufacturing in lower income tax jurisdictions.

Net earnings increased 15% in 2010 to $1,273.4 million from $1,107.4 million in 2009. Basic net earnings per share increased 15% in 2010 to $3.21 from $2.79 in 2009, and diluted net earnings per share increased 15% to $3.19 in 2010 from $2.77 in 2009.

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Excluding the impact of the property, plant and equipment impairment charge and gain on sale of certain assets recorded in 2010, the patent litigation gain recorded in 2009, the income tax adjustment associated with the repatriation of foreign earnings recorded in 2010 and 2009 and the restructuring charges recorded in 2009, adjusted net earnings increased 13% in 2010 to $1,329.2 million from $1,180.0 million in 2009. Adjusted basic net earnings per share increased 13% in 2010 to $3.35 from $2.97 in 2009 and adjusted diluted net earnings per share increased 13% in 2010 to $3.33 from $2.95 in 2009.

The reconciliations of these non-GAAP financial measures are as follows (in millions, except per share amounts):

	2010			2009			Percentage Change
Reported net earnings	$	1,273.4		$	1,107.4			15
Restructuring charges		—			48.4			(100	)
Patent litigation gain		—			(42.9	)		(100	)
Gain on sale of property, plant and equipment		(13.4	)		—			—
Income taxes on repatriation of foreign earnings		(7.4	)		67.1			—
Impairment of property, plant and equipment		76.6			—			—
Adjusted net earnings	$	1,329.2		$	1,180.0			13
Basic net earnings per share of common stock:
Reported basic net earnings per share	$	3.21		$	2.79			15
Restructuring charges		—		$	0.12			(100	)
Patent litigation gain		—		$	(0.11	)		(100	)
Gain on sale of property, plant and equipment	$	(0.03	)		—			—
Income taxes on repatriation of foreign earnings	$	(0.02	)	$	0.17			—
Impairment of property, plant and equipment	$	0.19			—			—
Adjusted basic net earnings per share	$	3.35		$	2.97			13
Weighted-average basic shares outstanding		396.4			397.4
Diluted net earnings per share of common stock:
Reported diluted net earnings per share	$	3.19		$	2.77			15
Restructuring charges		—		$	0.12			(100	)
Patent litigation gain		—		$	(0.11	)		(100	)
Gain on sale of property, plant and equipment	$	(0.03	)		—			—
Income taxes on repatriation of foreign earnings	$	(0.02	)	$	0.17			—
Impairment of property, plant and equipment	$	0.19			—			—
Adjusted diluted net earnings per share	$	3.33		$	2.95			13
Weighted-average diluted shares outstanding		399.5			399.4

The weighted-average basic and diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.

2009 Compared to 2008

The Company’s net sales increased to $6,723.1 million in 2009 from $6,718.2 million in 2008. Net sales grew by 2% as a result of increased unit volume and changes in product mix partially offset by unfavorable changes in foreign currency exchange rates.

The Company’s domestic sales were $4,317.4 million for 2009, representing an increase of 1%, as a result of higher shipments of Orthopaedic Implants partially offset by lower shipments of MedSurg Equipment.

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International sales were $2,405.7 million for 2009, representing a decrease of 1%. The impact of foreign currency comparisons to the dollar value of international sales was unfavorable by $110.1 million for 2009. On a constant currency basis, international sales increased 3% in 2009 as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment.

Worldwide sales of Orthopaedic Implants were $4,119.7 million for 2009, representing an increase of 4%. On a constant currency basis, sales of Orthopaedic Implants increased 6% in 2009 as a result of higher shipments of hips, knees, trauma, craniomaxillofacial and spinal implant systems.

Hip Implant Systems: Sales of hip implant systems increased 2% in 2009 (5% on a constant currency basis). In the United States, sales growth was driven by Trident hip products, X3 Polyethylene hip products, Accolade cementless hip products and Restoration Modular Hip System revision hip products. Sales growth in several hip systems, including X3 Polyethylene and Accolade cementless hip products in Europe, Canada and the Latin America and Pacific regions and Trident hip products in Japan also contributed to the Company’s constant currency sales growth in 2009.

Knee Implant Systems: Sales of knee implant systems increased 4% in 2009 (6% on a constant currency basis) due to strong sales growth in the Triathlon Knee System in the United States, Europe, Japan, Canada and the Pacific region and solid sales growth in the Scorpio Knee System in the Latin America region.

Trauma Implant Systems: Sales of trauma implant systems increased 5% in 2009 (6% on a constant currency basis) as a result of sales growth in the Gamma 3 Hip Fracture System and the SPS Calcaneal Foot Plating System in the United States, Europe, Canada and the Latin America and Pacific regions as well as sales growth in the Company’s VariAx Distal Radius System in Europe, Canada and the Latin America region. Strong sales growth of the HydroSet injectable bone substitute product in the United States, Canada and the Pacific region also contributed to the Company’s constant currency sales growth in 2009.

Spinal Implant Systems: Sales of spinal implant systems increased 10% in 2009 (11% on a constant currency basis). The increase was driven by strong worldwide sales growth of thoracolumbar implant systems, interbody devices and cervical implants in the United States, Europe and the Latin America and Pacific regions.

Worldwide sales of MedSurg Equipment were $2,603.4 million for 2009, representing a decrease of 5%. The general economic slowdown in the United States resulted in a significant and rapid contraction in hospital capital budgets that depressed demand for certain MedSurg Equipment products. The severe weakening of the economy caused the Company’s hospital customers to reduce capital purchases, which generates the majority of sales within the MedSurg Equipment segment, to a degree not previously experienced in prior recessionary periods. On a constant currency basis, sales of MedSurg Equipment decreased 4% in 2009 as higher shipments of surgical equipment and surgical navigation systems were offset by lower shipments of endoscopic and communication systems as well as patient handling and emergency medical equipment.

Surgical Equipment and Surgical Navigation Systems: Sales of surgical equipment and surgical navigation systems increased 1% in 2009 (2% on a constant currency basis) due to worldwide sales growth in operating room equipment as well as sales growth in powered surgical products in the United States, Europe, Japan and the Latin America region and sales growth in interventional pain products in the United States, Japan and the Pacific region.

Endoscopic and Communications Systems: Sales of endoscopic and communications systems decreased 2% in 2009 (1% decrease on a constant currency basis) due to lower sales of medical video imaging equipment products and image portal products in the United States partially offset by worldwide sales growth in arthroscopy and general surgery products, sales growth in communications products in Japan and the Latin America and Pacific regions and medical video imaging equipment in Europe, Japan and the Latin America and Pacific regions.

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Patient Handling and Emergency Medical Equipment: Sales of patient handling and emergency medical equipment decreased 22% in 2009 (20% decrease on a constant currency basis) due to lower worldwide sales of hospital bed products and stretchers in the United States, Europe, Canada and the Pacific and Latin America regions, partially offset by sales growth in stretchers in Japan and emergency medical equipment in the United States.

Cost of sales represented 32.5% of sales in 2009 compared to 31.7% in 2008. The increase in the cost of sales percentage is primarily due to increased spending for compliance initiatives, higher excess and obsolete inventory costs associated with the Orthopaedic Implants businesses as well as higher unabsorbed costs due to lower production levels.

Research, development and engineering expenses represented 5.0% of sales in 2009 compared to 5.5% in 2008. The spending level in 2009 decreased by 9% to $336.2 million due to tight control on discretionary spending as well as the Company’s continued focus of certain research and development resources on compliance initiatives. New product introductions in 2009 for the Orthopaedic Implants segment included the Rejuvenate Modular Primary Hip system, the VariAx elbow plating system and the Xia Uniplanar Titanium Spinal System. Within the MedSurg equipment segment, new product introductions in 2009 included the 1288 HD Camera, the Impression non-powered support surface, the Flyte Suit personal protection system and the RemB micro electric system.

Selling, general and administrative expenses decreased 5% in 2009 and represented 37.3% of sales compared to 39.1% in 2008. In 2009 the Company settled an outstanding patent infringement lawsuit and received $62.5 million pursuant to a confidential settlement agreement. This gain represented a reduction to selling, general and administrative expenses. The remaining decrease in selling, general and administrative expenses as a percent of sales in 2009 is due to tight control on discretionary spending that more than offset increased legal settlement costs, net of insurance recoveries, recorded for certain product liability claims.

In 2009 the Company recorded $67.0 million ($48.4 million net of income taxes) in restructuring charges related to decisions to terminate certain third-party agent agreements at the Company’s EMEA Division, to simplify the organization structure at its Biotech, EMEA, Japan and Canada divisions and to discontinue selling certain products within its Orthopaedic Implants and MedSurg Equipment segments. In 2008 the Company recorded $34.9 million ($21.7 million net of income taxes) in restructuring charges related to the decisions to simplify the structure of the Company’s Japanese distribution business and to substantially reduce development efforts associated with Sightline product technologies acquired in 2006.

Interest and marketable securities income, which is included in other income (expense), decreased to $53.9 million in 2009 from $97.7 million in 2008 primarily as a result of lower average yields on the Company’s investments.

The Company’s effective income tax rate on earnings for the year ended December 31, 2009 was 31.8% compared to an effective income tax rate for the year ended December 31, 2008 of 27.4%. The effective income tax rate for the year ended December 31, 2009 reflects the impact of restructuring charges of $48.4 million (net of $18.6 million income tax benefits), the patent litigation gain of $42.9 million (net of $19.6 million income tax expenses) and the impact of the $67.1 million income tax expenses associated with the repatriation of foreign earnings of $787.0 million. The effective income tax rate for the year ended December 31, 2008 reflects the impact of the restructuring charges of $21.7 million (net of $13.2 million income tax benefits). In addition to these factors, the Company’s reported effective income tax rates for the years ended December 31, 2009 and 2008 are lower than the U.S. statutory income tax rate primarily as a result of manufacturing in lower income tax jurisdictions.

Net earnings decreased 4% in 2009 to $1,107.4 million from $1,147.8 million in 2008. Basic net earnings per share decreased 1% in 2009 to $2.79 from $2.81 in 2008, and diluted net earnings per share decreased to $2.77 in 2009 from $2.78 in 2008.

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Excluding the impact of the patent litigation gain and the income tax charge associated with the repatriation of foreign earnings recorded in 2009 and the restructuring charges recorded in 2009 and 2008, adjusted net earnings increased 1% in 2009 to $1,180.0 million from $1,169.5 million in 2008. Adjusted basic net earnings per share increased 4% in 2009 to $2.97 from $2.87 in 2008 and adjusted diluted net earnings per share increased 4% in 2009 to $2.95 from $2.83 in 2008.

The reconciliations of these non-GAAP financial measures are as follows (in millions, except per share amounts):

	2009			2008		Percentage Change
Reported net earnings	$	1,107.4		$	1,147.8		(4	)
Restructuring charges		48.4			21.7		123
Patent litigation gain		(42.9	)		—		—
Income taxes on repatriation of foreign earnings		67.1			—		—
Adjusted net earnings	$	1,180.0		$	1,169.5		1
Basic net earnings per share of common stock:
Reported basic net earnings per share	$	2.79		$	2.81		(1	)
Restructuring charges	$	0.12		$	0.05		140
Patent litigation gain	$	(0.11	)		—		—
Income taxes on repatriation of foreign earnings	$	0.17			—		—
Adjusted basic net earnings per share	$	2.97		$	2.87		4
Weighted-average basic shares outstanding		397.4			408.1
Diluted net earnings per share of common stock:
Reported diluted net earnings per share	$	2.77		$	2.78		—
Restructuring charges	$	0.12		$	0.05		140
Patent litigation gain	$	(0.11	)		—		—
Income taxes on repatriation of foreign earnings	$	0.17			—		—
Adjusted diluted net earnings per share	$	2.95		$	2.83		4
Weighted-average diluted shares outstanding		399.4			413.6

The weighted-average basic and diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.

Liquidity and Capital Resources

The Company’s working capital at December 31, 2010 increased $1,616.2 million to $6,026.4 million from $4,410.2 million at December 31, 2009. The increase in working capital was primarily due to the issuance of $1,000.0 million of senior unsecured notes in January 2010 as well as increases in accounts receivable, inventories and prepaid expenses, partially offset by the use of cash to fund dividend payments and acquisitions. Accounts receivable days sales outstanding was 56 days at December 31, 2010 and 2009. Days sales in inventory increased by 9 days to 154 days at December 31, 2010 from 145 days at December 31, 2009. Days sales in inventory at December 31, 2010 is higher than the December 31, 2009 level primarily due to higher levels of inventory in support of anticipated 2011 sales growth.

The Company generated cash of $1,547.4 million from operations in 2010 compared to $1,460.7 million in 2009. The increase in cash from operations in 2010 is primarily due to increased earnings partially offset by increased inventory levels and higher tax payments.

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In 2010 the Company used cash of $425.5 million for the repurchase of common stock, $238.3 million for the payment of dividends, $182.1 million for capital expenditures and $265.4 million for acquisitions. On January 15, 2010, the Company sold $500.0 million of the 2015 Notes and $500.0 million of the 2020 Notes. The 2015 Notes bear interest at 3.00% per year and, unless previously redeemed, will mature on January 15, 2015. The 2020 Notes bear interest at 4.375% per year and, unless previously redeemed, will mature on January 15, 2020. The Company received net proceeds of $996.1 million, net of an offering discount of $3.9 million. The 2015 Notes and 2020 Notes carry effective interest rates of 3.02% and 4.46%, respectively. Debt issuance costs of $10.5 million were incurred in connection with the sale of the senior unsecured notes. These costs were capitalized and are amortized to interest expense over the lives of the related senior unsecured notes. The Company also purchased and sold marketable securities, including exercising its Auction Rate Securities (ARS) Rights agreement, which are classified as available-for-sale investments and trading marketable securities, respectively, in accordance with the provisions of the Investments-Debt and Equity Securities Topic of the Financial Accounting Standard Board (FASB) Accounting Standards Codification (Codification).

The Company had $1,757.6 million in cash and cash equivalents and $2,622.5 million in current marketable securities at December 31, 2010. The Company had outstanding borrowings totaling $1,021.8 million at December 31, 2010. On January 3, 2011 the Company completed the acquisition of the Neurovascular division from Boston Scientific Corporation. The initial payment of $1.45 billion was funded from the Company’s cash position. An addition $50.0 million will be payable upon completion of certain milestones. The Company believes its cash and current marketable securities on hand, anticipated future cash flows from operations and additional borrowing capacity under existing credit facilities will be sufficient to fund future operating capital requirements; future manufacturing facility construction and other capital expenditures; loaner instrumentation for surgical implants in support of new product launches; future debt service requirements; and the payment of dividends.

In August 2010 the Company refinanced its credit facility with a new $1,000.0 million Senior Unsecured Revolving Credit Facility due August 2013 (the 2010 Facility). The 2010 Facility replaces the previously outstanding $1,000.0 million Unsecured Credit Facility due in November 2010 (the 2005 Facility). The 2010 Facility includes an increase option permitting the Company to increase the size of the facility up to an additional $500.0 million, a $500.0 million multicurrency sublimit (with no sublimit for euro borrowings), a $100.0 million letter of credit sublimit and other terms, conditions and covenants substantially the same as the 2005 Facility. The 2010 Facility has an annual facility fee ranging from 10 to 45 basis points and bears interest at LIBOR, as defined in the 2010 Facility agreement, plus an applicable margin ranging from 65 to 205 basis points, both of which are dependent on the Company’s credit rating. Based on the Company’s current credit ratings, the 2010 Facility has an annual facility fee of 12.5 basis points and an interest margin of 87.5 basis points.

Should additional funds be required, the Company had $1,027.5 million of additional borrowing capacity available under all of its existing credit facilities as of December 31, 2010, including the 2010 Facility.

The Company’s additional borrowing capacity, along with the expected expiration period of the commitments, is summarized as follows (in millions):

	Total Amount Committed		Amount of Commitment Expiration Per Period
			Less Than 1 Year		In Excess of 1 Year
Unsecured Credit Facility and other lines of credit	$	1,027.5	$	117.1	$	910.4

The Company reviews declines in the fair value of its investments classified as available-for-sale for impairment in accordance with the provisions of the Investments-Debt and Equity Securities Topic of the FASB Codification in order to determine whether the decline in fair value is an other-than-temporary impairment. Other-than-temporary impairments of available-for-sale marketable securities are recorded in earnings.

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In June 2010 the Company exercised the ARS Rights agreement (ARS Rights) it had entered into in 2008 with UBS Financial Services Inc. (UBS), one of its investment providers, whereby the Company received the right to sell its ARS at par value to UBS at any time during the period from June 30, 2010 through July 2, 2012. Pursuant to this agreement, the Company redeemed its entire remaining outstanding ARS investment of $139.9 million par value in the second quarter. Prior to the exercise of the ARS Rights, the Company had applied the fair value option to its ARS Rights pursuant to the provisions of the Fair Value Option for Financial Assets and Financial Liabilities Topic of the FASB Codification. As a result of this election, in the twelve-month period ended December 31, 2010, the Company recorded a loss of $17.0 million in other income (expense) to recognize the change in fair value estimate of its ARS Rights. These losses were offset by corresponding gains in the fair value estimate of the related ARS investment.

The Company’s future contractual obligations for agreements with initial terms greater than 1 year, including agreements to purchase materials in the normal course of business, are summarized as follows (in millions):

	Payment Period
	2011		2012		2013		2014		2015		After 2015		Total
Balance sheet obligations:
Long-term debt	$	25.3	$	—	$	—	$	—	$	499.6	$	496.9	$	1,021.8
Contributions to defined benefit plans		18.7		—		—		—		—		—		18.7
Other		8.6		2.2		2.7		1.9		1.7		39.8		56.9
Off-balance sheet arrangements:
Unconditional purchase obligations		548.8		181.0		140.6		120.1		91.5		—		1,082.0
Operating leases		48.2		36.0		24.8		17.4		12.3		10.2		148.9
	$	649.6	$	219.2	$	168.1	$	139.4	$	605.1	$	546.9	$	2,328.3

As further described in Note 11 to the Consolidated Financial Statements, as of December 31, 2010 the Company’s defined benefit pension plans are in an underfunded status of $107.7 million. Due to the rules affecting tax-deductible contributions in the jurisdictions in which the plans are offered and the impact of future plan asset performance, changes in interest rates and the potential for changes in legislation in the United States and other foreign jurisdictions, the Company is not able to reasonably estimate the future periods, beyond 2011, in which contributions to fund defined benefit pension plans will be made. As further described in Note 12 to the Consolidated Financial Statements, as of December 31, 2010, the Company has recorded a liability for uncertain income tax positions of $365.6 million. Due to uncertainties regarding the ultimate resolution of income tax audits, the Company is not able to reasonably estimate the future periods in which income tax payments to settle these uncertain income tax positions will be made.

Critical Accounting Policies and Estimates

The preparation of the Company’s Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management evaluates these estimates and assumptions on an ongoing basis. Estimates are based on historical experience, when available, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes that, of its significant accounting policies (see Note 1 to the Consolidated Financial Statements), an understanding of the following critical accounting policies is important in obtaining an overall understanding of the Consolidated Financial Statements.

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Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses in the collection of accounts receivable. The Company makes estimates regarding the future ability of its customers to make required payments based on historical credit experience and expected future trends. If actual customer financial conditions are less favorable than projected by management, additional accounts receivable write offs may be necessary, which could unfavorably affect future operating results.

Inventory Reserves

The Company maintains reserves for excess and obsolete inventory resulting from the potential inability to sell its products at prices in excess of current carrying costs. The markets in which the Company operates are highly competitive and new products and surgical procedures are introduced on an ongoing basis. These marketplace changes may cause some of the Company’s products to become obsolete. The Company makes estimates regarding the future recoverability of the costs of these products and records a provision for excess and obsolete inventories based on historical experience, expiration of sterilization dates and expected future trends. If actual product life cycles, product demand or acceptance of new product introductions are less favorable than projected by management, additional inventory write downs may be required, which could unfavorably affect future operating results.

Income Taxes

The Company operates in multiple income tax jurisdictions both inside and outside the United States. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions. Income tax audits associated with the allocation of this income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in income tax adjustments if changes to the income allocation are required between jurisdictions with different income tax rates. Because income tax adjustments in certain jurisdictions can be significant, the Company records accruals representing management’s best estimate of the probable resolution of these matters. To the extent additional information becomes available, such accruals are adjusted to reflect the revised estimated probable outcome.

Legal and Other Contingencies

The Company is involved in various proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor and intellectual property, and other matters that are more fully described in Note 17 to the Consolidated Financial Statements. The outcomes of these matters will generally not be known for prolonged periods of time. In certain of the legal proceedings, the claimants seek damages, as well as other compensatory relief, which could result in the payment of significant claims and settlements. For legal matters for which management has sufficient information to reasonably estimate the Company’s future obligations, a liability representing management’s best estimate of the probable cost, or the minimum of the range of probable losses when a best estimate within the range is not known, for the resolution of these legal matters is recorded. The estimates are based on consultation with legal counsel, previous settlement experience and settlement strategies. If actual outcomes are less favorable than those projected by management, additional expense may be incurred, which could unfavorably affect future operating results.

To partially mitigate losses arising from unfavorable outcomes in such matters, the Company purchases third-party insurance coverage subject to certain deductibles and loss limitations. Future operating results may be unfavorably impacted by any settlement payments or losses beyond the amounts of insurance carried. In addition, such matters may negatively impact the Company’s ability to obtain cost-effective third-party insurance coverage in future periods.

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Recently Adopted Accounting Standards

In 2010 the Company adopted the provisions of the Improvement to Financial Reporting by Enterprises Involved with Variable Interest Entities Topic of the FASB Codification. The topic requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE) and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. There was no impact to the Consolidated Financial Statements as a result of the adoption of this topic of the FASB Codification.

In 2010 the Company adopted the provisions of the Fair Value Measurements and Disclosures Topic “Improving Disclosures About Fair Value Measurements” of the FASB Codification. This topic requires companies to make new disclosures about recurring and nonrecurring fair value measurements, including significant transfers into and out of Level 1 and Level 2 fair value measurements, and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The enhanced disclosures about recurring and nonrecurring fair value measurements are included in Note 2 to the Consolidated Financial Statements.

In 2009 the Company adopted the provisions of the Business Combinations Topic of the FASB Codification. This topic significantly changes the principles and requirements for how an acquisition is recognized and measured in financial statements, including the identifiable assets acquired and the liabilities assumed. This topic also provides guidance for recognizing and measuring goodwill acquired in a business combination and requires disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The additional disclosure requirements regarding the Business Combinations Topic of the FASB Codification are included in Note 5 to the Consolidated Financial Statements.

Other Matters

The Company distributes its products throughout the world. As a result, the Company’s financial results could be significantly affected by factors such as weak economic conditions or changes in foreign currency exchange rates. The Company’s operating results are primarily exposed to changes in exchange rates among the U.S. dollar, European currencies, in particular the euro and the British pound, the Japanese yen, the Australian dollar and the Canadian dollar. When the U.S. dollar weakens against foreign currencies, the dollar value of sales denominated in foreign currencies increases. When the U.S. dollar strengthens, the opposite situation occurs. The Company develops and manufactures its products in the United States, China, France, Germany, Ireland, Puerto Rico and Switzerland and incurs costs in the applicable local currencies. This worldwide deployment of facilities serves to partially mitigate the impact of currency exchange rate changes on the Company’s cost of sales.

The Company enters into forward currency exchange contracts to mitigate the impact of currency fluctuations on transactions denominated in nonfunctional currencies, thereby limiting risk to the Company that would otherwise result from changes in exchange rates. These nonfunctional currency exposures principally relate to intercompany receivables and payables arising from intercompany purchases of manufactured products as well as, in 2010, nonfunctional cash balances associated with the anticipated acquisition of the Neurovascular division from Boston Scientific and, in 2009, intercompany loans associated with the repatriation of foreign earnings. The periods of the forward currency exchange contracts correspond to the periods of the exposed transactions, with realized gains and losses included in the measurement and recording of transactions denominated in the nonfunctional currencies. All forward currency exchange contracts are recorded at their fair value each period, with resulting gains (losses) included in other income (expense) in the Consolidated Statements of Earnings.

At December 31, 2010, the Company had outstanding forward currency exchange contracts to purchase $1,011.9 million and sell $366.9 million of various currencies (principally U.S. dollars and euros) with maturities ranging from 7 to 99 days. At December 31, 2009, the Company had outstanding forward currency exchange

33

contracts to purchase $2,041.1 million and sell $280.5 million of various currencies (principally U.S. dollars and euros) with maturities ranging from 4 to 106 days. The estimated fair value of forward currency exchange contracts represents the measurement of the contracts at month-end spot rates as adjusted by current forward points. A hypothetical 10% change in foreign currencies relative to the U.S. dollar would change the December 31, 2010 fair value by approximately $63.9 million. The Company is exposed to credit loss in the event of nonperformance by counterparties on its outstanding forward currency exchange contracts but does not anticipate nonperformance by any of the counterparties.

The Company has certain investments in net assets in international locations that are not hedged. These investments are subject to translation gains and losses due to changes in foreign currency exchange rates. For the year ended December 31, 2010, the strengthening of U.S. dollar relative to foreign currencies decreased the value of these investments in net assets and the related foreign currency translation adjustment loss in shareholders’ equity by $81.0 million to $196.5 million from $277.5 million at December 31, 2009.

In the third quarter of 2010, the Company received separate subpoenas from the U.S. Department of Justice related to (i) the sales, marketing and regulatory matters related to the Stryker PainPump and (ii) sales, marketing and regulatory matters related to the OtisKnee device. The Company is in the process of responding to these subpoenas.

In March 2010 a shareholder’s derivative action complaint against certain current and former Directors and Officers of the Company was filed in the United States District Court for the Western District of Michigan Southern Division. This lawsuit was brought by the Westchester Putnam Counties Heavy and Highway Laborers Local 60 Benefit Funds and Laborers Local 235 Benefit Funds. The complaint alleges claims for breach of fiduciary duties and gross mismanagement in connection with certain product recalls, FDA warning letters, government investigations relating to physician compensation and the criminal proceeding brought against the Company’s Biotech division. The case has been stayed while a Special Committee of the Board of Directors evaluates the claims.

In January 2010 a purported class action lawsuit against the Company was filed in the United States District Court for the Southern District of New York on behalf of those who purchased the Company’s common stock between January 25, 2007 and November 13, 2008, inclusive. The lawsuit seeks remedies under the Securities Exchange Act of 1934. In May 2010 the lawsuit was transferred to the United States District Court for the Western District of Michigan Southern Division. The Company intends to defend itself vigorously.

In 2009 a federal grand jury in the District of Massachusetts returned an indictment charging Stryker Biotech LLC and certain current and former employees of Stryker Biotech with wire fraud, conspiracy to defraud the FDA, distribution of a misbranded device and false statements to the FDA. The Company still hopes to be able to reach a fair and just resolution of this matter. The ultimate resolution of this matter is not reasonably estimable at this time, however, a conviction on the charges described above could result in significant monetary fines. Because Stryker Biotech is not presently involved in the sale of health care products and services (see additional information in Note 18 to the Consolidated Financial Statements), any conviction on these charges resulting in exclusion from participating in federal and state health care programs would not be expected to have a material effect on Stryker Biotech’s present business operations. Certain former Stryker Biotech employees have pled guilty to charges in connection with this matter.

In 2009 the Company received a warning letter from the FDA related to compliance issues for one of its craniomaxillofacial (CMF) implant products that was previously sold through its CMF distribution facility in Portage, Michigan. In 2007 the Company received two warning letters from the FDA regarding compliance with certain quality system specifications at its reconstructive implant manufacturing facilities: one letter for its facility in Cork, Ireland and another for its facility in Mahwah, New Jersey. In March 2010 the FDA informed the Company that the warning letter related to its Mahwah manufacturing facility had been resolved following a re-inspection in 2009 and additional corrective actions. In May 2010 the FDA informed the Company that the

34

warning letters related to its Cork, Ireland and CMF facilities had been resolved following FDA re-inspection of the Cork, Ireland facility and additional corrective actions at both the Cork and CMF facilities.

In 2007 the Company announced that it reached a resolution with the U.S. Attorney’s office for the District of New Jersey in connection with an investigation relating to “any and all consulting contracts, professional service agreements, or remuneration agreements between Stryker Corporation and any orthopedic surgeon, orthopedic surgeon in training, or medical school graduate using or considering the surgical use of hip or knee joint replacement/reconstruction products manufactured or sold by Stryker Corporation.” The resolution was in the form of a non-prosecution agreement, which included oversight by a federal monitor, for an 18-month period that ended on March 27, 2009. Subsequent to entering into the non-prosecution agreement, the U.S. Department of Health and Human Services, Office of Inspector General (HHS) issued a civil subpoena to the Company in seeking to determine whether the Company violated various laws by paying consulting fees and providing other things of value to orthopedic surgeons and healthcare and educational institutions as inducements to use Stryker’s orthopedic medical devices in procedures paid for in whole or in part by Medicare. The investigation is ongoing and the Company has produced numerous documents and other materials to HHS in response to the subpoena.

In 2007 the Company disclosed that the U.S. Securities and Exchange Commission (SEC) made an informal inquiry of the Company regarding possible violations of the Foreign Corrupt Practices Act in connection with the sale of medical devices in certain foreign countries. Subsequently, in 2008, the Company received a subpoena from the U.S. Department of Justice, Criminal Division, requesting certain documents for the period since January 1, 2000 in connection with the SEC inquiry. The Company is fully cooperating with the U.S. Department of Justice and the SEC regarding these matters.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk are included in the “Results of Operations, Liquidity and Capital Resources” and “Other Matters” sections of the Company’s Management’s Discussion and Analysis of Financial Condition in Item 7 of this report.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and Shareholders of Stryker Corporation:

We have audited the accompanying consolidated balance sheets of Stryker Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Stryker Corporation and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, in 2009 the Company changed its method of accounting for business combinations with the adoption of the guidance originally issued in FASB Statement No. 141(R), Business Combinations (codified in FASB ASC Topic 805, Business Combinations).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Stryker Corporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 18, 2011 expressed an unqualified opinion thereon.

/s/    ERNST & YOUNG LLP

Grand Rapids, Michigan

February 18, 2011

36

Stryker Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

	December 31
	2010		2009
ASSETS
Current Assets
Cash and cash equivalents	$	1,757.6	$	658.7
Marketable securities		2,622.5		2,296.1
Accounts receivable, less allowance of $57.0 ($66.3 in 2009)		1,251.9		1,147.1
Inventories		1,056.8		943.0
Deferred income taxes		653.2		602.2
Prepaid expenses and other current assets		289.4		204.1
Total current assets		7,631.4		5,851.2
Property, Plant and Equipment
Land, buildings and improvements		553.8		693.4
Machinery and equipment		1,296.1		1,270.3
Total Property, Plant and Equipment		1,849.9		1,963.7
Less allowance for depreciation		1,051.6		1,016.1
Net Property, Plant and Equipment		798.3		947.6
Other Assets
Goodwill		1,072.3		956.8
Other intangibles, less accumulated amortization of $465.3 ($421.0 in 2009)		703.0		634.7
Loaner instrumentation, less accumulated amortization of $684.1 ($771.3 in 2009)		290.5		285.4
Deferred income taxes		248.3		258.9
Other		151.3		136.7
Total assets	$	10,895.1	$	9,071.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	291.7	$	200.2
Accrued compensation		417.5		354.1
Income taxes		47.4		134.7
Dividend payable		70.4		59.7
Accrued expenses and other liabilities		752.7		674.3
Current maturities of long-term debt		25.3		18.0
Total current liabilities		1,605.0		1,441.0
Long-Term Debt, excluding current maturities		996.5		—
Other Liabilities		1,120.0		1,035.2
Shareholders’ Equity
Common stock, $0.10 par value:
Authorized—1,000.0 shares, Outstanding -391.1 shares (397.9 in 2009)		39.1		39.8
Additional paid-in capital		964.1		899.9
Retained earnings		6,016.9		5,397.4
Accumulated other comprehensive gain		153.5		258.0
Total shareholders’ equity		7,173.6		6,595.1
Total liabilities & shareholders’ equity	$	10,895.1	$	9,071.3

See accompanying notes to Consolidated Financial Statements.

37

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts)

	Years Ended December 31
	2010			2009		2008
Net sales	$	7,320.0		$	6,723.1	$	6,718.2
Cost of sales		2,285.7			2,183.7		2,131.4
Gross profit		5,034.3			4,539.4		4,586.8
Research, development and engineering expenses		393.9			336.2		367.8
Selling, general and administrative expenses		2,707.3			2,506.3		2,625.1
Intangible asset amortization		58.2			35.5		40.0
Property, plant and equipment impairment		123.5			—		—
Restructuring charges		—			67.0		34.9
Total operating expenses		3,282.9			2,945.0		3,067.8
Operating income		1,751.4			1,594.4		1,519.0
Other income (expense)		(21.8	)		29.5		61.2
Earnings before income taxes		1,729.6			1,623.9		1,580.2
Income taxes		456.2			516.5		432.4
Net earnings	$	1,273.4		$	1,107.4	$	1,147.8
Net earnings per share of common stock:
Basic net earnings per share of common stock	$	3.21		$	2.79	$	2.81
Diluted net earnings per share of common stock	$	3.19		$	2.77	$	2.78

See accompanying notes to Consolidated Financial Statements.

38

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions, except per share amounts)

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Gain (Loss)			Total
Balances at January 1, 2008	$	41.1		$	711.9		$	4,364.7		$	260.8		$	5,378.5
Net earnings for 2008		—			—			1,147.8			—			1,147.8
Unrealized gains on securities, including $0.7 income tax benefit		—			—			—			0.8			0.8
Unfunded pension losses, net of $8.3 income tax benefit		—			—			—			(28.2	)		(28.2	)
Foreign currency translation adjustments		—			—			—			(68.6	)		(68.6	)
Comprehensive earnings for 2008														1,051.8
Issuance of 2.8 shares of common stock under stock option and benefit plans, including $33.7 excess income tax benefit		0.2			69.3			—			—			69.5
Share-based compensation		—			65.5			—			—			65.5
Cash dividend declared of $0.40 per share of common stock		—			—			(158.6	)		—			(158.6	)
Repurchase and retirement of 17.4 shares of common stock		(1.7	)		(33.9	)		(964.4	)		—			(1,000.0	)
Balances at December 31, 2008		39.6			812.8			4,389.5			164.8			5,406.7
Net earnings for 2009		—			—			1,107.4			—			1,107.4
Unrealized gains on securities, including $1.4 income tax expense		—			—			—			2.7			2.7
Unfunded pension gains, net of $8.2 income tax expense		—			—			—			16.7			16.7
Foreign currency translation adjustments		—			—			—			73.8			73.8
Comprehensive earnings for 2009														1,200.6
Issuance of 1.4 shares of common stock under stock option and benefit plans, including $6.9 excess income tax benefit		0.2			24.8			—			—			25.0
Share-based compensation		—			62.3			—			—			62.3
Cash dividends declared of $0.25 per share of common stock		—			—			(99.5	)		—			(99.5	)
Balances at December 31, 2009		39.8			899.9			5,397.4			258.0			6,595.1
Net earnings for 2010		—			—			1,273.4			—			1,273.4
Unrealized loss on securities, including $0.3 income tax benefit		—			—			—			(2.0	)		(2.0	)
Unfunded pension loss, net of $14.0 income tax benefit		—			—			—			(21.5	)		(21.5	)
Foreign currency translation adjustments		—			—			—			(81.0	)		(81.0	)
Comprehensive earnings for 2010														1,168.9
Issuance of 1.5 shares of common stock under stock option and benefit plans, including $11.2 excess income tax benefit		0.1			15.2			—			—			15.3
Share-based compensation		—			68.8			—			—			68.8
Cash dividends declared of $0.63 per share of common stock		—			—			(249.0	)		—			(249.0	)
Repurchase and retirement of 8.3 shares of common stock		(0.8	)		(19.8	)		(404.9	)		—			(425.5	)
Balances at December 31, 2010	$	39.1		$	964.1		$	6,016.9		$	153.5		$	7,173.6

See accompanying notes to Consolidated Financial Statements.

39

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Years Ended December 31
	2010			2009			2008
Operating Activities
Net earnings	$	1,273.4		$	1,107.4		$	1,147.8
Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities:
Depreciation		164.6			165.2			155.4
Amortization		245.6			220.1			232.2
Share-based compensation		68.8			62.3			65.5
Income tax benefit from exercise of stock options		24.5			12.7			44.6
Excess income tax benefit from exercise of stock options		(11.2	)		(6.9	)		(33.7	)
Restructuring charges		—			67.0			34.9
Property, plant and equipment impairment		123.5			—			—
Payments of restructuring charges		(8.7	)		(47.4	)		(0.5	)
(Gain) loss on sale of property, plant and equipment		(23.0	)		2.9			(1.7	)
Provision for losses on accounts receivable		18.6			27.9			10.4
Deferred income tax credit		(103.8	)		(72.7	)		(17.6	)
Other		5.9			7.1			1.9
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(121.4	)		(9.8	)		(131.2	)
Inventories		(131.2	)		33.7			(180.2	)
Loaner instrumentation		(192.6	)		(188.6	)		(181.8	)
Accounts payable		95.9			(80.5	)		10.4
Accrued expenses and other liabilities		91.1			66.1			54.8
Income taxes		(23.9	)		192.0			(29.1	)
Other		51.3			(97.8	)		(6.2	)
Net cash provided by operating activities		1,547.4			1,460.7			1,175.9
Investing Activities
Acquisitions, net of cash acquired		(265.4	)		(570.2	)		(14.2	)
Purchases of marketable securities		(5,619.0	)		(4,602.1	)		(16,832.3	)
Proceeds from sales of marketable securities		5,210.1			3,973.7			17,303.2
Purchases of property, plant and equipment		(182.1	)		(131.3	)		(155.2	)
Proceeds from sales of property, plant and equipment		60.9			1.5			8.6
Net cash provided by (used in) investing activities		(795.5	)		(1,328.4	)		310.1
Financing Activities
Proceeds from borrowings		100.1			16.9			26.0
Payments on borrowings		(80.8	)		(19.6	)		(19.3	)
Proceeds from issuance of long-term debt, net		996.1			—			—
Issuance cost of long-term debt		(10.5	)		—			—
Dividends paid		(238.3	)		(198.4	)		(135.6	)
Proceeds from exercise of stock options		3.6			6.3			50.1
Excess income tax benefit from exercise of stock options		11.2			6.9			33.7
Repurchase and retirement of common stock		(425.5	)		—			(1,000.0	)
Other		54.2			(5.4	)		(1.0	)
Net cash provided by (used in) financing activities		410.1			(193.3	)		(1,046.1	)
Effect of exchange rate changes on cash and cash equivalents		(63.1	)		18.6			(29.3	)
Increase (decrease) in cash and cash equivalents		1,098.9			(42.4	)		410.6
Cash and cash equivalents at beginning of year		658.7			701.1			290.5
Cash and cash equivalents at end of year	$	1,757.6		$	658.7		$	701.1

See accompanying notes to Consolidated Financial Statements.

40

Stryker Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2010

NOTE 1

SIGNIFICANT ACCOUNTING POLICIES

Business: Stryker Corporation (the Company or Stryker) is one of the world’s leading medical technology companies and is dedicated to helping healthcare professionals perform their jobs more efficiently while enhancing patient care. The Company provides innovative orthopaedic implants as well as state-of-the-art medical and surgical equipment to help people lead more active and more satisfying lives. The Company’s products include implants used in joint replacement, trauma, and spinal surgeries; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment as well as other medical device products used in a variety of medical specialties.

Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and its subsidiaries after elimination of intercompany accounts and transactions.

Use of Estimates: The preparation of these Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (GAAP) requires Company management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition: A significant portion of the Company’s Orthopaedic Implants revenue is generated from consigned inventory maintained at hospitals or with field representatives. The Company retains title to all inventory held on consignment at hospitals or with field locations until the Company receives appropriate notification that the product has been used or implanted at which time revenue is recognized. The Company records revenue from Orthopaedic Implants not held on consignment and MedSurg Equipment product sales when title and risk of ownership have been transferred to the customer, which is typically upon shipment to the customer. The Company records estimated sales returns, discounts, rebates and other sales incentives as a reduction of net sales in the same period revenue is recognized. Estimates of sales returns are recorded for anticipated product returns based on historical sales and returns information. Estimates of sales discounts, rebates and other sales incentives are recorded based on contractual terms, historical experience and trend analysis.

Shipping and Handling of Products: Amounts billed to customers for shipping and handling of products are included in net sales. Costs incurred related to shipping and handling of products are included in cost of sales.

Foreign Currency Translation: The functional currencies for substantially all of the Company’s international affiliates are their local currencies. Accordingly, the financial statements of these international affiliates are translated into U.S. dollars using current exchange rates for balance sheets and average exchange rates for statements of earnings and cash flows. Unrealized translation adjustments are included in accumulated other comprehensive gain (loss) in shareholders’ equity. Transaction gains and losses, such as those resulting from the settlement of nonfunctional currency receivables or payables, are included in net earnings.

Financial Instruments: The Company’s financial instruments consist of cash, cash equivalents, marketable securities, accounts receivable, other investments, accounts payable, debt and foreign currency exchange contracts. The Company’s estimates of fair value for financial instruments approximate their carrying amounts as of December 31, 2010 and 2009.

Cash equivalents are highly liquid investments with a maturity of three months or less when purchased. Marketable securities consist of marketable debt securities and certificates of deposit and mutual funds. Mutual funds are acquired to offset changes in certain liabilities related to deferred compensation arrangements and are

41

expected to be used to settle these liabilities. Pursuant to the Company’s investment policy, all individual marketable security investments must have a minimum credit quality of single A (per Standard & Poor’s or Fitch) or A2 (per Moody’s Corporation) at the time of acquisition, while the overall portfolio of marketable securities must maintain a minimum average credit quality of double A (per Standard & Poor’s or Fitch) or Aa (per Moody’s Corporation). In the event of a rating downgrade below the minimum credit quality subsequent to purchase, the marketable security investment is evaluated to determine the appropriate action to take to minimize the overall risk to the Company’s marketable security investment portfolio. As of December 31, 2010, only 1% of the Company’s investments in marketable securities had a credit quality rating of less than single A (per Standard & Poor’s or Fitch) and A2 (per Moody’s Corporation).

The Company follows the provisions of the Investments-Debt and Equity Securities Topic of the Financial Accounting Standard Board (FASB) Accounting Standard Codification (Codification) in accounting for its marketable securities, which are classified as available-for-sale and trading securities. This topic requires the Company to recognize all marketable securities on the Consolidated Balance Sheets at fair value. The Company’s marketable securities are stated at fair value pursuant to the requirements of the Fair Value Measurements and Disclosures Topic of the FASB Codification. Adjustments to the fair value of marketable securities that are classified as available-for-sale are recorded as increases or decreases, net of income taxes, within accumulated other comprehensive gain (loss) in shareholders’ equity and adjustments to the fair value of marketable securities that are classified as trading are recorded in earnings. The amortized cost of marketable debt securities is adjusted for amortization of premiums and discounts to maturity computed under the effective interest method. Such amortization is included in other income (expense) along with interest and realized gains and losses. The cost of securities sold is determined by the specific identification method.

The Company reviews declines in the fair value of its investments classified as available-for-sale for impairment in accordance with the provisions of the Investments-Debt and Equity Securities Topic of the FASB Codification in order to determine whether the decline in fair value is an other-than-temporary impairment. Other-than-temporary impairments of available-for-sale marketable securities are recorded in earnings.

The Company follows the provisions of the Derivatives and Hedging Topic of the FASB Codification, which requires the Company to recognize all derivatives on the Consolidated Balance Sheets at fair value. The Company enters into forward currency exchange contracts to mitigate the impact of currency fluctuations on transactions denominated in nonfunctional currencies, thereby limiting risk to the Company that would otherwise result from changes in exchange rates. These nonfunctional currency exposures principally relate to intercompany receivables and payables arising from intercompany purchases of manufactured products. The periods of the forward currency exchange contracts correspond to the periods of the exposed transactions, with realized gains and losses included in the measurement and recording of transactions denominated in the nonfunctional currencies. All forward currency exchange contracts are recorded at their fair value each period, with resulting gains (losses) included in other income (expense) in the Consolidated Statements of Earnings.

Accounts Receivable: Accounts receivable consists of trade and other miscellaneous receivables. The Company maintains an allowance for doubtful accounts for estimated losses in the collection of accounts receivable. The Company makes estimates regarding the future ability of its customers to make required payments based on historical credit experience and expected future trends. Accounts receivable are written off when all reasonable collection efforts are exhausted.

Inventories: Inventories are stated at the lower of cost or market. Cost for approximately 78% of inventories is determined using the first-in, first-out (FIFO) cost method. Cost for certain domestic inventories is determined using the last-in, first-out (LIFO) cost method. The FIFO cost for all inventories approximates replacement cost.

The Company maintains reserves for excess and obsolete inventory resulting from the potential inability to sell its products at prices in excess of current carrying costs. The markets in which the Company operates are highly competitive, and new products and surgical procedures are introduced on an ongoing basis. Such

42

marketplace changes may cause some of the Company’s products to become obsolete. The Company makes estimates regarding the future recoverability of the costs of these products and records a provision for excess and obsolete inventories based on historical experience, expiration of sterilization dates and expected future trends.

Property, Plant and Equipment: Property, plant and equipment is stated at cost. Depreciation is computed by either the straight-line or declining-balance method over the estimated useful lives of 3 to 30 years for buildings and improvements and 3 to 10 years for machinery and equipment.

Goodwill and Other Intangible Assets: Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts allocated to other intangible assets. Other intangible assets include developed technology, customer relationships (which reflect expected continued customer patronage), trademarks and patents, which are amortized on a straight-line basis over 4 to 40 years (weighted-average life of 15 years for other intangible assets).

Goodwill and Long-Lived Assets Impairment Tests: The Intangibles-Goodwill and Other Topic of the FASB Codification requires companies to test goodwill for possible impairment on an annual basis. The Company performs the annual impairment test in the fourth quarter of each year using a discounted cash flow analysis that requires certain assumptions and estimates be made regarding market conditions and the Company’s future profitability. The Company also performs impairment tests of goodwill and other intangible and long-lived assets during interim periods upon the occurrence of certain events or changes in circumstance as defined in the Property, Plant, and Equipment and Presentation of Financial Statements Topics of the FASB Codification.

Loaner Instrumentation: Loaner instrumentation represents the net book value of loaner instruments for surgical implants provided to customers by the Company. Loaner instrumentation is amortized on a straight-line basis over a 3-year period. Amortization expense for loaner instrumentation is included in selling, general and administrative expenses.

Stock Options: At December 31, 2010, the Company had key employee and director stock option plans, which are described more fully in Note 9 to the Consolidated Financial Statements. Pursuant to the provisions of the Compensation-Stock Compensation Topic of the FASB Codification, the Company measures the cost of employee stock options based on the grant-date fair value and recognizes that cost over the period during which a recipient is required to provide services in exchange for the options, typically the vesting period. The weighted-average fair value per share of options granted during 2010, 2009 and 2008, estimated on the date of grant using the Black-Scholes option pricing model, was $15.87, $13.09 and $19.87, respectively. The fair value of options granted was estimated using the following weighted-average assumptions:

	2010			2009			2008
Risk-free interest rate		3.0	%		2.5	%		3.2	%
Expected dividend yield		1.4	%		0.7	%		0.5	%
Expected stock price volatility		28.6	%		27.7	%		22.7	%
Expected option life		6.8 years			6.8 years			6.7 years

The risk-free interest rate for periods within the expected life of options granted is based on the U.S. Treasury yield curve in effect at the time of grant. Expected stock price volatility is based on historical volatility of the Company’s stock. The expected option life, representing the period of time that options granted are expected to be outstanding, is based on historical option exercise and employee termination data. The Company recognizes the cost of stock options using the straight-line method over their vesting periods.

Income Taxes: The Company accounts for income taxes pursuant to the provisions of the Income Taxes Topic of the FASB Codification. Deferred income tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities and are measured using the enacted income tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax

43

credit represents the change in net deferred income tax assets and liabilities during the year. Interest expense and penalties incurred associated with uncertain income tax positions are included in other income (expense) pursuant to the provisions of the Income Taxes Topic of the FASB Codification.

The Company operates in multiple income tax jurisdictions both inside and outside the United States. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions based on current interpretations of complex income tax regulations. Income tax authorities in these jurisdictions regularly perform audits of the Company’s income tax filings. Income tax audits associated with the allocation of this income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments if changes to the income allocation are required between jurisdictions with different income tax rates.

Legal and Other Contingencies: The Company is involved in various proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor and intellectual property, and other matters that are more fully described in Note 17 to the Consolidated Financial Statements. The outcomes of these matters will generally not be known for prolonged periods of time. In certain of the legal proceedings, the claimants seek damages, as well as other compensatory relief, which could result in the payment of significant claims and settlements. For legal matters for which management has sufficient information to reasonably estimate the Company’s future obligations, a liability representing management’s best estimate of the probable cost, or the minimum of the range of probable losses when a best estimate within the range is not known, for the resolution of these legal matters is recorded. The estimates are based on consultation with legal counsel, previous settlement experience and settlement strategies.

Accumulated Other Comprehensive Gain (Loss): The components of accumulated other comprehensive gain (loss) are as follows (in millions):

	Unrealized Gains (Losses) on Securities			Unfunded Pension Gains (Losses)			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Gain (Loss)
Balances at January 1, 2009	$	0.9		$	(39.8	)	$	203.7		$	164.8
Other comprehensive gain for 2009		2.7			16.7			73.8			93.2
Balances at December 31, 2009		3.6			(23.1	)		277.5			258.0
Other comprehensive loss for 2010		(2.0	)		(21.5	)		(81.0	)		(104.5	)
Balances at December 31, 2010	$	1.6		$	(44.6	)	$	196.5		$	153.5

Recently Adopted Accounting Standards: In 2010 the Company adopted the provisions of the Improvement to Financial Reporting by Enterprises Involved with Variable Interest Entities Topic of the FASB Codification. The topic requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE) and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. There was no impact to the Consolidated Financial Statements as a result of the adoption of this topic of the FASB Codification.

In 2010 the Company adopted the provisions of the Fair Value Measurements and Disclosures Topic “Improving Disclosures About Fair Value Measurements” of the FASB Codification. This topic requires companies to make new disclosures about recurring and nonrecurring fair value measurements, including significant transfers into and out of Level 1 and Level 2 fair value measurements, and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The enhanced disclosures about recurring and nonrecurring fair value measurements are included in Note 2 to the Consolidated Financial Statements.

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In 2009 the Company adopted the provisions of the Business Combinations Topic of the FASB Codification. This topic significantly changes the principles and requirements for how an acquisition is recognized and measured in a company’s financial statements including the identifiable assets acquired and the liabilities assumed. This topic also provides guidance for recognizing and measuring goodwill acquired in a business combination and required disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The additional disclosure requirements regarding the Business Combinations Topic of the FASB Codification are included in Note 5 to the Consolidated Financial Statements.

Recently Issued Accounting Standards: In 2009 the FASB amended the provisions of the Revenue Recognition for Multiple-Deliverable Revenue Arrangements Topic of the FASB Codification. This topic amends prior guidance and requires an entity to apply the relative selling price allocation method in order to estimate the selling price for all units of accounting, including delivered items, when vendor-specific objective evidence or acceptable third-party evidence does not exist. These provisions are effective for revenue arrangements entered into or which contain material modifications in fiscal years beginning on or after June 15, 2010, applied prospectively. This topic is effective for the Company beginning on January 1, 2011. The Company does not expect the adoption of the topic to have a material impact on its Consolidated Financial Statements.

Reclassifications: Certain prior year amounts have been reclassified to conform with the presentation used in 2010. In 2010 the Company separately disclosed the (gain) loss on sale of property, plant and equipment in its Consolidated Statements of Cash Flows.

NOTE 2

FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, cash equivalents, marketable securities, accounts receivable, other investments, accounts payable, debt and foreign currency exchange contracts. The Company’s estimates of fair value for financial instruments approximate their carrying amounts as of December 31, 2010.

Pursuant to the requirements of the Fair Value Measurements and Disclosures Topic of the FASB Codification, the Company’s financial assets and liabilities measured at fair value on a recurring basis are classified and disclosed in one of the following three categories:

Level 1:	Financial instruments with unadjusted, quoted prices listed on active market exchanges.
Level 2:	Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. The prices for the financial instruments are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3:	Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Cash and cash equivalents:

The Company considers the carrying values of these financial instruments to approximate fair value for these financial instruments because of the short period of time between origination of the instruments and their expected realization.

45

Available-for-sale marketable securities:

The Company’s Level 2 available-for-sale marketable securities primarily include U.S. agency debt securities, foreign government debt securities, asset backed debt securities, corporate debt securities and certificates of deposit. The Company’s Level 2 available-for-sale marketable securities values are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company’s Level 3 available-for-sale marketable securities include corporate and foreign government debt securities. The Company’s Level 3 available-for-sale marketable securities valuations are based on the income approach, specifically, discounted cash flow analyses that utilize significant inputs based on the Company’s estimates and assumptions. Using this approach, estimates for timing and amount of cash flows and expected holding periods of the securities were used and the expected future cash flows were calculated over the expected life of each security and were discounted to a single present value using an estimated market required rate of return.

Trading marketable securities:

The Company’s Level 1 trading marketable securities consist of mutual funds and are valued using a market approach based on quoted prices for the specific mutual fund from transactions in active exchange markets.

Auction Rate Securities Rights:

In June 2010 the Company exercised the ARS Rights agreement (ARS Rights) it had entered into in 2008 with UBS Financial Services Inc. (UBS), one of its investment providers, whereby the Company received the right to sell its ARS at par value to UBS at any time during the period from June 30, 2010 through July 2, 2012. Pursuant to this agreement, the Company redeemed its entire remaining outstanding ARS investment of $139.9 million par value. Prior to the exercise of the ARS Rights, the Company had applied the fair value option to its ARS Rights pursuant to the provisions of the Fair Value Option for Financial Assets and Financial Liabilities Topic of the FASB Codification. As a result of this election, in the twelve-month period ended December 31, 2010, the Company recorded a loss of $17.0 million in other income (expense) to recognize the change in fair value estimate of its ARS Rights. The loss was offset by corresponding gains in the fair value estimate of the related ARS investment. In the twelve-month period ended December 31, 2009 the Company recorded a loss of $11.0 million in other income (expense) to recognize the change in fair value estimate of its ARS Rights. This loss was offset by a corresponding gain in the fair value estimate of the related trading marketable securities.

Foreign currency exchange contracts:

The Company values foreign currency exchange contracts using a market approach based on foreign currency exchange rates obtained from active markets. The estimated fair value of forward currency exchange contracts represents the measurement of the contracts at month-end spot rates as adjusted by current forward points. At December 31, 2010, the fair value carrying amount of the Company’s forward currency exchange contracts assets and liabilities were $2.4 million and $1.1 million, respectively.

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The following table summarizes the valuation of the Company’s financial instruments by the aforementioned pricing categories (in millions):

	Total		Quoted Prices in Active Markets (Level 1)		Prices with Other Observable Inputs (Level 2)		Prices with Unobservable Inputs (Level 3)
At December 31, 2010
Assets:
Cash and cash equivalents	$	1,757.6	$	1,757.6	$	—	$	—
Available-for-sale marketable securities
Corporate and asset backed debt securities		1,620.0		—		1,619.3		0.7
Foreign government debt securities		522.8		—		522.2		0.6
U.S. agency debt securities		314.6		—		314.6		—
Certificates of deposit		70.7		—		70.7		—
Other		95.1		—		95.1		—
Total available-for-sale marketable securities		2,623.2		—		2,621.9		1.3
Trading marketable securities		48.2		48.2		—		—
Foreign currency exchange contracts		2.4		—		2.4		—
	$	4,431.4	$	1,805.8	$	2,624.3	$	1.3
Liabilities:
Deferred compensation arrangements	$	48.2	$	48.2	$	—	$	—
Foreign currency exchange contracts		1.1		—		1.1		—
	$	49.3	$	48.2	$	1.1	$	—
At December 31, 2009
Assets:
Cash and cash equivalents	$	658.7	$	658.7	$	—	$	—
Available-for-sale marketable securities
Corporate and asset backed debt securities		1,047.8		—		1,047.1		0.7
Foreign government debt securities		742.1		—		742.1		—
U.S. agency debt securities		166.3		—		166.3		—
Certificates of deposit		92.1		—		92.1		—
Other		109.2		—		109.2		—
Total available-for-sale marketable securities		2,157.5		—		2,156.8		0.7
Trading marketable securities
Municipal debt securities (ARS)		139.3		—		—		139.3
Mutual funds		39.3		39.3		—		—
Total trading marketable securities		178.6		39.3		—		139.3
ARS Rights		17.0		—		—		17.0
Foreign currency exchange contracts		8.3		—		8.3		—
Total	$	3,020.1	$	698.0	$	2,165.1	$	157.0
Liabilities:
Deferred compensation arrangements	$	39.3	$	39.3	$	—	$	—
Foreign currency exchange contracts		6.2		—		6.2		—
Total	$	45.5	$	39.3	$	6.2	$	—

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The following table presents a rollforward of the assets measured at fair value on a recurring basis using unobservable inputs (Level 3) (in millions):

	2010			2009
Balance as of January 1	$	157.0		$	168.9
Transfers into Level 3		0.6			—
Settlements		(156.3	)		(10.5	)
Other		—			(1.4	)
Balance as of December 31	$	1.3		$	157.0

The following is a summary of the Company’s marketable securities (in millions):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
At December 31, 2010
Available-for-sale marketable securities:
Corporate and asset backed debt securities	$	1,618.4	$	3.7	$	(2.1	)	$	1,620.0
Foreign government debt securities		522.7		0.6		(0.5	)		522.8
U.S. agency debt securities		314.2		0.6		(0.2	)		314.6
Certificates of deposit		70.6		0.1		—			70.7
Other		95.0		0.1		—			95.1
Total available-for-sale marketable securities	$	2,620.9	$	5.1	$	(2.8	)		2,623.2
Trading marketable securities									48.2
Total marketable securities								$	2,671.4
Reported as:
Current assets-Marketable securities								$	2,622.5
Noncurrent assets-Other									48.9
								$	2,671.4
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
At December 31, 2009
Available-for-sale marketable securities:
Corporate and asset backed debt securities	$	1,043.6	$	5.2	$	(1.0	)	$	1,047.8
Foreign government debt securities		742.2		0.9		(1.0	)		742.1
U.S. agency debt securities		165.9		0.5		(0.1	)		166.3
Certificates of deposit		92.0		0.1		—			92.1
Other		109.1		0.1		—			109.2
Total available-for-sale marketable securities	$	2,152.8	$	6.8	$	(2.1	)		2,157.5
Trading marketable securities:
Municipal debt securities (ARS)									139.3
Mutual funds									39.3
Total trading marketable securities									178.6
Total marketable securities								$	2,336.1
Reported as:
Current assets-Marketable securities								$	2,296.1
Noncurrent assets-Other									40.0
								$	2,336.1

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The cost and estimated fair value of available-for-sale marketable securities at December 31, 2010, by contractual maturity, are as follows (in millions):

	Cost		Estimated Fair Value
Due in one year or less	$	383.6	$	383.7
Due after one year through three years		2,168.7		2,170.8
Due after three years		68.6		68.7
	$	2,620.9	$	2,623.2

The gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2010 and 2009 are as follows (in millions):

	Less Than 12 months						Total
	Number of Investments		Estimated Fair Value		Gross Unrealized Losses		Number of Investments		Estimated Fair Value		Gross Unrealized Losses
At December 31, 2010
Available-for-sale marketable securities:
Corporate and asset backed debt securities		216	$	752.9	$	2.1		216	$	752.9	$	2.1
Foreign government debt securities		42		224.0		0.5		42		224.0		0.5
U.S. agency debt securities		32		99.1		0.2		32		99.1		0.2
Total		290	$	1,076.0	$	2.8		290	$	1,076.0	$	2.8
	Less Than 12 months						Total
	Number of Investments		Estimated Fair Value		Gross Unrealized Losses		Number of Investments		Estimated Fair Value		Gross Unrealized Losses
At December 31, 2009
Available-for-sale marketable securities:
Corporate and asset backed debt securities		102	$	380.8	$	1.0		102	$	380.8	$	1.0
Foreign government debt securities		34		380.2		1.0		34		380.2		1.0
U.S. agency debt securities		27		54.3		0.1		27		54.3		0.1
Total		163	$	815.3	$	2.1		163	$	815.3	$	2.1

The unrealized losses on the Company’s investments in corporate and asset backed and U.S. agency debt securities were primarily caused by increases in interest yields as a result of continued challenging conditions in the global credit markets. While many of these investments have been downgraded by rating agencies since their initial purchase, less than 1% of the Company’s investments in corporate and asset-backed debt securities had a credit quality rating of less than single A (per Standard & Poor’s or Fitch). Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2010.

The unrealized losses on the Company’s investments in foreign government debt securities were also caused by interest rate increases. Because the decline in market value is attributable to changes in interest rates and

49

because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2010.

Pursuant to the Company’s investment policy, all individual marketable security investments must have a minimum credit quality of single A (per Standard & Poor’s or Fitch) or A2 (per Moody’s Corporation) at the time of acquisition, while the overall portfolio of marketable securities must maintain a minimum average credit quality of double A (per Standard & Poor’s or Fitch) or Aa (per Moody’s Corporation). In the event of a rating downgrade below the minimum credit quality subsequent to purchase, the marketable security investment is evaluated to determine the appropriate action to take to minimize the overall risk to the Company’s marketable security investment portfolio. As of December 31, 2010, only 1% of the Company’s investments in marketable securities had a credit quality rating of less than single A (per Standard & Poor’s or Fitch) and A2 (per Moody’s Corporation). As of December 31, 2010, only 1% of the Company’s investments in marketable securities were held in asset backed debt securities. The majority of the Company’s asset backed debt securities relates to investments in U.S. agency-issued mortgage backed securities, where the recovery of the full amount by the investor is guaranteed by the issuing Federal agency.

Interest and marketable securities income, which is included in other income (expense), totaled $48.7 million in 2010, $53.9 million in 2009 and $97.7 million in 2008.

NOTE 3

DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

The Company follows the provisions of the Derivatives and Hedging Topic of the FASB Codification, which requires the Company to recognize all derivatives on the Consolidated Balance Sheets at fair value.

The Company enters into forward currency exchange contracts to mitigate the impact of currency fluctuations on transactions denominated in nonfunctional currencies, thereby limiting risk to the Company that would otherwise result from changes in exchange rates. These currency exposures principally relate to intercompany receivables and payables arising from intercompany purchases of manufactured products as well as, in 2009, intercompany loans associated with the repatriation of foreign earnings. The duration of the forward currency exchange contracts correspond to the anticipated period the intercompany receivables and payables remain outstanding. The Company does not designate these contracts as hedges; therefore, all forward currency exchange contracts are recorded at their fair value each period, with resulting gains and losses included in other income (expense) in the Consolidated Statements of Earnings as an offset to the gains and losses recognized on the intercompany receivables and payables. For the twelve months ended December 31, 2010, 2009 and 2008, recognized foreign currency transaction gains (losses) included in other income (expense) in the Consolidated Statements of Earnings were $7.0 million, ($1.1) million and ($6.0) million, respectively.

At December 31, 2010, the Company had outstanding forward currency exchange contracts to purchase $1,011.9 million and sell $366.9 million of various currencies (principally U.S. dollars and euros) with original maturities ranging from 7 to 99 days. The maximum length of time over which the Company is limiting its exposure to the reduction in value of nonfunctional receivables and payables through foreign currency exchange contracts is through March 31, 2011. At December 31, 2009, the Company had outstanding forward currency exchange contracts to purchase $2,041.1 million and sell $280.5 million of various currencies (principally U.S. dollars and euros) with maturities ranging from 4 to 106 days.

At December 31, 2010, the fair value carrying amount of the Company’s forward currency exchange contracts asset and liabilities were $2.4 million and $1.1 million, respectively, and were included as a component of prepaid expenses and other current assets and accrued expenses and other liabilities, respectively, in the Consolidated Balance Sheets. The estimated fair value of forward currency exchange contracts represents the measurement of the contracts at month-end spot rates as adjusted by current forward points. The Company is exposed to credit loss in the event of nonperformance by counterparties on its outstanding forward currency exchange contracts but does not anticipate nonperformance by any of its counterparties.

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NOTE 4

INVENTORIES

Inventories are summarized as follows (in millions):

	December 31
	2010			2009
Finished goods	$	834.3		$	730.4
Work-in-process		65.4			84.0
Raw materials		169.4			140.1
FIFO cost		1,069.1			954.5
Less LIFO reserve		(12.3	)		(11.5	)
	$	1,056.8		$	943.0

NOTE 5

ACQUISITIONS

Business and product line acquisitions completed in the year ended December 31, 2010 for $265.4 million included the acquisition of assets used to produce the Sonopet Ultrasonic Aspirator control consoles, handpieces and accessories from Mutoh Co., Ltd. and Synergetics USA, Inc., the acquisition of Gaymar Industries, Inc. and the acquisition of the bioimplantable porous polyethylene (PPE) product line and related assets from Porex Surgical, Inc. for use primarily in reconstructive surgery of the head and face. The Sonopet Ultrasonic Aspirator is used in the fields of neurosurgery as well as for orthopedic, general, laparoscopic and plastic surgeries. Gaymar Industries specializes in support surfaces and pressure ulcer management solutions as well as the temperature management segment of the healthcare industry.

These acquisitions, which enhance the Company’s product offerings within its Orthopaedic Implants and MedSurg Equipment segments, did not have a material effect on the Company’s consolidated net sales or operating income for the year ended December 31, 2010. Pro forma consolidated results of operations would not differ significantly as a result of these acquisitions. The acquisitions described above were accounted for pursuant to the requirements of the Business Combinations Topic of the FASB Codification. The assets acquired and liabilities assumed as a result of the acquisitions were included in the Company’s Consolidated Balance Sheet as of the acquisition dates and did not have a material effect on the Company’s Consolidated Balance Sheet as of those dates. The purchase price for each of the acquisitions described above was primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition dates. The fair value assigned to identifiable intangible assets acquired was determined primarily by using the income approach. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. Purchased identifiable intangible assets are amortized on a straight-line basis over their respective estimated useful lives. The estimated useful lives range between 2 and 11 years.

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The purchase price allocation in each case was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized. The table below represents the allocation of the purchase price to the acquired net assets of acquisitions completed in 2010 (in millions):

Accounts receivable	$	13.4
Inventory		17.3
Other current assets		5.0
Identifiable intangible assets:
Customer relationship		48.0
Developed technology		26.3
Trademarks		7.9
Other		37.2
Goodwill		135.7
Other assets		29.3
Current liabilities		(20.8	)
Noncurrent liabilities		(33.9	)

Goodwill associated with the acquisitions completed in 2010 was $135.7 million. The factors that contributed to the recognition of goodwill included securing synergies that are specific to the Company’s business and not available to other market participants, which are expected to increase revenues and profits; acquisition of a talented workforce; and cost savings opportunities.

In 2009 the Company completed several acquisitions including the acquisition of Ascent Healthcare Solutions, Inc. (Ascent), the market leader in the reprocessing and remanufacturing of medical devices in the United States, in an all cash transaction for $525.0 million. The acquisition of Ascent enhanced the Company’s product offerings as well as provided cost savings opportunities to customers in the MedSurg Equipment segment. Ascent’s purchase price valuation was completed in the fourth quarter of 2010 and did not differ from the preliminary valuation. The table below represents the allocation of the purchase price to the acquired net assets of acquisitions completed in 2009 (in millions):

	Ascent			All Other			Total
Accounts receivable	$	10.6		$	0.1		$	10.7
Inventory		10.3			0.2			10.5
Other current assets		6.3			2.9			9.2
Identifiable intangible assets:
Customer relationship		221.1			9.1			230.2
Developed technology		22.5			18.5			41.0
In-process research and development		—			20.2			20.2
Trademarks		5.0			—			5.0
Other		—			1.7			1.7
Goodwill		329.1			58.4			387.5
Other assets		22.7			5.2			27.9
Current liabilities		(6.3	)		(2.0	)		(8.3	)
Contingent consideration		—			(45.1	)		(45.1	)
Noncurrent deferred income tax liabilities		(96.7	)		(18.5	)		(115.2	)
Other liabilities		—			(0.5	)		(0.5	)

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In 2004 the Company acquired all of the outstanding stock of SpineCore, Inc. (SpineCore), a developer of artificial lumbar and cervical discs for an upfront payment of $120.0 million in cash plus certain transaction costs. Terms of the transaction also include potential milestone payments of $95 million upon commercialization of the FlexiCore lumbar artificial disc in the United States and $120 million upon commercialization of the CerviCore cervical artificial disc in the United States as well as royalty payments of up to an additional $25 million depending on the level of actual commercial sales of these devices, if any. The potential milestone payments are expected to be capitalized at their fair values as intangible assets at the time of payment, if they become due.

In October 2010 the Company made the decision to withdraw its application with the U.S. Food and Drug Administration (FDA) for the approval of the FlexiCore device. The CerviCore cervical artificial disc remains under development at this time; however, the Company continues to monitor the market, costs and approval process associated with the CerviCore device to determine whether the device will be made commercially available and result in the introduction of new products and additional future sales. In addition, unanticipated issues may arise that could further delay or terminate the development of the CerviCore device prior to regulatory approval or commercialization, which could have an unfavorable impact on the Company’s operating results.

NOTE 6

RESTRUCTURING CHARGES

The Company did not incur restructuring charges in 2010. In 2009 the Company initiated a number of restructuring projects focused on shifting resources to those areas where the Company has the greatest opportunities for growth and streamlining operations to drive operating leverage. In 2008 the Company made decisions to simplify the structure of its Japanese distribution business and to substantially reduce development efforts associated with product technologies purchased in the Sightline Technologies Ltd. acquisition in 2006. The Company recorded restructuring charges in 2009 and 2008 consisting of the following items (in millions):

	2009		2008
Agent conversion charges	$	30.3	$	—
Asset impairment charges		18.3		22.3
Severance and related costs		12.9		8.5
Contractual obligations and other charges		5.5		4.1
Total	$	67.0	$	34.9

2009 Charges:

The $30.3 million agent conversion charges represent costs associated with the termination of certain third-party agent agreements at the Company’s Europe, Middle East, Africa (EMEA) Division. This initiative is intended to provide the Company greater control over its distribution channels as well as improve customer focus and selling efficiency. The $18.3 million asset impairment charges are associated with the Company’s decision to discontinue selling certain products within its Orthopaedic Implants and MedSurg Equipment business segments and relates primarily to identifiable intangible assets. The discontinued product lines are not expected to have a material impact on the Company’s future operating results. The $12.9 million severance and related costs charge represents workforce reduction employment-related severance costs for approximately 120 employees resulting from the Company’s decision to simplify the organization structure at its Biotech, EMEA, Japan and Canada divisions. The $5.5 million contractual obligations and other charges represent costs associated with the termination of various supplier contracts as well as other incidental costs related to the discontinued product lines.

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2008 Charges:

The $22.3 million asset impairment charges represent the excess of net book value over fair market value for assets to be disposed of by sale, primarily related to sales offices and warehousing and distribution facilities in Japan. The $8.5 million charge represents employment-related severance costs for 84 employees. The $4.1 million contractual obligations and other charges represent costs associated with the termination of various supplier contracts as well as other incidental costs.

The following table provides a rollforward of the remaining liabilities, included within accrued expenses and other liabilities in the Consolidated Balance Sheet, related to the restructuring charges recorded by the Company in 2009 and 2008 (in millions):

	Agent Conversions			Severance and related costs			Contractual Obligations and Other Charges
Balances at January 1, 2010	$	5.9		$	3.4		$	2.5
Payments		(5.9	)		(1.9	)		(0.8	)
Foreign currency translation effects		—			(0.2	)		(0.3	)
Balances at December 31, 2010	$	0.0		$	1.3		$	1.4

The restructuring projects initiated in 2009 and 2008 are substantially complete. The Company expects the asset disposals to be completed and final severance payments to be made in 2011.

NOTE 7

GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the net carrying amount of goodwill by segment for the years ended December 31, 2010 and 2009 are as follows (in millions):

	Orthopaedic Implants			MedSurg Equipment			Total
Balance as of January 1, 2009	$	517.6		$	49.9		$	567.5
Goodwill acquired		36.3			351.2			387.5
Foreign currency translation effects and other		(1.6	)		3.4			1.8
Balance as of December 31,2009		552.3			404.5			956.8
Goodwill acquired		28.8			106.9			135.7
Foreign currency translation effects and other		(19.5	)		(0.7	)		(20.2	)
Balance as of December 31, 2010	$	561.6		$	510.7		$	1,072.3

In the fourth quarters of 2010 and 2009, the Company completed the required annual impairment tests of goodwill as prescribed by the Intangibles-Goodwill and Other Topic of the FASB Codification and determined, in all instances, that recorded goodwill was not impaired and that no goodwill write down was necessary.

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The following is a summary of the Company’s other intangible assets (in millions):

	Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
At December 31, 2010:
Amortized intangible assets:
Developed technology	$	355.4	$	160.5	$	194.9
Customer relationship		446.3		80.6		365.7
Patents		233.0		158.6		74.4
Trademarks		56.0		19.7		36.3
Other		77.6		45.9		31.7
	$	1,168.3	$	465.3	$	703.0
At December 31, 2009:
Amortized intangible assets:
Developed technology	$	316.9	$	160.3	$	156.6
Customer relationship		410.9		63.0		347.9
Patents		241.4		156.0		85.4
Trademarks		37.8		19.2		18.6
Other		48.7		22.5		26.2
	$	1,055.7	$	421.0	$	634.7

The estimated amortization expense for each of the five succeeding years is as follows (in millions):

2011	$	57.1
2012	$	57.1
2013	$	56.3
2014	$	54.9
2015	$	54.6

NOTE 8

LONG-TERM DEBT AND CREDIT FACILITIES

The Company’s long-term debt is summarized as follows (in millions):

	December 31
	2010			2009
3.00% senior unsecured notes, due January 15, 2015	$	499.6		$	—
4.375% senior unsecured notes, due January 15, 2020		496.9			—
Other		25.3			18.0
Total debt		1,021.8			18.0
Less current maturities		(25.3	)		(18.0	)
Long-term debt	$	996.5		$	—

In August 2010 the Company refinanced its credit facility with a new $1,000.0 million Senior Unsecured Revolving Credit Facility due August 2013 (the 2010 Facility). The 2010 Facility replaced the previously outstanding $1,000.0 million Unsecured Credit Facility due in November 2010 (the 2005 Facility). The 2010 Facility includes an increase option permitting the Company to increase the size of the facility up to an additional $500.0 million, a $500.0 million multicurrency sublimit (with no sublimit for euro borrowings), a $100.0 million letter of credit sublimit and other terms, conditions and covenants substantially the same as the 2005 Facility.

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The 2010 Facility has an annual facility fee ranging from 10 to 45 basis points and bears interest at LIBOR, as defined in the agreement, plus an applicable margin ranging from 65 to 205 basis points, both of which are dependent on the Company’s credit rating. Based on the Company’s current credit ratings, the 2010 Facility has an annual facility fee of 12.5 basis points and an interest margin of 87.5 basis points.

In January 2010 the Company sold $500.0 million of senior unsecured notes due January 15, 2015 (the 2015 Notes) and $500.0 million of senior unsecured notes due January 15, 2020 (the 2020 Notes). The 2015 Notes bear interest at 3.00% per year and, unless previously redeemed, will mature on January 15, 2015. The 2020 Notes bear interest at 4.375% per year and, unless previously redeemed, will mature on January 15, 2020. The Company received net proceeds of $996.1 million, net of an offering discount of $3.9 million. The 2015 Notes and 2020 Notes carry effective interest rates of 3.02% and 4.46%, respectively. The net proceeds from the offering have been and will continue to be available for working capital and other general corporate purposes, including acquisitions, stock repurchases and other business opportunities.

Debt issuance costs of $10.5 million were incurred in connection with the sale of the senior unsecured notes. These costs were capitalized and are being amortized to interest expense over the lives of the related senior unsecured notes. At December 31, 2010, total unamortized debt issuance costs were $9.0 million.

In addition to the senior unsecured notes, the Company had current debt outstanding under various debt instruments totaling $25.3 and $18.0 million at December 31, 2010 and 2009, respectively.

The weighted-average interest rate, excluding required fees, for all borrowings was 3.7% at December 31, 2010. The 2010 Facility requires the Company to comply with certain financial and other covenants. The Company was in compliance with all covenants at December 31, 2010. In addition to the 2010 Facility, the Company has lines of credit, issued by various financial institutions, available to fund the Company’s day-to-day operating needs. At December 31, 2010, the Company had $1,027.5 million of additional borrowing capacity available under all of its existing credit facilities.

The carrying amounts of the Company’s debt approximate their fair values, based on the quoted interest rates for similar types and amounts of borrowing agreements.

Interest expense, including required fees, incurred on outstanding debt and credit facilities, which is included in other income (expense), totaled $53.2 million in 2010, $14.0 million in 2009 and $12.7 million in 2008. Interest paid on debt, including required fees, was $39.2 million in 2010, $5.3 million in 2009 and $5.7 million in 2008.

NOTE 9

CAPITAL STOCK

In December 2010 and 2009 the Company announced that its Board of Directors had authorized the Company to purchase up to $500.0 million and $750.0 million, respectively, of the Company’s common stock from time to time in the open market, in privately negotiated transactions or otherwise. The Company had not made any stock repurchase pursuant to the $500.0 million repurchase program as of December 31, 2010. During 2010, the Company repurchased 8.3 million shares at a total cost of $425.5 million pursuant to the $750.0 million repurchase program.

The Company has 0.5 million authorized shares of $1 par value preferred stock, none of which is outstanding.

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The Company’s stock based plans include stock options, restricted stock units and employee stock purchases. The following is a summary of the Company’s significant stock compensation plans:

Stock Options

The Company has key employee and director stock option plans under which options are granted at an exercise price not less than the fair market value of the underlying common stock at the date of grant. The options are granted for periods of up to 10 years and become exercisable in varying installments. A summary of stock option activity follows:

	Shares (in millions)			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Options outstanding at January 1, 2010		26.3		$	45.69
Granted		2.6			53.09
Exercised		(3.2	)		30.27
Cancelled		(0.9	)		55.27
Options outstanding at December 31, 2010		24.8		$	48.06		5.7	$	201.9
Exercisable at December 31, 2010		14.6		$	45.77		4.3	$	146.7
Options expected to vest		9.7		$	51.84		7.7	$	51.7

The aggregate intrinsic value, which represents the cumulative difference between the fair market value of the underlying common stock and the option exercise prices, of options exercised during the years ended December 31, 2010, 2009 and 2008 was $72.9 million, $37.5 million and $135.4 million, respectively. Shares reserved for future compensation grants of Stryker common stock were 10.8 million at December 31, 2010 and 14.5 million at December 31, 2009. Exercise prices for options outstanding as of December 31, 2010 ranged from $23.30 to $67.80. At December 31, 2010, there was $106.1 million of unrecognized compensation cost related to nonvested stock options granted under the stock option plans; that cost is expected to be recognized over the following 4.9 years (weighted-average period of 1.5 years).

Restricted Stock Units (RSUs)

The Company grants RSUs to key employees. The fair value of RSUs is determined based on the number of shares granted and the closing quoted price of the Company’s common stock on the day prior to the date of grant less anticipated dividends. RSU generally vest in one-third increments over a three-year period and are settled in stock. A summary of RSU activity follows:

	Shares (in millions)			Weighted Average Grant date Fair value
Nonvested RSUs at January 1, 2010		0.1		$	40.45
Granted		0.7			51.06
Vested		(0.0	)		41.43
Cancelled		(0.0	)		51.09
Nonvested RSUs at December 31, 2010		0.8		$	49.89

As of December 31, 2010, there was $25.9 million of unrecognized compensation cost related to nonvested RSUs; that cost is expected to be recognized as expense over the following 2.9 years (weighted-average period of 1.1 years). The weighted average grant date fair value per share of RSUs granted in 2010 and 2009 was $51.06 and $40.45, respectively. The fair value of RSUs vested in 2010 was $0.8 million.

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Employee Stock Purchase Plans (ESPP)

Full time and part time employees may participate in the Company’s ESPP, provided they meet certain eligibility requirements. Effective January 1, 2009, the purchase price for the Company’s common stock under the terms of the ESPP is defined as 95% of the closing stock price on the last trading day of a purchase. During 2010 and 2009, the Company issued 179,634 and 214,004 shares, respectively, under the ESPP.

NOTE 10

NET EARNINGS PER SHARE

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

	2010		2009		2008
Net earnings	$	1,273.4	$	1,107.4	$	1,147.8
Weighted-average shares outstanding for basic net earnings per share		396.4		397.4		408.1
Effect of dilutive employee stock options		3.1		2.0		5.5
Adjusted weighted-average shares outstanding for diluted net earnings per share		399.5		399.4		413.6
Net earnings per share of common stock:
Basic	$	3.21	$	2.79	$	2.81
Diluted	$	3.19	$	2.77	$	2.78

Options to purchase an average of 7.5 million, 18.1 million and 5.7 million shares of common stock during the years ended December 31, 2010, 2009 and 2008, respectively, were outstanding but were not included in the computation of diluted net earnings per share because the exercise prices of the options were greater than the average market price of common stock for those periods.

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NOTE 11

RETIREMENT PLANS

Certain of the Company’s subsidiaries have both funded and unfunded defined benefit pension plans covering some or all of their employees. Substantially all of the defined benefit pension plans have projected benefit obligations in excess of plan assets. A summary of the Company’s defined benefit pension plans is as follows (in millions):

	December 31
	2010			2009
Change in projected benefit obligations:
Projected benefit obligations at beginning of year	$	262.4		$	252.1
Service cost		16.2			15.8
Interest cost		12.3			11.5
Foreign exchange impact		(2.2	)		3.7
Employee contributions		3.6			3.4
Actuarial gains		25.9			(9.8	)
Benefits paid		(10.6	)		(14.3	)
Projected benefit obligations at end of year		307.6			262.4
Change in plan assets:
Fair value of plan assets at beginning of year		177.3			150.5
Actual return		8.3			13.2
Employer contributions		18.2			20.4
Employee contributions		3.6			3.4
Foreign exchange impact		1.6			3.2
Benefits paid		(9.1	)		(13.4	)
Fair value of plan assets at end of year		199.9			177.3
Funded status	$	(107.7	)	$	(85.1	)

The weighted-average discount rate used in the determination of the projected benefit obligations was 4.2% as of December 31, 2010 and 4.9% as of December 31, 2009.

The components of the amounts recognized in the Consolidated Balance Sheets are as follows (in millions):

	December 31
	2010			2009
Noncurrent assets—Other	$	—		$	1.7
Current liabilities—Accrued compensation		(1.0	)		(1.0	)
Noncurrent liabilities—Other liabilities		(106.7	)		(85.8	)
	$	(107.7	)	$	(85.1	)

The components of the amounts recognized in accumulated other comprehensive gain (loss), before the effect of income taxes, are as follows (in millions):

	December 31
	2010			2009
Unrecognized net actuarial loss	$	(60.6	)	$	(24.4	)
Unrecognized prior service cost		(0.1	)		(0.1	)
Unrecognized transition amount		0.2			(0.5	)
	$	(60.5	)	$	(25.0	)

59

The accumulated benefit obligations for all of the defined benefit pension plans were $292.7 million and $238.2 million as of December 31, 2010 and 2009, respectively. Pension plans with an accumulated benefit obligation in excess of plan assets had projected benefit obligations, accumulated benefit obligations and fair value of plan assets of $288.3 million, $280.8 million and $186.4 million, respectively, as of December 31, 2010 and $248.9 million, $229.8 million and $165.0 million, respectively, as of December 31, 2009.

The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive gain (loss) before the effect of income taxes are as follows (in millions):

	2010			2009			2008
Net periodic benefit cost:
Service cost	$	(16.2	)	$	(15.8	)	$	(15.8	)
Interest cost		(12.3	)		(11.5	)		(11.7	)
Expected return on plan assets		9.4			8.4			11.1
Amortization of prior service cost and transition amount		—			(0.1	)		(0.1	)
Recognized actuarial loss		(0.8	)		(2.2	)		(0.2	)
Net periodic benefit cost		(19.9	)		(21.2	)		(16.7	)
Other changes in plan assets and benefit obligations, recognized in other comprehensive gain (loss):
Net actuarial gain (loss)		(37.0	)		22.5			(36.5	)
Recognized net actuarial loss		0.8			2.2			0.2
Prior service cost and transition amount		0.7			0.2			0.3
Total recognized in other comprehensive gain (loss)		(35.5	)		24.9			(36.0	)
Total recognized in net periodic benefit cost and other comprehensive gain (loss)	$	(55.4	)	$	3.7		$	(52.7	)
Weighted-average assumptions used in the determination of net periodic benefit cost:
Discount rate		4.9%			4.7%			4.7%
Expected return on plan assets		5.2%			5.8%			5.5%
Rate of compensation increase		2.8%			2.8%			2.9%

The estimated net actuarial loss for the defined benefit pension plans to be recognized from accumulated other comprehensive gain (loss) into net periodic benefit cost in the year ended December 31, 2011 is ($1.9) million. The Company estimates that an immaterial amount of amortization of prior service cost and transition amount for the defined benefit pension plans will be recognized from accumulated other comprehensive gain (loss) into net periodic benefit cost in the year ended December 31, 2011.

The Company has assumed an average long-term expected return on defined benefit plan assets of 5.2% as of December 31, 2010. The expected return is determined by applying the target allocation in each asset category of plan investments to the anticipated return for each asset category based on historical and projected returns.

The weighted-average allocation of plan assets by asset category is as follows:

	December 31
	2010			2009
Equity securities		39	%		57	%
Debt securities		46			26
Other		15			17
		100	%		100	%

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The investment strategy for the Company’s defined benefit pension plans is both to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within appropriate risk tolerances.

Reflected below are weighted-average target investment allocation ranges for the plans at December 31, 2010:

	Low			High
Equity securities		34	%		45	%
Debt securities		46			59
Other		3			19

The following table summarizes the valuation of the Company’s pension plan assets by pricing categories at December 31, 2010 and 2009 (in millions):

	Total		Quoted Prices in Active Markets (Level 1)		Prices with Other Observable Inputs (Level 2)		Prices with Unobservable Inputs (Level 3)
At December 31, 2010
Assets:
Cash and cash equivalent	$	4.2	$	4.2	$	—	$	—
Equity securities:
U.S companies		57.6		57.6		—		—
International companies		20.6		20.6		—		—
Corporate debt securities		92.8		91.3		1.5		—
Other		24.7		6.4		—		18.3
Total	$	199.9	$	180.1	$	1.5	$	18.3
At December 31, 2009
Assets:
Cash and cash equivalent	$	12.2	$	8.5	$	3.7	$	—
Equity securities:
U.S companies		34.8		23.4		11.4		—
International companies		66.2		31.7		34.5		—
Mutual funds		28.3		28.3		—		—
U.S Treasury securities		12.4		—		12.4		—
Corporate debt securities		5.7		5.7		—		—
Other		17.7		1.5		—		16.2
Total	$	177.3	$	99.1	$	62.0	$	16.2

The Company’s Level 3 pension plan assets consist primarily of guaranteed investment contracts with insurance companies. The insurance contracts guarantee the Company principal repayment and a fixed rate of return. The Company’s valuation of its Level 3 assets is based on third party actuarial valuations which are an estimation of the surrender value of the guaranteed investment contract between the Company and the insurance company. The surrender value equals the actuarial value of the notional investments underlying the guaranteed investment contract, using the actuarial assumptions as stated in the guaranteed investment contract.

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The following table presents a rollforward of pension plan assets measured at fair value on a recurring basis using unobservable inputs (Level 3) at December 31, 2010 and 2009 (in millions):

	2010			2009
Balance as of January 1	$	16.2		$	14.9
Actual return on plan assets held at the reporting date		(0.1	)		(0.3	)
Purchases, sales, and settlements		2.2			1.6
Balance as of December 31	$	18.3		$	16.2

The Company anticipates contributing $18.7 million to its defined benefit pension plans in 2011.

The following estimated future benefit payments, which reflect expected future service as appropriate, are expected to be paid in the years indicated (in millions):

	2011		2012		2013		2014		2015		2016-2020
Expected benefits payments	$	10.4	$	10.9	$	11.2	$	11.2	$	11.2	$	65.1

Retirement plan expense under the Company’s defined contribution retirement plans totaled $101.6 million in 2010, $100.7 million in 2009 and $98.6 million in 2008. A portion of the Company’s retirement plan expense was funded with Stryker common stock totaling $11.3 million in 2010, $10.8 million in 2009 and $9.3 million in 2008. The use of Stryker common stock represents a noncash operating activity that is not reflected in the Consolidated Statements of Cash Flows. The amount of Stryker common stock held by the Company’s defined contribution retirement plans totaled $96.1 million (approximately 1.8 million shares) and $82.6 million (approximately 1.6 million shares) as of December 31, 2010 and 2009, respectively. The value of Stryker common stock as a percentage of total defined contribution retirement plan assets was 10% and 11% as of December 31, 2010 and 2009, respectively.

NOTE 12

INCOME TAXES

Earnings before income taxes consist of the following (in millions):

	2010		2009		2008
U.S. operations	$	566.0	$	709.5	$	738.1
Foreign operations		1,163.6		914.4		842.1
	$	1,729.6	$	1,623.9	$	1,580.2

The components of the provision for income taxes follow (in millions):

	2010			2009			2008
Current income tax expense
Federal	$	307.9		$	382.4		$	262.3
State		21.2			26.6			48.1
Foreign		230.9			180.2			139.6
Total current income tax expense		560.0			589.2			450.0
Deferred income tax expense (benefit)
Federal		(80.7	)		(17.3	)		(7.6	)
State		(2.3	)		(2.2	)		1.5
Foreign		(20.8	)		(53.2	)		(11.5	)
Total deferred income tax benefit		(103.8	)		(72.7	)		(17.6	)
Total income tax expense	$	456.2		$	516.5		$	432.4

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A reconciliation of the U.S. statutory income tax rate to the Company’s effective income tax rate from continuing operations follows:

	2010			2009			2008
U.S. statutory income tax rate		35.0	%		35.0	%		35.0	%
Add (deduct):
State income taxes, less effect of federal deduction		0.9			2.6			1.5
International operations		(12.1	)		(13.8	)		(11.5	)
Repatriation of foreign earnings		(0.4	)		4.1			—
Other		3.0			3.9			2.4
		26.4	%		31.8	%		27.4	%

Deferred income taxes reflect the net income tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are recorded to reduce deferred income tax assets when it is more likely than not that an income tax benefit will not be realized.

The income tax effects of significant temporary differences, which comprise the Company’s deferred income tax assets and liabilities, are as follows (in millions):

	December 31
	2010			2009
Deferred income tax assets:
Inventories	$	501.5		$	471.7
Other accrued expenses		134.5			130.7
Depreciation and amortization		30.7			17.3
State income taxes		27.7			29.0
Share-based compensation		109.0			98.5
Net operating loss carryforwards		47.2			59.7
Other		77.0			81.8
Total deferred income tax assets		927.6			888.7
Less valuation allowances		(26.1	)		(27.6	)
Total deferred income tax assets after valuation allowances		901.5			861.1
Deferred income tax liabilities:
Depreciation and amortization		(330.2	)		(347.4	)
Other		(40.7	)		(59.3	)
Total deferred income tax liabilities		(370.9	)		(406.7	)
Total deferred income tax assets	$	530.6		$	454.4
Reported as:
Current assets—Deferred income taxes	$	653.2		$	602.2
Noncurrent assets—Deferred income taxes		248.3			258.9
Current liabilities—Accrued expenses and other liabilities		(26.9	)		(24.1	)
Noncurrent liabilities—Other liabilities		(344.0	)		(382.6	)
	$	530.6		$	454.4

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Net operating loss carryforwards totaling $160.9 million at December 31, 2010 are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. U.S. loss carryforwards of $36.9 million expire between 2011 and 2026. The majority of the Company’s foreign loss carryforwards of $124.0 million do not expire. In addition, $102.1 million of the foreign loss carryforward is subject to a full valuation allowance.

During the fourth quarter of 2009, the Company repatriated $787.0 million of foreign earnings to the United States. The Company recorded tax expense of $67.1 million in 2009 and a tax benefit of $7.4 million in 2010 to recognize the tax liability and benefit associated with the repatriation. The repatriated cash was used to fund the acquisition of Ascent and previously announced initiatives, including the share repurchase authorization. Pursuant to the requirements of the Accounting for Income Taxes-Special Areas (included in the Income Taxes Topic of the FASB Codification), no provision has been made for U.S. federal and state income taxes or foreign income taxes that may result from future remittances of the undistributed earnings of foreign subsidiaries that are determined to be reinvested overseas indefinitely ($4,219.1 million at December 31, 2010). Determination of the amount of any unrecognized deferred income tax liability on these unremitted earnings is not practicable.

Total income taxes paid, net of refunds received, were $579.4 million in 2010, $406.4 million in 2009 and $478.5 million in 2008.

The changes in the amounts recorded for uncertain income tax positions are as follows (in millions):

	December 31
	2010			2009
Balance at beginning of year	$	292.7		$	277.1
Increases related to current year income tax positions		32.5			41.0
Increases related to prior year income tax positions		65.9			64.7
Decreases related to prior year income tax positions:
Settlements and resolutions of income tax audits		(15.0	)		(66.9	)
Statute of limitations expirations		(4.9	)		(3.7	)
Other		(5.6	)		(19.5	)
Balance at end of year	$	365.6		$	292.7
Reported as:
Current liabilities—Income taxes	$	13.0		$	0.5
Noncurrent liabilities—Other liabilities		352.6			292.2
	$	365.6		$	292.7

The Company’s income tax expense could be reduced by $347.0 million and $274.3 million at December 31, 2010 and December 31, 2009, respectively, upon favorable resolution of these uncertain income tax positions.

At December 31, 2010, income tax authorities in several income tax jurisdictions both inside and outside the United States were conducting routine audits of the Company’s income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with the Company’s interpretations of complex income tax regulations regarding the allocation of income to the various income tax jurisdictions. With few exceptions, the Company is no longer subject to audits by income tax authorities for tax years prior to 2003. Income tax years subsequent to 2002 are open to examination in many of the income tax jurisdictions in which the Company operates. In July 2010 the Company received an income tax assessment related to an income tax position the Company has taken for the allocation of profits within Europe in previously filed 2006 and 2007 income tax returns. The Company believes it followed the applicable tax laws and regulations and will vigorously defend this income tax position. If the Company were to ultimately lose with

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respect to this income tax position it could have a material unfavorable impact on the Company’s income tax expense, results of operations and cash flows in future periods. In April 2009 the U.S. Internal Revenue Service (IRS) proposed adjustments to the Company’s previously filed 2003, 2004 and 2005 income tax returns related to income tax positions the Company has taken for its cost sharing arrangements with two wholly owned entities operating in Ireland. The Company believes it followed the applicable tax law and Treasury regulations and is vigorously defending these income tax positions. Ultimate resolution with respect to these proposed adjustments could have a material impact on the Company’s income tax expense, results of operations and cash flows in future periods.

Interest expense and penalties included in other income (expense) were $24.3 million, $9.2 million and $17.8 million for the year ended December 31, 2010, 2009 and 2008 respectively. Accrued interest and penalties included in accrued expenses and other liabilities were $83.0 million and $58.7 million at December 31, 2010 and December 31, 2009, respectively.

It is reasonably possible that the amount of unrecognized tax benefits will significantly change due to one or more of the following events in the next twelve months: expiring statutes, audit activity, tax payments, competent authority proceedings related to transfer pricing, or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements. The Company is not able to reasonably estimate the amount or the future periods in which changes in unrecognized tax benefits may be required.

NOTE 13

SEGMENT AND GEOGRAPHIC DATA

The Company segregates its operations into two reportable business segments: Orthopaedic Implants and MedSurg Equipment. The Orthopaedic Implants segment includes orthopaedic reconstructive (hip and knee), trauma and spinal implant systems and other related products. The MedSurg Equipment segment includes surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; as well as other medical device products used in a variety of medical specialties. The Other category includes corporate administration, interest expense, interest and marketable securities income and share-based compensation, which includes compensation related to both employee and director stock option and restricted stock grants.

The Company’s reportable segments are business units that offer different products and services and are managed separately because each business requires different manufacturing, technology and marketing strategies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 to the Consolidated Financial Statements. The Company measures the financial results of its reportable segments using an internal performance measure that excludes the impairment of property, plant and equipment and gain on sale of certain assets recorded in 2010, the income tax adjustment associated with the repatriation of foreign earnings recorded in 2010 and 2009, the patent litigation gain recorded in 2009 and the restructuring charges recorded in 2009 and 2008. Identifiable assets are those assets used exclusively in the operations of each business segment or allocated when used jointly. Corporate assets are principally cash and cash equivalents, marketable securities and property, plant and equipment.

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Sales and other financial information by business segment follows (in millions):

	Orthopaedic Implants		MedSurg Equipment		Other			Total
Year ended December 31, 2010:
Net sales	$	4,308.4	$	3,011.6	$	—		$	7,320.0
Interest and marketable securities income		—		—		48.7			48.7
Interest expense		—		—		(77.5	)		(77.5	)
Depreciation and amortization expense		312.9		87.5		9.8			410.2
Income taxes (credit)		391.3		179.3		(71.0	)		499.6
Segment net earnings (loss)		963.3		524.0		(158.1	)		1,329.2
Less property, plant and equipment impairment, net of income tax benefit									(76.6	)
Add income taxes on repatriation of foreign earnings									7.4
Add gain on sale of property, plant and equipment, net of income tax expense									13.4
Net earnings									1,273.4
Total assets		3,955.3		2,280.2		4,659.6			10,895.1
Purchases of property, plant and equipment		120.9		48.9		12.3			182.1
Year ended December 31, 2009:
Net sales	$	4,119.7	$	2,603.4	$	—		$	6,723.1
Interest and marketable securities income		—		—		53.9			53.9
Interest expense		—		—		(23.2	)		(23.2	)
Depreciation and amortization expense		305.7		68.8		10.8			385.3
Income taxes (credit)		327.0		159.5		(38.2	)		448.3
Segment net earnings (loss)		802.0		462.9		(84.9	)		1,180.0
Less restructuring charges, net of income tax benefits									(48.4	)
Less income taxes on repatriation of foreign earnings									(67.1	)
Add patent litigation gain, net of income tax expense									42.9
Net earnings									1,107.4
Total assets		3,830.7		1,924.2		3,316.4			9,071.3
Purchases of property, plant and equipment		83.0		43.4		4.9			131.3
Year ended December 31, 2008:
Net sales	$	3,967.5	$	2,750.7	$	—			6,718.2
Interest and marketable securities income		—		—		97.7			97.7
Interest expense		—		—		(30.5	)		(30.5	)
Depreciation and amortization expense		308.1		72.2		7.3			387.6
Income taxes (credit)		310.6		162.8		(27.8	)		445.6
Segment net earnings (loss)		760.4		471.2		(62.1	)		1,169.5
Less restructuring charges, net of income tax benefits									(21.7	)
Net earnings									1,147.8
Total assets		3,693.5		1,319.6		2,590.2			7,603.3
Purchases of property, plant and equipment		95.3		52.1		7.8			155.2

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The countries in which the Company has local revenue-generating operations have been combined into the following geographic areas: the United States (including Puerto Rico); Europe, Middle East, Africa (EMEA); and other foreign countries, which are comprised of Japan, Canada, the Pacific region and the Latin America region. Sales are attributable to a geographic area based upon the customer’s country of domicile. Long-lived assets include net property, plant and equipment, goodwill and other intangibles. Net property, plant and equipment are based upon physical location of the assets. Geographic information follows (in millions):

	Net Sales		Long-Lived Assets
Year ended December 31, 2010:
United States	$	4,792.8	$	2,084.4
EMEA		1,227.5		752.6
Other foreign countries		1,299.7		178.4
	$	7,320.0	$	3,015.4
Year ended December 31, 2009:
United States	$	4,317.4	$	2,031.2
EMEA		1,254.2		751.4
Other foreign countries		1,151.5		178.6
	$	6,723.1	$	2,961.2
Year ended December 31, 2008:
United States	$	4,282.2	$	1,440.1
EMEA		1,313.3		784.1
Other foreign countries		1,122.7		187.6
	$	6,718.2	$	2,411.8

NOTE 14

LEASES

The Company leases various manufacturing, warehousing and distribution facilities, administrative and sales offices as well as equipment under operating leases. Future minimum lease commitments under these leases are as follows (in millions):

2011	$	48.2
2012		36.0
2013		24.8
2014		17.4
2015		12.3
Thereafter		10.2
	$	148.9

Rent expense totaled $80.9 million in 2010, $75.1 million in 2009 and $76.0 million in 2008.

NOTE 15

PROPERTY, PLANT AND EQUIPMENT

During the third quarter of 2010, the Company sold its Orthopaedics Implants manufacturing facility based in Caen, France for total consideration of $52.9 million in an all cash transaction and recorded a gain of $13.4 million (net of $10.9 million income tax expense). The transaction also included a 5-year supply agreement with the acquirer in volumes commensurate with the production levels achieved prior to the sale. The supply agreement is contingent, among other things, on the acquirer’s ability to provide products that meet quality standards, and may be terminated by Stryker if such a material breach occurs.

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NOTE 16

ASSETS HELD FOR SALE

During the fourth quarter of 2010, the Company announced a definitive agreement to sell its OP-1 product family for use in orthopaedic bone applications and its manufacturing facility based in Lebanon, NH. As a result of the announcement, the Company recorded a $76.6 million (net of $46.9 million income tax expense) non cash impairment charge to reflect the reduction of the carrying amount of the associated assets to their fair value. At December 31, 2010 the assets held for sale included in current assets in the Consolidated Balance Sheet consisted of the following (in millions):

Accounts receivable, net	$	1.0
Inventories		24.9
Prepaid expenses and other current assets		0.8
Net property, plant and equipment		29.0
Other assets		6.3
Total	$	62.0

NOTE 17

CONTINGENCIES

In the third quarter of 2010, the Company received separate subpoenas from the U.S. Department of Justice related to (i) the sales, marketing and regulatory matters related to the Stryker PainPump and (ii) sales, marketing and regulatory matters related to the OtisKnee device. The Company is in the process of responding to these subpoenas.

In March 2010 a shareholder’s derivative action complaint against certain current and former Directors and Officers of the Company was filed in the United States District Court for the Western District of Michigan Southern Division. This lawsuit was brought by the Westchester Putnam Counties Heavy and Highway Laborers Local 60 Benefit Funds and Laborers Local 235 Benefit Funds. The complaint alleges claims for breach of fiduciary duties and gross mismanagement in connection with certain product recalls, FDA warning letters, government investigations relating to physician compensation and the criminal proceeding brought against the Company’s Biotech division. The case has been stayed while a Special Committee of the Board of Directors evaluates the claims.

In January 2010 a purported class action lawsuit against the Company was filed in the United States District Court for the Southern District of New York on behalf of those who purchased the Company’s common stock between January 25, 2007 and November 13, 2008, inclusive. The lawsuit seeks remedies under the Securities Exchange Act of 1934. In May 2010 the lawsuit was transferred to the United States District Court for the Western District of Michigan Southern Division. The Company intends to defend itself vigorously.

In 2009 a federal grand jury in the District of Massachusetts returned an indictment charging Stryker Biotech LLC and certain current and former employees of Stryker Biotech with wire fraud, conspiracy to defraud the FDA, distribution of a misbranded device and false statements to the FDA. The Company still hopes to be able to reach a fair and just resolution of this matter. The ultimate resolution of this matter is not reasonably estimable at this time, however, a conviction on the charges described above could result in significant monetary fines. Because Stryker Biotech is not presently involved in the sale of health care products or services (see additional information in Note 18), any conviction on these charges resulting in exclusion from participating in federal and state health care programs would not be expected to have a material effect on Stryker Biotech’s present business operations. Certain former Stryker Biotech employees have pled guilty to charges in connection with this matter.

In 2009 the Company received a warning letter from the FDA related to compliance issues for one of its craniomaxillofacial (CMF) implant products that was previously sold through its CMF distribution facility in

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Portage, Michigan. In 2007 the Company received two warning letters from the FDA regarding compliance with certain quality system specifications at its reconstructive implant manufacturing facilities: one letter for its facility in Cork, Ireland and another for its facility in Mahwah, New Jersey. In March 2010 the FDA informed the Company that the warning letter related to its Mahwah manufacturing facility had been resolved following a re-inspection in 2009 and additional corrective actions. In May 2010 the FDA informed the Company that the warning letters related to its Cork, Ireland and CMF facilities had been resolved following FDA re-inspection of the Cork, Ireland facility and additional corrective actions at both the Cork and CMF facilities.

In 2007 the Company announced that it reached a resolution with the U.S. Attorney’s office for the District of New Jersey in connection with an investigation relating to “any and all consulting contracts, professional service agreements, or remuneration agreements between Stryker Corporation and any orthopedic surgeon, orthopedic surgeon in training, or medical school graduate using or considering the surgical use of hip or knee joint replacement/reconstruction products manufactured or sold by Stryker Corporation.” The resolution was in the form of a non-prosecution agreement, which included oversight by a federal monitor, for an 18-month period that ended on March 27, 2009. Subsequent to entering into the non-prosecution agreement, the U.S. Department of Health and Human Services, Office of Inspector General (HHS) issued a civil subpoena to the Company in seeking to determine whether the Company violated various laws by paying consulting fees and providing other things of value to orthopedic surgeons and healthcare and educational institutions as inducements to use Stryker’s orthopedic medical devices in procedures paid for in whole or in part by Medicare. The investigation is ongoing and the Company has produced numerous documents and other materials to HHS in response to the subpoena.

In 2007 the Company disclosed that the U.S. Securities and Exchange Commission (SEC) made an informal inquiry of the Company regarding possible violations of the Foreign Corrupt Practices Act in connection with the sale of medical devices in certain foreign countries. Subsequently, in 2008, the Company received a subpoena from the U.S. Department of Justice, Criminal Division, requesting certain documents for the period since January 1, 2000 in connection with the SEC inquiry. The Company is fully cooperating with the U.S. Department of Justice and the SEC regarding these matters.

Pursuant to certain of the Company’s credit and lease agreements, the Company has provided financial guarantees to third parties in the form of indemnification provisions. These provisions indemnify the third parties for costs, including but not limited to adverse judgments in lawsuits and the imposition of additional income taxes due to either a change in the tax law or an adverse interpretation of the tax law. The terms of the guarantees are equal to the terms of the related credit or lease agreements. The Company is not able to calculate the maximum potential amount of future payments it could be required to make under these guarantees, as any potential payment is dependent on the occurrence of future unknown events (e.g., changes in U.S. or foreign tax laws).

NOTE 18

SUBSEQUENT EVENTS

On February 1, 2011, the Company completed its previously announced sale of its OP-1 product family for use in orthopaedic bone applications and its manufacturing facility based in West Lebanon, NH for total consideration of $60.0 million.

On January 3, 2011, the Company completed the previously announced acquisition of assets of the Neurovascular division of Boston Scientific Corporation (Neurovascular) in an all cash transaction for $1.45 billion, with an additional $50.0 million payment to be made upon completion of certain milestones. The acquisition of Neurovascular is expected to substantially enhance the Company’s presence in the neurovascular market, allowing it to offer a comprehensive portfolio of products in both neurosurgical and neurovascular devices. The effect of the Neurovascular acquisition will be included in the Company’s consolidated results of operations prospectively from the date of acquisition.

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The Company has evaluated subsequent events after December 31, 2010 and concluded that no material transactions occurred subsequent to that date that provided additional evidence about conditions that existed at or after December 31, 2010 that require adjustment to the Consolidated Financial Statements.

Stryker Corporation and Subsidiaries

SUMMARY OF QUARTERLY DATA (UNAUDITED)

(in millions, except per share amounts)

	2010 Quarter Ended								2009 Quarter Ended
	Mar. 31		June 30		Sept. 30		Dec. 31		Mar. 31		June 30		Sept. 30		Dec. 31
Net sales	$	1,799.1	$	1,758.2	$	1,767.6	$	1,995.1	$	1,601.3	$	1,634.3	$	1,653.3	$	1,834.2
Gross profit		1,217.7		1,218.9		1,226.8		1,370.9		1,085.8		1,098.0		1,114.6		1,241.0
Earnings before income taxes		445.8		442.6		461.9		379.3		386.4		400.0		314.4		523.1
Net earnings		321.7		319.0		337.7		295.0		281.1		291.3		229.0		306.0
Net earnings per share of common stock:
Basic		0.81		0.80		0.85		0.75		0.71		0.73		0.58		0.77
Diluted		0.80		0.80		0.85		0.74		0.71		0.73		0.57		0.76
Market price of common stock:
High		58.49		59.72		53.29		55.00		44.46		41.73		48.10		52.66
Low		49.85		48.76		42.74		48.13		30.96		32.34		37.14		42.74

The price quotations reported above were supplied by the New York Stock Exchange.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures—An evaluation of the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2010 was carried out under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Vice President and Chief Financial Officer (the Certifying Officers). Based on that evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting—There was no change to the Company’s internal control over financial reporting during the quarter ended December 31, 2010 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting—The management of Stryker Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Stryker Corporation’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Stryker Corporation’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on that assessment, management believes that, as of December 31, 2010, the Company’s internal control over financial reporting is effective.

Stryker Corporation’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting. This report appears on the following page.

Other Matters—The Company is in the process of implementing new Enterprise Resource Planning (ERP) systems at certain of its divisions including its Europe division. An ERP system is a fully-integrated set of programs and databases that incorporate order processing, production planning and scheduling, purchasing, accounts receivable and inventory management and accounting. In connection with this ERP system implementation, the Company will update its internal controls over financial reporting, as necessary, to accommodate modifications to its business processes and accounting procedures. The Company does not believe that this ERP system implementation will have an adverse effect on the Company’s internal control over financial reporting.

71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Shareholders of Stryker Corporation:

We have audited Stryker Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Stryker Corporation and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Stryker Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Stryker Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010 of Stryker Corporation and subsidiaries, and our report dated February 18, 2011 expressed an unqualified opinion thereon.

/s/    ERNST & YOUNG LLP

Grand Rapids, Michigan

February 18, 2011

72

ITEM 9B. OTHER INFORMATION.

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information regarding the directors of the Company and certain corporate governance and other matters appearing under the captions “Information About the Board of Directors and Corporate Governance Matters,” “Proposal 1—Election of Directors,” “Audit Committee” and “Additional Information—Section 16(a) Beneficial Ownership Reporting Compliance” in the 2011 proxy statement is incorporated herein by reference.

Information regarding the executive officers of the Company appears below. All officers are appointed annually. Reported ages are as of January 31, 2011.

Stephen P. MacMillan, age 47, was appointed President and Chief Operating Officer of the Company in June 2003 and Chief Executive Officer as of January 1, 2005. He was also appointed Chairman of the Board on January 1, 2010. Prior to joining the Company, he was most recently Sector Vice President, Global Specialty Operations for Pharmacia Corporation, which he joined in 1999. Prior to Pharmacia, he spent 11 years at Johnson & Johnson (“J&J”), most recently as President of Johnson & Johnson-Merck Consumer Pharmaceuticals, a joint venture between J&J and Merck. Prior to joining J&J, he held various marketing positions at Procter & Gamble.

Lonny J. Carpenter, age 49, was appointed Group President, Global Quality and Operations in September 2009 and was the Group President, Instruments and Medical since November 2008. He had previously been President, Stryker Medical since May 2008 and Vice President and General Manager, Stryker Medical since 2006. After joining the Company in 1989, Mr. Carpenter held various roles of increasing responsibility at Stryker Instruments before being promoted to Vice President, Global Operations, Stryker Instruments in 2004.

Andrew G. Fox-Smith, age 45, was appointed Group President, International in January 2008. He had previously been President, Pacific since 2005, Vice President and General Manager, Stryker Pacific since 2001 and Managing Director, UK/Ireland/South Africa since 1999. Prior to the acquisition of Howmedica in 1998, he held various sales positions with the Howmedica division of Pfizer since 1994.

Curtis E. Hall, age 54, was appointed Vice President and General Counsel of the Company in June 2004, and was also appointed Secretary of the Company in June, 2010. He had previously been General Counsel for the Company since 1994. Prior to joining the Company, he was a partner in the Michigan law firm of Miller, Canfield, Paddock and Stone, an Assistant United States Attorney in Washington, D.C. and an Assistant District Attorney in New York City.

Curt R. Hartman, age 47, was appointed Vice President and Chief Financial Officer in April 2009 and was the Vice President, Finance of the Company since November 2008. He had previously been President, Stryker Global Instruments since 2006 and President, Stryker Instruments since 2003. After joining the Company in 1990, Mr. Hartman held several functional leadership roles at Stryker Instruments before being promoted to Vice President and General Manager, Stryker Instruments in 1999.

Marcia S. Kaminsky, age 52, was appointed Vice President, Communications and Public Affairs in December 2010. Prior to joining the Company, she served as Vice President, Corporate Responsibility for United Airlines, Senior Vice President, Corporate Communications for USG Corporation, Senior Vice President, Public Affairs for Harris Bank/Bank of Montreal and various communication and public affairs roles at Nutrasweet and Quaker Oats.

73

Tony M. McKinney, age 41, was appointed Vice President, Chief Accounting Officer in November 2008. He had previously been the Vice President, Finance, International Group since 2006 and Group Controller, International Group since 2004. After joining the Company in 1995, Mr. McKinney held various roles of increasing responsibility in the Corporate Accounting department before becoming the Director, Finance for the Japan Division in 2002. Prior to joining the Company in 1995, Mr. McKinney was an Audit Senior Accountant with Ernst & Young LLP.

Michael P. Mogul, age 46, was appointed Group President, Orthopaedics in September 2009. He had previously been President, Stryker Orthopaedics since 2005 and Managing Director of Stryker’s businesses in Germany, Austria and Switzerland since 2000. After joining the Company in 1989, Mr. Mogul held various roles of increasing responsibility at Stryker Instruments before being promoted to Vice President of Sales for the now Orthopaedics division in 1994.

Katherine A. Owen, age 40, was appointed Vice President, Strategy and Investor Relations in February 2007. Prior to joining the Company, she served as a medical technology analyst at Merrill Lynch. Prior to that she held a similar position at Cowen & Co./SG Cowen and had been a corporate lending analyst at State Street Bank.

Michael W. Rude, age 49, was appointed Vice President, Human Resources of the Company in July 2000. Prior to joining the Company, he served as Vice President of Human Resources for the SCIMED Division of Boston Scientific Corporation. Prior to that he held various positions as Vice President, Human Resources within The Dun & Bradstreet Corporation and spent eight years in various Human Resources positions at Baxter International, Inc.

Timothy J. Scannell, age 46, was appointed Group President, MedSurg and Spine in September 2009 and was Group President, Spine and Endoscopy since November 2008. He had previously been President, Stryker Spine since 2005 and Vice President and General Manager, Stryker Spine since 2003. After joining the Company in 1990, Mr. Scannell held a variety of leadership roles at Stryker Endoscopy before being promoted to Vice President and General Manager, Stryker Biotech in 2001.

The Corporate Governance Guidelines adopted by the Company’s Board of Directors, as well as the charters of each of the Audit Committee, the Finance Committee, the Governance and Nominating Committee, the Compensation Committee and the Code of Ethics applicable to the principal executive officer, principal financial officer and principal accounting officer or controller or persons performing similar functions is available, free of charge, under the “Investors—Corporate Governance” section of the Company’s website at www.stryker.com. Print copies of such documents are available, free of charge, upon written request sent to the Secretary of the Company at 2825 Airview Boulevard, Kalamazoo, Michigan 49002.

ITEM 11. EXECUTIVE COMPENSATION.

Information regarding the compensation of the management of the Company appearing under the captions “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation” and “Compensation of Directors” in the 2011 proxy statement is incorporated herein by reference.

74

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information under the caption “Stock Ownership” in the 2011 proxy statement is incorporated herein by reference.

At December 31, 2010, the Company had key employee and director stock option plans under which options are granted at a price not less than fair market value at the date of grant. These stock option plans were previously submitted to and approved by the Company’s shareholders. Additional information regarding the Company’s stock option plans appears in Note 1 and Note 9 to the Consolidated Financial Statements in Item 8 of this report. At December 31, 2010, the Company also had a stock performance incentive award program pursuant to which shares of the Company’s common stock have been and may be issued to certain employees with respect to performance. The status of these plans as of December 31, 2010 follows:

Plan category	Number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of shares of common stock remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column)
Equity compensation plans approved by shareholders		25,532,552	$	46.64		16,026,270

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information under the caption “Information About the Board of Directors and Corporate Governance Matters—Independent Directors” and “Information About the Board of Directors and Corporate Governance Matters—Certain Relationships and Related Party Transactions” in the 2011 proxy statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information under the caption “Proposal 2—Ratification of Appointment of Our Independent Registered Public Accounting Firm—Relationship with Ernst & Young LLP” in the 2011 proxy statement is incorporated herein by reference.

75

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) 1.	Financial Statements
	The following Consolidated Financial Statements of the Company and its subsidiaries are set forth in Part II, Item 8 of this report.
	Report of Independent Registered Public Accounting Firm on Financial Statements	36
	Consolidated Balance Sheets as of December 31, 2010 and 2009	37
	Consolidated Statements of Earnings for the Years Ended December 31, 2010, 2009 and 2008	38
	Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2010, 2009 and 2008	39
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008	40
	Notes to Consolidated Financial Statements	41
(a) 2.	Financial Statement Schedules
	The consolidated financial statement schedule (Schedule II) of the Company and its subsidiaries has been submitted as a separate section of this report following the signature page. All other schedules for which provision is made in the applicable accounting regulation of the U.S. Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
(a) 3.	Exhibits
	A list of exhibits required to be filed as part of this report is set forth in the Exhibit Index, which immediately precedes such exhibits, and is incorporated herein by reference.
(c)	Financial Statement Schedules
	The consolidated financial statement schedule (Schedule II) of the Company and its subsidiaries has been submitted as a separate section of this report following the signature page. All other schedules for which provision is made in the applicable accounting regulation of the U.S. Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

76

SIGNATURES

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

	STRYKER CORPORATION
Date: February 18, 2011	/s/    CURT R. HARTMAN
	Curt R. Hartman, Vice President and     Chief Financial Officer

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

/s/    STEPHEN P. MACMILLAN	/s/    CURT R. HARTMAN
Stephen P. MacMillan, Chairman, President and Chief Executive Officer (Principal Executive Officer)	Curt R. Hartman, Vice President and Chief Financial Officer (Principal Financial Officer)
/s/    TONY M. MCKINNEY
Tony M. McKinney, Vice President, Chief Accounting Officer (Principal Accounting Officer)
/s/    HOWARD E. COX, JR.	/s/    SRIKANT M. DATAR
Howard E. Cox, Jr.—Director	Srikant M. Datar, Ph.D.—Director
/s/     ROCH DOLIVEUX	/s/     DONALD M. ENGELMAN
Roch Doliveux—Director	Donald M. Engelman, Ph.D.—Director
/s/    LOUISE L. FRANCESCONI	/s/    ALLAN C. GOLSTON
Louise L. Francesconi—Director	Allan C. Golston—Director
/s/    HOWARD L. LANCE	/s/    WILLIAM U. PARFET
Howard L. Lance—Director	William U. Parfet—Director
/s/    RONDA E. STRYKER
Ronda E. Stryker—Director

77

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

STRYKER CORPORATION AND SUBSIDIARIES

Column A	Column B		Column C		Column D		Column E			Column F
			Additions		Deductions
Description	Balance at Beginning of Period		Charged to Costs & Expenses		Describe (a)		Describe (b)			Balance at End of Period
DEDUCTED FROM ASSET ACCOUNTS
Allowance for Doubtful Accounts (in millions):
Year ended December 31, 2010	$	66.3	$	18.6	$	29.8	$	(1.9	)	$	57.0
Year ended December 31, 2009	$	44.5	$	27.9	$	6.6	$	(0.5	)	$	66.3
Year ended December 31, 2008	$	44.5	$	10.4	$	10.2	$	0.2		$	44.5

(a) Uncollectible amounts written off, net of recoveries.

(b) Effect of changes in foreign exchange rates.

78

FORM 10-K—ITEM 15(a) 3. and ITEM 15(c)

STRYKER CORPORATION AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit 1—	Underwriting Agreements
(i)	Underwriting Agreement, dated January 12, 2010, between Stryker Corporation and Banc of America Securities LLC, Barclays Capital Inc. and Wells Fargo Securities, LLC, as representatives of the underwriters named therein—Incorporated by reference to Exhibit 1.1 to the Company’s Form 8-K dated January 15, 2010 (Commission File No. 000-09165).
Exhibit 3—	Articles of Incorporation and By-Laws
(i)	Composite copy of Restated Articles of Incorporation as amended through April 19, 2000— Incorporated by reference to Exhibit 3(i) to the Company’s Form 10-K for the year ended December 31, 2000 (Commission File No. 000-09165).
(ii)	Certificate of Amendment of Restated Articles of Incorporation dated June 4, 2004— Incorporated by reference to Exhibit 3(i) to the Company’s Form 10-Q for the quarter ended June 30, 2004 (Commission File No. 000-09165).
(iii)	By-Laws-Incorporated by reference to Exhibit 3(ii) to the Company’s Form 8-K dated October 28, 2008 (Commission File No. 000-09165).
Exhibit 4—	Instruments defining the rights of security holders, including indentures—The Company agrees to furnish to the Commission upon request a copy of each instrument pursuant to which long-term debt of the Company and its subsidiaries not exceeding 10% of the total assets of the Company and its consolidated subsidiaries is authorized.
(i)	Credit Agreement, dated August 5, 2010, among Stryker Corporation and certain subsidiaries, as designated borrowers; the lenders party thereto; and Bank of America, N.A., as administrative agent—Incorporated by reference to Exhibit 4.1 to the Company’s Form 10-Q for the quarter ended June 30, 2010 (Commission File No. 000-09165).
(ii)	Indenture, dated January 15, 2010, between Stryker Corporation and U.S. Bank National Association.—Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K dated January 15, 2010 (Commission File No. 000-09165).
(iii)	First Supplemental Indenture (including the form of 2015 note), dated January 15, 2010, between Stryker Corporation and U.S. Bank National Association.—Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K dated January 15, 2010 (Commission File No. 000-09165).
(iv)	Second Supplemental Indenture (including the form of 2020 note), dated January 15, 2010, between Stryker Corporation and U.S. Bank National Association.—Incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K dated January 15, 2010 (Commission File No. 000-09165).
Exhibit 10—	Material contracts
(i)*	2006 Long-Term Incentive Plan (as amended effective February 8, 2011).
(ii)*	Form of grant notice and terms and conditions for stock options granted in 2011 under the 2006 Long-Term Incentive Plan.
(iii)*	Form of grant notice and terms and conditions for restricted stock units granted in 2011 under the 2006 Long-Term Incentive Plan.
(iv)*	Form of grant notice and terms and conditions for performance stock units granted in 2011 under the 2006 Long-Term Incentive Plan.
(v)*	Form of grant notice and terms and conditions for stock options granted in 2010 under the 2006 Long-Term Incentive Plan.—Incorporated by reference to Exhibit 10(ii) to the Company’s Form 10-K for the year ended December 31, 2009 (Commission File No.000-09165).
(vi)*	Form of grant notice and terms and conditions for restricted stock units granted in 2010 under the 2006 Long-Term Incentive Plan.—Incorporated by reference to Exhibit 10(iii) to the Company’s Form 10-K for the year ended December 31, 2009 (Commission File No.000-09165).

79

(vii)*	1998 Stock Option Plan (as Amended Effective July 23, 2008)—Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended June 30, 2008 (Commission File No. 000-09165).
(viii)*	Supplemental Savings and Retirement Plan (as Amended Effective January 1, 1996)—Incorporated by reference to Exhibit 10(iii) to the Company’s Form 10-K for the year ended December 31, 1994 (Commission File No.000-09165).
(ix)*	Stock option agreement relating to special stock option award to Stephen P. MacMillan pursuant to the 1998 Stock Option Plan on February 7, 2006—Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K dated February 9, 2006 (Commission File No. 000-09165).
(x)*	Statement of Terms Relating to Employment dated as of December 4, 1998 between Stryker UK Limited and Andrew G. Fox-Smith as amended and restated through February 9, 2009—Incorporated by reference to Exhibit 10 (x) to the Company’s Form 10-K for the year ended December 31, 2008 (Commission File No. 000-09165).
(xi)*	Executive Management Agreement dated as of December 2, 2008 between Dean H. Bergy and Stryker Corporation- Incorporated by reference to Exhibit 10 (xii) to the Company’s Form 10-K for the year ended December 31, 2008 (Commission File No. 000-09165).
(xii)*	Stryker Corporation Executive Bonus Plan—Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K dated February 21, 2007 (Commission File No. 000-09165).
(xiii)	Form of Indemnification Agreement for Directors—Incorporated by reference to Exhibit 10 (xiv) to the Company’s Form 10-K for the year ended December 31, 2008 (Commission File No. 000-09165).
(xiv)	Form of Indemnification Agreement for Certain Officers—Incorporated by reference to Exhibit 10 (xv) to the Company’s Form 10-K for the year ended December 31, 2008 (Commission File No. 000-09165).
(xv)	Sale and Purchase Agreement, dated January 3, 2011, between Boston Scientific Corporation and Stryker Corporation.
Exhibit 11—	Statement re: computation of per share earnings
(i)	Note 10 to the Consolidated Financial Statements in Item 8 of this report.
Exhibit 21—	Subsidiaries of the registrant
(i)	List of Subsidiaries.
Exhibit 23—	Consent of experts and counsel
(i)	Consent of Independent Registered Public Accounting Firm.
Exhibit 31—	Rule 13a-14(a) Certifications
(i)	Certification of Principal Executive Officer of Stryker Corporation.
(ii)	Certification of Principal Financial Officer of Stryker Corporation.
Exhibit 32—	18 U.S.C. Section 1350 Certifications
(i)**	Certification by President and Chief Executive Officer of Stryker Corporation.
(ii)**	Certification by Vice President and Chief Financial Officer of Stryker Corporation.
Exhibit 99—	Additional exhibits
(i)*	2008 Employee Stock Purchase Plan as amended on February 10, 2009—Incorporated by reference to Exhibit 99 (i) to the Company’s Form 10-K for the year ended December 31, 2008 (Commission File No. 000-09165).
Exhibit 101—	XBRL (Extensible Business Reporting Language) Documents
101.INS**	XBRL Instance Document
101.SCH**	XBRL Schema Document
101.CAL**	XBRL Calculation Linkbase Document
101.DEF**	XBRL Definition Linkbase Document
101.LAB**	XBRL Label Linkbase Document
101.PRE**	XBRL Presentation Linkbase Document

* compensation arrangement

** furnished with this Form 10-K

80

EX-10.(I)

EXHIBIT 10i

STRYKER CORPORATION 2006 LONG-TERM INCENTIVE PLAN

As Amended Through February 8, 2011

Article 1. Establishment, Objectives and Duration

1.1 Establishment of this Plan. Stryker Corporation, a Michigan corporation, hereby establishes this Stryker Corporation 2006 Long-Term Incentive Plan (the “Plan”) as set forth in this document. Capitalized terms used but not otherwise defined herein will have the meanings given to them in Article 2. This Plan permits the grant of Options, Restricted Stock and Other Stock Awards.

This Plan will become effective as of April 26, 2006, subject to this Plan having been approved by the Company’s shareholders on that date, and will remain in effect as provided in Section 1.3 hereof.

1.2 Purpose of this Plan. The purpose of this Plan is to advance the interests of the Company and its Subsidiaries (collectively, “Stryker”) by providing a larger personal and financial interest in the success of Stryker to employees and directors whose judgment, interest and special efforts Stryker is dependent upon for the successful conduct of its operations and to enable Stryker to compete effectively with others for the services of new employees and directors as may be needed for the continued improvement of the enterprise. It is believed that the acquisition of such interest will stimulate the efforts of such employees and directors on behalf of Stryker and strengthen their desire to continue to serve Stryker.

1.3 Duration of this Plan. This Plan will commence on the Effective Date and will remain in effect, subject to the right of the Committee to amend or terminate this Plan at any time pursuant to Article 10, until the earlier of (a) April 25, 2013 and (b) the date that all Shares subject to this Plan pursuant to Article 4 have been issued according to this Plan’s provisions; provided, however, that upon Plan termination, all Awards outstanding under this Plan will continue to have full force and effect in accordance with the terms of the Award Agreements evidencing such Awards.

Article 2. Definitions

Whenever used in this Plan, the following terms have the meanings set forth below, and when the meaning is intended, the initial letter of the word is capitalized:

1

“Award” means any Option, Restricted Stock, Other Stock Award or any other right, interest or option (including any stock appreciation right), relating to Shares granted pursuant to the provisions of this Plan.

“Award Agreement” means any written agreement, contract or other instrument or document evidencing an Award or Awards granted by the Committee hereunder, which in the sole and absolute discretion of the Company may, but need not, be signed or acknowledged by the Company and/or the Participant.

“Board” or “Board of Directors” means the Board of Directors of the Company.

“Business Combination” shall have the meaning provided therefor in the definition of Change in Control.

“Change in Control” means the occurrence of any one or more of the following: (a) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), after the Effective Date, becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the outstanding Shares, (b) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company (a “Business Combination”), unless immediately following such Business Combination more than sixty percent (60%) of the total voting power of (i) the company resulting from such Business Combination (the “Surviving Company”), or (ii) if applicable, the ultimate parent company that directly or indirectly has beneficial ownership of one hundred percent (100%) of the voting securities eligible to elect directors of the Surviving Company is represented by the Shares that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Shares were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Shares among the holders thereof immediately prior to the Business Combination, or (c) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company’s assets.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor act thereto.

“Committee” means the Compensation Committee of the Board of Directors or such other persons or committee to which the Board has delegated any authority, as may be appropriate. A person may serve on the Committee only if he or she is an “outside director” for purposes of Section 162(m) of the Code, is a “Non-Employee Director” within the meaning of Exchange Act Rule 16b-3 and is an “independent” Director for purposes of the Corporate Governance Standards of the New York Stock Exchange.

“Company” means Stryker Corporation, a Michigan corporation, and any successor thereto as provided in Article 12.

“Director” means a member of the Board of Directors.

2

“Disability” means (i) when used in the context of an Award other than an Incentive Stock Option Award, a physical or mental condition that qualifies as a disability under the long-term disability pay plan of Stryker then in effect for United States employees (irrespective of whether the Participant is eligible to participate in such plan), which disability has, in the case of an Employee, prevented such Employee from being in the full-time, active service of Stryker for the entire period of one hundred-eighty (180) days immediately preceding termination of employment; and (ii) when used in the context of an Incentive Stock Option, a physical or mental condition that qualifies as a disability within the meaning of Code Section 22(e)(3).

“Effective Date” means April 26, 2006, subject to this Plan having been approved by the Company’s shareholders on that date.

“Employee” means any person employed by Stryker in a common law employee-employer relationship. A Participant shall not cease to be an Employee for purposes of this Plan in the case of (i) any leave of absence approved by Stryker or (ii) transfers between locations of the Company or among the Company, any Subsidiary or any successor. Service as a Director shall not be sufficient to constitute “employment” by Stryker.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

“Exercise Period” shall have the meaning provided therefor in Section 3.4.

“Exercise Price” means, with respect to an Option, the price at which a Share may be purchased by a Participant pursuant to the Option and, with respect to a stock appreciation right, the price at which the stock appreciation right is granted.

“Fair Market Value” of the Shares as of any date means the closing sales price of the Shares (or the closing bid, if no sales were reported) as reported on the New York Stock Exchange-Composite Transactions for the last market trading day prior to such date or, if the Shares are not then listed on the New York Stock Exchange, the fair market value of the Shares on such date as determined in good faith by the Committee.

“Incentive Stock Option” means an Option that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422.

“Non-Employee Director” means a Director who is not currently an Employee.

“Nonstatutory Stock Option” means an Option that is designated as not being intended to qualify, or that has ceased to qualify, as an Incentive Stock Option.

“Option” means an option to purchase Shares granted under Article 6.

“Other Stock Award” means any right granted to a Participant by the Committee pursuant to Article 8.

“Participant” means an Employee or Non-Employee Director to whom an Award has been granted that remains outstanding.

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“Performance Award” shall have the meaning provided therefor in Section 14.5.

“Restricted Stock” means any Share issued pursuant to Article 7 with a restriction on transferability, a risk of forfeiture and such other restrictions as the Committee, in its sole discretion may impose, which restrictions generally will expire on a specified date, upon the occurrence of an event and/or on an accelerated basis under certain circumstances, as specified in this Plan or the Award Agreement relating to the Restricted Stock.

“Restriction Period” means the period during which Restricted Stock remains nontransferable and subject to a risk of forfeiture.

“Retirement” means termination of employment with or service as a Director of Stryker on or after the Participant’s 65th birthday or the Participant’s 60th birthday if the Participant has completed or is otherwise credited with ten (10) years of service as an Employee or Director of Stryker.

“Shares” means the shares of common stock, $.10 par value, of the Company.

“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Code Section 424(f).

Article 3. Administration

3.1 The Committee. This Plan will be administered by the Committee. The Board of Directors may from time to time remove members from the Committee or add members thereto, and vacancies in such Committee, however caused, shall be filled by the Board.

3.2 Authority of the Committee. Except as limited by law and subject to the provisions of this Plan and such orders or resolutions not inconsistent with the provisions of this Plan as may from time to time be adopted by the Board, the Committee will have full power to (a) select Employees and Non-Employee Directors to whom Awards may from time to time be granted under this Plan, (b) determine the type or types of Awards to be granted to each Participant, (c) determine the number of Shares to be covered by or relating to each Award granted under this Plan (d) determine the terms and conditions of Awards in a manner consistent with this Plan, (e) determine whether, to what extent and under what circumstances Awards may be settled in Shares, cash or any other form of property, (f) determine whether, to what extent and under what circumstances payment of cash, Shares other property and other amounts payable with respect to an Award made under this Plan shall be deferred either automatically or at the election of the Participant consistent with the terms of this Plan, (g) construe and interpret this Plan and any Award Agreement (h) establish, amend or waive rules and regulations and appoint such agents as it shall deem appropriated for the proper administration of this Plan and (i) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. The Committee shall be authorized to make adjustments in the terms and conditions of Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in

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applicable laws, regulations or accounting principles. The interpretation and construction by the Committee of any provision of this Plan or any Award granted pursuant hereto shall be final and conclusive. No member of the Committee or the Board of Directors shall be liable for any action or determination made in good faith with respect to this Plan or any Award granted pursuant hereto.

3.3 Delegation. Subject to the terms of this Plan and terms and limitations as the Committee shall determine, the Committee may delegate its authority to make Awards to Employees to the Company’s Chief Executive Officer, subject to annual limits of 20,000 Shares subject to Awards per Employee and in 300,000 Shares subject to Awards in the aggregate, with any Share issuable in connection with an Award other than an Option or stock appreciation right being counted against such limit as two (2) Shares, except that no such delegation may be made in the case of Awards to persons who are subject to the provisions of Section 16 of the Exchange Act or in the case of Awards intended to be qualified under Section 162(m) of the Code. To the extent that the Committee delegates its authority as provided by this Section 3.3, all references in this Plan to the Committee’s authority to make Awards shall be deemed to include the Chief Executive Officer. The annual limit described in this Section 3.3 shall be subject to adjustment as provided in Section 4.4.

3.4 Change in Control. In the event of a Change in Control, the Committee shall have the discretion to accelerate the vesting of Awards, eliminate any restriction applicable to Awards, deem the performance measures, if any, to be satisfied, or take such other action as it deems appropriate, in its sole discretion. In addition, notwithstanding any other provision of this Plan, during the sixty (60)-day period from and after a Change in Control (the “Exercise Period”), if the Committee shall determine at, or at any time after, the time of grant, a Participant holding an Option shall have the right, whether or not the Option is fully exercisable and in lieu of the payment of the Exercise Price for the Shares being purchased under the Option and by giving written notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Option to the Company and to receive in cash, within thirty (30) days of such notice an amount equal to the amount by which the Fair Market Value per Share on the date of such election shall exceed the Exercise Price per Share under the Option multiplied by the number of Shares granted under the Option as to which the right granted under this Section 3.4 shall have been exercised.

Article 4. Shares Subject to this Plan and Maximum Awards

4.1 Number of Shares Available for Awards. The maximum number of Shares that may be subject to Awards under this Plan is 20,000,000. The maximum number of Shares that may be subject to all Awards, in the aggregate, granted during any calendar year to any one Participant is 2,000,000; provided, however, that, to the extent required by Section 162(m) of the Code, Shares subject to Options or stock appreciation rights that are canceled shall continue to be counted against the foregoing limit and provided, further, that such limit will apply whether the Awards are paid in Shares or settled in cash. Any Share for which an Award other than an Option or stock appreciation right is granted shall be counted against the limits described above as two

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(2) Shares. All limits described in this Section 4.1 are subject to adjustment as provided in Section 4.4.

4.2 Lapsed Awards. If any Award is canceled, terminates, expires, or lapses for any reason, any Shares subject to such Award shall not count against the aggregate number of Shares that may be issued under this Plan set forth in Section 4.1 above.

4.3 Shares Used to Pay Exercise Price and Withholding Taxes. If a Participant pays the Exercise Price for an Option by surrendering previously owned Shares to the Company (either by actual delivery or attestation to the ownership) in accordance with the provisions of Section 6.2(a)(ii) herein or pursuant to a net exercise arrangement in accordance with the provisions of Section 6.2(a)(iii) herein or satisfies any tax withholding requirement with respect to any Award by having the Company withhold Shares or by surrendering Shares in accordance with Section 11 herein, then such Shares surrendered or withheld to pay the Exercise Price or used to satisfy such tax withholding requirement shall count against the aggregate number of Shares that may be issued under this Plan set forth in Section 4.1 above.

4.4 Adjustments of and Changes in Shares.

(a) In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, split-up, share combination, or other change in the corporate structure of the Company affecting the Shares or of any stock or other securities into which the Shares shall have been changed or for which Shares shall have been exchanged, such adjustment shall be made in the number and class of Shares that may be delivered under this Plan, and in the number and class of and/or price of Shares subject to outstanding Awards granted under this Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights and provided that the number of Shares subject to any Award shall always be a whole number.

(b) Fractional Shares resulting from any adjustment in Awards pursuant to this Section 4.4 may be settled in cash or otherwise as the Committee determines.

(c) The Company will give written notice of any adjustment to each Participant who holds an Award that has been adjusted and the adjustment (whether or not that notice is given) will be effective and binding for all Plan purposes.

Article 5. Eligibility and Participation

Any Employee or Non-Employee Director shall be eligible to be selected as a Participant as provided herein; provided, however, that Incentive Stock Options shall only be awarded to Employees. Notwithstanding any provision in this Plan to the contrary, the Board (not the Committee) shall have the authority, in its sole and absolute discretion, to select Non-Employee Directors as Participants who are eligible to receive Awards other than Incentive Stock Options under this Plan and all references in this Plan

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to the Committee, insofar as they relate to Awards to Non-Employee Directors, shall be deemed references to the Board. The Board shall set the terms of Awards to Non-Employee Directors in its sole and absolute discretion, and the Board shall be responsible for administering and construing such Awards in substantially the same manner that the Committee administers and construes Awards to Employees.

Article 6. Options

6.1 Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Employees and Non-Employee Directors in the number, and upon the terms, and at any time and from time to time, as determined by the Committee.

6.2 Terms and Conditions. Except as hereinafter provided, all Options granted pursuant to this Plan shall be subject to the following terms and conditions:

(a) Price. The Exercise Price of the Shares issuable upon exercise of Options granted under this Plan shall be not less than 100% of the Fair Market Value of the Shares on the date of the grant of the Option. The Exercise Price shall be paid in full at the time of purchase by any combination of the methods set forth below. The Committee shall have the authority to grant Options that do not entitle the Participant to use all methods or that require prior written consent of the Company to use certain of the methods. The methods of payment are: (i) cash, (ii) by surrender to the Company (either by actual delivery or attestation to the ownership) of Shares with an aggregate Fair Market Value on the date of purchase that is sufficient to cover the aggregate Exercise Price or (iii) by a net exercise arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise by the largest whole number of Shares with an aggregate Fair Market Value on the date of purchase that is sufficient to cover the aggregate Exercise Price. The Exercise Price shall be subject to adjustment, but only as provided in Section 4.4 hereof.

(b) Duration and Exercise of Options. Options may be granted for terms of up to but not exceeding ten (10) years from the date the particular Option is granted. Options shall be exercisable as provided by the Committee at the time of grant thereof.

(c) Termination of Employment or Service as a Director. Upon the termination of the Participant’s employment or service as a Director, except as otherwise provided under terms of the Award Agreement, his or her rights to exercise an Option shall be as follows:

Retirement. If a Participant’s employment or service as a Director terminates by reason of Retirement, the Participant or the Participant’s estate (in the event of death after such termination) may, at any time prior to the fixed termination date provided in the Option, exercise the Option with respect to all or any part of the Shares subject thereto, regardless of whether the right to purchase such Shares had accrued on or before the last

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day on which the Participant was either an Employee or Director. Anything in this Plan to the contrary notwithstanding, if a Participant were eligible for Retirement but ceased to be an Employee or Director by reason of Disability, death or any other reason before such Participant retired, his or her rights to exercise an Option shall be as if such Participant’s employment or service as a Director ceased by reason of Retirement.

Disability or Death. If a Participant’s employment or service as a Director terminates by reason of Disability or death, the Participant or the Participant’s estate may, within one (1) year following such termination, exercise the Option with respect to all or any part of the Shares subject thereto, regardless of whether the right to purchase such Shares had accrued on or before the date of termination.

Other Reasons. If a Participant’s employment or service as a Director terminates for any reason other than Retirement, Disability or death, the Participant or the Participant’s estate (in the event of the Participant’s death after such termination) may, within thirty (30) days following such termination, exercise the Option with respect to only such number of Shares as to which the right of exercise had accrued on or before the Termination Date unless the Committee determines that the Option shall be exercisable as to a greater portion thereof. Except as otherwise provided in the following sentence, “Termination Date” means the effective date of termination of a Participant’s employment or service as a Director. If a Participant is employed outside the United States, “Termination Date” shall be the earliest of (i) the date on which notice of termination of employment is provided to the Participant, (ii) the last day of the Participant’s active service with the Company or a Subsidiary, or (iii) the last day on which the Participant is an Employee of the Company or any Subsidiary, as determined in each case without including any required advance notice period and irrespective of the status of the termination under local labor or employment laws.

General. Notwithstanding the foregoing, no Option shall be exercisable in whole or in part (i) after the termination date provided in the Option, or (ii) except as provided in Section 3.4 or in the event of termination of employment or service as a Director because of Disability, Retirement or death, unless the Participant shall have continued in the employ of Stryker or to serve as a Director for one year following the date the Option was granted. A Participant’s “estate” shall mean the Participant’s legal representatives upon the Participant’s death or any person who acquires the right under the laws of descent and distribution to exercise an Option by reason of the Participant’s death. The Board of Directors or the Committee may determine that the transfer of employment of one or more Employees at the Company’s request or with its permission to an entity that has a contractual relation with Stryker shall not be deemed a

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termination of employment for purposes of this Section 6.2(c). In the case of a person who is both an Employee and a Director, the provisions of this Section 6.2(c) shall not apply until such time as such person is neither an Employee nor a Director.

(d) Surrender of Options. Subject to the provisions of Section 10.2 of this Plan, the Committee may require the surrender of outstanding Options as a condition precedent to the grant of new Options. Upon each such surrender, the Option or Options surrendered shall be canceled and the Shares previously subject to the Option or Options under this Plan shall thereafter be available for the grant of Options under this Plan.

(e) Other Terms and Conditions. Options may also contain such other provisions, which shall not be inconsistent with any of the foregoing terms, as the Committee shall deem appropriate.

(f) Incentive Stock Options. Incentive Stock Options granted pursuant to this Plan shall be subject to all the terms and conditions included in subsections (a) through (e) of this Section 6.2 and to the following terms and conditions:

(i) No Incentive Stock Option shall be granted to an individual who is not an Employee;

(ii) No Incentive Stock Option shall be granted to an Employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company; (iii) No Incentive Stock Option may be granted under this Plan if such grant, together with any applicable prior grants that are Incentive Stock Options within the meaning of Section 422(b) of the Code, would exceed any maximum established under the Code for Incentive Stock Options that may be granted to an individual Employee; and

(iv) An Incentive Stock Option will cease to qualify as an Incentive Stock Option and shall be treated as a Nonstatutory Stock Option if not exercised on or before the earliest of (i) the time specified in the Award Agreement, (ii) three (3) months after the Participant’s termination of service for a reason other than death or Disability, or (iii) twelve (12) months after the Participant’s termination of service for Disability.

Article 7. Restricted Stock

7.1 Grant of Restricted Stock. Subject to the terms and provisions of this Plan, the Committee may, at any time and from time to time, grant Restricted Stock to Participants in such amounts as it determines. Restricted Stock may be issued for no cash consideration or for such minimum consideration as may be required by applicable law.

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7.2 Award Agreement. Each grant of Restricted Stock will be evidenced by an Award Agreement that specifies the Restriction Period, the number of Shares granted and such other provisions as the Committee determines.

7.3 Other Restrictions. The Committee may impose such conditions or restrictions on any Restricted Stock as it deems advisable, including, without limitation, restrictions based upon the achievement of specific performance objectives (Company-wide, business unit, individual, or any combination of them), time-based restrictions on vesting and restrictions under applicable federal or state securities laws. The Committee may provide that restrictions established under this Section 7.3 as to any given Award will lapse all at once or in installments. The Company will retain the certificates representing Restricted Stock in its possession until all conditions and restrictions applicable to the Shares have been satisfied.

7.4 Payment of Awards. Except as otherwise provided in this Article 7, Shares covered by each Restricted Stock grant will become freely transferable by the Participant after the last day of the applicable Restriction Period or on the date provided in the Award Agreement.

7.5 Voting Rights. During the Restriction Period, Participants holding Restricted Stock may exercise full voting rights with respect to those Shares.

7.6 Termination of Service. Each Award Agreement will set forth the extent to which the Participant has the right to retain unvested Restricted Stock after his or her termination of employment or service as a Non-Employee Director. These terms will be determined by the Committee in its sole discretion, need not be uniform among all Awards of Restricted Stock, and may reflect, among other things, distinctions based on the reasons for termination of employment or service.

Article 8. Other Stock Awards

8.1 Stock and Administration. Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares (collectively, “Other Stock Awards”) may be granted hereunder to Participants, either alone or in addition to other Awards granted under this Plan, and such Other Stock Awards shall also be available as a form of payment in the settlement of other Awards granted under this Plan. Other Stock Awards may include Awards based on the achievement of pre-established performance criteria during a specified period. Other Stock Awards shall be subject to such other terms and conditions as the Committee shall deem advisable or appropriate, consistent with the provisions of this Plan as herein set forth. Unless the Committee determines otherwise to address specific considerations, Other Stock Awards granted to Participants shall have a vesting period of not less than one year.

8.2 Other Provisions. Shares purchased pursuant to a purchase right awarded under Section 8.1 shall be purchased for such consideration as the Committee shall in its sole discretion determine, which shall not be less than the Fair Market Value of such Shares as of the date such purchase right is awarded. Otherwise, Shares subject to Other

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Stock Awards granted under Section 8.1 may be issued for no cash consideration or for such minimum consideration as may be required by applicable law.

Article 9. Rights of Participants

9.1 Employment and Service. Nothing in this Plan will confer upon any Participant any right to continue in the employ of Stryker, or interfere with or limit in any way the right of Stryker to terminate any Participant’s employment or service as a Director at any time.

9.2 Participation. No Employee or Director will have the right to receive an Award under this Plan or, having received an Award, to receive a future Award.

9.3 Dividends and Other Distributions. Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (other than an Option or stock appreciation right) may, if so determined by the Committee, be entitled to receive, currently or on a deferred basis, all cash or stock dividends that are or would be payable with respect to each Share underlying such Award (“Dividend Equivalents”). Notwithstanding the foregoing, with respect to Awards that are earned based on the achievement of performance objectives, Dividend Equivalents will only be paid upon the achievement of the respective performance objectives. The Committee may provide that the Dividend Equivalents shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Dividend Equivalents that are to be paid on a deferred basis shall be granted and administered in accordance with all applicable provisions of Code Section 409A.

Article 10. Amendment, Modification and Termination

10.1 Amendment, Modification and Termination. The Committee may at any time and from time to time, alter, amend, modify or terminate this Plan in whole or in part. The Committee will not, however, increase the number of Shares that may be issued to Participants under this Plan, as described in Section 4.1 (and subject to adjustment as provided in Section 4.4), extend the term of this Plan or of Awards granted hereunder, change the eligibility criteria in Article 5 or reduce the Exercise Price of Options or stock appreciation rights below Fair Market Value without the approval of the Company’s shareholders. No termination, amendment or modification of this Plan may adversely affect in any material way any Award already granted, without the written consent of the Participant who holds the Award.

10.2 Awards Previously Granted. Subject to the terms and conditions of this Plan, the Committee may modify, extend or renew outstanding Awards under this Plan, or accept the surrender of outstanding Awards (to the extent not already exercised) and grant new Awards in substitution of them (to the extent not already exercised). The Committee will not, however, modify any outstanding Option or stock appreciation right so as to specify a lower Exercise Price. Furthermore, no Option or stock appreciation right will be canceled in exchange for cash or Other Stock Awards or replaced with an Option or stock appreciation right having a lower Exercise Price, without the approval of the Company’s shareholders. Notwithstanding the foregoing, no modification of an

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Award will materially alter or impair any right or obligation under any Award already granted under this Plan without the prior written consent of the Participant.

Article 11. Withholding

The Company shall be authorized to withhold from any Award granted or payment due under this Plan the minimum amount of withholding taxes due in respect of an Award or payment hereunder based on the Participant’s statutory minimum tax rate and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee shall be authorized to establish procedures for election by Participants to satisfy the obligation for the payment of such taxes by surrender to the Company (either by actual delivery or attestation to the ownership) of Shares or by directing the Company to retain Shares otherwise deliverable in connection with the Award.

Article 12. Successors

All obligations of the Company under this Plan or any Award Agreement will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business or assets of the Company or both, or a merger or consolidation or otherwise.

Article 13. Breach of Restrictive Covenants

An Award Agreement may provide that, notwithstanding any other provision of this Plan to the contrary, if the Participant breaches any noncompetition, nonsolicitation or nondisclosure provision or provision as to Stryker’s ownership of inventions contained in the Award Agreement or otherwise required as a condition to an Award, whether during or after termination of employment or service as a Director, the Participant will forfeit such Award or the Shares issued or payment received in respect thereof (in which case the Company will repay the lesser of any Exercise Price or other amount paid by the Participant or the then Fair Market Value) or pay to the Company any gain realized as a result of the disposition of Shares issued in respect of such Award, all as provided in the applicable Award Agreement.

Article 14. Miscellaneous

14.1 Number. Except where otherwise indicated by the context, any plural term used in this Plan includes the singular and a singular term includes the plural.

14.2 Severability. If any provision of this Plan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify this Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable law or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Plan, it shall be stricken and the remainder of this Plan shall remain in full force and effect.

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14.3 Requirements of Law. The granting of Awards and the issuance of Shares or cash payouts under this Plan will be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies or national securities exchanges as may be required.

14.4 Securities Law Compliance. As to any individual who is, on the relevant date, an officer, Director or ten percent beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act or any successor rule. To the extent any provision of this Plan or action by the Committee fails to so comply, it will be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.

No Option or stock appreciation right granted pursuant to this Plan shall be exercisable in whole or in part, and no Shares shall be issued pursuant to an Award, if such exercise or issuance would, in the opinion of counsel for the Company, violate the Securities Act of 1933 (or other federal or state statutes having similar requirements), as in effect at that time. Each Award shall be subject to the further requirement that, if at any time the Board of Directors shall determine in its discretion that the listing or qualification of the Shares subject to such Award under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue of Shares thereunder, such Award may not be exercised and no Shares may be issued in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Board of Directors.

14.5 Code Section 162(m) Provisions. Notwithstanding any other provision of this Plan, if the Committee determines at the time an Award based on the achievement of performance objectives (a “Performance Award”) is granted to a Participant who is then an officer of the Company that such Participant is, or may be as of the end of the tax year in which the Company would ordinarily claim a tax deduction in connection with such Award, a covered employee within the meaning of Section 162(m)(3) of the Code, then the Committee may provide that this Section 14.5 shall be applicable to such Award. If a Performance Award is subject to this Section 14.5, then the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one or any combination of revenues, cost reductions, operating income, income before taxes, net income, adjusted net income, earnings per share, adjusted earnings per share, operating margins, working capital measures, return on assets, return on equity, return on invested capital, cash flow measures, market share, shareholder return, economic value added, quality initiatives or compliance initiatives in respect of the Company or the Subsidiary or division of the Company within which the Participant is primarily employed. Such performance goals also may be based on the achievement of specified levels of Company performance (or performance of an applicable Subsidiary or

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division of the Company) under one or more of the measures described above relative to the performance of other corporations or external indices. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder. Notwithstanding any provision of this Plan other than Section 3.4, with respect to any Performance Award that is subject to this Section 14.5, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals except in the case of the death or Disability of the Participant, or under such other conditions where such waiver will not jeopardize the treatment of other Performance Awards as “performance-based compensation” under Section 162(m) of the Code. In addition, at the time of granting Performance Awards or at any time thereafter, in either case to the extent permitted under Section 162(m) of the Code without adversely affecting the treatment of the Performance Award as “performance-based compensation under Section 162(m), the Committee may provide for the manner in which performance will be measured against the performance goals or may adjust the performance goals to reflect the impact of specified corporate transactions, accounting or tax law changes and other extraordinary or nonrecurring events. The Committee shall have the power to impose such other restrictions on Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.

14.6 Section 409A Compliance. Awards under this Plan are intended to either comply with, or be exempt from, the requirements of Code Section 409A and this Plan shall be interpreted and administered in a manner consistent with such intent. If an operational failure occurs with respect to Code Section 409A requirements, the Company shall require any affected Participant or beneficiary to fully cooperate with the Company to correct the failure, to the extent possible, in accordance with any correction procedure established by the Internal Revenue Service. Payments made to a Participant in error shall be returned to the Company and do not create a legally binding right to such payments.

14.7 Awards to Foreign Nationals and Employees Outside the United States. To the extent the Committee deems it necessary, appropriate or desirable to comply with foreign law or practice and to further the purposes of this Plan, the Committee may, without amending this Plan, establish rules applicable to Awards granted to Participants who are foreign nationals or are employed outside the United States, or both, including rules that differ from those set forth in this Plan, and grant Awards to such Participants in accordance with those rules. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country.

14.8 No Restriction on Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required;

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and such arrangements may be either generally applicable or applicable only in specific cases.

14.9 Non-Transferability of Awards. Unless the Committee determines otherwise at the time an Award is granted, Awards may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised during the Participant’s lifetime only by him or her or, if permissible under applicable law, by the Participant’s guardian or legal representative. An Award and all rights thereunder shall terminate immediately if a Participant attempts to sell, pledge, assign, hypothecate, transfer or otherwise dispose of an Award or any rights therein to any person except as permitted herein or pursuant to the terms of such Award.

14.10 Governing Law. To the extent not preempted by federal law, this Plan and all agreements hereunder will be construed in accordance with and governed by the laws of the State of Michigan.

14.11 No Limitation on Rights of the Company. The grant of an Award does not and will not in any way affect the right or power of the Company to make adjustments, reclassifications or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.

14.12 Participant to Have No Rights as a Shareholder. Before the date as of which he or she is recorded on the books of the Company as the holder of any Shares underlying an Award, a Participant will have no rights as a shareholder with respect to those Shares.

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EX-10.(II)

EXHIBIT 10ii

PERSONAL and CONFIDENTIAL

February 9, 2011

First Name Last Name

Dear First Name:

I am pleased to inform you that you are one of a select group of individuals receiving a stock option award in 2011. We use these awards to reward performers who we believe will be key contributors to our growth well into the future. You have been awarded a nonstatutory stock option for XX shares of Stryker Corporation Common Stock at a price of $XX.XX per share. Except as otherwise provided in the Terms and Conditions, this option will become exercisable 20% per year beginning on February 9, 2012 and will expire on February 8, 2021.

You will be required to “Accept” the award online via the UBS One Source website located at www.ubs.com/onesource/SYK between March 2 and March 30, 2011. The detailed terms of the option are set forth in the Terms and Conditions and any applicable country addendum and the provisions of the Company’s 2006 Long-Term Incentive Plan. Those documents, together with the related Prospectus, are available on the UBS One Source website and you should read them before accepting the award. We suggest that you retain hard copies of this letter and the Terms and Conditions and any applicable country addendum as evidence of the award of the option to you.

There also are additional educational materials on the UBS One Source website in the Library section including Stock Option Brochure, Stock Option Frequently Asked Questions and Stock Option Tax Questions & Answers.

The efforts and the results you have delivered have demonstrated how you are there for Stryker, and these stock awards are one way in which we are there for you. Thank you for your strong performance and I look forward to your future contributions toward making Stryker the world’s most admired, fastest growing medical technology company!

Sincerely,

/s/ Stephen P. MacMillan

Stephen P. MacMillan

Chairman, President and Chief Executive Officer

STRYKER CORPORATION

TERMS AND CONDITIONS

RELATING TO NONSTATUTORY STOCK OPTIONS GRANTED

PURSUANT TO THE 2006 LONG-TERM INCENTIVE PLAN

1. The Options to purchase Shares of Stryker Corporation (the “Company”) granted to you during 2011 are subject to these Terms and Conditions Relating to Nonstatutory Stock Options Granted Pursuant to the 2006 Long-Term Incentive Plan (the “Terms and Conditions”) and all of the terms and conditions of the Stryker Corporation 2006 Long-Term Incentive Plan, as amended (the “Plan”), which is incorporated herein by reference. In the case of a conflict between these Terms and Conditions and the terms of the Plan, the provisions of the Plan will govern. Capitalized terms used but not defined herein have the meaning provided therefor in the Plan. For purposes of these Terms and Conditions, “Employer” means the Company or Subsidiary that employs you as of the Grant Date and, in the event you transfer employment to the Company or another Subsidiary following the Grant Date, the Company or Subsidiary that employs you during the remaining term of the Options on an applicable date.

2. Upon the termination of your employment with your Employer, your right to exercise the Options shall be only as follows:

(a) If your employment is terminated by Retirement (as such term is defined in the Plan or determined under local law), you or your estate (in the event of your death after your termination by Retirement) shall have the right, at any time on or prior to the 10^th anniversary of the grant date, to exercise the Options with respect to all or any part of the Shares subject thereto, regardless of whether the right to purchase Shares had accrued on or before the date of your termination by Retirement.

(b) If your employment is terminated by reason of Disability (as such term is defined in the Plan or determined under local law) or death, you, your legal representative or your estate shall have the right, for a period of one year following such termination, to exercise the Options with respect to all or any part of the Shares subject thereto, regardless of whether the right to purchase such Shares had accrued on or before the date of your termination by Disability or death.

(c) If you cease to be an Employee of your Employer for any reason other than those provided in (a) or (b) above, you or your estate (in the event of your death after such termination) may, within the thirty (30)-day period following such termination, exercise the Options with respect to only such number of Shares as to which the right of exercise had accrued on or before the Termination Date. If you are a resident of or employed in the United States, “Termination Date” shall mean the effective date of termination of your employment with your Employer. If you are resident or employed outside of the United States, “Termination Date” shall mean the earliest of (i) the date on which notice of termination is provided to you, (ii) the last day of your active service with your Employer, or (iii) the last day on which you are an Employee of your Employer, as determined in each case without including any required advance

notice period and irrespective of the status of the termination under local labor or employment laws.

(d) Notwithstanding the foregoing, the Options shall not be exercisable in whole or in part (i) after the 10^th anniversary of the grant date, or (ii) except as provided in Section 3(c) hereof or in the event of termination of employment because of Disability, Retirement or death, unless you shall have continued in the employ of the Company or one of its Subsidiaries for one (1) consecutive year following the date of grant of the Options.

(e) Notwithstanding the foregoing, if you are eligible for Retirement but cease to be an Employee of your Employer for any other reason before you retire, your right to exercise the Options shall be determined as if your employment ceased by reason of Retirement.

(f) If you are both an Employee and a Director, the provisions of this Section 2 shall not apply until such time as you are neither an Employee nor a Director of the Company.

(g) If you are resident or employed in a country that is a member of the European Union, the grant of the Options and these Terms and Conditions are intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Age Discrimination Rules”). To the extent that a court or tribunal of competent jurisdiction determines that any provision of these Terms and Conditions is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local law.

3. The number of Shares subject to the Options and the price to be paid therefor shall be subject to adjustment and the term and exercise dates hereof may be accelerated as follows:

(a) In the event that the Shares, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise) or if the number of such Shares shall be increased through the payment of a stock dividend or a dividend on the Shares of rights or warrants to purchase securities of the Company shall be made, then there shall be substituted for or added to each Share theretofore subject to the Options the number and kind of shares of stock or other securities into which each outstanding Share shall be so changed, or for which each such share shall be exchanged, or to which each such share shall be entitled. The Options shall also be appropriately amended as to price and other terms as may be necessary to reflect the foregoing events. In the event there shall be any other change in the number or kind of the outstanding Shares, or of any stock or other securities into which such Common Stock shall have been exchanged, then if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the Options, such adjustments shall be made in accordance with such determination.

(b) Fractional Shares resulting from any adjustment in the Options may be settled in cash or otherwise as the Committee shall determine. Notice of any adjustment will be given to you and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes hereof.

(c) The Committee shall have the power to amend the Options to permit the exercise of the Options (and to terminate any unexercised Options) prior to the effectiveness of (i) any disposition of substantially all of the assets of the Company or the Employer, (ii) the shutdown, discontinuance of operations or dissolution of the Company or the Employer, or (iii) the merger or consolidation of the Company or the Employer with or into any other unrelated corporation.

4. To exercise the Options, you must complete the on-line exercise procedures as established through UBS, the outsourced stock plan administration vendor, at www.ubs.com/onesource/SYK, or you can contact UBS by telephone at +1 860 727 1515 (or such other direct dial-in number that may be established from time to time). As part of such procedures, you shall be required to specify the number of Shares that you elect to purchase and the date on which such purchase is to be made, and you shall be required to make full payment of the Exercise Price. An Option shall not be deemed to have been exercised (i.e., the exercise date shall not be deemed to have occurred) until the notice of such exercise and payment in full of the Exercise Price are provided. The exercise date will be defined by the New York Stock Exchange (NYSE) trading hours. If an exercise is completed after the market close or on a weekend, the exercise will be dated the next following trading day.

The Exercise Price may be paid in such manner as the Committee may specify from time to time in its sole discretion and as established through UBS, including (but not limited to) the two following methods: (i) by a net exercise arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise by the largest whole number of Shares with an aggregate Fair Market Value on the date of purchase sufficient to cover the aggregate Exercise Price, or (ii) cash payment. In cases where you utilize the net exercise arrangement and the Fair Market Value of the number of whole Shares withheld is greater than the aggregate Exercise Price, the Company shall make a cash payment to you equal to the difference as soon as administratively practicable.

5. Regardless of any action the Company and/or your Employer take with respect to any or all income tax (including U.S. federal, state and local taxes and/or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and your Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Options, including the grant of the Options, the vesting of the Options, the exercise of the Options, the subsequent sale of any Shares acquired pursuant to the Options and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the Options to reduce or eliminate your liability for Tax-Related Items.

Prior to the delivery of Shares upon exercise of your Options, if your country of residence (and/or your country of employment, if different) requires withholding of Tax-Related

Items, the Company shall withhold a sufficient number of whole Shares otherwise issuable upon exercise of the Options that have an aggregate Fair Market Value sufficient to pay the minimum Tax-Related Items required to be withheld with respect to the Shares. In cases where the Fair Market Value of the number of whole Shares withheld is greater than the minimum Tax-Related Items required to be withheld, the Company shall make a cash payment to you equal to the difference as soon as administratively practicable. The cash equivalent of the Shares withheld will be used to settle the obligation to withhold the Tax-Related Items. Alternatively, your Employer may withhold the minimum Tax-Related Items required to be withheld with respect to the Shares in cash from your regular salary and/or wages, or other amounts payable to you. In the event the withholding requirements are not satisfied through the withholding of Shares by the Company or through your regular salary and/or wages or any other amounts payable to you by your Employer, no Shares will be issued to you (or your estate) upon exercise of the Options unless and until satisfactory arrangements (as determined by the Board of Directors) have been made by you with respect to the payment of any Tax-Related Items which the Company and your Employer determines, in its sole discretion, must be withheld or collected with respect to such Options. By accepting these Options, you expressly consent to the withholding of Shares and/or cash as provided for hereunder. All other Tax-Related Items related to the Options and any Shares delivered in payment thereof are your sole responsibility.

The Options are intended to be exempt from the requirements of Code Section 409A. The Plan and these Terms and Conditions shall be administered and interpreted in a manner consistent with this intent. If the Company determines that these Terms and Conditions are subject to Code Section 409A and that it has failed to comply with the requirements of that Section, the Company may, at the Company’s sole discretion, and without your consent, amend these Terms and Conditions to cause them to comply with Code Section 409A or be exempt from Code Section 409A.

6. If you were required to sign the “Stryker Confidentiality, Intellectual Property, Non-Competition and Non-Solicitation Agreement” or a similar agreement in order to receive the Options or have previously signed such an agreement and you breach any non-competition, nonsolicitation or nondisclosure provision or provision as to ownership of inventions contained therein at any time while employed by the Company or a subsidiary or during the one-year period following termination of employment, any unexercised portion of the Options shall be rescinded and you shall return to the Company all Shares that were acquired upon exercise of the Options that you have not disposed of and the Company shall repay you an amount for each such Share equal to the lesser of the Exercise Price or the Fair Market Value of a Share at such time. Further, you shall pay to the Company an amount equal to the profit realized by you on all Shares that were acquired upon exercise of the Options that you have disposed of. For purposes of the preceding sentence, the profit shall be the difference between the Exercise Price and the Fair Market Value of the Shares at the time of disposition.

7. The Options shall be transferable only by will or the laws of descent and distribution and shall be exercisable during your lifetime only by you. If you shall purport to make any transfer of the Options, except as aforesaid, the Options and all rights thereunder shall terminate immediately.

8. If you are resident or employed outside of the United States, you agree, as a condition of the grant of the Options, to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of the Shares acquired pursuant to the Options) in accordance with local foreign exchange rules and regulations in your country of residence (and country of employment, if different). In addition, you also agree to take any and all actions, and consent to any and all actions taken by the Company, as may be required to allow the Company to comply with local laws, rules and regulations in your country of residence (and country of employment, if different). Finally, you agree to take any and all actions as may be required to comply with your personal legal and tax obligations under local laws, rules and regulations in your country of residence (and country of employment, if different).

9. The Options shall not be exercisable in whole or in part, and the Company shall not be obligated to issue any Shares subject to the Options, if such exercise and sale would, in the opinion of counsel for the Company, violate the Securities Act of 1933, or other Federal, State or non-U.S. statutes having similar requirements, as in effect at the time. The Options are subject to the further requirement that, if at any time the Board of Directors shall determine in its discretion that the listing or qualification of the Shares subject to the Options under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance of shares under the Options, the Options may not be exercised in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

10. The grant of the Options shall not confer upon you any right to continue in the employ of your Employer nor limit in any way the right of your Employer to terminate your employment at any time. You shall have no rights as a shareholder of the Company with respect to any Shares issuable upon the exercise of the Options until the date of issuance of such Shares.

11. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by the Company, in its sole discretion, at any time. The grant of the Options under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of stock options or benefits in lieu of stock options in the future. Future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of any grant, the number of Shares subject to the grant, the vesting provisions and the exercise price. Any amendment, modification or termination of the Plan shall not constitute a change or impairment of the terms and conditions of your employment with your Employer.

12. Your participation in the Plan is voluntary. The value of the Options and any other awards granted under the Plan is an extraordinary item of compensation outside the scope of your employment (and your employment contract, if any). Any grant under the Plan, including the grant of the Options, is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension, or retirement benefits or similar payments.

13. These Terms and Conditions shall bind and inure to the benefit of the Company, its successors and assigns and you and your estate in the event of your death.

14. The Options are Nonstatutory Stock Options and shall not be treated as Incentive Stock Options.

15. The Company and your Employer hereby notify you of the following in relation to your personal data and the collection, processing and transfer of such data in relation to the grant of the Options and your participation in the Plan, pursuant to applicable personal data protection laws. The collection, processing and transfer of your personal data is necessary for the Company’s administration of the Plan and your participation in the Plan, and your denial and/or objection to the collection, processing and transfer of personal data may affect your ability to participate in the Plan. As such, you voluntarily acknowledge, consent and agree (where required under applicable law) to the collection, use, processing and transfer of personal data as described herein.

The Company and your Employer hold certain personal information about you, including (but not limited to) your name, home address and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, purchased, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). The Data may be provided by you or collected, where lawful, from third parties, and the Company and your Employer will process the Data for the exclusive purpose of implementing, administering and managing your participation in the Plan. The data processing will take place through electronic and non-electronic means according to logics and procedures strictly correlated to the purposes for which the Data is collected and with confidentiality and security provisions as set forth by applicable laws and regulations in your country of residence. Data processing operations will be performed minimizing the use of personal and identification data when such operations are unnecessary for the processing purposes sought. The Data will be accessible within the Company’s organization only by those persons requiring access for purposes of the implementation, administration and operation of the Plan and for your participation in the Plan.

The Company and your Employer will transfer Data as necessary for the purpose of implementation, administration and management of your participation in the Plan, and the Company and your Employer may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located in the European Economic Area, the United States or elsewhere throughout the world. You hereby authorize (where required under applicable law) the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf to a broker or other third party with whom you may elect to deposit any Shares acquired pursuant to the Plan.

You may, at any time, exercise your rights provided under applicable personal data

protection laws, which may include the right to (a) obtain confirmation as to the existence of the Data, (b) verify the content, origin and accuracy of the Data, (c) request the integration, update, amendment, deletion, or blockage (for breach of applicable laws) of the Data, and (d) to oppose, for legal reasons, the collection, processing or transfer of the Data which is not necessary or required for the implementation, administration and/or operation of the Plan and your participation in the Plan. You may seek to exercise these rights by contacting your local HR manager.

16. The grant of the Options is not intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law). No employee of the Company is permitted to advise you on whether you should purchase Shares under the Plan. Investment in Shares involves a degree of risk. Before deciding to purchase Shares pursuant to the Options, you should carefully consider all risk factors relevant to the acquisition of Shares under the Plan and you should carefully review all of the materials related to the Options and the Plan. In addition, you should consult with your personal advisor for professional investment advice.

17. All questions concerning the construction, validity and interpretation of the Options and the Plan shall be governed and construed according to the laws of the State of Michigan, without regard to the application of the conflicts of laws provisions thereof. Any disputes regarding the Options or the Plan shall be brought only in the state or federal courts of the State of Michigan.

18. The Company may, in its sole discretion, decide to deliver any documents related to the Options or other awards granted to you under the Plan by electronic means. You hereby consent to receive such documents be electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

19. If you are resident outside of the United States, you acknowledge and agree that it is your express intent that these Terms and Conditions, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Options, be drawn up in English. If you have received these Terms and Conditions, the Plan or any other documents related to the Options translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version will control.

20. Notwithstanding any provisions of these Terms and Conditions to the contrary, the Options shall be subject to any special terms and conditions for your country of residence (and country of employment, if different), as are forth in the applicable Addendum to these Terms and Conditions. Further, if you transfer your residence and/or employment to another country reflected in the Addenda to these Terms and Conditions, the special terms and conditions for such country will apply to you to the extent the Company determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable. Any applicable Addendum shall constitute part of these Terms and Conditions.

21. The Company reserves the right to impose other requirements on the Options, any Shares acquired pursuant to the Options, and your participation in the Plan, to the extent the Company determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local law or to facilitate the administration of the Plan. Such requirements may include (but are not limited to) requiring you to sign any agreements or undertakings that may be necessary to accomplish the foregoing.

*    *    *    *    *

EX-10.(III)

EXHIBIT 10iii

PERSONAL and CONFIDENTIAL

February 9, 2011

First Name Last Name

Dear First Name:

I am pleased to inform you that you are one of a select group of individuals receiving a restricted stock units (RSUs) award in 2011. We use this award to reward performers who we believe will be key contributors to our growth well into the future.

You have been awarded XX RSUs.

The RSUs will vest as follows:

Date of Vest	Portion Vested
March 21, 2012	One-third
March 21, 2013	One-third
March 21, 2014	One-third

Also, the vesting of your RSUs is dependent upon your remaining continuously employed with Stryker through the vesting date except as otherwise provided in the Terms and Conditions.

You will be required to “Accept” the award online via the UBS One Source website located at www.ubs.com/onesource/SYK between March 2 and March 30, 2011. The detailed terms of the RSUs are set forth in the Terms and Conditions and any applicable country addendum and the provisions of the Company’s 2006 Long-Term Incentive Plan. Those documents, together with the related Prospectus, are available on the UBS One Source website and you should read them before accepting the award. We suggest that you retain hard copies of this letter and the Terms and Conditions and any applicable country addendum as evidence of the award of the RSUs to you.

There also are additional educational materials on the UBS One Source website in the Library section including RSUs Brochure, RSUs Frequently Asked Questions and RSUs Tax Questions & Answers.

The efforts and the results you have delivered have demonstrated how you are there for Stryker, and these stock awards are one way in which we are there for you. Thank you for your strong performance and I look forward to your future contributions toward making Stryker the world’s most admired, fastest growing medical technology company!

Sincerely,

/s/ Stephen P. MacMillan

Stephen P. MacMillan

Chairman, President and Chief Executive Officer

STRYKER CORPORATION

TERMS AND CONDITIONS

RELATING TO RESTRICTED STOCK UNITS GRANTED

PURSUANT TO THE 2006 LONG-TERM INCENTIVE PLAN

1. The Restricted Stock Units (“RSUs”) with respect to Common Stock of Stryker Corporation (the “Company”) granted to you during 2011 are subject to these Terms and Conditions Relating to Restricted Stock Units Granted Pursuant to the 2006 Long-Term Incentive Plan (“Terms and Conditions”) and all of the terms and conditions of the Stryker Corporation 2006 Long-Term Incentive Plan, as amended (the “Plan”), which is incorporated herein by reference. In the case of a conflict between these Terms and Conditions and the terms of the Plan, the provisions of the Plan will govern. Capitalized terms used but not defined herein have the meaning provided therefor in the Plan. For purposes of these Terms and Conditions, “Employer” means the Company or Subsidiary that employs you as of the Grant Date and, in the event you transfer employment to the Company or another Subsidiary following the Grant Date, the Company or Subsidiary that employs you during the remaining term of the RSUs on an applicable date.

2. Your right to receive the Shares issuable pursuant to the RSUs upon vesting shall be only as follows:

(a) If you cease to be an Employee of your Employer by reason of Disability (as such term is defined in the Plan or determined under local law) or death, you or your estate will become fully vested in your RSUs, and you, your legal representative or your estate will receive all of the underlying Shares as soon as administratively practicable following your termination by Disability or death.

(b) If you cease to be an Employee of your Employer for any reason other than those provided in (a) above, you or your estate (in the event of your death after such termination) shall cease vesting in your RSUs effective as of your Termination Date. If you are a resident of or employed in the United States, “Termination Date” shall mean the effective date of termination of your employment with your Employer. If you are resident or employed outside of the United States, “Termination Date” shall mean the earliest of (i) the date on which notice of termination is provided to you, (ii) the last day of your active service with your Employer, or (iii) the last day on which you are an Employee of your Employer, as determined in each case without including any required advance notice period and irrespective of the status of the termination under local labor or employment laws.

(c) If you are resident and/or employed in a country that is a member of the European Union, the grant of the RSUs and these Terms and Conditions are intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Age Discrimination Rules”). To the extent that a court or tribunal of competent jurisdiction determines that any provision of the Terms and Conditions are invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the

minimum extent necessary to make it valid and enforceable to the full extent permitted under local law.

(d) Notwithstanding the foregoing, the Company may, in its sole discretion, settle the RSUs in the form of a cash payment to the extent settlement of the RSUs is prohibited under local law, or would require you, the Company and/or your Employer to obtain the approval of any governmental and/or regulatory body in your country of residence (or country of employment, if different). Alternatively, the Company may, in its sole discretion, settle the RSUs in the form of Shares but require an immediate sale of such Shares.

3. The number of Shares subject to the RSUs shall be subject to adjustment and the vesting dates hereof may be accelerated as follows:

(a) In the event that the Shares, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise) or if the number of such Shares shall be increased through the payment of a stock dividend or a dividend on the Shares of rights or warrants to purchase securities of the Company shall be made, then there shall be substituted for or added to each Share theretofore subject to the RSUs the number and kind of shares of stock or other securities into which each outstanding Share shall be so changed, or for which each such share shall be exchanged, or to which each such share shall be entitled. The other terms of the RSUs shall also be appropriately amended as may be necessary to reflect the foregoing events. In the event there shall be any other change in the number or kind of the outstanding Shares, or of any stock or other securities into which such Shares shall have been exchanged, then if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the RSUs, such adjustment shall be made in accordance with such determination.

(b) Fractional Shares resulting from any adjustment in the RSUs may be settled in cash or otherwise as the Committee shall determine. Notice of any adjustment will be given to you and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes hereof.

(c) The Committee shall have the power to amend the RSUs to permit the immediate vesting of the RSUs (and to terminate any unvested RSUs) and the distribution of the underlying Shares prior to the effectiveness of (i) any disposition of substantially all of the assets of the Company or the Employer, (ii) the shutdown, discontinuance of operations or dissolution of the Company or the Employer, or (iii) the merger or consolidation of the Company or the Employer with or into any other unrelated corporation.

4. If you are resident or employed outside of the United States, you agree, as a condition of the grant of the RSUs, to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of the Shares acquired pursuant to the RSUs) in accordance with local foreign exchange rules and regulations in your country of residence (and country of employment, if

different). In addition, you also agree to take any and all actions, and consent to any and all actions taken by the Company and its Subsidiaries, as may be required to allow the Company and its Subsidiaries to comply with local laws, rules and regulations in your country of residence (and country of employment, if different). Finally, you agree to take any and all actions as may be required to comply with your personal legal and tax obligations under local laws, rules and regulations in your country of residence (and country of employment, if different).

5. Regardless of any action the Company and/or your Employer take with respect to any or all income tax (including U.S. federal, state and local taxes or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and your Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including the grant of the RSUs, the vesting of the RSUs, the subsequent sale of any Shares acquired pursuant to the RSUs and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items.

Prior to the delivery of Shares upon the vesting of your RSUs, if your country of residence (and/or the country of employment, if different) requires withholding of Tax-Related Items, the Company shall withhold a sufficient number of whole Shares otherwise issuable upon the vesting of the RSUs that have an aggregate Fair Market Value sufficient to pay the minimum Tax-Related Items required to be withheld with respect to the Shares. In cases where the Fair Market Value of the number of whole Shares withheld is greater than the minimum Tax-Related Items required to be withheld, the Company shall make a cash payment to you equal to the difference as soon as administratively practicable. The cash equivalent of the Shares withheld will be used to settle the obligation to withhold the Tax-Related Items. Alternatively, your Employer may withhold the minimum Tax-Related Items required to be withheld with respect to the Shares in cash from your regular salary and/or wages, or any other amounts payable to you. In the event the withholding requirements are not satisfied through the withholding of Shares by the Company or through your regular salary and/or wages or other amounts payable to you by your Employer, no Shares will be issued to you (or your estate) upon vesting of the RSUs unless and until satisfactory arrangements (as determined by the Board of Directors) have been made by you with respect to the payment of any Tax-Related Items which the Company and your Employer determines, in its sole discretion, must be withheld or collected with respect to such RSUs. By accepting this grant of RSUs, you expressly consent to the withholding of Shares and/or your regular salary and/or wages, or other amounts payable to you as provided for hereunder. All other Tax-Related Items related to the RSUs and any Shares delivered in payment thereof are your sole responsibility.

The RSUs are intended to be exempt from the requirements of Code Section 409A. The Plan and these Terms and Conditions shall be administered and interpreted in a manner consistent with this intent. If the Company determines that these Terms and Conditions are subject to Code Section 409A and that it has failed to comply with the requirements of that Section, the Company may, at the Company’s sole discretion, and without your consent, amend these Terms and Conditions to cause them to comply with Code Section 409A or be exempt from

Code Section 409A.

6. If you were required to sign the “Stryker Confidentiality, Intellectual Property, Non-Competition and Non-Solicitation Agreement” or a similar agreement in order to receive the RSUs or have previously signed such an agreement and you breach any non-competition, nonsolicitation or nondisclosure provision or provision as to ownership of inventions contained therein at any time while employed by the Company or a Subsidiary, or during the one-year period following termination of employment, any unvested RSUs shall be rescinded and you shall return to the Company all Shares that were acquired upon vesting of the RSUs that you have not disposed of and the Company shall repay you an amount for each such Share equal to the Fair Market Value of a Share at such time. Further, you shall pay to the Company an amount equal to the profit realized by you on all Shares that were acquired upon vesting of the RSUs that you have disposed of. For purposes of the preceding sentence, the profit shall be the Fair Market Value of the Shares at the time of disposition.

7. The RSUs shall be transferable only by will or the laws of descent and distribution. If you shall purport to make any transfer of the RSUs, except as aforesaid, the RSUs and all rights thereunder shall terminate immediately.

8. The RSUs shall not be vested in whole or in part, and the Company shall not be obligated to issue any Shares subject to the RSUs, if such issuance would, in the opinion of counsel for the Company, violate the Securities Act of 1933, or other Federal, State or non-U.S. statutes having similar requirements, as it may be in effect at the time. The RSUs are subject to the further requirement that, if at any time the Board of Directors shall determine in its discretion that the listing or qualification of the Shares subject to the RSUs under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance of shares under the RSUs, the RSUs may not be vested in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

9. The grant of the RSUs shall not confer upon you any right to continue in the employ of your Employer nor limit in any way the right of your Employer to terminate your employment at any time. You shall have no rights as a shareholder of the Company with respect to any Shares issuable upon the vesting of the RSUs until the date of issuance of such Shares.

10. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by the Company, in its sole discretion, at any time. The grant of the RSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of RSUs or any other award under the Plan or other benefits in lieu thereof in the future. Future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of any grant, the number of Shares subject to the grant, and the vesting provisions. Any amendment, modification or termination of the Plan shall not constitute a change or impairment of the terms and conditions of your employment with your Employer.

11. Your participation in the Plan is voluntary. The value of the RSUs and any other awards granted under the Plan is an extraordinary item of compensation outside the scope of your employment (and your employment contract, if any). Any grant under the Plan, including the grant of the RSUs, is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension, or retirement benefits or similar payments.

12. These Terms and Conditions shall bind and inure to the benefit of the Company, its successors and assigns and you and your estate in the event of your death.

13. The Company and your Employer hereby notify you of the following in relation to your personal data and the collection, processing and transfer of such data in relation to the grant of the RSUs and your participation in the Plan, pursuant to applicable personal data protection laws. The collection, processing and transfer of your personal data is necessary for the Company’s administration of the Plan and your participation in the Plan, and your denial and/or objection to the collection, processing and transfer of personal data may affect your ability to participate in the Plan. As such, you voluntarily acknowledge, consent and agree (where required under applicable law) to the collection, use, processing and transfer of personal data as described herein.

The Company and your Employer hold certain personal information about you, including (but not limited to) your name, home address and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all RSUs or any other entitlement to Shares awarded, canceled, purchased, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). The Data may be provided by you or collected, where lawful, from third parties, and the Company and your Employer will process the Data for the exclusive purpose of implementing, administering and managing your participation in the Plan. The data processing will take place through electronic and non-electronic means according to logics and procedures strictly correlated to the purposes for which the Data is collected and with confidentiality and security provisions as set forth by applicable laws and regulations in your country of residence. Data processing operations will be performed minimizing the use of personal and identification data when such operations are unnecessary for the processing purposes sought. The Data will be accessible within the Company’s organization only by those persons requiring access for purposes of the implementation, administration and operation of the Plan and for your participation in the Plan.

The Company and your Employer will transfer Data as necessary for the purpose of implementation, administration and management of your participation in the Plan, and the Company and your Employer may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located in the European Economic Area, the United States or elsewhere throughout the world. You hereby authorize (where required under applicable law) the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the

subsequent holding of Shares on your behalf to a broker or other third party with whom you may elect to deposit any Shares acquired pursuant to the Plan.

You may, at any time, exercise your rights provided under applicable personal data protection laws, which may include the right to (a) obtain confirmation as to the existence of the Data, (b) verify the content, origin and accuracy of the Data, (c) request the integration, update, amendment, deletion, or blockage (for breach of applicable laws) of the Data, and (d) to oppose, for legal reasons, the collection, processing or transfer of the Data which is not necessary or required for the implementation, administration and/or operation of the Plan and your participation in the Plan. You may seek to exercise these rights by contacting your local HR manager.

14. The grant of the RSUs is not intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law).

15. All questions concerning the construction, validity and interpretation of the RSUs and the Plan shall be governed and construed according to the laws of the State of Michigan, without regard to the application of the conflicts of laws provisions thereof. Any disputes regarding the RSUs or the Plan shall be brought only in the state or federal courts of the State of Michigan.

16. The Company may, in its sole discretion, decide to deliver any documents related to the RSUs or other awards granted to you under the Plan by electronic means. You hereby consent to receive such documents be electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

17. If you are resident outside of the United States, you acknowledge and agree that it is your express intent that these Terms and Conditions, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the RSUs, be drawn up in English. If you have received these Terms and Conditions, the Plan or any other documents related to the RSUs translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version will control.

18. Notwithstanding any provisions of these Terms and Conditions to the contrary, the RSUs shall be subject to any special terms and conditions for your country of residence (and country of employment, if different), as are set forth in the applicable Addendum to these Terms and Conditions. Further, if you transfer your residence and/or employment to another country reflected in the Addenda to these Terms and Conditions, the special terms and conditions for such country will apply to you to the extent the Company determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable. Any applicable Addendum shall constitute part of these Terms and Conditions.

19. The Company reserves the right to impose other requirements on the RSUs, any

Shares acquired pursuant to the RSUs, and your participation in the Plan, to the extent the Company determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local law or to facilitate the administration of the Plan. Such requirements may include (but are not limited to) requiring you to sign any agreements or undertakings that may be necessary to accomplish the foregoing.

*     *     *     *     *

EX-10.(IV)

EXHIBIT 10iv

PERSONAL and CONFIDENTIAL

February 9, 2011

First Name Last Name

Dear First Name:

I am pleased to inform you that you are one of a select group of individuals receiving a performance stock units (PSUs) award in 2011. We use these awards to reward performers who we believe will be key contributors to our growth well into the future.

You have been awarded XX PSUs. The vesting of the PSUs is dependent upon Stryker’s financial performance during the three-year period ending December 31, 2013, with the vesting of 50% of the PSUs being based on our Adjusted EPS Growth and the vesting of the remaining 50% of the PSUs being based on our Sales Growth Quartile. Also, the vesting of your PSUs is dependent upon your remaining continuously employed with Stryker through the vesting date, March 21, 2014 except as otherwise provided in the Terms and Conditions.

You will be required to “Accept” all awards online via the UBS One Source website located at www.ubs.com/onesource/SYK between March 2 and March 30, 2011. The detailed terms of the PSUs are set forth in the Terms and Conditions and the provisions of the Company’s 2006 Long-Term Incentive Plan. Those documents, together with the related Prospectus, are available on the UBS One Source website and you should read them before accepting the award. We suggest that you retain hard copies of this letter and the Terms and Conditions as evidence of the award of the PSUs to you.

The efforts and the results you have delivered have demonstrated how you are there for Stryker, and these stock awards are one way in which we are there for you. Thank you for your strong performance and I look forward to your future contributions toward making Stryker the world’s most admired, fastest growing medical technology company!

Sincerely,

/s/ Stephen P. MacMillan

Stephen P. MacMillan

Chairman, President and Chief Executive Officer

STRYKER CORPORATION

FORM OF TERMS AND CONDITIONS

RELATING TO PERFORMANCE STOCK UNITS GRANTED

PURSUANT TO THE 2006 LONG-TERM INCENTIVE PLAN

1. The Performance Stock Units with respect to Common Stock of Stryker Corporation (the “Company”) granted to you during 2011 (the “PSUs”) are subject to the terms and conditions set forth herein (the “Terms and Conditions”) and all of the terms and conditions of the Stryker Corporation 2006 Long-Term Incentive Plan, as amended (the “Plan”), which is incorporated herein by reference. In the case of a conflict between these Terms and Conditions and the terms of the Plan, the provisions of the Plan will govern. Capitalized terms used but not defined herein have the meaning provided therefor in the Plan. For purposes of these Terms and Conditions, “Stryker” or “Employer” means the Company or Subsidiary that employs you as of the date the PSUs were granted (the “Grant Date”) and, in the event you transfer employment to the Company or another Subsidiary following the Grant Date, the Company or Subsidiary that employs you during the remaining term of the PSUs on an applicable date.

2. Vesting. Except as provided in Section 6, the vesting of your PSUs is dependent upon your remaining continuously employed with Stryker through March 21, 2014 (the “Vesting Date”) as well as upon the Company’s financial performance during the three-year period ending December 31, 2013 (the “Performance Period”). Specifically, the vesting of 50% of the PSUs (the “EPS PSUs”) is dependent upon Adjusted EPS Growth as set forth in Section 3, and the vesting of the remaining 50% of the PSUs (the “Sales Growth PSUs”) is dependent upon the Sales Growth Quartile as set forth in Section 4.

3. Adjusted EPS Growth.

(a) If you have remained in the continuous employment of Stryker through the Vesting Date, you shall become vested in the percentage of the EPS PSUs determined based on the Company’s Adjusted EPS Growth using the table below, applying straight line interpolation rounded to the nearest whole number of EPS PSUs for Adjusted EPS Growth between 50% and 100% or between 100% and 200%.

	< Minimum	Minimum	Target	Maximum
Adjusted EPS Growth
Vested Percent of EPS PSUs	0%	50%	100%	200%

Any EPS PSUs that do not become vested in accordance with the foregoing shall be forfeited.

(b) As soon as administratively practicable following the Vesting Date (but in no event later than December 31, 2014), the Company shall issue you the Shares underlying the vested EPS PSUs.

(c) For purposes of this Agreement:

(i) “Adjusted EPS” for a calendar year shall mean the Company’s diluted net earnings per share for such year as determined under U.S. generally accepted accounting principles (“GAAP”) but subject to such adjustments, if any, for non-GAAP financial measures that are reflected in a reconciliation to the GAAP financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

(ii) “Adjusted EPS Growth” shall mean the sum of the Annual Percentage Change in Adjusted EPS for the three (3) calendar years in the Performance Period divided by three (3).

(iii) “Annual Percentage Change in Adjusted EPS” for a calendar year shall mean the amount by which the Adjusted EPS for such calendar year has increased or decreased relative to the immediately preceding calendar year, expressed as a positive or negative percentage (depending on whether Adjusted EPS increased or decreased) of the Adjusted EPS for such preceding calendar year.

(d) Notwithstanding anything to the contrary herein, the Committee shall have discretion to make such adjustments to the foregoing metrics as it deems appropriate to reflect the impact of corporate transactions, accounting or tax law changes or extraordinary, unusual, nonrecurring or infrequent items; provided, however, that in no case shall such adjustments have the net aggregate effect of increasing Adjusted EPS Growth.

4. Sales Growth Quartile.

(a) If you have remained in the continuous employment of Stryker through the Vesting Date, you shall become vested in the percentage of the Sales Growth PSUs based upon the Company’s Sales Growth Quartile, as determined using the table below:

Sales Growth Quartile	75% to 100%	50% to 74%	25% to 49%	Below 25%
Vested Percent of Sales Growth PSUs	200%	100%	50%	0%

Any Sales Growth PSUs that do not become vested in accordance with the foregoing shall be forfeited, and if the Company’s Average Sales Growth in the Performance Period is equal to or less than zero, all of the Sales Growth PSUs shall be forfeited (irrespective of the Sales Growth Quartile).

(b) As soon as administratively practicable following the Vesting Date (but in no event later than December 31, 2014), the Company shall issue you the Shares underlying the vested Sales Growth PSUs.

(c) For purposes of this Agreement:

(i) “Average Sales Growth” shall mean, for the Company and each company in the Comparison Group, the sum of the Sales Growth for each Reporting Period ending within the Performance Period divided by three;

(ii) “Comparison Group” shall mean:

• Abbott Laboratories

• Alcon Inc.

• CR Bard Inc.

• Baxter International Inc.

• Becton, Dickinson and Co.

• Boston Scientific Corporation

• Covidien plc

• Genzyme Corp.

• Hill-Rom Holdings, Inc.

• Johnson & Johnson

• Medtronic, Inc.

• Smith & Nephew plc

• St. Jude Medical Inc.

• Thermo Fisher Scientific, Inc.

• Zimmer Holdings, Inc.

For purposes of the foregoing, any company for which Sales Growth cannot be calculated for three full annual Reporting Periods ending within the Performance Period shall be excluded.

(iii) “Net Sales” shall mean, for the Company and each company in the Comparison Group, net sales for the applicable Reporting Period as determined under U.S. generally accepted accounting principles and as reported in an Annual Report on Form 10-K or a Quarterly Report of Form 10-Q (or the comparable reports filed by foreign issuers) filed with the Securities and Exchange Commission.

(iv) “Reporting Period” shall mean a calendar year in the case of the Company and each company in the Comparison Group that reports on a calendar year basis, and in the case of any other company in the Comparison Group, the four fiscal quarters that include the last fiscal quarter ending prior to December 31 for which such company has filed an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q (or the comparable reports filed by foreign issuers) with the Securities and Exchange Commission prior to the following February 28.

(v) “Sales Growth” for a Reporting Period shall mean the amount by which Net Sales has increased or decreased relative to the immediately preceding Reporting Period, expressed as a positive or negative percentage (depending on whether Net Sales increased or decreased) of the Net Sales for such preceding Reporting Period.

(vi) “Sales Growth Quartile” shall mean the percentile ranking of the Company’s Average Sales Growth relative to the Average Sales Growth for each company in the Comparison Group. For this purpose, the percentile ranking shall be calculated as 1 – (Rank-1)/(Total of the Comparison Group plus the Company-1). For example, if the Company ranked 5^th out of 15 companies including itself, the percentile rank would be calculated as 1 – (5-1)/(15-1) or 1 – (4/14) or 1-.2857 or the 71^st percentile.

5. Dividend Equivalents. In connection with your Award, you shall be entitled to receive all of the cash dividends that are or would be payable with respect to each Share underlying your PSUs (“Dividend Equivalents”). Dividend Equivalents shall be converted into their equivalent number of PSUs based on the Fair Market Value of a Share on the applicable dividend payment date. Such PSUs shall be subject to the terms and conditions applicable to the PSUs to which the Dividend Equivalents relate, including, without limitation, the vesting, forfeiture, and payment form and timing provisions contained herein.

6. In the event you cease to remain in the continuous employment of the Company for the entire period commencing on the Date of Grant and ending on the applicable Vesting Date, your right to receive the Shares issuable pursuant to the PSUs shall be only as follows:

(a) If you cease to be an Employee prior to the Vesting Date by reason of Disability (as such term is defined in the Plan or required under a foreign law that is applicable to you because you are a foreign national or are employed outside the United States, or both, at that time) or death, you or your estate will become immediately vested in a pro-rata portion (determined by dividing (a) the number of days during the Performance Period in which you were an Employee by (b) the total number of days during the Performance Period) of your PSUs based upon the Company’s Adjusted EPS Growth and Sales Growth Quartile. Adjusted EPS Growth shall be determined in accordance with Section 3, except that only calendar year 2011 and, if you remain an Employee through December 31, 2012, calendar year 2012, shall be taken into account, and except that the denominator in determining Adjusted EPS Growth shall be one (if only calendar year 2011 is taken into account) or two (if both 2011 and 2012 are taken into account). The Sales Growth Quartile shall be determined in accordance with Section 4, except that the only Reporting Periods taken into account shall be (i) Reporting Periods ending after December 31, 2010 and before January 1, 2012, and (ii) if you cease to be an Employee after December 31, 2012, Reporting Periods ending after December 31, 2011 and before January 1, 2013, and except that the denominator in determining Average Sales Growth shall be one (if the preceding clause (ii) does not apply) or two (if the preceding clause (ii) does apply). You, your legal representative or your estate will receive all of the underlying Shares attributable to the vested PSUs as soon as administratively practicable following (and in no event more than ninety(90) days after the later of December 31, 2011 or the date you cease to be an Employee.

(b) If you cease to be an Employee for any reason other than those provided in (a) above and your Termination Date is prior to the Vesting Date, you shall immediately forfeit all PSUs granted hereunder effective as of your Termination Date. If you are a resident of or employed in the United States, “Termination Date” shall mean the effective date of termination of your employment with your Employer. If you are resident or employed outside of the United

States, “Termination Date” shall mean the earliest of (i) the date on which notice of termination is provided to you, (ii) the last day of your active service with your Employer, or (iii) the last day on which you are an Employee of your Employer, as determined in each case without including any required advance notice period and irrespective of the status of the termination under local labor or employment laws.

(c) If you are resident and/or employed in a country that is a member of the European Union, the grant of the PSUs and these Terms and Conditions are intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Age Discrimination Rules”). To the extent that a court or tribunal of competent jurisdiction determines that any provision of the Terms and Conditions are invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local law.

7. Notwithstanding anything in the Terms and Conditions to the contrary, the Company may, in its sole discretion, settle the PSUs (and any Dividend Equivalents) in the form of a cash payment to the extent settlement in Shares is prohibited under local law or would require you, the Company and/or your Employer to obtain the approval of any governmental and/or regulatory body in your country of residence (and country of employment, if different). Alternatively, the Company may, in its sole discretion, settle the PSUs (and any Dividend Equivalents) in the form of Shares but require an immediate sale of such Shares.

8. The number of Shares subject to the PSUs shall be subject to adjustment and the vesting dates hereof may be accelerated as follows:

(a) In the event that the Shares, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise) or if the number of such Shares shall be increased through the payment of a stock dividend or a dividend on the Shares of rights or warrants to purchase securities of the Company shall be made, then there shall be substituted for or added to each Share theretofore subject to the PSUs the number and kind of shares of stock or other securities into which each outstanding Share shall be so changed, or for which each such share shall be exchanged, or to which each such share shall be entitled. The other terms of the PSUs shall also be appropriately amended as may be necessary to reflect the foregoing events. In the event there shall be any other change in the number or kind of the outstanding Shares, or of any stock or other securities into which such Shares shall have been exchanged, then if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the PSUs, such adjustment shall be made in accordance with such determination.

(b) Fractional Shares resulting from any adjustment in the PSUs may be settled in cash or otherwise as the Committee shall determine. Notice of any adjustment will be given to you and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes hereof.

(c) The Committee shall have the power to amend the PSUs to permit the immediate vesting of the PSUs (and to terminate any unvested PSUs) and the distribution of the underlying Shares prior to the effectiveness of (i) any disposition of substantially all of the assets of the Company or the Employer, (ii) the shutdown, discontinuance of operations or dissolution of the Company or the Employer, or (iii) the merger or consolidation of the Company or the Employer with or into any other unrelated corporation.

9. If you are resident or employed outside of the United States, you agree, as a condition of the grant of the PSUs, to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of the Shares acquired pursuant to the PSUs) in accordance with local foreign exchange rules and regulations in your country of residence (and country of employment, if different). In addition, you also agree to take any and all actions, and consent to any and all actions taken by the Company and its Subsidiaries, as may be required to allow the Company and its Subsidiaries to comply with local laws, rules and regulations in your country of residence (and country of employment, if different). Finally, you agree to take any and all actions as may be required to comply with your personal legal and tax obligations under local laws, rules and regulations in your country of residence (and country of employment, if different).

10. Regardless of any action the Company and/or your Employer take with respect to any income tax (including U.S. federal, state and local taxes or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and your Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the PSUs, including the grant of the PSUs, the vesting of the PSUs, the subsequent sale of any Shares acquired pursuant to the PSUs and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the PSUs to reduce or eliminate your liability for Tax-Related Items.

Prior to the delivery of Shares upon the vesting of your PSUs, if your country of residence (and/or the country of employment, if different) requires withholding of Tax-Related Items, the Company shall withhold a sufficient number of whole Shares otherwise issuable upon the vesting of the PSUs that have an aggregate Fair Market Value sufficient to pay the minimum Tax-Related Items required to be withheld with respect to the Shares. In cases where the Fair Market Value of the number of whole Shares withheld is greater than the minimum Tax-Related Items required to be withheld, the Company shall make a cash payment to you equal to the difference as soon as administratively practicable. The cash equivalent of the Shares withheld will be used to settle the obligation to withhold the Tax-Related Items. Alternatively, your Employer may withhold the minimum Tax-Related Items required to be withheld with respect to the Shares in cash from your regular salary and/or wages, or any other amounts payable to you. In the event the withholding requirements are not satisfied through the withholding of Shares by the Company or through your regular salary and/or wages or other amounts payable to you by your Employer, no Shares will be issued to you (or your estate) upon vesting of the PSUs unless and until satisfactory arrangements (as determined by the Board of Directors) have been made by

you with respect to the payment of any Tax-Related Items which the Company and your Employer determines, in its sole discretion, must be withheld or collected with respect to such PSUs. By accepting this grant of PSUs, you expressly consent to the withholding of Shares and/or your regular salary and/or wages, or other amounts payable to you as provided for hereunder. All other Tax-Related Items related to the PSUs and any Shares delivered in payment thereof are your sole responsibility.

The PSUs are intended to be exempt from the requirements of Code Section 409A. The Plan and these Terms and Conditions shall be administered and interpreted in a manner consistent with this intent. If the Company determines that these Terms and Conditions are subject to Code Section 409A and that it has failed to comply with the requirements of that Section, the Company may, at the Company’s sole discretion, and without your consent, amend these Terms and Conditions to cause them to comply with Code Section 409A or be exempt from Code Section 409A.

11. If you were required to sign the “Stryker Confidentiality, Intellectual Property, Non-Competition and Non-Solicitation Agreement” or a similar agreement in order to receive the PSUs or have previously signed such an agreement and you breach any non-competition, nonsolicitation or nondisclosure provision or provision as to ownership of inventions contained therein at any time while employed by the Company or a Subsidiary, or during the one-year period following termination of employment, any unvested PSUs shall be rescinded and you shall return to the Company all Shares that were acquired upon vesting of the PSUs that you have not disposed of and the Company shall repay you an amount for each such Share equal to the Fair Market Value of a Share at such time. Further, you shall pay to the Company an amount equal to the profit realized by you on all Shares that were acquired upon vesting of the PSUs that you have disposed of. For purposes of the preceding sentence, the profit shall be the Fair Market Value of the Shares at the time of disposition.

12. The PSUs shall be transferable only by will or the laws of descent and distribution. If you shall purport to make any transfer of the PSUs, except as aforesaid, the PSUs and all rights thereunder shall terminate immediately.

13. The PSUs shall not be vested in whole or in part, and the Company shall not be obligated to issue any Shares subject to the PSUs, if such issuance would, in the opinion of counsel for the Company, violate the Securities Act of 1933, or other Federal, State or non-U.S. statutes having similar requirements, as it may be in effect at the time. The PSUs are subject to the further requirement that, if at any time the Board of Directors shall determine in its discretion that the listing or qualification of the Shares subject to the PSUs under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance of shares under the PSUs, the PSUs may not be vested in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

14. The grant of the PSUs shall not confer upon you any right to continue in the employ of your Employer nor limit in any way the right of your Employer to terminate your

employment at any time. You shall have no rights as a shareholder of the Company with respect to any Shares issuable upon the vesting of the PSUs until the date of issuance of such Shares.

15. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by the Company, in its sole discretion, at any time. The grant of the PSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of PSUs or any other award under the Plan or other benefits in lieu thereof in the future. Future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of any grant, the number of Shares subject to the grant, and the vesting provisions. Any amendment, modification or termination of the Plan shall not constitute a change or impairment of the terms and conditions of your employment with your Employer.

16. Your participation in the Plan is voluntary. The value of the PSUs and any other awards granted under the Plan is an extraordinary item of compensation outside the scope of your employment (and your employment contract, if any). Any grant under the Plan, including the grant of the PSUs, is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension, or retirement benefits or similar payments.

17. These Terms and Conditions shall bind and inure to the benefit of the Company, its successors and assigns and you and your estate in the event of your death.

18. The Company and your Employer hereby notify you of the following in relation to your personal data and the collection, processing and transfer of such data in relation to the grant of the PSUs and your participation in the Plan, pursuant to applicable personal data protection laws. The collection, processing and transfer of your personal data is necessary for the Company’s administration of the Plan and your participation in the Plan, and your denial and/or objection to the collection, processing and transfer of personal data may affect your ability to participate in the Plan. As such, you voluntarily acknowledge, consent and agree (where required under applicable law) to the collection, use, processing and transfer of personal data as described herein.

The Company and your Employer holds certain personal information about you, including (but not limited to) your name, home address and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all PSUs or any other entitlement to Shares awarded, canceled, purchased, vested, unvested or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”). The Data may be provided by you or collected, where lawful, from third parties, and the Company and your Employer will process the Data for the exclusive purpose of implementing, administering and managing your participation in the Plan. The data processing will take place through electronic and non-electronic means according to logics and procedures strictly correlated to the purposes for which the Data is collected and with confidentiality and security provisions as set forth by applicable laws and regulations in your country of residence. Data processing operations will be performed minimizing the use of personal and identification data when such operations are unnecessary for

the processing purposes sought. The Data will be accessible within the Company’s organization only by those persons requiring access for purposes of the implementation, administration and operation of the Plan and for your participation in the Plan.

The Company and your Employer will transfer Data as necessary for the purpose of implementation, administration and management of your participation in the Plan, and the Company and your Employer may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located in the European Economic Area, the United States or elsewhere throughout the world. You hereby authorize (where required under applicable law) the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf to a broker or other third party with whom you may elect to deposit any Shares acquired pursuant to the Plan.

You may, at any time, exercise your rights provided under applicable personal data protection laws, which may include the right to (a) obtain confirmation as to the existence of the Data, (b) verify the content, origin and accuracy of the Data, (c) request the integration, update, amendment, deletion, or blockage (for breach of applicable laws) of the Data, and (d) to oppose, for legal reasons, the collection, processing or transfer of the Data which is not necessary or required for the implementation, administration and/or operation of the Plan and your participation in the Plan. You may seek to exercise these rights by contacting your local HR manager.

19. The grant of the PSUs is not intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law). 20. All questions concerning the construction, validity and interpretation of the PSUs and the Plan shall be governed and construed according to the laws of the State of Michigan, without regard to the application of the conflicts of laws provisions thereof. Any disputes regarding the PSUs or the Plan shall be brought only in the state or federal courts of the State of Michigan.

21. The Company may, in its sole discretion, decide to deliver any documents related to the PSUs or other awards granted to you under the Plan by electronic means. You hereby consent to receive such documents be electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

22. If you are resident outside of the United States, you acknowledge and agree that it is your express intent that these Terms and Conditions, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the PSUs, be drawn up in English. If you have received these Terms and Conditions, the Plan or any other documents

related to the PSUs translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version will control.

23. Notwithstanding any provisions of these Terms and Conditions to the contrary, the PSUs shall be subject to any special terms and conditions for your country of residence (and country of employment, if different), as are set forth in the applicable Addendum to these Terms and Conditions. Further, if you transfer your residence and/or employment to another country reflected in an Addendum to these Terms and Conditions, the special terms and conditions for such country will apply to you to the extent the Company determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable. Any applicable Addendum shall constitute part of these Terms and Conditions.

24. The Company reserves the right to impose other requirements on the PSUs, any Shares acquired pursuant to the PSUs, and your participation in the Plan, to the extent the Company determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local law or to facilitate the administration of the Plan. Such requirements may include (but are not limited to) requiring you to sign any agreements or undertakings that may be necessary to accomplish the foregoing.

* * * * *

EX-10.(XV)

EXECUTION VERSION

Exhibit 10xv

SALE AND PURCHASE AGREEMENT

(As conformed through the Amendment to

Sale and Purchase Agreement between

Boston Scientific Corporation and Stryker Corporation

dated as of January 3, 2011)

Between

BOSTON SCIENTIFIC CORPORATION

and

STRYKER CORPORATION

Dated as of October 28, 2010

TABLE OF CONTENTS

ARTICLE I
DEFINITIONS
Section 1.01	Certain Defined Terms	6
Section 1.02	Definitions	18
Section 1.03	Interpretation and Rules of Construction	20
ARTICLE II
SALE AND PURCHASE
Section 2.01	Sale and Purchase of Assets	21
Section 2.02	Assumption and Exclusion of Liabilities	25
Section 2.03	Purchase Price; Allocation of Purchase Price	28
Section 2.04	Milestone Payments	29
Section 2.05	Closing	30
Section 2.06	Closing Deliveries by BSC	30
Section 2.07	Closing Deliveries by the Purchaser	31
Section 2.08	Deferred Closings	32
Section 2.09	Other Transfers	34
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BSC
Section 3.01	Organization, Authority and Qualification of BSC and the Sellers	34
Section 3.02	No Conflict	34
Section 3.03	Governmental Consents and Approvals	35
Section 3.04	Financial Information	35
Section 3.05	Absence of Undisclosed Material Liabilities	36
Section 3.06	Conduct in the Ordinary Course	36
Section 3.07	Litigation	36
Section 3.08	Compliance with Laws; Permits	36
Section 3.09	Environmental Matters	36
Section 3.10	Intellectual Property	37
Section 3.11	Real Property	39
Section 3.12	Title to Purchased Assets; Sufficiency	39
Section 3.13	Labor Matters	40
Section 3.14	Employee Benefit Matters	41
Section 3.15	Taxes	43
Section 3.16	Material Contracts	44
Section 3.17	FDA Regulatory Compliance	45

i

Section 3.18	Healthcare Regulatory Compliance	46
Section 3.19	Product Liability	48
Section 3.20	Customers and Suppliers	48
Section 3.21	Certain Business Practices	48
Section 3.22	Brokers	49
Section 3.23	Disclaimer of BSC	49
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
Section 4.01	Organization and Authority of the Purchaser and its Affiliates	49
Section 4.02	No Conflict	50
Section 4.03	Governmental Consents and Approvals	50
Section 4.04	Financing	50
Section 4.05	Litigation	50
Section 4.06	Brokers	51
Section 4.07	BSC’s Representations	51
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01	Conduct of Business Prior to the Closing	51
Section 5.02	Access to Information	54
Section 5.03	Confidentiality	55
Section 5.04	Regulatory and Other Authorizations	55
Section 5.05	Consents	57
Section 5.06	Retained Names and Marks	57
Section 5.07	Notifications	59
Section 5.08	Bulk Transfer Laws	59
Section 5.09	Audited Special Purpose Financial Statements	59
Section 5.10	Non-Solicitation	59
Section 5.11	Non-Competition	60
Section 5.12	Collection of Accounts Receivables; Inventory	62
Section 5.13	Further Action	62
Section 5.14	Tax Cooperation and Exchange of Information	62
Section 5.15	Conveyance Taxes	63
Section 5.16	VAT and Recoverable Taxes	63
Section 5.17	Proration of Taxes	64
Section 5.18	BSC Compensation Tax Items	64
Section 5.19	Tax Treatment of Deferred Transfers	65
Section 5.20	Successor Employer	65
Section 5.21	Risk of Loss	66
Section 5.22	Intercompany Arrangements	66
Section 5.23	Mixed Contracts	66

ii

Section 5.24	Schedules and Exhibits to Certain Ancillary Agreements; OUS Transfer Agreements	66
Section 5.25	IP Docket; Assignment Documents	67
Section 5.26	Additional Patents	67
ARTICLE VI
EMPLOYEE MATTERS
Section 6.01	Offers of Employment and Automatic Transfers	69
Section 6.02	Employee Benefits	71
Section 6.03	Existing Agreements	73
Section 6.04	WARN	73
Section 6.05	COBRA	73
Section 6.06	401(k) Plans	74
Section 6.07	Accrued Vacation	74
Section 6.08	No Guarantee of Continued Employment; No Third-Party Rights	74
Section 6.09	Compliance with Law	75
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.01	Conditions to Obligations of BSC	75
Section 7.02	Conditions to Obligations of the Purchaser	76
ARTICLE VIII
INDEMNIFICATION
Section 8.01	Survival of Representations and Warranties	77
Section 8.02	Indemnification by BSC	77
Section 8.03	Indemnification by the Purchaser	78
Section 8.04	Limits on Indemnification	78
Section 8.05	Notice of Loss; Third Party Claims; Mixed Actions	79
Section 8.06	Tax Treatment	81
Section 8.07	Remedies	81
Section 8.08	Set-Off Rights	81
Section 8.09	Information; Waiver	83
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.01	Termination	84
Section 9.02	Effect of Termination	84

iii

ARTICLE X
GENERAL PROVISIONS
Section 10.01	Expenses	84
Section 10.02	Notices	85
Section 10.03	Public Announcements	86
Section 10.04	Severability	86
Section 10.05	Entire Agreement	86
Section 10.06	Assignment	86
Section 10.07	Amendment	86
Section 10.08	Waiver	86
Section 10.09	No Third Party Beneficiaries	87
Section 10.10	Currency and Exchange Rates	87
Section 10.11	Specific Performance	87
Section 10.12	Governing Law	87
Section 10.13	Waiver of Jury Trial	88
Section 10.14	Counterparts	88

EXHIBITS

1.01(a)(i)	Form of Assignment of Lease (Fremont Building #4 Facility)
1.01(a)(ii)	Form of Assignment of Lease (West Valley Facility)
1.01(b)	Form of Assumption Agreement
1.01(c)	Form of Bill of Sale
1.01(d)	Form of Cork Lease Agreement
1.01(e)	Form of IP Assignment
1.01(f)	Form of OUS Transfer Agreement
1.01(g)	Form of Purchaser IP License Agreement
1.01(h)	Form of Independent Sales Agent Agreement (Japan)
1.01(i)	Form of Seller IP License Agreement
1.01(j)	Form of Separation Agreement
1.01(k)	Form of Supply Agreement
1.01(l)	Form of Technology Transfer Agreement
1.01(m)	Form of Transition Services Agreement
1.01(n)	Form of Distribution Agreement
1.01(o)	Form of Escrow Agreement
2.08(c)	Forms of OUS Transfer Agreements for Deferred Closing Countries
SCHEDULES (IN ADDITION TO THE DISCLOSURE SCHEDULE)
1.01(a)	Knowledge of BSC
1.01(b)	Contract Manufacturing Sites
1.01(c)	Sellers
2.08(a)	Deferred Closing Countries
5.05(a)	Consents
5.12(b)	Inventory

iv

5.24(a)	Schedules and Exhibits to Certain Ancillary Agreements
7.02(e)	Required Consents
10.06	Purchaser Affiliate Assignments

v

SALE AND PURCHASE AGREEMENT, dated as of October 28, 2010, between BOSTON SCIENTIFIC CORPORATION, a Delaware corporation (“BSC”), and STRYKER CORPORATION, a Michigan corporation (the “Purchaser”).

WHEREAS, BSC is directly, and indirectly through the Sellers (as hereinafter defined), engaged in the Business (as hereinafter defined);

WHEREAS, BSC desires to sell, and to cause the Sellers to sell, the Business to the Purchaser, and the Purchaser desires to purchase the Business from BSC and the Sellers; and

WHEREAS, in connection with the sale of the Business, BSC wishes to sell, and to cause the Sellers to sell and assign, to the Purchaser, and the Purchaser wishes to purchase and assume from BSC and the Sellers, the Purchased Assets and Assumed Liabilities (each as hereinafter defined), upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the promises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound hereby, BSC and the Purchaser hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Certain Defined Terms. For purposes of this Agreement:

“Accounts Payable” means all accounts payable and liabilities, obligations and commitments, regardless of when asserted, billed or imposed.

“Accounts Receivable” means all accounts receivable, notes receivable and other indebtedness due and owed by any third party, including all trade accounts receivable representing amounts receivable in respect of goods shipped, products sold or services rendered, together with any unpaid financing charges accrued thereon.

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

“Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“Agreement” or “this Agreement” means this Sale and Purchase Agreement between the parties hereto (including the Schedules hereto and the Disclosure Schedule) and all amendments hereto made in accordance with the provisions of Section 10.07, as conformed through the Amendment to Sale and Purchase Agreement dated as of January 3, 2011 between the parties hereto.

6

“Ancillary Agreements” means the Assignments of Lease, the Assumption Agreements, the Bills of Sale, the Cafeteria Agreement, the Cork Lease Agreement, the Distribution Agreement, the IP Assignment, the OUS Transfer Agreements, the Purchaser IP License Agreement, the Sales Agent Agreement, the Seller IP License Agreement, the Separation Agreement, the Supply Agreement, the Technology Transfer Agreement and the Transition Services Agreement.

“Assignments of Lease” means the Assignments of Lease to be executed by BSC and the Sellers at the Closing with respect to the Fremont Building #4 Facility and the West Valley Facility, substantially in the forms attached hereto as Exhibit 1.01(a)(i) and Exhibit 1.01(a)(ii), respectively.

“Assumption Agreements” means the Assumption Agreements to be executed by the Purchaser and one or more of BSC and the Sellers at the Closing, substantially in the form attached hereto as Exhibit 1.01(b).

“Bills of Sale” means the Bills of Sale and Assignment to be executed by one or more of BSC and the Sellers at the Closing, substantially in the form attached hereto as Exhibit 1.01(c).

“BSC Compensation Tax Items” means items of loss, deduction or credits in respect of the grant, exercise, vesting or disposition by a Transferred Employee of an option to acquire BSC capital stock.

“BSC’s Knowledge” or “Knowledge of BSC” or similar terms used in this Agreement mean the actual (but not constructive or imputed) knowledge of the Persons listed on Schedule 1.01(a), after reasonable inquiry of the current employees of BSC and its Affiliates having primary responsibility for the subject matter of the inquiry.

“Business” means the business of researching, developing, manufacturing, marketing, distributing and selling diagnostic and therapeutic products for use in intra-cranial endovascular surgeries to treat vascular diseases of the brain; provided that the Business does not include such activities with respect to devices for treatment of diseases of the carotid artery, including within the internal or external carotid artery.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the City of New York.

“Business Intellectual Property” means the Transferred Intellectual Property and the Licensed Intellectual Property.

“Cafeteria Agreement” means the agreement to be executed by the Purchaser and BSC relating to access and use of the cafeteria located in the Fremont Building #4 Facility.

“Cleanup” means all actions required to: (i) cleanup, remove, treat or remediate Hazardous Materials in the indoor or outdoor environment; (ii) prevent the Release of Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and

7

post-remedial monitoring and care; or (iv) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Hazardous Materials in the indoor or outdoor environment.

“Closing Transfer Employee” means an employee of BSC or the Sellers who is (i) listed and identified (either by name or, to the extent disclosure by name is prohibited by applicable Law, by description of function) as a Closing Transfer Employee in Section 6.01 of the Disclosure Schedule, and (ii) any other employees employed by BSC or the Seller between the date hereof and the Closing Date, and identified as a Closing Transfer Employee by mutual agreement of BSC and the Purchaser (in each case, if such employee is still employed by BSC or the Sellers on the Closing Date).

“Code” means the Internal Revenue Code of 1986, as amended.

“Contract” means any binding contract, agreement, instrument, license, sublicense, lease, sublease, commitment, sales and purchase order, bid and offer.

“Contract Manufacturing Sites” means the Real Property identified on Schedule 1.01(b), at which BSC currently manufactures certain Products and Product components or performs certain services with respect to the manufacturing of certain Products.

“control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

“Conveyance Taxes” means any sales, use, transfer, conveyance, ad valorem, stamp, stamp duty, recording, real property transfer or gains Taxes or other similar Taxes imposed by any Governmental Authority upon the sale, transfer or assignment of real, personal, tangible or intangible property or any interest therein, or upon the recording of any such sale, transfer or assignment, together with any interest, additions or penalties in respect thereof; but, for the avoidance of doubt, shall exclude VAT, any Taxes that are imposed on BSC’s or any Seller’s income or gain, and any Taxes that are Recoverable Taxes.

“Cork Facility” means BSC’s manufacturing facilities located at Business and Technology Park, Model Farm Road, Cork, Ireland.

“Cork Lease Agreement” means the Lease Agreement to be executed by Boston Scientific Cork Limited and the Purchaser or a Purchaser Affiliate at the Closing, substantially in the form attached hereto as Exhibit 1.01(d) pursuant to which Boston Scientific Cork Limited shall lease the Cork Purchaser Leased Facility to the Purchaser or such Purchaser Affiliate effective as of the Cork Manufacturing Transfer Date.

“Cork Manufacturing Transfer Date” has the meaning given to such term in the Separation Agreement.

8

“Cork Purchaser Leased Facility” means that portion of the Cork Facility to be leased to the Purchaser pursuant to the Cork Lease Agreement.

“Cork Transfer Employee” means an employee of BSC or the Sellers who (i) is, with respect to salaried employees of the Business, set forth (either by name or, to the extent disclosure by name is prohibited by applicable Law, by description of function) in Section 6.01 of the Disclosure Schedule under the heading Cork Transfer Employees, (ii) will be, with respect to hourly employees of BSC or the Sellers, set forth by name in an update to Section 6.01 of the Disclosure Schedule, which shall be provided to the Purchaser as soon as practicable following the signing of this Agreement (and in no event later than fifteen (15) Business Days following the signing of this Agreement) and shall include all hourly labor employees of BSC or the Sellers located in the Cork Facility who are primarily engaged in the Business on the date of this Agreement (approximately 425 employees) and (iii) any other employee who is employed by BSC or the Seller in accordance with the terms of the Separation Agreement between the Closing Date and the Cork Manufacturing Transfer Date and identified as a Cork Transfer Employee to the Purchaser (in each case, if such employee is still employed by BSC or the Sellers on the Cork Manufacturing Transfer Date).

“Corresponding Transfer Date Employees” means, with respect to the Closing Date, the Cork Manufacturing Transfer Date, the Fremont Manufacturing Transfer Date, the West Valley Manufacturing Transfer Date, a Deferred Closing Date and a Delayed Transfer Date, respectively, the Closing Transfer Employees, the Cork Transfer Employees, the Fremont Transfer Employees, the West Valley Transfer Employees, the Deferred Closing Transfer Employees located in the applicable Deferred Closing Country and the Delayed Transfer Employees.

“Deferred Closing Transfer Employee” means, for each Deferred Closing Country, (i) an employee of BSC or the Sellers who is set forth (either by name or, to the extent disclosure by name is prohibited by applicable Law, by description of function) in Section 6.01 of the Disclosure Schedule under the heading Deferred Closing Transfer Employees and (ii) any other employee who is employed by BSC or the Sellers between the Closing Date and the applicable Deferred Closing Date, identified as a Deferred Closing Transfer Employee to the Purchaser and agreed to be included as a Deferred Closing Transfer Employee by the Purchaser (in each case, if such employee is still employed by BSC or the Sellers on the Deferred Closing Date).

“Delayed Transfer Date” means a date agreed upon by BSC and the Purchaser on which the Purchaser shall offer employment to a Delayed Transfer Employee or the date on which such employment shall transfer automatically by operation of Law.

“Delayed Transfer Employee” means (i) an employee of BSC or the Sellers who is set forth (either by name or, to the extent disclosure by name is prohibited by applicable Law, by description of function) in Section 6.01 of the Disclosure Schedule under the heading Delayed Transfer Employees and (ii) any other employee who is employed by BSC or the Sellers between the Closing Date and the final Employee Transfer Date, identified as a Delayed Transfer Employee to the Purchaser and agreed to be included as a Delayed Transfer Employee by the Purchaser (in each case, if such employee is still employed by BSC or the Sellers prior to the final Employee Transfer Date).

9

“Disclosure Schedule” means the Disclosure Schedule attached hereto, dated as of the date hereof, delivered by BSC to the Purchaser in connection with this Agreement. Notwithstanding anything to the contrary contained in the Disclosure Schedule or in this Agreement, the information and disclosures contained in any section of the Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any other section of the Disclosure Schedule as though fully set forth in such other section for which the applicability of such information and disclosure is reasonably apparent on the face of such information or disclosure.

“Distribution Agreement” means the Distribution Agreement to be executed among one or more of BSC and its Affiliates and one or more of the Purchaser and its Affiliates at the Closing, substantially in the form attached hereto as Exhibit 1.01(n).

“Employee Transfer Date” means, as applicable, (i) the Closing Date, in respect of the Closing Transfer Employees, (ii) the Cork Manufacturing Transfer Date, in respect of the Cork Transfer Employees, (iii) the Fremont Manufacturing Transfer Date, in respect of the Fremont Transfer Employees, (iv) the West Valley Manufacturing Transfer Date, in respect of the West Valley Transfer Employees, (v) the applicable Deferred Closing Date, in respect of the Deferred Closing Transfer Employees located in a Deferred Closing Country or (vi) the Delayed Transfer Date, in respect of each Delayed Transfer Employee.

“Encumbrance” means any security interest, charge, pledge, hypothecation, mortgage, lien, encumbrance, option, restrictive covenant or imperfection of title, other than any license of, option to license, or covenant not to assert claims or infringement, misappropriation or other violation with respect to, Intellectual Property.

“Environmental Claim” means any Action alleging Liability arising out of, based on or resulting from (a) the presence, Release or threatened Release of any Hazardous Materials at any location, whether or not owned or operated by BSC or any Seller, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

“Environmental Law” means any Law relating to (a) pollution or protection of the environment, including natural resources, (b) human exposure to Hazardous Materials, (c) the manufacture, processing, distribution, use, treatment, storage, Release or threatened Release, transport or handling of Hazardous Materials and (d) recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.

“Environmental Liability” means any claim, demand, order, suit, obligation, Liability, cost (including the cost of any investigation, testing, compliance or remedial action), consequential damages, loss or expense (including reasonable and incurred attorney’s and consultant’s fees and expenses) arising out of, relating to or resulting from any Environmental Law or environmental, health or safety matter, violation or condition, including natural resources, and to the extent related in any way to or arising out of, directly or indirectly, the operation of the Business or the ownership, control or use of the Purchased Assets.

“Environmental Permits” means any permit, approval, registration, identification number or license required under or issued pursuant to any applicable Environmental Law.

10

“ERISA” means the Employment Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“ERISA Affiliate” means any entity that, together with BSC, would be deemed a single employer within the meaning of Section 414 of the Code or Section 4001 of ERISA.

“Escrow Agent” means Wells Fargo Bank, National Association.

“Escrow Agreement” means the Escrow Agreement to be executed among BSC, the Purchaser and the Escrow Agent at the Closing, substantially in the form attached hereto as Exhibit 1.01(o); provided that if the Escrow Agent does not execute the Escrow Agreement on the Closing Date, BSC and the Purchaser agree to obtain the Escrow Agent’s signature promptly (and in no event later than three (3) Business Days) following the Closing Date.

“Excluded Taxes” means all Liabilities for (i) Taxes imposed with respect to or relating to any Purchased Asset or the Business for any Pre-Closing Period, (ii) Taxes imposed with respect to or relating to any Purchased Asset or the Business with respect to any Straddle Period that are allocated to the portion of the Straddle Period ending on the Closing Date pursuant to Section 5.17, (iii) Taxes for which BSC or any Seller or predecessor to BSC or any Seller is or may be liable for any taxable period that are not imposed with respect to or relating to the Purchased Assets or the Business, (iv) any Taxes related to or determined by reference to the Tax liability of BSC or any Seller for which the Purchaser or any of its Affiliates may become liable as a result of the failure of any party to comply with any bulk sale, bulk transfer or similar Laws and (v) Taxes imposed on the Purchaser or any of the Purchaser Affiliates, as applicable, resulting from the amount of Taxes withheld from the Initial Purchase Price and the Milestone Payments being less than the amount required to be so withheld under applicable Law. For the avoidance of doubt, “Excluded Taxes” shall include all income, franchise and similar Taxes of BSC or any Seller arising as a result of the sale of the Purchased Assets pursuant to this Agreement (but shall not include any Conveyance Taxes).

“Facility Transfer Date” means, as applicable, (i) the Cork Manufacturing Transfer Date, in respect of the Cork Purchaser Leased Facility, (ii) the Fremont Manufacturing Transfer Date, in respect of the Fremont Building #4 Facility or (iii) the West Valley Manufacturing Transfer Date, in respect of the West Valley Facility.

“FDA Laws” means all applicable statutes, rules, regulations, standards, guidelines, policies and orders administered or issued by the FDA or any comparable Governmental Authority.

“Federal Health Care Program” has the meaning specified in Section 1128B(f) of the SSA and includes the Medicare, Medicaid and TRICARE programs.

“Federal Privacy and Security Regulations” means the regulations contained in 45 C.F.R. Parts 160 and 164.

“Former Employee” means an employee of BSC or any of its Affiliates with respect to the Business who has terminated employment for any reason (including retirement and long-term disability) prior to the applicable Employee Transfer Date.

11

“Fremont Building #4 Facility” means Building #4 at BSC’s Fremont manufacturing facilities located at 47900 Bayside Parkway, Fremont, CA 94538, which is subject to the Industrial Space Lease, dated January 1, 2007, between JER BTP II, LLC and BSC.

“Fremont Manufacturing Transfer Date” has the meaning given such term in the Separation Agreement.

“Fremont Transfer Employee” means an employee of BSC or the Sellers who (i) is, with respect to salaried employees of the Business, set forth (either by name or, to the extent disclosure by name is prohibited by applicable Law, by description of function) in Section 6.01 of the Disclosure Schedule under the heading Fremont Transfer Employees, (ii) will be, with respect to hourly employees of BSC or the Sellers, set forth by name in an update to Section 6.01 of the Disclosure Schedule, which shall be provided to the Purchaser as soon as practicable following the signing of this Agreement (and in no event later than fifteen (15) Business Days following the signing of this Agreement) and shall include all hourly employees who are either primarily engaged in the Business or have the requisite degree of expertise and experience to be useful to the Business (approximately 25 employees) and (iii) is any other employee who is employed by BSC or the Seller in accordance with the terms of the Separation Agreement between the Closing Date and the Fremont Manufacturing Transfer Date and identified as a Fremont Transferred Employee to the Purchaser (in each case, if such employee is still employed by BSC or the Sellers on the Fremont Manufacturing Transfer Date).

“Governmental Authority” means any federal, national, supranational, foreign, state, provincial, local or other government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body of competent jurisdiction.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, ruling, determination or award entered by or with any Governmental Authority.

“Hazardous Materials” means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. § 300.5, or defined as such by, or regulated as such under, any Environmental Law, including any petroleum or petroleum products, by-products or derivatives, radon, toxic mold, radioactive materials, and asbestos or asbestos-containing materials.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

“Indemnifying Party” means BSC pursuant to Section 8.02 and the Purchaser pursuant to Section 8.03, as the case may be.

“Intellectual Property” means any and all of the following throughout the world: (a) utility patents, design patents, industrial designs, and foreign equivalents, (b) trademarks, service marks, trade names, trade dress and Internet domain names, together with the goodwill

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associated exclusively therewith, (c) copyrights and all rights related thereto, including copyrights in computer software, (d) registrations and applications for registration of any of the foregoing in (a)-(c), and (e) trade secrets and other confidential and proprietary information.

“InZone™ Detachment System” means the InZone™ Detachment System described in the 510(k) submission therefor, a copy of which was provided to the Purchaser prior to the date hereof.

“IP Assignment” means the IP Assignment to be executed among one or more of BSC or the Sellers and the Purchaser at the Closing, substantially in the form attached hereto as Exhibit 1.01(e).

“IRS” means the Internal Revenue Service of the United States and any successor agency.

“Law” means any federal, national, supranational, state, provincial, foreign, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

“Leased Real Property” means the real property leased by BSC, as tenant, consisting of the Fremont Building #4 Facility and the West Valley Facility, including all buildings and other structures, facilities or improvements currently or hereafter located thereon and together with, all fixtures, systems, equipment and items of personal property of BSC or any Seller which are attached to, or located at such real property or appurtenant thereto, and all easements, licenses, rights and appurtenances relating to the foregoing.

“Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, known or unknown or determined or determinable, including those arising under any Law, Action or Governmental Order and those arising under any Contract, commitment or undertaking.

“Licensed Intellectual Property” means all Intellectual Property that BSC or a Seller is licensed to use pursuant to the Transferred IP Agreements.

“Material Adverse Effect” means any circumstance, change, effect, development or condition that, individually or considered together with all other circumstances, changes, effects, developments and conditions, (a) has had or would reasonably be expected to have a material adverse effect on the business, results of operations, properties, assets or condition (financial or otherwise) of the Business, taken as a whole or (b) materially and adversely affects or materially delays, or would be reasonably expected to materially and adversely affect or delay, the ability of BSC and its Affiliates to carry out their respective material obligations under, and to consummate the transactions contemplated by, this Agreement, the Separation Agreement, the Supply Agreement, the Technology Transfer Agreement, the Seller IP License Agreement, or the Transition Services Agreement; provided that none of the following, either alone or in combination, shall be considered in determining whether there has been a “Material Adverse Effect”: (i) events, circumstances, changes or effects that generally affect the industries in which the Business operates (including legal and regulatory changes), (ii) general economic or political conditions (or changes therein) or events, circumstances, changes or effects affecting the

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securities markets generally, (iii) changes arising from the announcement of the execution of this Agreement or the pendency of the transactions contemplated hereby, (iv) any circumstance, change or effect that results from any action taken pursuant to or in accordance with Section 5.01 or at the written request of the Purchaser, (v) changes caused by acts of terrorism or war (whether or not declared) occurring after the date hereof, including any worsening thereof, (vi) natural disasters occurring in any country or region in the world and (vii) the failure by the Business to meet any estimates, expectations, projections or budgets (provided that, to the extent not the subject of any of the foregoing clauses (i) through (vi) above, the underlying cause of such failure may be taken into account to determine whether a Material Adverse Effect has occurred), except in the cases of (i), (ii), (v) and (vi) to the extent such circumstance, change, effect, development or condition has a materially disproportionate effect on the Business, taken as a whole, compared with other Persons operating in the industries in which the Business operates.

“OUS Transfer Agreements” means the business transfer agreements to be executed by the Purchaser or the applicable Purchaser Affiliates, on the one hand, and BSC or the applicable Sellers, on the other hand, at the Closing, in substantially the form attached hereto as Exhibit 1.01(f) and subject to Section 5.24(b).

“Permitted Encumbrances” means (a) statutory liens for current Taxes not yet due or delinquent (or which may be paid without interest or penalties) or the validity or amount of which is being contested in good faith by appropriate proceedings diligently pursued, (b) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of BSC or any of the Sellers, as the case may be, or the validity or amount of which is being contested in good faith by appropriate proceedings diligently pursued, or pledges, deposits or other liens securing the performance of bids, trade contracts, leases or statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation), (c) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities which do not, individually or in the aggregate, materially interfere with the occupancy or current use of any of the Purchased Assets or materially reduce the value of any of the Purchased Assets, (d) all covenants, conditions, restrictions, easements, non-monetary charges, rights-of-way, other non-monetary Encumbrances and other similar matters of record set forth in any state, local or municipal franchise under which the Business is conducted which do not, individually or in the aggregate, materially interfere with the occupancy or current use of any of the Purchased Assets or materially reduce the value of any of the Purchased Assets and (e) matters which would be disclosed by an accurate survey or inspection of the Real Property included in the Purchased Assets which do not, individually or in the aggregate, materially impair the occupancy or current use of such Real Property which they encumber or materially reduce the value of any of the Purchased Assets.

“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

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“Pre-Closing Period” means any taxable period ending on or prior to the Closing Date, provided that (i) in the case of any Purchased Asset that relates to any of the Transferred Sites that is subject to a deferred transfer under the terms of this Agreement, and is actually transferred on a Facility Transfer Date that occurs after the Closing Date, the term “Pre-Closing Period” means any taxable period ending on or prior to the relevant Facility Transfer Date with respect to such Purchased Asset; (ii) in the case of any Deferred Asset or Deferred Liability, the term “Pre-Closing Period” means any taxable period ending on or prior to the relevant Deferred Closing Date with respect to such Deferred Asset or Deferred Liability and (iii) in the case of any Corresponding Transfer Date Employees (other than a Closing Transfer Employee), the term “Pre-Closing Period” means any taxable period ending on or prior to the relevant Employee Transfer Date with respect to such Corresponding Transfer Date Employee.

“Product” means each product that is or was manufactured, marketed, distributed or sold by BSC or any Seller in connection with the Business and any product that is currently being developed by BSC or any Seller in connection with the Business, including the products identified on Schedules A through C of the Technology Transfer Agreement.

“Product Liabilities” means, with respect to any Product, all Liabilities resulting from actual or alleged personal injury, including death and damage to property, irrespective of the legal theory asserted.

“Purchase Price Bank Account” means a bank account in the United States to be designated by BSC in a written notice to the Purchaser at least five Business Days before the Closing.

“Purchaser IP License Agreement” means the Purchaser IP License Agreement to be executed among one or more of BSC or its Affiliates and the Purchaser at the Closing, substantially in the form attached hereto as Exhibit 1.01(g).

“Real Property” means all land and all buildings, any ground lease or leasehold interests therein and any improvements and fixtures erected thereon and all appurtenances related thereto.

“Recoverable Taxes” means Taxes that would otherwise be considered Conveyance Taxes, but for the fact that the amount paid is refundable or creditable by the applicable Governmental Authority to the Purchaser, BSC or any Seller regardless of whether such refund or credit is applied for by the party that is entitled to receive it. The term “Recoverable Taxes” shall also include any VAT to the extent that it is refundable or creditable by the applicable Governmental Authority to the Purchaser, BSC or any Seller regardless of whether such refund or credit is applied for by the party that is entitled to receive it.

“Registrations” means authorizations, approvals, clearances, licenses, permits, certificates or exemptions issued by any Governmental Authority (including 510(k) clearances, pre-market approval applications, pre-market notifications, investigational device exemptions, product recertifications, manufacturing approvals and authorizations, CE Marks, pricing and reimbursement approvals, labeling approvals, registration notifications or their foreign equivalent) held by BSC or any Seller relating to the Business, that are required for the research,

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development, manufacture, distribution, marketing, storage, transportation, use and sale of the Products.

“Regulations” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.

“Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment (including ambient air, surface water, groundwater and surface or subsurface strata) or within any building, structure, facility or fixture, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or property.

“Restricted Areas” means the researching, developing, manufacturing, marketing, distributing and selling of diagnostic, preventative, monitoring or therapeutic products for the following anatomy or disease states, in each case, excluding the Business:

(a) all coronary functions and diseases, including heart failure and hypertension;

(b) all arterial and venous systems;

(c) all pulmonary function;

(d) all gastrointestinal function and endoluminal access, including stomach, liver, pancreas and colon;

(e) all diabetes and obesity solutions, excluding insulin pumps;

(f) all urinary tract, including kidneys, bladder and prostate;

(g) all women’s health function, including pelvic floor and reproductive systems; and

(h) all neuromodulation solutions, including deep brain stimulation.

“Sales Agent Agreement” means the Independent Sales Agent Agreement to be executed between Boston Scientific Japan K.K. and the Purchaser or one of its Affiliates at the Closing with respect to sales of BSC products in Japan, substantially in the form attached hereto as Exhibit 1.01(h).

“Seller IP License Agreement” means the Seller IP License Agreement to be executed among one or more of BSC or its Affiliates and the Purchaser at the Closing, substantially in the form attached hereto as Exhibit 1.01(i).

“Sellers” means all Affiliates of BSC engaged in the Business, including the Persons set forth on Schedule 1.01(c).

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“Separation Agreement” means the Separation Agreement substantially in the form attached hereto as Exhibit 1.01(j).

“Straddle Period” means any taxable period beginning on or prior to the Closing Date and ending after the Closing Date, provided that (i) in the case of any Purchased Asset that relates to any of the Transferred Sites that is subject to a deferred transfer under the terms of this Agreement, and is actually transferred on a Facility Transfer Date that occurs after the Closing Date, the term “Straddle Period” means any taxable period beginning on or prior to the relevant Facility Transfer Date and ending after the relevant Facility Transfer Date with respect to such Purchased Asset; (ii) in the case of any Deferred Asset or Deferred Liability, the term “Straddle Period” means any taxable period beginning on or prior to the relevant Deferred Closing Date and ending after the relevant Deferred Closing Date with respect to such Deferred Asset or Deferred Liability and (iii) in the case of any Corresponding Transfer Date Employees (other than a Closing Transfer Employee), the term “Straddle Period” means any taxable period beginning on or prior to the relevant Employee Transfer Date and ending after the relevant Employee Transfer Date with respect to such Corresponding Transfer Date Employee.

“Supply Agreement” means the Supply Agreement substantially in the form attached hereto as Exhibit 1.01(k).

“Target™ Detachable Coils” means the Target™ Detachable Coils described in the 510(k) submission therefor, a copy of which was provided to the Purchaser prior to the date hereof.

“Tax” or “Taxes” means (i) all income, profits, franchise, gross receipts, capital, sales, use, withholding, value added, ad valorem, transfer, employment, social security, disability, occupation, asset, property, severance, documentary, stamp, estimated, payroll, license, premium, windfall profits, environmental, unemployment, registration, alternative or add-on minimum, any amount owed in respect of any Law relating to unclaimed property or escheat, excise and any other taxes, duties and similar charges or assessments in the nature of a tax imposed by or on behalf of any Governmental Authority and any interest, fines, penalties or additions relating to any such tax, duty or similar charge or assessment in the nature of a tax and (ii) any liability for or in respect of any amounts described in clause (i) as a transferee or successor, by contract, or as a result of having filed any Tax Return on a combined, consolidated, unitary, affiliated or similar basis with any other Person.

“Tax Returns” means any and all returns, reports, forms and any other document (including elections, declarations, amendments, schedules, information returns or attachments thereto) filed or required to be filed with a Governmental Authority with respect to Taxes.

“Technology Transfer Agreement” means the Technology Transfer Agreement substantially in the form attached hereto as Exhibit 1.01(l).

“Transfer Laws” means those provisions of applicable local Laws providing for the automatic transfer of employment of employees on the sale of a business including local Laws implementing EC Directive 2001/23/EC (the Acquired Rights Directive).

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“Transferred Sites” means the Fremont Building #4 Facility, the West Valley Facility and the Cork Purchaser Leased Facility.

“Transition Services Agreement” means the Transition Services Agreement substantially in the form attached hereto as Exhibit 1.01(m).

“U.S. GAAP” means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved.

“U.S. Plan” means each Plan established or maintained in the United States of America for the benefit of Corresponding Transfer Date Employees of BSC or the Sellers residing inside the United States of America.

“VAT” means any value added tax imposed on the supply of goods and services under European Union Directive 2006/112/EC (or under any rules, regulation, orders or instruments authorized by that Directive) and any similar value added tax pursuant to the laws of any jurisdiction which is not a member of the European Union (including Canadian GST and Quebec Sales Tax), and includes any interest or penalties in respect thereof.

“West Valley Facility” means the manufacturing facility located at 2405 West Orton Circle, West Valley City, UT 84119, which is subject to the Lease, dated November 3, 2000, between H. W. Breinholt and BSC, as amended by the Extension of Lease, dated October 16, 2005, and as amended by Extension of Lease, dated October 15, 2010.

“West Valley Manufacturing Transfer Date” has the meaning given such term in the Separation Agreement.

“West Valley Transfer Employee” means an employee of BSC or the Sellers who is (i) set forth (either by name or, to the extent disclosure by name is prohibited by applicable Law, by description of function) in Section 6.01 of the Disclosure Schedule under the heading West Valley Transfer Employees and (ii) any other employee who is employed by BSC or the Seller in accordance with the terms of the Separation Agreement between the Closing Date and the West Valley Manufacturing Transfer Date and identified as a West Valley Transfer Employee to the Purchaser (in each case, if such employee is still employed by BSC or the Sellers on the West Valley Manufacturing Transfer Date).

Section 1.02 Definitions. The following terms have the meanings set forth in the Sections set forth below:

Definition	Location
“2010 Bonus Pool”	6.02(b)(ii)
“Acquired Business”	5.11(b)
“Aggregate Deferred Amount”	2.07(b)
“Allocation Date”	2.03(b)
“Allocation Statement”	2.03(b)
“Allowed Requested Set-Off Payment”	8.08(g)
“Antitrust Laws”	5.04(a)

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Definition	Location
“Assumed Liabilities”	2.02(a)
“Assumed Portion”	8.05(c)
“Audited Special Purpose Financial Statements”	5.09
“BSC”	Preamble
“BSC’s 401(k) Plan”	6.06(a)
“BSC Other Businesses”	2.02(b)(iv)
“Business Associate Agreement”	3.18(e)
“Closing”	2.05
“Closing Date”	2.05
“COBRA”	6.05
“Confidentiality Agreement”	5.03(a)
“Covers”	5.26(a)
“Defense Strategy”	8.05(c)
“Deferred Assets”	2.08(a)
“Deferred Closing”	2.08(b)
“Deferred Closing Countries”	2.08(a)
“Deferred Closing Country Amount”	2.07(b)
“Deferred Closing Date”	2.08(b)
“Deferred Liabilities”	2.08(a)
“Disallowed Requested Set-Off Payment”	8.08(f)
“Excess Cost”	Schedule 5.05
“End Date”	9.01(a)
“Escrow Account”	8.08(h)
“Excluded Assets”	2.01(b)
“Excluded Liabilities”	2.02(b)
“Existing Stock”	5.06(b)
“FDA”	3.17(a)
“Federal Health Care Program Laws”	3.18(c)
“Foreign Benefit Plan”	3.14(k)
“Incentive Compensation Continuation Period”	6.02(b)(i)
“Incentive Plans”	6.02(b)(i)
“Initial Purchase Price”	2.03(a)
“Loss”	8.02
“Material Contracts”	3.16(a)
“Milestone Payment”	2.04
“Milestone Payment Date”	8.08(c)
“Mixed Action”	8.05(c)
“Mixed Contract”	5.23
“Plans”	3.14(a)
“Permits”	3.08
“PIP”	6.02(b)(ii)
“Purchase Price”	2.03(a)
“Purchased Assets”	2.01(a)
“Purchaser”	Preamble
“Purchaser Affiliate”	10.06

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Definition	Location
“Purchaser Indemnified Party”	8.02
“Purchaser’s 401(k) Plan”	6.06(b)
“Purchaser’s Employment Contingencies”	6.01(a)
“Recipient”	5.16
“Request Notice”	8.08(c)
“Requested Set-Off Payment”	8.08(c)
“Retained Names and Marks”	5.06(a)
“Seller Indemnified Party”	8.03
“Set-Off Claim”	8.08(b)
“Set-Off Dispute Notice”	8.08(d)
“Severance Plan Continuation Period”	6.02(c)
“Specified Representations and Warranties”	8.01
“Supplier”	5.16
“Tangible Personal Property”	2.01(a)(iv)
“Third Party Claim”	8.05(b)
“Third Party Firm”	2.03(b)
“Transferred Contracts”	2.01(a)(x)
“Transferred Employee”	6.01(a)
“Transferred Intellectual Property”	2.01(a)(vii)
“Transferred IP Agreements”	2.01(a)(viii)
“Transferred Permits”	2.01(a)(xii)
“Transferred Records”	2.01(a)(vi)
“Transferred Sales Materials”	2.01(a)(ix)
“Unaudited Special Purpose Financial Statements”	3.04(a)
“WARN”	6.04

Section 1.03 Interpretation and Rules of Construction. In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

(a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated;

(b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

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(d) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

(f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

(g) references to a Person are also to its successors and permitted assigns;

(h) the use of “or” is not intended to be exclusive unless expressly indicated otherwise; and

(i) references to any Action that has been initiated but with respect to which process or other comparable notice has not been served on or delivered to BSC or the Sellers shall be deemed to be “threatened” rather than “pending.”

ARTICLE II

SALE AND PURCHASE

Section 2.01 Sale and Purchase of Assets. (a) Upon the terms and subject to the conditions of this Agreement, effective as of the Closing (or as of such later date as may be expressly provided in this Section 2.01(a), Section 2.08 or in the Separation Agreement), BSC shall, and shall cause the Sellers to, sell, assign, transfer, convey and deliver to the Purchaser or its Purchaser Affiliates, free and clear of all Encumbrances (other than Permitted Encumbrances) and the Purchaser shall, and shall cause its Purchaser Affiliates to, purchase from BSC and the Sellers, all the right, title and interest of BSC and the Sellers in and to all of the assets, properties, rights and claims of BSC and the Sellers primarily used in or primarily related to the Business, other than the Excluded Assets or as expressly provided in this Section 2.01(a) or in the Ancillary Agreements (the “Purchased Assets”), including the following:

(i) the Business as a going concern;

(ii) the goodwill of BSC and the Sellers primarily related to the Business;

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(iii) (A) all rights in respect of the Leased Real Property and (B) all rights granted to the Purchaser with respect to the Cork Purchaser Leased Facility pursuant to the Cork Lease Agreement;

(iv) all tangible personal property used or held for use primarily in the conduct of the Business, including the tangible personal property identified on Section 2.01(a)(iv) of the Disclosure Schedule and all machinery, equipment, furnishings, computer hardware, tangible copies of software or other code, tools, furniture, fixtures and vehicles used primarily in the operation of the Business, and all assets held for personal use such as cell phones, personal computers, external storage devices and Blackberrys used by Transferred Employees (collectively, the “Tangible Personal Property”);

(v) all finished goods inventory (including consigned inventory) and other merchandise used or held for use primarily in the conduct of the Business and maintained, held or stored by or for BSC or one or more of the Sellers, as of the Closing Date, and any prepaid deposits for any of the same;

(vi) all books of account, general, financial, personnel records and non-income Tax Returns (and supporting workpapers and other records), invoices, shipping records, supplier lists, correspondence and other documents, records and files of BSC and the Sellers, including filings with the FDA and other Governmental Authorities and quality control histories to the extent pertaining to the Products, in each case primarily related to the Business or the Purchased Assets, (the “Transferred Records”); provided that BSC may redact any information from such Transferred Records not pertaining to the Products or primarily related to the Business prior to the delivery of such Transferred Records to the Purchaser (provided that such redaction shall not impair any information pertaining to the Products or primarily related to the Business contained in the Transferred Records) and may retain a copy of any Transferred Records;

(vii) only the Intellectual Property identified in Section 2.01(a)(vii) of the Disclosure Schedule (the “Transferred Intellectual Property”);

(viii) subject to Section 5.05, only the rights of BSC or the Sellers under the licenses of, and covenants not to assert with respect to, Intellectual Property identified in Section 2.01(a)(viii) of the Disclosure Schedule (the “Transferred IP Agreements”);

(ix) all sales, marketing and promotional literature and manuals, customer and supplier lists, distribution lists, pre-clinical, clinical and marketing studies and other sales-related materials of BSC and the Sellers, in each

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case primarily related to the Products or the Business (the “Transferred Sales Materials”); provided that BSC may redact any information from such Transferred Sales Materials not primarily related to the Products or the Business prior to the delivery of such Transferred Sales Materials to the Purchaser (provided that such redaction shall not impair any information primarily related to the Products or the Business contained in the Transferred Sales Materials) and may retain a copy of any Transferred Sales Materials;

(x) subject to Section 5.05, all rights of BSC or the Sellers under all Contracts exclusively related to the Business, other than the Transferred IP Agreements (which are addressed in Section 2.01(a)(viii)) (and including all real property leases contemplated by Section 2.01(a)(iii)(A) but excluding any other real property leases) (the “Transferred Contracts”), including the Contracts set forth on Section 2.01(a)(x) of the Disclosure Schedule;

(xi) all prepayments, security deposits, refunds and prepaid expenses to the extent primarily related to the Business;

(xii) all transferable licenses, Permits, Registrations, authorizations, orders and approvals from any Governmental Authority of BSC or the Sellers relating to any Transferred Site or primarily related to the Business, including those identified in Section 2.01(a)(xii) of the Disclosure Schedule (the “Transferred Permits”); and

(xiii) all claims, defenses, causes of action, choses in action, rights of recovery and rights of setoff or reimbursement of any kind (and rights under and pursuant to all warranties, representations and guarantees made by suppliers of products, materials, or equipment, or components thereof) of BSC or any of the Sellers, primarily related to the Business or the Purchased Assets, including rights to recover past, present and future damages in connection therewith.

(b) Notwithstanding anything in Section 2.01(a) to the contrary, the Purchased Assets shall not include the right, title and interest of BSC and the Sellers in, to and under the following assets, properties, rights and claims (the “Excluded Assets”):

(i) the Purchase Price Bank Account;

(ii) all cash and cash equivalents, securities, and negotiable instruments of BSC or any of the Sellers on hand, in lock boxes, in financial institutions or elsewhere, including all cash residing in any collateral

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cash account securing any obligation or contingent obligation of BSC, the Sellers or any of their Affiliates;

(iii) all Accounts Receivable arising from the conduct of the Business prior to 11:59 p.m. EST on the day immediately prior to the Closing Date;

(iv) all claims, defenses, causes of action, choses in action, rights of recovery for reimbursement, contribution, refunds, indemnity or other similar payment recoverable by BSC or the Sellers from or against any third party to the extent relating to any Excluded Liabilities;

(v) all assets, properties, rights and claims in respect of the Contract Manufacturing Sites, other than all rights of the Purchaser under the Ancillary Agreements;

(vi) the company seal, minute books, charter documents, stock or equity record books and such other books and records as pertain to the organization, existence or capitalization of BSC, the Sellers or any of their Affiliates, as well as any other records or materials relating to BSC generally and not primarily associated with or primarily employed by BSC or any of the Sellers in the conduct of the Business;

(vii) any capital stock of the Sellers;

(viii) any Plan and any assets of any such Plan;

(ix) except as set forth in Section 5.06, any and all rights in and to the Retained Names and Marks;

(x) any asset, property, right or claim that is listed or described in Section 2.01(b)(x) of the Disclosure Schedule;

(xi) all rights of BSC and the Sellers under this Agreement and the Ancillary Agreements;

(xii) any rights to Tax refunds, credits or similar benefits to the extent relating to the Excluded Taxes (but only to the extent that such Excluded Taxes were paid by a Seller);

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(xiii) non-income Tax Returns (and supporting work papers and other records) of BSC and any of its Affiliates, other than those relating primarily to the Purchased Assets or the Business, and income Tax Returns (and supporting work papers and other records) of BSC and any of its Affiliates including the Sellers;

(xiv) all current and prior insurance policies of BSC and its Affiliates and, except as set forth in Section 5.21, all rights of any nature with respect thereto, including all insurance recoveries thereunder and rights to assert claims with respect to any such insurance recoveries; and

(xv) books of account, invoices, shipping records and other records to the extent pertaining to Accounts Receivable referred to in Section 2.01(b)(iii) and Accounts Payable referred to in Section 2.02(b)(i); provided, that BSC shall provide to the Purchaser copies of all such books of account, invoices, shipping records and other records redacted to exclude any information not pertaining to such Accounts Receivable and such Accounts Payable.

Section 2.02 Assumption and Exclusion of Liabilities. (a) Upon the terms and subject to the conditions set forth in this Agreement, the Purchaser shall assume, effective as of the Closing (or as of such later date as may be expressly provided in Section 2.08, Section 5.23 or in the Separation Agreement), and from and after the Closing (or such later date as may be expressly provided in Section 2.08, Section 5.23 or in the Separation Agreement) the Purchaser shall pay, perform and discharge when due, only the following Liabilities of BSC and the Sellers relating to the Business or the Purchased Assets, other than the Excluded Liabilities (the “Assumed Liabilities”):

(i) the obligations of BSC and the Sellers arising under the Transferred IP Agreements and Transferred Contracts, whether arising prior to, on or after the Closing Date (including all Liabilities arising out of or relating to any termination or announcement or notification of an intent to terminate any such Contract as a result of the transactions contemplated by this Agreement), other than any such Liabilities that are either the subject of an action, suit or arbitration pending on the Closing Date or the subject of a claim with respect to which BSC or any of its Affiliates has received written notice on or prior to the Closing Date;

(ii) all Liabilities for product warranty service claims and all Product Liabilities, whether arising prior to, on or after the Closing Date, other than Liabilities that are either the subject of an action, suit or arbitration pending on the Closing Date or the subject of a claim with respect to which BSC or any of its Affiliates has received written notice on or prior to the Closing Date;

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(iii) all Liabilities arising out of or relating to any claim that the manufacture, use, importation, sale or offer for sale of Products sold by Purchaser or its Affiliates on or after the Closing Date (regardless of whether such Products existed prior to the Closing Date) infringes, misappropriates, or violates any Person’s Intellectual Property rights or that Products sold by Purchaser or its Affiliates on or after the Closing Date (regardless of whether such Products existed prior to the Closing Date) are falsely marked with patent numbers;

(iv) all Liabilities that the Purchaser expressly has assumed or agreed to pay, or be responsible for, pursuant to the terms of this Agreement or of any Ancillary Agreement;

(v) fifty percent (50%) of all Conveyance Taxes as provided in Section 5.15; and

(vi) 100% of all Recoverable Taxes that are recoverable by the Purchaser under applicable Law.

Notwithstanding anything to the contrary contained herein, the Assumed Liabilities set forth in Section 2.02(a)(i) shall not include and the Purchaser shall not assume or have any responsibility for, and BSC shall, and shall cause the Sellers to, retain and be responsible for paying, performing and discharging when due, any Excluded Liabilities set forth in Sections 2.02(b)(i) through (xiv).

(b) BSC shall, and shall cause the Sellers to, retain and be responsible for paying, performing and discharging when due, and the Purchaser shall not assume or have any responsibility for, any Liability not expressly included in the Assumed Liabilities (the “Excluded Liabilities”), including the following Liabilities:

(i) all Accounts Payable arising from the conduct of the Business prior to 11:59 p.m. EST on the day immediately prior to the Closing Date;

(ii) all Excluded Taxes;

(iii) all Liabilities for customs duties arising from the conduct of the Business on or prior to the Closing Date;

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(iv) all Liabilities to the extent relating to or arising out of assets or businesses of BSC or any of its Affiliates that are not included in the Purchased Assets (including the Excluded Assets) (the “BSC Other Businesses”);

(v) all intercompany and intracompany receivables, payables, loans and investments related to the Business;

(vi) (A) with respect to each of the Transferred Sites, all Environmental Liabilities arising on or prior to the applicable Facility Transfer Date, including (1) the presence or Release of any Hazardous Materials at, on, under or from any of the Transferred Sites on or prior to the applicable Facility Transfer Date; (2) the disposal, on or prior to the applicable Facility Transfer Date, of any Hazardous Materials generated by BSC or any Seller or that relates to, or arises out of, directly or indirectly, the operation of the Business or BSC’s or any Seller’s ownership, control or use of the Purchased Assets; and (3) the violation of any Environmental Law on or prior to the applicable Facility Transfer Date and (B) any other Liabilities under Environmental Law, including any such Liabilities relating to any other facility used by BSC or any of its Affiliates in connection with the Business, arising on or prior to the Closing Date;

(vii) all Liabilities arising from (A) the matters listed in Section 3.07 of the Disclosure Schedule, (B) actions, suits or arbitrations pending on the Closing Date, or (C) matters that are the subject of a claim with respect to which BSC or any of its Affiliates has received written notice on or prior to the Closing Date and that would, in the case of clause (B) or (C), be required to be listed on such section of the Disclosure Schedule if existing on the date of this Agreement;

(viii) fifty percent (50%) of all Conveyance Taxes as provided in Section 5.15;

(ix) 100% of all Recoverable Taxes that are recoverable by BSC or any Seller under applicable Law;

(x) all Liabilities arising out of or relating to any claim that the manufacture, use, importation, offer for sale or sale of any Products sold by BSC or its Affiliates prior to the Closing Date infringes, misappropriates, or violates any Person’s Intellectual Property rights or that Products sold by BSC or its Affiliates prior to the Closing Date are falsely marked with patent numbers;

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(xi) all Liabilities that BSC and the Sellers have expressly assumed or agreed to pay, or be responsible for, pursuant to the terms of this Agreement or any Ancillary Agreement;

(xii) except to the extent expressly assumed in Article VI, all Liabilities in any way attributable to (A) any Corresponding Transfer Date Employee who does not become a Transferred Employee and all other employees of BSC or the Sellers, including the Former Employees, in any case, whether arising prior to, on or after the applicable Employee Transfer Date, (B) the Transferred Employees to the extent arising or otherwise attributable to the period on or prior to the applicable Employee Transfer Date, and (C) the Plans;

(xiii) all Liabilities arising (A) under the Agreement dated November 13, 1998, between the Industrial Development Agency (Ireland) and Boston Scientific Cork Limited (x) prior to the Cork Manufacturing Transfer Date in respect of the Cork Facility, or (y) after the Cork Manufacturing Transfer Date in respect of the portion of the Cork Facility that is not a Transferred Site, (B) prior to the West Valley Manufacturing Transfer Date under the Lease dated November 3, 2000, between H.W. Breinhold and BSC, as amended by the Extension of Lease, dated October 16, 2005, in respect of the West Valley Facility, and (C) prior to the Closing Date under the Industrial Space Lease dated January 1, 2007, between JER BTP II, LLC and BSC in respect of the Fremont Building #4 Facility; and

(xiv) all Liabilities arising from any failure by BSC or any of the Sellers to comply with any FDA Laws, Federal Health Care Program Laws or the Foreign Corrupt Practices Act of 1977, as amended, or any other federal, foreign, or state anti-corruption or anti-bribery Law or requirement in connection with the Business or the Products on or prior to the Closing Date.

Section 2.03 Purchase Price; Allocation of Purchase Price. (a) The purchase price for the Purchased Assets (the “Purchase Price”) shall consist of $1,400,000,000 (the “Initial Purchase Price”), (ii) the Milestone Payments contemplated by Section 2.04 and (iii) the Assumed Liabilities. To the extent that any amount of VAT is required to be paid with respect to any payment made by the Purchaser to BSC under this Section 2.03 or under Section 2.04, the amount of such payment shall be increased to include the amount of VAT so required to be paid.

(b) Within thirty (30) days after the date hereof, the Purchaser shall provide to BSC, for income Tax purposes, the Purchaser’s proposed allocation of the Purchase Price among the Purchased Assets (the “Allocation Statement”). BSC shall review the Allocation Statement and, to the extent BSC in good faith disagrees with the content of the Allocation Statement, BSC shall, within twenty-one (21) days after receipt of the Allocation Statement, provide written notice to the Purchaser of such disagreement, which notice shall

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contain specific items of disagreement and reasons therefor. If BSC does not object by written notice within such 21-day period, the Purchaser’s Allocation Statement shall be final, binding and conclusive for all purposes hereunder and for all Tax purposes. If BSC notifies the Purchaser that it objects to the Allocation Statement, the parties will attempt in good faith to resolve any such disagreement until the 90th day following the Closing Date (the “Allocation Date”). If the parties cannot resolve their differences at least five (5) days prior to the Closing Date, the Allocation Statement will become an estimated allocation used for purposes of the Closing. If the parties cannot resolve their differences by the Allocation Date, the issues in dispute shall be referred to a third party firm that has expertise in valuation matters and that is mutually agreeable to the Purchaser and BSC (the “Third Party Firm”) and the decision of the Third Party Firm will be binding on the parties. The decision will be reflected in a revised Allocation Statement which will be considered the final allocation. The costs of the Third Party Firm shall be borne equally by the Purchaser and BSC.

(c) The Purchaser and BSC each agree to file, and to cause their respective Affiliates to file, their income Tax Returns and all other Tax Returns and necessary forms in such a manner as to reflect the allocation of the consideration as determined in accordance with Section 2.03(b), and shall take no position inconsistent therewith in any audit, litigation or other proceeding.

Section 2.04 Milestone Payments. No later than five (5) Business Days after the occurrence of an event described in this Section 2.04, the Purchaser shall deposit in the Purchase Price Bank Account the applicable payment associated with such event as specified below (any such payment, a “Milestone Payment”), less any withholding of Taxes required by applicable Law (provided that the Purchaser and BSC shall cooperate in good faith to determine the amount of any such Taxes required to be withheld); provided that if the event described in Section 2.04(a) occurs prior to the Closing Date, the Purchaser shall deposit in the Purchase Price Bank Account on the Closing Date the Milestone Payment applicable to such event:

(a) $50,000,000 if (i) the FDA provides written notification of clearance of the 510(k) submission for the Target^TM Detachable Coils provided to the Purchaser by BSC prior to the date of this Agreement; provided that the parties agree that any deviations from such form in the written notification of such clearance from the FDA shall be disregarded for purposes of this Section 2.04(a) to the extent such deviations would not change the indications for use contained in such 510(k) submission and otherwise would not materially and adversely delay or affect the Purchaser’s ability to market and sell Target^TM Detachable Coils (it being agreed that any requirement that post-market clinical trials be conducted will not by itself constitute a material and adverse effect for this purpose), and (ii) BSC has at least 3,500 units of Target^TM Detachable Coils in inventory that comply with, and are available to be delivered pursuant to, the terms of the Supply Agreement;

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(b) $15,000,000 following the completion of the Cork Separation Activities (as such term is defined in the Separation Agreement) in accordance with the terms of the Separation Agreement, which may occur prior to the Cork Manufacturing Transfer Date;

(c) $15,000,000 following the occurrence of the Cork Manufacturing Transfer Date in accordance with the terms of the Separation Agreement;

(d) $10,000,000 following the occurrence of the Fremont Manufacturing Transfer Date in accordance with the terms of the Separation Agreement; and

(e) $10,000,000 following the occurrence of the West Valley Manufacturing Transfer Date in accordance with the terms of the Separation Agreement.

Section 2.05 Closing. Subject to the terms and conditions of this Agreement, the sale and purchase of the Purchased Assets and the assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the “Closing”) to be held at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York at 10:00 A.M. New York time on the fifth Business Day following the satisfaction or waiver of the conditions to the obligations of the parties hereto set forth in Sections 7.01 and 7.02 (other than those conditions which, by their terms, are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) or at such other place or at such other time or on such other date as BSC and the Purchaser may mutually agree upon in writing. The day on which the Closing takes place being the “Closing Date”.

Section 2.06 Closing Deliveries by BSC. At the Closing, BSC shall, and shall cause the Sellers to, deliver to the Purchaser:

(a) duly executed counterparts of each Ancillary Agreement to which one or more of BSC and the Sellers is a party and such other instruments, in form and substance reasonably satisfactory to the Purchaser, as may be required to transfer the Purchased Assets to the Purchaser;

(b) a receipt for the Initial Purchase Price (and any Milestone Payment paid pursuant to Section 2.04(a)) less the Aggregate Deferred Amount;

(c) from BSC and each Seller that is transferring a U.S. real property interest within the meaning of Section 897(c) of the Code, a certificate of non-foreign status pursuant to Section 1.1445-2(b)(2) of the Regulations; it being understood that notwithstanding anything to the contrary contained herein, if BSC or any Seller fails to provide the Purchaser with such certification, the Purchaser shall be entitled to withhold the requisite amount from the Initial Purchase Price in accordance with Section 1445 of the Code and the applicable

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Regulations and that any amount so withheld shall be considered to have been paid by the Purchaser to BSC or any such Seller;

(d) the following documents in BSC’s or the Sellers’ possession: (i) patent assignment documents demonstrating ownership by BSC or a Seller of the Transferred Intellectual Property, and (ii) copies of all written opinions of outside counsel to BSC or any Seller providing a legal opinion concerning the non-infringement or non-appropriation by a Product of any Person’s Intellectual Property, including whether such Intellectual Property is invalid or unenforceable;

(e) a true and complete copy, certified by the Secretary or Assistant Secretary of BSC or the Sellers, as the case may be, of the resolutions duly and validly adopted by the Board of Directors of each such Person and (to the extent necessary to authorize due execution and delivery) the equity holders of each Seller, evidencing their authorization of the execution and delivery of this Agreement and any Ancillary Agreement to which such Person is, or will on the Closing Date be, party and the consummation of the transactions contemplated hereby and thereby; and

(f) the certificate referenced in Section 7.02(a)(iii).

Section 2.07 Closing Deliveries by the Purchaser. At the Closing, the Purchaser shall, and shall cause its Purchaser Affiliates to:

(a) deliver to BSC an amount equal to the Initial Purchase Price (and the Milestone Payment, if any, due pursuant to Section 2.04(a)) less the sum of (x) the Aggregate Deferred Amount and (y) any withholding of Taxes required by applicable Law (provided that the Purchaser and BSC shall cooperate in good faith to determine the amount of any such Taxes required to be withheld), by wire transfer in immediately available funds to the Purchase Price Bank Account or, in the event that a local payment of the relevant portion of the Initial Purchase Price is required in a particular jurisdiction, such other bank accounts to be designated by BSC in a written notice to the Purchaser at least five (5) Business Days before the Closing;

(b) deposit with the Escrow Agent an amount (the “Aggregate Deferred Amount”) equal to the aggregate amount of the Purchase Price allocable to each Deferred Closing Country in U.S. dollars (each such amount, a “Deferred Closing Country Amount”), to be released in accordance with the terms of the Escrow Agreement; provided that if the Escrow Agreement is not executed as of the Closing Date, the Purchaser shall withhold from the Initial Purchase Price the Aggregate Deferred Amount and deposit such amount with the Escrow Agent concurrently with the execution and delivery of the Escrow Agreement and the establishment of the escrow account thereunder;

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(c) deliver to BSC duly executed counterparts of each Ancillary Agreement to which the Purchaser or any of its Affiliates is a party;

(d) deliver to BSC a true and complete copy, certified by the Secretary or Assistant Secretary of the Purchaser, of the resolutions duly and validly adopted by the Board of Directors of the Purchaser evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is, or will on the Closing Date be, party and the consummation of the transactions contemplated hereby and thereby;

(e) deliver to BSC a true and complete copy, certified by the Secretary or Assistant Secretary of the applicable Purchaser Affiliate, of the resolutions duly and validly adopted by the Board of Directors and (to the extent necessary to authorize due execution and delivery) the equity holders of each of the Purchaser Affiliates evidencing their authorization of the execution and delivery of the Ancillary Agreements to which such Purchaser Affiliate is, or will on the Closing Date be, party and the consummation of the transactions contemplated thereby; and

(f) deliver to BSC the certificate referenced in Section 7.01(a)(iii).

Section 2.08 Deferred Closings. (a) Notwithstanding anything to the contrary contained in this Agreement, the sale, assignment, transfer, conveyance, delivery and purchase of the Purchased Assets (the “Deferred Assets”) located in the jurisdictions listed on Schedule 2.08(a) (the “Deferred Closing Countries”), and the assumption of the Assumed Liabilities (the “Deferred Liabilities”) relating to the Business conducted in the Deferred Closing Countries or relating to such Deferred Assets shall not occur on the Closing Date.

(b) The sale, assignment, transfer, conveyance, delivery and purchase of the Deferred Assets, and the assumption of the Deferred Liabilities with respect to a Deferred Closing Country shall take place at a closing on the Distribution Country Transition Date (as defined in the Distribution Agreement) for such Deferred Closing Country (each such closing, a “Deferred Closing”) to be held at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York at 10:00 a.m. New York time on such date, or at such other place or on such other date or at such other time, as BSC and the Purchaser may mutually agree upon in writing (each day on which a Deferred Closing takes place, being a “Deferred Closing Date”); provided that if the Distribution Country Transition Date for any Deferred Closing Country is not scheduled to occur prior to the termination of the Distribution Agreement, the Deferred Closing for each such Deferred Closing Country shall occur on the End Date (as defined in the Distribution Agreement).

(c) At each Deferred Closing, the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver the applicable OUS Transfer Agreement in respect of the applicable Deferred Closing Country and such other documents and instruments, as may be reasonably necessary to transfer the Deferred Assets and Deferred Liabilities in such

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Deferred Closing Country. The forms of the OUS Transfer Agreements to be executed on each Deferred Closing Date in respect of each Deferred Closing Country (other than China) are attached hereto as Exhibit 2.08(c). The form of the OUS Transfer Agreement in respect of China shall be subject to Section 5.24(b).

(d) Notwithstanding anything contained herein to the contrary, but subject to Section 2.08(b), other than the occurrence of the applicable Distribution Country Transition Date, there shall be no conditions required to be satisfied or waived prior to a Deferred Closing in order to consummate the transactions contemplated by this Section 2.08 with respect to a Deferred Closing Country.

(e) During the period between the Closing Date and the applicable Deferred Closing Date, the parties hereto shall, and shall cause their respective Affiliates to, cooperate fully and use commercially reasonable efforts to take such actions with respect to each Deferred Closing Country as may be reasonably requested by the other party hereto in order to permit the transfer of the Deferred Assets and Deferred Liabilities in such Deferred Closing Country in accordance with this Section 2.08.

(f) Between the Closing Date and the Deferred Closing Date, BSC (through its Affiliates) shall be the distributor of Products for the Purchaser (or its applicable Affiliate) in each of the Deferred Closing Countries in accordance with the terms of the Distribution Agreement. Prior to the occurrence of a Deferred Closing, subject to the terms of the Distribution Agreement, all Deferred Assets in a Deferred Closing Country shall be held for the account of BSC and its Affiliates and all Deferred Liabilities shall be retained by BSC and its Affiliates.

(g) From the Closing Date to the Deferred Closing Date, subject to the terms of the Distribution Agreement, unless the context clearly requires otherwise and except for purposes of Article V (other than Sections 5.02, 5.05, 5.06(b), 5.12(a), 5.14, 5.21, 5.22, 5.23 and 5.24(b)), Article VII, Article VIII and Article IX, all references in this Agreement to the “Closing” or the “Closing Date” shall, with respect to any Deferred Closing Country, be deemed to refer to the Deferred Closing or the Deferred Closing Date for each such Deferred Closing Country, respectively, and the parties hereto shall continue to comply with all covenants and agreements contained in this Agreement that are required by their terms to be performed prior to the Closing and are deemed to refer to a Deferred Closing in respect of the Deferred Closing Countries.

(h) On the Deferred Closing Date for a Deferred Closing Country, the Purchaser shall pay, or cause the applicable Purchaser Affiliate to pay, as applicable, the relevant Deferred Closing Country Amount to the applicable Seller on the Deferred Closing, less any withholding of Taxes required by applicable Law (provided that the Purchaser and BSC shall cooperate in good faith to determine the amount of any such Taxes required to be withheld), by wire transfer in immediately available funds to the Purchase Price Bank Account or, in the event

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that a local payment of such amount is required in a particular jurisdiction, such other bank accounts to be designated by BSC in a written notice to the Purchaser at least five (5) Business Days before such Deferred Closing.

Section 2.09 Other Transfers. The parties acknowledge that the sale, assignment, transfer, conveyance, delivery and purchase of the Purchased Assets, and the assumption of the Assumed Liabilities, relating to the Business conducted in the Philippines, Taiwan and Thailand shall not occur on the Closing Date, but shall occur on a later date and in a manner as mutually agreed by the parties within a reasonable time period after Closing.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF BSC

Subject to such exceptions as disclosed in the Disclosure Schedule, BSC hereby represents and warrants to the Purchaser as follows:

Section 3.01 Organization, Authority and Qualification of BSC and the Sellers. Each of BSC and the Sellers is a corporation (or similar entity) duly organized, validly existing and in good standing, (or, in each case, the equivalent concept in the applicable jurisdiction of organization) under the laws of the jurisdiction of its organization and has all necessary power and authority to enter into and deliver this Agreement and the Ancillary Agreements to which it is, or will on the Closing Date be, party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, except where failure to do so would not have a Material Adverse Effect. The execution and delivery of this Agreement and the Ancillary Agreements to which it is, or will on the Closing Date be, party by BSC and each Seller, the performance by BSC and each Seller of its obligations hereunder and thereunder and the consummation by BSC and each Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of BSC and each Seller. This Agreement and the Ancillary Agreements to which it is, or will on the Closing Date be, party have been, or will, on the Closing Date, be duly executed and delivered by BSC and each Seller and (assuming due authorization, execution and delivery by the Purchaser) this Agreement and the Ancillary Agreements to which it is, or will on the Closing Date be, party constitute, or will on the Closing Date constitute, the legal, valid and binding obligations of BSC and each Seller enforceable against each such Person in accordance with their respective terms.

Section 3.02 No Conflict. Assuming compliance with the pre-merger notification and waiting period requirements of the HSR Act and the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 3.03, and except as may result from any facts or circumstances relating solely to the Purchaser, the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is, or will on the Closing Date be, party by BSC and each Seller do not and will not (a) violate, conflict with or result in the breach of the certificate of

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incorporation or bylaws (or similar organizational documents) of BSC or any Seller, (b) conflict with or violate any Law or Governmental Order applicable to BSC or any Seller or any of their respective properties, assets or businesses, including the Business or (c) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, result in the creation of any Encumbrance upon any of the Purchased Assets, or give to any Person any rights of termination, acceleration or cancellation of, any note, bond, mortgage or indenture, Contract, permit, franchise or other instrument or arrangement (or right thereunder) related to the Business to which BSC or any Seller is a party or by which any of them or any of their properties or assets are bound, except, in the case of clauses (b) and (c), as would not have a Material Adverse Effect.

Section 3.03 Governmental Consents and Approvals. The execution, delivery and performance of this Agreement and each Ancillary Agreement to which it is, or will on the Closing Date be, party by BSC and each Seller do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority, except (a) the pre-merger notification and waiting period requirements of the HSR Act, (b) any additional consents, approvals, authorizations, filings and notifications required under any other applicable Antitrust Laws, (c) where failure to obtain such consent, approval, authorization or action, or to make any such filing or notification would not have a Material Adverse Effect, or (d) as may be necessary as a result of any facts or circumstances relating solely to the Purchaser or any of its Affiliates.

Section 3.04 Financial Information. (a) True and complete copies of (i) the unaudited special purpose statement of assets to be acquired and liabilities to be assumed of the Business for the fiscal years ended as of December 31, 2008 and December 31, 2009 and for the six months ended June 30, 2010, and the related unaudited special purpose statements of revenue and direct expenses of the Business (collectively, the “Unaudited Special Purpose Financial Statements”) have been delivered by BSC to the Purchaser.

(b) The Unaudited Special Purpose Financial Statements, except as may be indicated in the notes thereto, if any, (i) were prepared from the books of account of BSC and the Sellers, (ii) present fairly in all material respects the items reflected thereon, as of the dates thereof or for the periods covered thereby and (iii) were prepared in accordance with BSC policies consistently applied (which are consistent with U.S. GAAP except as otherwise expressly set forth therein). The books of account of BSC and the Sellers used for the Unaudited Special Purpose Financial Statements are correct in all material respects and have been maintained in accordance with sound business and accounting practices and BSC’s internal control procedures.

(c) The Audited Special Purpose Financial Statements will, when furnished to the Purchaser, except as may be indicated in the notes thereto, (i) be prepared from the books of account of BSC and the Sellers, (ii) present fairly in all material respects the items reflected thereon, as of the dates thereof or for the periods covered thereby and (iii) be prepared in accordance with BSC policies consistently applied (which are consistent with U.S. GAAP except as otherwise expressly set forth therein). The books of account of BSC and the Sellers

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that will be used for the Audited Special Purpose Financial Statements are correct in all material respects and have been maintained in accordance with sound business and accounting practices and BSC’s internal control procedures.

Section 3.05 Absence of Undisclosed Material Liabilities. There are no material Liabilities of BSC or the Sellers relating to the Business, other than (a) Liabilities reflected or reserved against on the Unaudited Special Purpose Financial Statements, (b) as set forth in Section 3.05 of the Disclosure Schedule and (c) trade payables and accrued expenses incurred since December 31, 2009 in the ordinary course of business consistent with past practice.

Section 3.06 Conduct in the Ordinary Course. Since December 31, 2009, (a) the Business has been conducted in the ordinary course consistent with past practice, (b) there has not been any circumstance, change, effect, development or condition, which has had a Material Adverse Effect and (c) none of BSC and the Sellers (to the extent it relates to the Business) has taken any action that, if taken after the date hereof, would constitute a violation of Section 5.01(b)(i) through (xii).

Section 3.07 Litigation. There is no material Action by or against BSC or any of the Sellers (and relating to the operation or conduct of the Business or the ownership, sale or lease of any of the Purchased Assets or which would otherwise be an Assumed Liability) pending or, to the Knowledge of BSC, threatened, before any Governmental Authority.

Section 3.08 Compliance with Laws; Permits. Except with respect to Environmental Laws, Intellectual Property, Plans, Taxes, and certain matters relating to regulatory compliance (which are exclusively addressed in Sections 3.09, 3.10, 3.14, 3.15, 3.17 and 3.18, respectively), BSC and the Sellers have conducted and continue to conduct the Business in accordance in all material respects with all Laws and Governmental Orders applicable to the Business and the Purchased Assets, and none of BSC or any of its Affiliates is in violation of any such Law or Governmental Order. Except with respect to Registrations (which are exclusively addressed in Section 3.17), BSC and the Sellers hold all licenses, permits, product registrations, authorizations, orders and approvals from, and have made all filings, applications and registrations with, each Governmental Authority (collectively, the “Permits”) necessary for the operation of the Business as it is conducted as of the date hereof and as currently proposed to be conducted, except where the failure to make such filings, applications or registrations would not have a Material Adverse Effect, BSC and the Sellers have conducted and continue to conduct the Business pursuant to and in compliance in all material respects with the terms of all such Permits. Section 3.08 of the Disclosure Schedule sets forth each material Permit and such Permits (including the Transferred Permits) are valid and in full force and effect and neither BSC nor any Seller is in or has been in material default under any such Permit, and to the Knowledge of BSC, no condition exists that with the notice or lapse of time or both would constitute a material default under such Permits.

Section 3.09 Environmental Matters. (a)(i) Each of BSC and the Sellers (to the extent it relates to the Business) is in material compliance with all applicable Environmental Laws (which compliance includes the possession of all material Environmental

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Permits, and material compliance with the terms and conditions thereof), and BSC and the Sellers have not received any unresolved notice from any Governmental Authority that alleges that BSC is not in such compliance with applicable Environmental Laws, (ii) there is no material Environmental Claim pending or, to BSC’s Knowledge, threatened in writing, against BSC or any of the Sellers (to the extent relating to the Business) or, to BSC’s Knowledge, against any person or entity whose liability for any Environmental Claim BSC or any of the Sellers (to the extent relating to the Business) has or may have retained or assumed either contractually or by operation of Law, and (iii) there are no past or present actions, activities, circumstances, conditions, events or incidents, including the Release, threatened Release or presence of any Hazardous Material by BSC or any Seller which would reasonably be expected to form the basis of any material Environmental Claim against BSC and the Sellers (to the extent it relates to the Business).

(b) BSC and the Sellers have delivered for inspection to the Purchaser copies of any reports, studies or analyses issued in the past five (5) years and possessed or initiated by BSC or the Sellers, pertaining to Hazardous Materials in, on, beneath or adjacent to any of the Transferred Sites, or regarding BSC’s or any of the Sellers’ compliance with or liability under applicable Environmental Laws.

Section 3.10 Intellectual Property.

(a) The Business Intellectual Property, together with the Intellectual Property licensed under the Ancillary Agreements (assuming the receipt of the consents and approvals set forth on Section 3.02 of the Disclosure Schedule for Purchaser to practice any Intellectual Property in the Transferred IP Agreements and Third Party Licenses (as that term is defined in the Seller IP License Agreement)), is all of the Intellectual Property owned by or licensed to BSC or the Sellers that is necessary to make, use, sell, offer to sell, import, distribute, market or otherwise exploit the Products, as such activities are performed by BSC or the Sellers in the Business as currently conducted, including with respect to the commercialization of the Target™ Detachable Coil and the InZone™ Detachment System.

(b) BSC or a Seller owns the entire right, title and interest in and to, each item of the Transferred Intellectual Property, free and clear of any Encumbrances (other than Permitted Encumbrances). There is no Action pending or, to the Knowledge of BSC, threatened in writing, by any Person contesting the ownership or validity of the Transferred Intellectual Property. To the Knowledge of BSC, none of the Transferred Intellectual Property is now involved in any reissue proceeding.

(c) Other than Transferred Intellectual Property abandoned in the ordinary course of business consistent with past practice, BSC and each Seller have taken commercially reasonable and customary measures to protect and safeguard the proprietary nature of the material Business Intellectual Property.

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(d) To the Knowledge of BSC, the operation, manufacturing, testing, marketing, offer for sale, sale, importation or use of the commercialized Products and the Target™ Detachable Coil and the InZone™ Detachment System, does not infringe, misappropriate or violate any other Person’s valid and enforceable Intellectual Property rights. There is no Action pending nor, to the Knowledge of BSC, threatened in writing against BSC or the Sellers concerning the foregoing. Neither BSC nor any Seller is asserting rights in any of the Transferred Intellectual Property against any other Person in any pending or threatened Action concerning the infringement, misappropriation or violation of the Transferred Intellectual Property. Neither BSC nor any Seller has any Liabilities under any Transferred IP Agreement or Transferred Contract arising out of or related to the infringement, misappropriation or violation of any Person’s Intellectual Property to the extent based on events occurring or actions taken prior to the Closing Date; provided that the foregoing shall not require BSC to indemnify any Purchaser Indemnified Party under Section 8.02 for any Assumed Liabilities described in Section 2.02(a)(iii) and shall not excuse the Purchaser from its obligation under Section 8.03 to indemnify the Seller Indemnified Parties for such Assumed Liabilities.

(e) None of the Business Intellectual Property that is material to the Business, including the patents marked on the labels of the Products commercialized by the Business as of the Closing Date, has been finally adjudged invalid or unenforceable by a Governmental Authority.

(f) To the extent that any material inventions, improvements, discoveries, or information used in the Products has been conceived, developed or created for BSC or the Sellers by another Person, BSC or the relevant Seller has, and (assuming the receipt of the consents and approvals set forth on Section 3.02 of the Disclosure Schedule for the Purchaser to practice any Intellectual Property in the Transferred IP Agreements and Third Party Licenses (as that term is defined in the Seller IP License Agreement)) will have assigned or licensed to the Purchaser pursuant to this Agreement or the Ancillary Agreements, sufficient rights to use such inventions, improvements, discoveries, or information within the Business as currently conducted, including with respect to the commercialization of the Target™ Detachable Coil and the InZone™ Detachment System.

(g) The Purchaser acknowledges and agrees that (i) the representations and warranties contained in Section 3.10(d) are the only representations and warranties being made by BSC in this Agreement with respect to infringement, misappropriation or other violation of Intellectual Property, (ii) no other representation or warranty contained in this Agreement shall apply to infringement, misappropriation or other violation of Intellectual Property and (iii) no other representation or warranty, express or implied, is being made by BSC with respect to infringement, misappropriation or other violation of Intellectual Property.

(h) To the Knowledge of BSC, all of the registered trademarks identified in Section 2.01(a)(vii) of the Disclosure Schedule are valid and enforceable.

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Section 3.11 Real Property. (a) Section 3.11 of the Disclosure Schedule lists the street address of each parcel of Leased Real Property and the Cork Purchaser Leased Facility and the identity of the lessor, lessee and current occupant (if different from lessee) of each such parcel of such property. BSC and the Sellers have delivered to the Purchaser true and complete copies of the leases (and all amendments, modifications and waivers thereto) in effect as of the date hereof relating to the Leased Real Property and the Cork Purchaser Leased Facility. BSC or a Seller, as applicable, has a good and valid leasehold interest in, and the right to quiet enjoyment of, the Leased Real Property and the land which is included in the Cork Purchaser Leased Facility and good and marketable title to the improvements located on the land which is included in the Cork Purchaser Leased Facility, free and clear of all Encumbrances other than Permitted Encumbrances. There is no sublease, license or other use or occupancy agreement in place with respect to any Leased Real Property or the Cork Purchaser Leased Facility.

(b) Each of the Leased Real Property and the Cork Purchaser Leased Facility is in good condition and repair and has been maintained in the ordinary course of business consistent with past practice.

(c) The Leased Real Property, the Cork Purchaser Leased Facility and the Contract Manufacturing Sites constitute all of the land, buildings, structures and other improvements and fixtures used primarily for the operation of the Business as currently conducted and as currently proposed to be conducted.

Section 3.12 Title to Purchased Assets; Sufficiency. (a) Except with respect to the Leased Real Property and the Cork Purchaser Leased Facility, as of the date of this Agreement and as of the Closing Date, one or more of BSC and the Sellers has good, valid and marketable title, legal right or license to use, or a valid leasehold interest in (in connection with the operation of the Business as currently conducted and as currently proposed to be conducted), all the Purchased Assets, free and clear of all Encumbrances, except Permitted Encumbrances. Following the consummation of the transactions contemplated by this Agreement and the execution of the instruments of transfer contemplated by this Agreement, subject, in the case of Purchased Assets described in clauses (viii), (x) and (xii) of Section 2.01(a), to receipt of necessary third party consents and approvals including those set forth on Section 3.02 of the Disclosure Schedule, and in respect of all other Purchased Assets, receipt of the consents and approvals set forth on Section 3.02 of the Disclosure Schedule, the Purchaser will own, with good, valid and marketable title, or lease, under valid and subsisting leases, or have legal right or license to use, or otherwise acquire the interests of BSC and the Sellers in, the Purchased Assets, free and clear of any Encumbrances, other than Permitted Encumbrances. No representation or warranty, express or implied, is being made by BSC in this Section 3.12(a) with respect to issues of title to the Transferred Intellectual Property (which is the subject of Section 3.10(b)).

(b) The Purchased Assets and the Cork Purchaser Leased Facility, together with the licenses, services and assets to be provided to the Purchaser under the Ancillary

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Agreements (subject to the terms and conditions thereof) are adequate in all material respects to conduct the Business as currently conducted, including with respect to the commercialization of the Target™ Detachable Coil and the InZone™ Detachment System. At all times since December 31, 2009, BSC and the Sellers have caused the Purchased Assets to be maintained in accordance with good business practices consistent with past practice, and all the Purchased Assets are in all material respects in good operating condition and repair, normal wear and tear excepted, and are suitable in all material respects for the purposes for which they are currently used.

Section 3.13 Labor Matters. (a) Neither BSC nor any of the Sellers is party to or bound by any collective bargaining agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor union, labor organization or works council in connection with the Business; there are no such agreements, arrangements, work rules or practices that pertain to any Corresponding Transfer Date Employees in connection with the Business; no Corresponding Transfer Date Employees are represented by any labor union, labor organization or works council with respect to their employment with BSC or the Sellers in connection with the Business; from January 1, 2008, no labor union, labor organization, works council, or group of Corresponding Transfer Date Employees has made a pending demand for recognition or certification in connection with the Business; and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority in connection with the Business.

(b) From January 1, 2008, there has been no actual or, to the Knowledge of BSC or the Sellers, threatened material arbitrations, material grievances, labor disputes, strikes, lockouts, slowdowns or work stoppages against or affecting BSC or the Sellers in connection with the Business.

(c) BSC and the Sellers are in material compliance with all applicable Laws respecting employment and employment practices in connection with the Business, including all Laws respecting terms and conditions of employment, health and safety, wages and hours, child labor, immigration, employment discrimination, disability rights or benefits, equal opportunity, plant closures and layoffs, affirmative action, workers’ compensation, labor relations, employee leave issues and unemployment insurance.

(d) With respect to the Business, BSC and the Sellers (i) have taken reasonable steps to properly classify and treat all of their workers as independent contractors or employees, (ii) have taken reasonable steps to properly classify and treat all of their employees as “exempt” or “non-exempt” from overtime requirements under applicable Law, and (iii) are not delinquent in any payments to, or on behalf of, any current or former independent contractors or employees for any services or amounts required to be reimbursed or otherwise paid.

(e) Since January 1, 2008, neither BSC nor any of the Sellers has received (i) notice of any charges, complaints, grievances or arbitration procedures pending or

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threatened before the National Labor Relations Board, Equal Employment Opportunity Commission, or any other Governmental Authority against it in connection with the Business, or (ii) notice of the intent of any Governmental Authority responsible for the enforcement of labor, employment, wages and hours of work, child labor, immigration, worker classification, or occupational safety and health Laws to conduct an investigation with respect to or relating to it or notice that such investigation is in progress, or notice of any complaint, lawsuit or other proceeding pending or threatened in any forum by or on behalf of any Corresponding Transfer Date Employee alleging breach of any express or implied contract of employment, any applicable Law governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship in connection with the Business. Solely for purposes of this Section 3.13(e), “notice” shall mean written notice or, with respect to any other form of notice, notice of which BSC has Knowledge.

Section 3.14 Employee Benefit Matters. (a) Section 3.14(a) of the Disclosure Schedule lists, as of the date hereof, (i) all employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, health, welfare, disability, retiree medical or life insurance, retirement, supplemental retirement, profit sharing, pension, severance termination pay, retention payments/arrangements or other benefit plans, programs, policies or arrangements, and all employment, termination or severance contracts or agreements, to which any of BSC and the Sellers is a party; provided that any governmental plan or program requiring the mandatory payment of social insurance taxes or similar contributions to a governmental fund with respect to the wages of an employee shall not be considered a “Plan”; (ii) each employee benefit plan for which BSC or a Seller could incur liability under Section 4069 of ERISA in the event such plan has been or were to be terminated and (iii) any plan in respect of which BSC or a Seller could incur liability under Section 4212(c) of ERISA, in the case of each plan described in (i), (ii) and (iii), with respect to which BSC or a Seller has any obligation in respect of any Corresponding Transfer Date Employee or which are maintained, contributed to or sponsored by BSC, a Seller or any of their respective ERISA Affiliates for the benefit of any Corresponding Transfer Date Employee (collectively, the “Plans”). Each U.S. Plan is in writing.

(b) With respect to each of the U.S. Plans, BSC or the Sellers have delivered or made available to the Purchaser complete copies of each of the following documents: (i) the Plan (including all amendments thereto); (ii) the annual report and actuarial report, if required under ERISA or the Code, for the most recent completed plan year; (iii) the most recent Summary Plan Description, together with each Summary of Material Modifications, if required under ERISA; (iv) if the U.S. Plan is funded through a trust or any third party funding vehicle, the trust or other funding agreement (including all amendments thereto) and the latest financial statements with respect to the most recently ended reporting period; and (v) the most recent determination letter received from the IRS with respect to each U.S. Plan that is intended to be qualified under Section 401(a) of the Code.

(c) (i) Each Plan has been operated in all material respects in accordance with its terms and the requirements of all applicable Laws, (ii) each of BSC and the Sellers, as applicable, has performed all material obligations required to be performed by it under,

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is not in any material respect in default under or in material violation of, and BSC has no Knowledge of any material default or violation by any party to, any Plan, and (iii) no Action is pending or, to the Knowledge of BSC, threatened by a Corresponding Transfer Date Employee with respect to any Plan (other than claims for benefits in the ordinary course) and, to the Knowledge of BSC, no fact or event exists that could give rise to any such Action.

(d) Each Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has timely received a favorable determination letter from the IRS covering all of the provisions applicable to the Plan for which determination letters are currently available that the Plan is so qualified and each trust established in connection with any Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that it is so exempt, and no fact or event has occurred since the date of such determination letter or letters from the IRS to adversely affect the qualified status of any such Plan or the exempt status of any such trust.

(e) The transactions contemplated by this Agreement will not, either alone or in combination with any other event or events, cause the Purchaser to incur any Liabilities under Title IV of ERISA. No Plan that is subject to Title IV of ERISA is a “multiemployer plan,” as defined in Section 3(37) or 4001(a)(3) of ERISA.

(f) The consummation of the transactions contemplated by this Agreement (whether alone or together with any other event) will not, with respect to any Corresponding Transfer Date Employee: (i) entitle such employee to severance pay, termination pay or any other payment or benefit of any nature or (ii) accelerate the time of payment or vesting (other than the accelerated vesting of employee equity-based awards), or increase the amount of compensation due any such employee, in each case except as otherwise required under applicable Law.

(g) Neither BSC nor any of the Sellers is a party to, or liable under, any agreement, contract, arrangement or plan, including any Plan, that in any case could affect any Corresponding Transfer Date Employee, which has resulted or could reasonably be expected to result, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state or local Law) or (ii) any amount that will not be fully deductible by the Purchaser pursuant to Section 162(m) of the Code (or any corresponding provision of state, local or foreign Law).

(h) No U.S. Plan provides, or is obligated to provide, benefits, including death or medical benefits (whether or not insured), with respect to any Corresponding Transfer Date Employee beyond such employees’ retirement or other termination of service, other than coverage mandated solely by applicable Law.

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(i) Within ninety (90) days prior to the applicable Employee Transfer Date, or with respect to the Closing Transfer Employees only, as of the date hereof, BSC or the Sellers shall provide or make available (or, in respect of Closing Transfer Employees, has made available) to the Purchaser a list of each Corresponding Transfer Date Employee, which list sets forth such employee’s name (subject to applicable Law), current annual compensation (including, where applicable, bonus, stock awards, retention payments/arrangements, or incentive compensation opportunity), years of credited service, full or part time status, exempt/nonexempt status (where applicable), leave status (if applicable), hourly or salaried status, date of hire, work location, job title and any other payroll or individual tax information that may be necessary to effect the transfer in accordance with applicable Law.

(j) Neither BSC nor any of the Sellers has any formal plan or commitment to create any additional Plan, or modify or change any existing Plan, that would affect any Corresponding Transfer Date Employee, other than such modifications or changes made in the ordinary course of business that do not materially increase the level of benefits under such Plan and that are consistent with those made in respect of Plans covering employees of BSC Other Businesses.

(k) With respect to each Plan established or maintained outside of the United States of America primarily for benefit of Corresponding Transfer Date Employees of BSC or the Sellers residing outside the United States of America (a “Foreign Benefit Plan”): (i) a summary of all Foreign Benefit Plans has been provided to or made available to the Purchaser; (ii) all employer and employee contributions to each Foreign Benefit Plan required by Law or by the terms of such Foreign Benefit Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices; and (iii) each Foreign Benefit Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities. A copy of each Foreign Benefit Plan will be provided to the Purchaser as soon as possible following the signing of this Agreement, provided that each Foreign Benefit Plan sponsored, maintained or contributed to for the benefit of Closing Transfer Employees shall be provided no later than three (3) weeks following such signing.

Section 3.15 Taxes. All material Tax Returns required to have been filed with respect to the Purchased Assets or the Business have been timely filed (taking into account any extension of time to file granted or obtained) and all material Taxes with respect to the Purchased Assets or the Business have been paid or will be timely paid (regardless of whether having been shown as due on any Tax Return). All material Taxes required to have been withheld from amounts paid or owing to any Person and paid over to any Governmental Authority in connection with the Business or any Purchased Asset have been duly and timely withheld and so paid. BSC has not received from any Governmental Authority any material written notice of proposed adjustment, deficiency or underpayment of any Taxes relating to the Purchased Assets or the Business, other than a proposed adjustment, deficiency or underpayment that has been satisfied by payment or settlement, or withdrawn. There are no Tax liens on any of the Purchased Assets (other than Permitted Encumbrances). No notice or inquiry has been received from any jurisdiction in which Tax Returns have not been filed with respect to the Purchased Assets or the Business to the effect that the filing of Tax Returns may be required and

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no Seller that is not a U.S. person pursuant to Section 7701(a)(30) of the Code holds a Purchased Asset that is a United States real property interest within the meaning of Section 897(c) of the Code.

Section 3.16 Material Contracts. (a) Section 3.16(a) of the Disclosure Schedule lists each of the following Contracts of BSC and the Sellers with respect to the Business or by which any of the Purchased Assets may be bound (such Contracts, whether listed or required to be listed, being the “Material Contracts”):

(i) any Contract for the distribution or sale of Products by the Business, which involved consideration or payments in excess of $250,000 in the aggregate during the year ended December 31, 2009 or contemplates or involves consideration or payments in excess of $250,000 after the date of this Agreement;

(ii) all Contracts with independent contractors or consultants (or similar arrangements) that involve annual payments in excess of $150,000, or in the case of Contracts with U.S. health care professionals $75,000, and are not cancelable without penalty or further payment and without more than 60 days’ notice;

(iii) any Contract for the purchase of materials, supplies, goods, services, equipment or other assets providing for annual payments by BSC or any Seller of $250,000 or more and is not cancelable without penalty or further payment and without more than 60 days’ notice;

(iv) any employee collective bargaining Contract with any labor union, staff association, works council or other body of employee representatives;

(v) any lease for personal property providing for annual rentals payable by BSC or any Seller of $250,000 or more and is not cancelable without penalty or further payment and without more than 60 days’ notice;

(vi) any Contract concerning the establishment or operation of a partnership, joint venture or limited liability company or other similar agreement or arrangement;

(vii) all Transferred IP Agreements;

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(viii) all leases in respect of the Leased Real Property and the Cork Purchaser Leased Facility;

(ix) all Contracts that limit or purport to limit the ability of the Business to compete in any line of business or with any Person or in any geographic area or during any period of time;

(x) any Contract creating or granting a material Encumbrance (other than Permitted Encumbrances) on any Purchased Asset;

(xi) any other Contract with respect to the Business not made in the ordinary course of business which involved payments to or by BSC or any Seller in excess of $250,000 in the aggregate during the year ended December 31, 2009 or contemplates or involves payments to or by BSC or any Seller in excess of $250,000 in any 12 month period after the date of this Agreement; and

(xii) all material Contracts pursuant to which BSC or any of its Affiliates provides services in respect of the Business.

(b) BSC has delivered to Purchaser true and complete copies (including all amendments, modifications and waivers thereto) of each written Material Contract, and a description of each oral Material Contract (if any). Each Material Contract (i) is legal, valid and binding on one or more of BSC and the Sellers and, to the Knowledge of BSC, the counterparties thereto, and is in full force and effect and (ii) upon consummation of the transactions contemplated by this Agreement, except to the extent that any consents set forth in Section 3.02 of the Disclosure Schedule are not obtained, shall continue in full force and effect without penalty or other adverse consequence. None of BSC or the Sellers is in breach of, or default under, any Material Contract to which it is a party and, to the Knowledge of BSC, (i) no other party to any Material Contract is in breach of, or default under, any Material Contract and (ii) no event has occurred which with notice or lapse of time would constitute a breach or default, or would permit termination, modification or acceleration, under such Material Contract.

Section 3.17 FDA Regulatory Compliance. (a) BSC and the Sellers have all material Registrations from the United States Food and Drug Administration (the “FDA”) and any other comparable Governmental Authority required to conduct the Business as currently conducted, and Section 3.17 of the Disclosure Schedule sets forth a true and complete list of such Registrations. Each such Registration is valid and subsisting in full force and effect. To the Knowledge of BSC, neither BSC nor the Sellers have received any written notice from the FDA or any comparable Governmental Authority that the FDA or such comparable Governmental Authority is considering limiting, suspending or revoking such Registrations or changing the marketing classification or labeling of the related Products. To the Knowledge of BSC, there is no false or misleading information or significant omission in any product application or other submission to the FDA or any comparable Governmental Authority. BSC

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and the Sellers have, in all material respects, fulfilled and performed their obligations under each such Registration, and no event has occurred or condition or state of facts exists which would constitute a material breach or material default or would cause revocation or termination of any such Registration. To the Knowledge of BSC, any third party that is a manufacturer or contractor with respect to the Products is in material compliance with all such Registrations insofar as they pertain to the manufacture of Products or components for the Products for BSC or the Sellers. Each Product that is subject to the jurisdiction of the FDA or any comparable Governmental Authority has been and is being developed, tested, investigated, manufactured, distributed, marketed, and sold in material compliance with all applicable statutes, rules, regulations, standards, guidelines, policies and orders administered or issued by the FDA or any comparable Governmental Authority and any other applicable requirement of Law, including those regarding clinical research, pre-market notification, good manufacturing practices, labeling, advertising, record-keeping, adverse event reporting and reporting of corrections and removals.

(b) Neither BSC nor any Seller has received, since January 1, 2008, any Form FDA-483, notice of adverse finding, Warning Letters, notice of violation or “untitled letters,” or notice of FDA action for import detentions or refusals for the FDA or other comparable Governmental Authority alleging or asserting noncompliance with any applicable Laws or Registrations with respect to the Business. Neither BSC nor any Seller is subject to any obligation arising under an administrative or regulatory action, FDA inspection, FDA warning letter, FDA notice of violation letter, or other notice, response or commitment made to or with the FDA or any comparable Governmental Authority with respect to the Business. BSC and the Sellers have made all notifications, submissions and reports required by any such obligation, and all such notifications, submissions and reports were true, complete and correct in all material respects as of the date of submission to the FDA or any comparable Governmental Authority with respect to the Business.

(c) Since January 1, 2008, no Product has been seized, withdrawn, recalled, detained or subject to a suspension of manufacturing, and, to the Knowledge of BSC, there are no facts or circumstances reasonably likely to cause (i) the seizure, denial, withdrawal, recall, detention, field notification, field correction, safety alert or suspension of manufacturing relating to any such Product; (ii) a change in the labeling of any such Product; or (iii) a termination, seizure or suspension of marketing of any such Product. No proceedings in the United States or any other jurisdiction seeking the withdrawal, recall, correction, suspension, import detention or seizure of any Product are pending or, to the Knowledge of BSC, threatened.

Section 3.18 Healthcare Regulatory Compliance. (a) None of BSC, any Seller nor, to the Knowledge of BSC, any officer, director, managing employee, agent (as those terms are defined in 42 C.F.R. § 1001.1001), or any other person described in 42 C.F.R. § 1001.1001(a)(1)(ii), is a party to, or bound by, any order, individual integrity agreement, corporate integrity agreement or other formal or informal agreement with any Governmental Authority concerning compliance with Federal Health Care Program Laws with respect to the Business.

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(b) None of BSC, any Seller nor, to the Knowledge of BSC, any officer, director, managing employee, agent (as those terms are defined in 42 C.F.R. § 1001.1001), or any other person described in 42 C.F.R. § 1001.1001(a)(1)(ii): (i) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Federal Health Care Program in the conduct of the Business; (ii) has been debarred, excluded or suspended from participation in any Federal Health Care Program with respect to the Business; (iii) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the SSA in the conduct of the Business; (iv) is currently listed on the General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs with respect to the Business; or (v) to the Knowledge of BSC, is the target or subject of any current or potential investigation relating to any Federal Health Care Program-related offense with respect to the Business.

(c) None of BSC, any Seller, nor, to the Knowledge of BSC, any officer, director, managing employee, agent (as those terms are defined in 42 C.F.R. § 1001.1001), or any other person described in 42 C.F.R. § 1001.1001(a)(1)(ii): has engaged in any activity in the conduct of the Business that is in material violation of, or is cause for civil penalties or mandatory or permissive exclusion under, the federal Medicare or federal or state Medicaid statutes, Sections 1128, 1128A, 1128B, 1128C or 1877 of the SSA (42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the federal TRICARE statute (10 U.S.C. § 1071 et seq.), the civil False Claims Act of 1863 (31 U.S.C. § 3729 et seq.), criminal false claims statutes (e.g., 18 U.S.C. §§ 287 and 1001), the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. § 3801 et seq.), the anti-fraud and related provisions of the Health Insurance Portability and Accountability Act of 1996 (e.g., 18 U.S.C. §§ 1035 and 1347), or related regulations, or any other Laws that govern the health care industry (collectively, “Federal Health Care Program Laws”), including any activity that violates any state or federal Law relating to prohibiting fraudulent, abusive or unlawful practices connected in any way with the provision of health care items or services or the billing for such items or services provided to a beneficiary of any Federal Health Care Program.

(d) To the Knowledge of BSC, no Person has filed or has threatened to file against BSC or any Seller an action relating to the Business under any federal or state whistleblower statute, including under the False Claims Act of 1863 (31 U.S.C. § 3729 et seq.).

(e) BSC has delivered to the Purchaser true and complete copies of all agreements (each, a “Business Associate Agreement”) under which BSC or any Seller is a business associate, as such term is defined in 45 C.F.R. § 160.103, as amended, with respect to the Business. Neither BSC nor any Seller is in material breach of any Business Associate Agreement or in material violation of the administrative simplification provisions of HIPAA and the Federal Privacy and Security Regulations with respect to the Business. To the Knowledge of BSC, neither BSC nor any Seller is under investigation by any Governmental Authority for a material violation of HIPAA or the Federal Privacy and Security Regulations with respect to the Business, including receiving any notices from the United States Department of Health and Human Services Office of Civil Rights relating to any such violations.

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(f) To the extent BSC or any Seller provides to customers or others reimbursement coding or billing advice regarding Products and procedures related thereto, such advice is (i) in compliance with Medicare and other Federal Healthcare Program Laws, (ii) conforms to the applicable American Medical Association’s Current Procedural Terminology (CPT), the International Classification of Disease, Ninth Revision, Clinical Modification (ICD 9 CM) and other applicable coding systems and (iii) includes a disclaimer advising customers to contact individual payers to confirm coding and billing guidelines.

(g) BSC and the Sellers have an operational healthcare compliance program with respect to the Business, including a code of ethics or have adopted a code of ethics that governs all employees engaged in the Business, including sales representatives and their interactions with their physician and hospital customers.

Section 3.19 Product Liability. Since January 1, 2005, neither BSC nor any Seller has received written notice of a material claim for or based upon breach of product warranty or product specifications or any other allegation of material Liability resulting from the sale of any Product or the provision of any services related thereto. The Products sold on or prior to the Closing Date (including the features and functionality offered thereby) and services rendered by BSC or the Sellers related thereto comply in all material respects with all contractual requirements, covenants or express or implied warranties applicable thereto and are not subject to any term, condition, guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale for such Products and services, true and complete copies of which have previously been delivered to the Purchaser.

Section 3.20 Customers and Suppliers. Section 3.20 of the Disclosure Schedule sets forth a true and complete list of the ten (10) largest suppliers to and customers of the Business during (i) the fiscal year ended December 31, 2009 and (ii) the six months ended June 30, 2010 (determined on the basis of the total dollar amount of purchases or sales, as the case may be) showing the total dollar number of purchases from or sales to, as the case may be, each such customer or supplier during such period. Since December 31, 2009, there has been no termination, cancellation or material curtailment of the business relationship of BSC or any Seller with respect to the Business with any such customer or supplier or group of affiliated customers or suppliers nor, to the Knowledge of BSC, has any such customer, supplier or group of affiliated customers or suppliers indicated in writing an intent to so terminate, cancel or materially curtail its business relationship with BSC or any Seller with respect to the Business.

Section 3.21 Certain Business Practices. Neither BSC nor any Seller in the conduct of the Business, nor, to the Knowledge of BSC, any of their respective directors, officers, agents or employees engaged in the Business has, in respect of the Business, (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, or (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any other federal, foreign, or state anti-corruption or anti-bribery Law or requirement applicable to BSC or any Seller.

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Section 3.22 Brokers. Except for Bank of America Merrill Lynch, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Ancillary Agreements based upon arrangements made by or on behalf of BSC. BSC is solely responsible for the fees and expenses of Bank of America Merrill Lynch.

Section 3.23 Disclaimer of BSC. EXCEPT AS SET FORTH IN THIS ARTICLE III, NONE OF BSC, THE SELLERS, THEIR AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR REPRESENTATIVES MAKE OR HAVE MADE ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE BUSINESS OR ANY OF THE PURCHASED ASSETS, INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, THE OPERATION OF THE BUSINESS BY THE PURCHASER AFTER THE CLOSING OR THE PROBABLE SUCCESS OR PROFITABILITY OF THE BUSINESS AFTER THE CLOSING.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF THE PURCHASER

The Purchaser hereby represents and warrants to BSC as follows:

Section 4.01 Organization and Authority of the Purchaser and its Affiliates. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary corporate power and authority to enter into and deliver this Agreement and the Ancillary Agreements to which it is, or will on the Closing Date be, party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, except as would not materially and adversely affect or materially delay or would reasonably be expected to materially and adversely affect or materially delay the ability of the Purchaser or its Affiliates to carry out its obligations under, and to consummate the transactions contemplated by this Agreement and the Ancillary Agreements to which they will on the Closing Date be a party. Each Affiliate of the Purchaser that will be party to an Ancillary Agreement is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary corporate power and authority to enter into and deliver the Ancillary Agreements to which it will on the Closing Date be party, to carry out its obligations thereunder and to consummate the transactions contemplated thereby. The execution and delivery by the Purchaser of this Agreement and the execution and delivery by the Purchaser and any of its Affiliates of an Ancillary Agreement to which it will on the Closing Date be party, the performance by the Purchaser of its obligations hereunder, and of the Purchaser and its Affiliates thereunder and the consummation by the Purchaser of the transactions contemplated hereby have been, or will be, as applicable, duly authorized by all requisite corporate action on the part of the Purchaser and such Affiliates. This Agreement has been, and upon their execution the Ancillary Agreements to which the Purchaser or any of its Affiliates will be party shall have been, duly

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executed and delivered by the Purchaser and such Affiliates, and (assuming due authorization, execution and delivery by BSC) this Agreement constitutes, and upon their execution the Ancillary Agreements to which the Purchaser or any of its Affiliates shall be party shall constitute, legal, valid and binding obligations of the Purchaser and such Affiliates, enforceable against them in accordance with their respective terms.

Section 4.02 No Conflict. Assuming compliance with the pre-merger notification and waiting period requirements of the HSR Act, the execution, delivery and performance by the Purchaser of this Agreement and of the Purchaser and its Affiliates of the Ancillary Agreements to which any of them will on the Closing Date be party do not and will not (a) violate, conflict with or result in the breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of the Purchaser or any such Affiliate, (b) conflict with or violate any Law or Governmental Order applicable to the Purchaser, any such Affiliate or any of their respective assets, properties or businesses or (c) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to any Person any rights of termination, acceleration or cancellation of, any note, bond, mortgage or indenture, Contract, permit, franchise or other instrument or arrangement (or right thereunder) to which the Purchaser or any such Affiliate is a party, except, in the case of clauses (b) and (c), as would not materially and adversely affect or materially delay or would reasonably be expected to materially and adversely affect or materially delay the ability of the Purchaser or its Affiliates to carry out its obligations under, and to consummate the transactions contemplated by this Agreement and the Ancillary Agreements to which they will on the Closing Date be a party.

Section 4.03 Governmental Consents and Approvals. The execution, delivery and performance of this Agreement and each Ancillary Agreement to which it is, or will on the Closing Date be, party by the Purchaser and each Purchaser Affiliate do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Authority, except (a) the pre-merger notification and waiting period requirements of the HSR Act, (b) any additional consents, approvals, authorizations, filings and notifications required under any other applicable Antitrust Laws, or (c) where failure to obtain such consent, approval, authorization or action or to make any such filing or notification, would not prevent or materially delay the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements to which it or any of them is, or will on the Closing Date be, party by the Purchaser and each Purchaser Affiliate.

Section 4.04 Financing. The Purchaser has cash and cash equivalents, available lines of credit or other sources of immediately available funds to enable it to pay, in cash, the Initial Purchase Price and all other amounts payable pursuant to this Agreement and the Ancillary Agreements or otherwise necessary to consummate all the transactions contemplated hereby and thereby.

Section 4.05 Litigation. No Action by or against the Purchaser or any Purchaser Affiliate is pending or, to the best knowledge of the Purchaser, threatened, before any Governmental Authority that would affect the legality, validity or enforceability of this Agreement or any Ancillary Agreement or that would reasonably be expected to hinder, impair

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or delay the ability of the Purchaser or any Purchaser Affiliate to consummate the transactions contemplated hereby or thereby.

Section 4.06 Brokers. Except for Barclays Capital, Inc., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Ancillary Agreement based upon arrangements made by or on behalf of the Purchaser. The Purchaser shall be solely responsible for payment of the fees and expenses of Barclays Capital, Inc.

Section 4.07 BSC’s Representations. The Purchaser is purchasing the Purchased Assets and assuming the Assumed Liabilities based solely on the results of its inspections and investigations, and not on any representation or warranty of BSC or any Seller not expressly set forth in this Agreement. The Purchaser hereby agrees and acknowledges that other than the representations and warranties made in Article III, none of BSC, the Sellers, their Affiliates, or any of their respective officers, directors, employees or representatives make or have made any representation or warranty, express or implied, at law or in equity, with respect to the Purchased Assets or the Business including as to merchantability or fitness for any particular use or purpose, the operation of the Business by the Purchaser after the Closing or the probable success or profitability of the Business after the Closing. Based on the inspections and investigations referred to above and the representations and warranties set forth in Article III, the Purchaser is relinquishing any right to any claim based on any representation or warranty other than those specifically included in Article III.

ARTICLE V

ADDITIONAL AGREEMENTS

Section 5.01 Conduct of Business Prior to the Closing.

(a) BSC covenants and agrees that between the date hereof and the Closing, BSC shall, and shall cause each Seller to:

(i) conduct the Business in the ordinary course consistent with past practice in all material respects;

(ii) use commercially reasonable efforts to preserve intact in all material respects the business organization of the Business; and

(iii) use commercially reasonable efforts to preserve the goodwill and relationships with customers, distributors, sales agents, suppliers, licensees and licensors and others having business dealings with the Business.

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(b) BSC covenants and agrees that between the date hereof and the Closing (or in the case of clause (i) below, between the date hereof and the Deferred Closing Date for the Deferred Assets, or in the case of clauses (xiii) and (xiv) below, between the date hereof and the Deferred Closing Date, or in the case of clauses (ii), (iii) and (vii) below, between the date hereof and the Closing Date for the Closing Transfer Employees and between the Closing Date and the applicable Employee Transfer Date for the Cork Transfer Employees, the Fremont Transfer Employees, the West Valley Transfer Employees, the Deferred Closing Transfer Employees and the Delayed Transfer Employees) without the prior written consent of the Purchaser (such consent not to be unreasonably withheld, delayed or conditioned), BSC will not, and will not permit the Sellers to, with respect to the Business:

(i) sell, lease, transfer or otherwise dispose (other than the sale of inventories in the ordinary course consistent with past practice) of or permit or allow all or any portion of any of the Purchased Assets or the Deferred Assets (whether tangible or intangible) or any Leased Real Property or the Cork Purchaser Leased Facility to be subjected to any Encumbrance, other than Permitted Encumbrances or Encumbrances that will be released at or prior to the Closing (or the Deferred Closing in the case of the Deferred Assets);

(ii) grant, implement or announce any increase or decrease in the salaries, wage rates, bonuses or other benefits payable by BSC or any of the Sellers to any of the employees of the Business that would be Corresponding Transfer Date Employees pursuant to Section 6.01, other than as required by Law, pursuant to any plans, programs or agreements existing on the date hereof or other ordinary increases consistent with the past practices of BSC, including ordinary course annual grants of equity-based awards or as set forth in Section 3.14(j) of the Disclosure Schedule;

(iii) establish, adopt or amend in any material respect any Plan covering any employees of the Business that would be Corresponding Transfer Date Employees pursuant to Section 6.01, except for such establishments, adoptions or amendments that are consistent with those made in respect of Plans covering employees of BSC Other Businesses or those required by Law;

(iv) change any method of accounting or accounting practice or policy or internal control procedures used by BSC (as it relates to the Business), other than such changes required by U.S. GAAP or Law;

(v) fail to exercise any rights of renewal with respect to any Leased Real Property or with respect to any lease affecting the Cork Purchaser Leased Facility that by its terms would otherwise expire;

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(vi) settle or compromise any material claims of BSC or the Sellers (to the extent relating to the Business), other than settlements of any claims against BSC or any Seller solely for money damages payable prior to the Closing Date;

(vii) transfer any Corresponding Transfer Date Employee to another business unit of BSC or terminate the employment of any Corresponding Transfer Date Employee other than for cause;

(viii) enter into, extend, materially amend, cancel or terminate other than for cause (except with respect to any lease for a Transferred Site) any Material Contract or agreement which if entered into prior to the date hereof would be a Material Contract, other than customer or supplier contracts in the ordinary course of business consistent with past practice;

(ix) acquire any material asset or property primarily related to the Business other than in the ordinary course consistent with past practice;

(x) delay payment of any account payable or other Liability of the Business beyond its due date or the date when such Liability would have been paid in the ordinary course of business consistent with past practice;

(xi) materially amend the current insurance policies in respect of the Business, except for such amendments that are consistent with those made in respect of insurance policies for BSC Other Businesses;

(xii) settle or compromise any material claims of BSC or the Sellers (to the extent relating to the Business) that would constitute a Deferred Asset, other than settlements of any such claims against BSC or any Seller solely for money damages payable prior to the Deferred Closing Date;

(xiii) enter into any Contract that will be a Transferred Contract on the Deferred Closing Date for a Deferred Closing Country or extend, materially amend, cancel or terminate other than for cause any Contract that will be a Transferred Contract on the Deferred Closing Date for a Deferred Closing Country; or

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(xiv) agree to take any of the actions specified in this Section 5.01(b), except as expressly contemplated by this Agreement and the Ancillary Agreements.

Section 5.02 Access to Information. (a) From the date hereof until the Closing, upon reasonable notice, BSC shall, and shall cause its officers, directors, employees, agents, representatives, accountants and counsel to, (i) afford the Purchaser and its officers, employees and authorized agents and representatives reasonable access to the offices, properties and books and records of BSC and the Sellers (to the extent relating to the Business) and (ii) furnish to the officers, employees, and authorized agents and representatives of the Purchaser such additional financial and operating data and other information regarding the Business (or copies thereof) as the Purchaser may from time to time reasonably request (including, subject to the rights of any landlord, access to conduct an environmental site assessment of any Transferred Site, provided that such assessment shall not include any sampling or testing of any soil, groundwater, air or other environmental media, or building material, without the express written consent of BSC, such consent to be withheld at the sole discretion of BSC); provided that any such access or furnishing of information shall be conducted at the Purchaser’s expense, during normal business hours, under the supervision of BSC’s personnel and in such a manner as not to unreasonably interfere with the normal operations of the Business. Notwithstanding anything to the contrary in this Agreement, BSC shall not be required to disclose any information to the Purchaser if such disclosure would be reasonably likely to, (i) jeopardize any attorney-client or other legal privilege (provided that BSC shall, and shall cause the Sellers to, use commercially reasonable efforts to put in place an arrangement to permit such disclosure without loss of attorney-client privilege) or (ii) contravene any applicable Laws, fiduciary duty or binding agreement entered into prior to the date hereof (provided that BSC shall, and shall cause the Sellers to, use commercially reasonable efforts to put in place an arrangement to permit such disclosure without violating such Law, duty or agreement).

(b) In order to facilitate the resolution of any claims made against or incurred by BSC or the Sellers relating to the Business or for any other reasonable purpose, for a period of seven years after the Closing or the expiration of the relevant period for the statutes of limitations, the Purchaser shall (i) retain the books and records relating to the Business relating to periods prior to the Closing, and (ii) upon reasonable notice, afford the officers, employees, agents and representatives of BSC or the Sellers reasonable access (including the right to make, at BSC’s expense, photocopies), during normal business hours, to such books and records; provided that the Purchaser shall notify BSC at least 20 Business Days in advance of destroying any such books and records in order to provide BSC the opportunity to copy such books and records in accordance with this Section 5.02(b).

(c) In order to facilitate the resolution of any claims made by or against or incurred by the Purchaser relating to the Business or for any other reasonable purpose, for a period of seven years after the Closing or the expiration of the relevant period for the statutes of limitations, BSC shall (i) retain the books and records relating to the Business relating to periods prior to the Closing which shall not otherwise have been delivered to the Purchaser and (ii) upon reasonable notice, afford the officers, employees, agents and representatives of the Purchaser

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reasonable access (including the right to make, at the Purchaser’s expense, photocopies), during normal business hours, to such books and records; provided that BSC shall notify the Purchaser at least 20 Business Days in advance of destroying any such books and records in order to provide the Purchaser the opportunity to copy such books and records in accordance with this Section 5.02(c).

(d) Notwithstanding anything to the contrary in this Agreement, this Section 5.02 shall not apply to Tax Returns and related information (that are exclusively addressed in Section 5.14).

Section 5.03 Confidentiality. (a) The terms of the letter agreement dated as of April 5, 2010 (the “Confidentiality Agreement”) between BSC and the Purchaser are hereby incorporated herein by reference and shall continue in full force and effect until the Closing, at which time such Confidentiality Agreement and the obligations of the Purchaser under this Section 5.03 shall terminate; provided that the Confidentiality Agreement shall terminate only in respect of that portion of the Evaluation Material (as defined in the Confidentiality Agreement) relating to the Business. If this Agreement is, for any reason, terminated prior to the Closing, the Confidentiality Agreement shall nonetheless continue in full force and effect.

(b) Nothing provided to the Purchaser pursuant to Section 5.02(a) shall in any way amend or diminish the Purchaser’s obligations under the Confidentiality Agreement. The Purchaser acknowledges and agrees that any Evaluation Material provided to the Purchaser pursuant to Section 5.02(a) or otherwise by BSC, the Sellers or any officer, director, employee, agent, representative, accountant or counsel thereof shall be subject to the terms and conditions of the Confidentiality Agreement.

Section 5.04 Regulatory and Other Authorizations. (a) Each party shall use its reasonable best efforts to promptly obtain all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Ancillary Agreements and will cooperate fully with the other party in promptly seeking to obtain all such authorizations, consents, orders and approvals, including cooperation to enable the Purchaser to obtain, to the extent not included in the Purchased Assets, all material Permits and Registrations necessary for the operation of the Business as currently conducted and as currently proposed to be conducted and the ownership of the Purchased Assets. Each party hereto agrees to make promptly (but in no event later than ten Business Days of the date hereof) its respective filing, if necessary, pursuant to the HSR Act with respect to the transactions contemplated by this Agreement and to supply as promptly as practicable to the appropriate Governmental Authorities any additional information and documentary material that may be requested pursuant to the HSR Act. Each party hereto agrees to make as promptly as practicable its respective filings and notifications, if any, under any other applicable antitrust, competition, or trade regulation Law (together with the HSR Act, the “Antitrust Laws”), to supply as promptly as practicable to the appropriate Governmental Authorities any additional information and documentary material that may be requested pursuant to the applicable Antitrust Law and

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not to enter into any transaction prior to the Closing that would reasonably be expected to make it more difficult, or increase the time required, to obtain any necessary consents or approvals under such Laws.

(b) Each party shall have the right to review in advance, and, to the extent reasonably practicable, each will consult the other on, all information relating to the other and each of their respective Affiliates that appears in any filing made with, or written materials submitted to, any Governmental Authority in connection with this Agreement and the transactions contemplated hereby; provided that materials may be redacted (x) to remove references concerning the valuation of the Purchased Assets, (y) as necessary to comply with contractual arrangements, and (z) as necessary to address reasonable attorney-client or other privilege or confidentiality concerns.

(c) Without limiting the generality of the foregoing, the parties agree to use their reasonable best efforts to avoid or eliminate each and every impediment under any Antitrust Law that may be asserted by any antitrust or competition Governmental Authority or any other party so as to enable the parties hereto to close the transactions contemplated hereby as promptly as practicable, and in any event prior to the End Date. In addition, the parties shall use their reasonable best efforts to defend through litigation on the merits any claim asserted in court by any party in order to avoid entry of, or to have vacated or terminated, any decree, order or judgment (whether temporary, preliminary or permanent) that would prevent the Closing prior to the End Date. Notwithstanding anything to the contrary in this Agreement, in connection with the receipt of any necessary approvals under the HSR Act or any other Antitrust Law, neither the Purchaser nor any of its Affiliates shall be required to divest or hold separate any material assets or business.

(d) Each party to this Agreement shall promptly notify the other party of any communication it or any of its Affiliates receives from any Governmental Authority relating to the transactions contemplated by this Agreement and permit the other party to review in advance (and to consider any comments made by the other party in relation to) any proposed communication by such party to any Governmental Authority relating to such matters. Neither party to this Agreement shall participate in or agree to participate in any substantive meeting, telephone call or discussion with any Governmental Authority in respect of any filings, investigation (including any settlement of the investigation), litigation or other inquiry relating to such matters unless it consults with the other party in advance and, to the extent permitted by such Governmental Authority, gives the other party the opportunity to attend and participate in such meeting, telephone call or discussion. The parties to this Agreement will coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other party may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods, including under the HSR Act. Each party to this Agreement will provide the outside legal counsel for the other party with copies of all correspondence, filings or communications between them or any of their representatives, on the one hand, and any Governmental Authority or members of its staff, on the other hand, with respect to the transactions contemplated by this Agreement; provided that materials may be

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redacted (x) to remove references concerning the valuation of the Purchased Assets, (y) as necessary to comply with contractual arrangements, and (z) as necessary to address reasonable attorney-client or other privilege or confidentiality concerns.

(e) Each party to this Agreement shall (i) subject to Section 5.04(d) above, respond as promptly as reasonably practicable to any inquiries or requests for additional information and documentary material received from any Governmental Authority in connection with any antitrust or competition matters related to this Agreement and the transactions contemplated by this Agreement, (ii) not extend any waiting period or agree to refile under the HSR Act (except with the prior written consent of the other party hereto, which consent shall not be unreasonably withheld, conditioned or delayed) and (iii) not enter into any agreement with any Governmental Authority agreeing not to consummate the transactions contemplated by this Agreement.

Section 5.05 Consents. (a) Each party hereto agrees to use commercially reasonable efforts to obtain any consents, approvals and authorizations not contemplated by Section 5.04 that may be required in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. In furtherance of the foregoing, the parties further agree as set forth in Schedule 5.05.

(b) Each party hereto agrees that, in the event that any consent, approval or authorization necessary to preserve for the Business any right or benefit under any Contract to which BSC or any Seller is a party is not obtained prior to the Closing, BSC will, and will cause the Sellers to, subsequent to the Closing, cooperate with the Purchaser in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, BSC shall, and shall cause the Sellers to, use their commercially reasonable efforts to provide the Purchaser with the rights and benefits of the affected Contract for the term of such Contract, and, if BSC and the Sellers provide such rights and benefits, the Purchaser, as the case may be, shall assume the obligations and burdens thereunder to the same extent provided in Schedule 2.02(a)(i) in respect of Transferred Contracts and to the extent the obligations and burdens are not substantially different than the obligations and burdens on BSC or Sellers under such Contract as of the Closing Date and do not include any Excluded Liabilities set forth in Sections 2.02(b)(i) through (xiv).

Section 5.06 Retained Names and Marks. (a) The Purchaser hereby acknowledges that all right, title and interest in and to the “BOSTON SCIENTIFIC”, “BSCI” and “BSC” names, together with all names that resemble the foregoing so as to be likely to cause confusion or mistake or to deceive, and all trademarks, service marks, Internet domain names, tag lines, logos, trade names, trade dress, packaging designs, media branding designs, company names and other identifiers of source or goodwill containing or incorporating any of the foregoing (collectively, the “Retained Names and Marks”) shall be retained by BSC or any of its Affiliates, and that, except as expressly provided below, any and all right of the Purchaser to use the Retained Names and Marks hereunder shall terminate as of the Closing and shall immediately revert to BSC, along with any and all goodwill associated therewith. The Purchaser

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further acknowledges that it is not acquiring any rights to use the Retained Names and Marks, except as expressly provided herein.

(b) After the Closing Date, the Purchaser shall be entitled to use, solely in connection with the operation of the Business as operated in all material respects immediately prior to the Closing, all of its existing stocks of signs, letterheads, invoice stock, advertisements and promotional materials, inventory, packaging and other documents and materials (“Existing Stock”) containing the Retained Names and Marks, provided that the Purchaser shall use commercially reasonable efforts to remove, or cease using the Retained Names and Marks (or in the case of advertisements, promotional materials, inventory and packaging, over-label or re-sticker such Existing Stock so as to conceal such Retained Names and Marks) as promptly as practicable after the Closing. After the twelve (12) month anniversary of the Closing Date (or until such Existing Stock is exhausted in the case of the inventory of any Product for which the Retained Names and Marks are embedded in such Product as part of the manufacturing process and not reasonably capable of being stickered or labeled), the Purchaser shall have no right to use the Retained Names and Marks hereunder and shall have removed or obliterated all Retained Names and Marks from such Existing Stock or ceased using such Existing Stock (or in the case of advertisements, promotional materials, inventory and packaging, shall have over-labeled or re-stickered such Existing Stock so as to conceal such Retained Names and Marks).

(c) Except as expressly provided in this Section 5.06, no other right to use the Retained Names and Marks is granted by BSC to the Purchaser or its Affiliates whether by implication or otherwise, and nothing hereunder permits the Purchaser or its Affiliates to use the Retained Names and Marks in any manner other than in connection with Existing Stock. The Purchaser shall ensure that all its uses of the Retained Names and Marks as provided in this Section 5.06 shall be only with respect to goods and services of a level of quality commensurate with the quality of goods and services with respect to which the Retained Names and Marks were used in the Business prior to the Closing. Any and all goodwill generated by the use of the Retained Names and Marks under this Section 5.06 shall inure solely to the benefit of BSC. The Purchaser or its Affiliates shall not use the Retained Names and Marks hereunder in any manner that may damage or tarnish the reputation of BSC or the goodwill associated with the Retained Names and Marks. For the avoidance of doubt, nothing in this Section 5.06 shall preclude the Purchaser and its Affiliates from keeping records and other historical or archived documents containing or referencing the Retained Names and Marks or referring to the historical fact that the Business was previously conducted under the Retained Names and Marks, provided that with respect to any such reference, the Purchaser shall not use the Retained Names and Marks to promote any products or services and the Purchaser shall make explicit that the Business is no longer affiliated with BSC, the Sellers or any of their Affiliates.

(d) The Purchaser agrees that BSC shall have no responsibility for claims by third parties arising out of, or relating to, the use by the Purchaser of any Retained Names and Marks after the Closing, except as provided under Article VIII. In addition to any and all other available remedies, and except as provided pursuant to Article VIII, the Purchaser shall indemnify and hold harmless BSC and its Affiliates, and their officers, directors, employees,

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agents, successors and assigns, from and against any and all such claims that may arise out of the use of the Retained Names and Marks by the Purchaser (i) in accordance with the terms and conditions of this Section 5.06, other than such claims that the Retained Names and Marks infringe the Intellectual Property rights of any third party, or (ii) in violation of or outside the scope permitted by this Section 5.06. Notwithstanding anything in this Agreement to the contrary, the Purchaser hereby acknowledges that in the event of any breach or threatened breach of this Section 5.06, BSC, in addition to any other remedies available to it, shall be entitled to seek a preliminary injunction, temporary restraining order or other equivalent relief restraining the Purchaser and any of its Affiliates from any such breach or threatened breach.

Section 5.07 Notifications. Until the Closing, each party hereto shall promptly notify the other party in writing of any fact, change, condition, circumstance or occurrence or nonoccurrence of any event of which it is aware that will or is reasonably likely to result in any breach of a representation or warranty or covenant of such party, which breach would reasonably be expected to result in any of the conditions set forth in Article VII of this Agreement becoming incapable of being satisfied. The delivery of notice pursuant to this Section 5.07 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice or the representations or warranties of the parties or the conditions to the obligations of the parties hereto.

Section 5.08 Bulk Transfer Laws. Each party hereby waives compliance by the other parties with any applicable bulk sale or bulk transfer laws of any jurisdiction in connection with the sale of the Purchased Assets to the Purchaser.

Section 5.09 Audited Special Purpose Financial Statements. BSC has retained Ernst & Young LLP to audit the unaudited special purpose statement of assets to be acquired and liabilities to be assumed of the Business for the fiscal years ended as of December 31, 2008 and December 31, 2009 and the related unaudited special purpose statements of revenue and direct expenses of the Business and prior to the Closing shall (i) deliver to the Purchaser such audited special purpose financial statements (the “Audited Special Purpose Financial Statements”) and (ii) after the execution by the Purchaser of such reasonable acknowledgement or non-reliance letters as BSC’s auditors may request, permit access to the work papers related thereto; provided that any information in such workpapers not pertaining to the Business shall be redacted prior to access by the Purchaser of such workpapers (provided that such redaction shall not impair any information pertaining to the Business).

Section 5.10 Non-Solicitation. (a) BSC shall not, and shall cause its Affiliates not to, without the prior written consent of the Purchaser or except as expressly provided in any Ancillary Agreement, for a period of 18 months from the applicable Employee Transfer Date, directly or indirectly, solicit for employment or hire any Transferred Employee whose employment was transferred as of such Employee Transfer Date; provided that (i) BSC and its Affiliates are not prohibited from employing any such person who contacts BSC or any such Affiliate on his or her own initiative and without any direct or indirect solicitation by BSC or such Affiliate, and (ii) the term “solicit for employment” shall not be deemed to include general solicitations of employment not specifically directed toward any such Person.

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(b) The Purchaser shall not, and shall cause its Affiliates not to, without the prior written consent of BSC or except as expressly provided in any Ancillary Agreement, for a period of (x) except as otherwise provided in clause (y) below, 18 months from the Closing Date in the case of clause (I) below and 12 months from the Closing Date in the case of clause (II) below, directly or indirectly, solicit for employment or hire any individual who is employed by BSC or any of its Affiliates as of the date hereof (or at any time during such period) and (I) becomes known to the Purchaser or any of its Affiliates or any officer, director, employee, agent or advisor of the Purchaser or its Affiliates as a result of the transactions contemplated by this Agreement or the Ancillary Agreements or (II) is recommended as a potential employee of the Purchaser or any of its Affiliates (who, when hired, would be classified as a Manager or above in the Purchaser’s human resources system) by any of the individuals who received a Special Retention Bonus Program Participation Notice as described in Section 6.03 of the Disclosure Schedule, to the individual with responsibility for hiring decisions on behalf of the Purchaser or any of its Affiliates or (y) 18 months from the Cork Manufacturing Transfer Date, the Fremont Manufacturing Transfer Date or the West Valley Manufacturing Transfer Date (as applicable), directly or indirectly, solicit for employment or hire any individual (other than the Transferred Employees) who (A) is employed in the Cork Facility or the Fremont manufacturing facility by BSC or any of its Affiliates as of the Cork Manufacturing Transfer Date or the Fremont Manufacturing Transfer Date, respectively, or (B) was employed in the West Valley Facility prior to the West Valley Manufacturing Transfer Date and is employed elsewhere by BSC or any of its Affiliates as of the West Valley Manufacturing Transfer Date; provided that (i) the Purchaser and its Affiliates are not prohibited from employing any such person who contacts the Purchaser or any such Affiliate on his or her own initiative and without any direct or indirect solicitation by the Purchaser or such Affiliate, and (ii) the term “solicit for employment” or “solicitation” shall not be deemed to include general solicitations of employment not specifically directed toward any such person.

Section 5.11 Non-Competition. (a) Except as otherwise specifically provided in any of the Ancillary Agreements, for a period of three years after the Closing Date, the Purchaser shall not, and shall cause its Affiliates not to, directly or indirectly, anywhere in the world, use in the Restricted Areas, except in those Restricted Areas described in clauses (d), (f) and (h) of the definition of Restricted Areas, any of (i) the products set forth on Schedules A through C to the Technology Transfer Agreement, including as improved during such three year period, (ii) the Transferred Intellectual Property, (iii) the Intellectual Property provided under the Transferred IP Agreements or (iv) the Transferred Products Know-how (which, as used in this Section 5.11(a), has the meaning assigned to it in the Technology Transfer Agreement) licensed under the Technology Transfer Agreement.

(b) Except as otherwise specifically provided in any of the Ancillary Agreements, for either (x) a period of five years after the Closing Date or (y) a period of three years after the last Facility Transfer Date, whichever is longer, BSC shall not, and shall cause its Affiliates not to, directly or indirectly, anywhere in the world, engage in the Business or, without the prior written consent of the Purchaser, directly or indirectly, own an interest in, manage, operate, join, control or participate in or be connected with, as a member, agent, partner, stockholder or investor, any Person anywhere that engages in the Business; provided that, for the purposes of this Section 5.11(b), (i) the ownership of securities having no more than five percent

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of the outstanding voting power of any such Person which are listed on any national securities exchange shall not be deemed to be in violation of this Section 5.11(b) as long as BSC and its Affiliates have no other connection or relationship with such Person, (ii) the ownership of no more than ten (10) percent of the outstanding ownership interest in any fund which invests in, manages or operates such Person shall not be deemed to be in violation of this Section 5.11(b) so long as (A) the principal purpose of such fund is not to make investments in Persons that engage in the Business, and (B) BSC or the Affiliate thereof owning such interest does not control or exercise any influence over such Person, and (ii) BSC and its Affiliates shall not be prohibited from acquiring shares of capital stock or assets of any Person (an “Acquired Business”) that has operations that would otherwise be restricted under this Section 5.11(b) or from continuing to operate such Acquired Business if (A) the primary purpose or effect of such acquisition shall not be for BSC or its Affiliates to engage in the Business, (B) the Acquired Business is not primarily engaged in any business that engages in the Business, and (C) either (x) the annual net revenues of the portion of the Acquired Business that engages in the Business do not exceed $30 million for the most recently completed fiscal year of the Acquired Business prior to such acquisition or (y) if the annual net revenues of the portion of the Acquired Business that engages in the Business exceed $30 million for the most recently completed fiscal year or in any twelve (12) month period ending after the Closing Date (but prior to the expiration of the period set forth in the preceding sentence), BSC and its Affiliates shall sell or otherwise dispose of that portion of the Acquired Business that engages in the Business no later than twelve (12) months after either the date of such acquisition or the last day of the last month of the twelve month period in which the aggregate net revenues of the portion of the Acquired Business that engaged in the Business exceeded $30 million, as applicable. Notwithstanding anything to the contrary, nothing in this Section 5.11(b) shall apply to any Person or its Affiliates (other than BSC and its Affiliates prior to the date of acquisition (and their respective assets however held)) that acquires a majority of the capital stock of BSC and that prior to such acquisition already was engaged in the Business.

(c) If any covenant in this Section 5.11 is found to be invalid, void or unenforceable in any situation in any jurisdiction by a final determination of a court or any other Governmental Authority of competent jurisdiction, the parties agree that: (i) such determination will not affect the validity or enforceability of (A) the offending term or provision in any other situation or in any other jurisdiction or (B) the remaining terms and provisions of this Section 5.11 in any situation in any jurisdiction; (ii) the offending term or provision will be reformed rather than voided and the court or Governmental Authority making such determination will have the power to reduce the scope, duration or geographical area of any invalid or unenforceable term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable provision, in order to render the restrictive covenants set forth in this Section 5.11 enforceable to the fullest extent permitted by applicable Law; and (iii) the restrictive covenants set forth in this Section 5.11 will be enforceable as so modified.

(d) Nothing in this Section 5.11 shall prevent Purchaser or its Affiliates from reprocessing any medical device for any purpose for use in any field; provided that the

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foregoing shall not permit the Purchaser or any of its Affiliates to market or promote any Product described in clause (i) of Section 5.11(a) in a manner that violates Section 5.11(a).

Section 5.12 Collection of Accounts Receivables; Inventory.

(a) To the extent any amounts with respect to Accounts Receivable are received by the Purchaser or any of its Affiliates that arise from the conduct of the Business prior to 11:59 pm on the day immediately preceding the Closing Date or by BSC or any of its Affiliates that arise from the conduct of the Business after such time, the Purchaser or BSC, as the case may be, shall promptly remit such amounts to the other.

(b) BSC covenants and agrees that the value of gross finished goods inventory included in the Purchased Assets as of the Closing Date, determined in a manner consistent with the Unaudited Special Purpose Financial Statements, shall not be less than the amount set forth on Schedule 5.12(b).

Section 5.13 Further Action. The parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action, to do or cause to be done all things necessary, proper or advisable under applicable Law, the Transferred Contracts or otherwise, and to execute and deliver such documents and other papers, as may be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

Section 5.14 Tax Cooperation and Exchange of Information. BSC and the Purchaser will provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return, amended Tax Return or claim for refund, determining any liability for Taxes or a right to a refund of Taxes or participating in or conducting any audit or other proceeding in respect of Taxes relating to this Agreement, the Purchased Assets or the Business. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules and related work papers and documents relating to rulings or other determinations by taxing authorities; provided that in no event shall BSC or the Purchaser or any of their respective Affiliates be required to provide access to or copies of any income Tax Returns of BSC, the Purchaser, or any such Affiliate including the Sellers. BSC and the Purchaser will make themselves (and their respective employees) available, on a mutually convenient basis, to provide explanations of any documents or information provided under this Section 5.14. Each of BSC and the Purchaser will retain all Tax Returns, schedules and work papers and all material records or other documents in its possession (or in the possession of its Affiliates) relating to Tax matters relevant to the Purchased Assets for the taxable period first ending after the Closing and for all prior taxable periods until the later of (i) the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions, or (ii) six years following the due date (without extension) for such Tax Returns. After such time, before BSC or the Purchaser shall dispose of any such documents in its possession (or in the possession of its Affiliates), the other party shall be given the opportunity, after 90 days’ prior written notice, to remove and retain all or any part of such documents as such

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other party may select (at such other party’s expense). Any information obtained under this Section 5.14 shall be kept confidential, except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting an audit or other proceeding. Any out-of-pocket expenses incurred in furnishing such information or assistance pursuant to this Section 5.14 shall be borne by the party requesting it.

Section 5.15 Conveyance Taxes. Conveyance Taxes attributable to the sale of the Purchased Assets or the Business shall be borne fifty percent (50%) by the Purchaser and fifty percent (50%) by BSC and the Sellers when due. Without limiting the foregoing, each party shall complete and execute a resale or other exemption certificate with respect to inventory and similar items sold hereunder, and shall provide the other party with an executed copy thereof. BSC, the Sellers and the Purchaser shall use reasonable efforts and cooperate in good faith to exempt the sale and transfer of the Purchased Assets from any such Conveyance Taxes. The Purchaser, BSC and the Sellers shall cooperate in the preparation and filing of all necessary Tax Returns or other documents with respect to all such Conveyance Taxes; provided, however, that in the event any such Tax Return requires execution by any Seller, the Purchaser shall prepare and deliver to such Seller a copy of such Tax Return at least five (5) days before the due date thereof, and such Seller shall promptly execute such Tax Return and deliver it to the Purchaser, which shall cause it to be filed. The parties shall provide reimbursement for any Tax described in this Section 5.15 that is paid by the other parties as may be necessary such that the Purchaser, on the one hand, and BSC and the Sellers, on the other each pay fifty percent (50%) of such Conveyance Taxes.

Section 5.16 VAT and Recoverable Taxes. Save as otherwise provided in this Agreement, Recoverable Taxes shall be borne entirely by the party entitled to recover such Taxes under applicable Law. VAT, to the extent not considered Recoverable Taxes, shall be paid by the Purchaser on any supplies effected for VAT purposes under or pursuant to the terms of this Agreement in accordance with the provisions of this Section 5.16. The Purchaser, BSC and the Sellers shall cooperate to file any Tax Return relating to VAT or Recoverable Taxes, to the extent necessary. To the extent that any VAT is chargeable on any Purchased Assets transferred pursuant to this Agreement, the transferring person (the “Supplier”) shall deliver to the recipient (the “Recipient”): (i) a valid VAT invoice where required by applicable Law or practice and (ii) any other documentation as may be reasonably requested by the Recipient to assist it to recover the VAT chargeable or payable, in each case, in such form and within such timing as may be required by Law. An amount equal to the amount of VAT chargeable or payable by the Supplier on the Purchased Assets transferred shall be paid in addition to the consideration provided in this Agreement, by the Recipient to the Supplier within five (5) Business Days of receipt of a valid VAT invoice (or where no invoice is required, within five (5) Business Days of demand) or, if later, two (2) Business Days before the date on which the obligation to account for VAT would have had to be discharged in order to avoid liability to interest or a charge or penalty. The Supplier shall account for all amounts in respect of VAT paid to it by the Recipient to the appropriate Tax Authorities in compliance with applicable Laws. The Supplier and the Recipient shall use reasonable efforts and cooperate in good faith to determine the appropriate rate of VAT and to exempt the transfer of the Purchased Assets from any VAT and/or, where available, to apply for a specific VAT-relief for a “Transfer Of a Going Concern” (TOGC). This shall include, but not be limited to, cooperation to ensure that the transfer of the Purchased Assets is treated as the transfer of a business or part thereof under

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Articles 19 and 29 of the VAT Directive (2006/112/EC) and is not a supply of goods or the supply of services. In the event that VAT is incorrectly charged by the Supplier, and the Supplier is entitled to recover the amount of incorrectly charged VAT, the Supplier shall use its reasonable best efforts to recover such amount and shall pay such recovered amount over to the Recipient within three (3) Business Days after receipt thereof.

Section 5.17 Proration of Taxes. Except as provided in Section 5.15 or 5.16, the portion of any Tax payable with respect to a Straddle Period that is allocable to the portion of the Straddle Period ending on the Closing Date or Facility Transfer Date applicable to the Purchased Asset or Transferred Employee (or, with respect to any Deferred Asset or Deferred Closing Transfer Employee, the applicable Deferred Closing Date) shall be (i) in the case of property and similar ad valorem Taxes and any other Taxes not described in clause (ii) below relating to the Purchased Assets or the Business, equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that fall on or prior to the Closing Date, Facility Transfer Date or Deferred Closing Date, as applicable, and the denominator of which is the number of days in the entire Straddle Period, and (ii) in the case of sales and similar Taxes, employment Taxes and other Taxes that are readily apportionable based on an actual or deemed closing of the books relating to the Purchased Assets or the Business, computed as if such taxable period ended as of the close of business on the Closing Date or Facility Transfer Date applicable to the Purchased Asset or Transferred Employee or, with respect to any Deferred Asset or Deferred Closing Transfer Employee, the applicable Deferred Closing Date. If any Taxes subject to proration pursuant to the preceding sentence are paid by the Purchaser or its Affiliates, on the one hand, or BSC or its Affiliates, on the other hand, then the proportionate amount of such Taxes for which the non-paying party is responsible under the terms of this Agreement shall be promptly reimbursed to the paying party by the non-paying party after the payment of such Taxes. Any refunds, credits or similar benefits relating to such Taxes shall be allocated between the Purchaser and BSC in the same manner that the Taxes to which the refunds, credits or similar benefits relate were paid, and BSC shall promptly pay to the Purchaser, or the Purchaser shall promptly pay to BSC, as the case may be, the portion of such refund, credit or similar benefit received or realized that is allocable to the other party hereunder.

Section 5.18 BSC Compensation Tax Items. (a) BSC and the Purchaser acknowledge and agree that BSC and its Affiliates will take into account any BSC Compensation Tax Items in computing liability for U.S. federal, state and local income Taxes (and shall be responsible for all withholding and information reporting with respect to such amounts), and that neither the Purchaser nor any of its Affiliates will take into account any such BSC Compensation Tax Items in computing liability for such Taxes except as provided in this Section 5.18 or as otherwise required by applicable Law. The same approach shall be followed for purposes of computing liability for Taxes outside the United States, except to the extent the Laws of a particular jurisdiction provide to the contrary.

(b) If BSC determines that, under applicable Law, neither BSC nor any of its Affiliates is permitted to take into account any BSC Compensation Tax Item, and the Purchaser or any of its Affiliates determines in good faith that it is permitted or required to take into account such BSC Compensation Tax Item in computing its income Tax liability, which

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determination shall be conclusive and binding on the parties, then the Purchaser shall calculate in good faith and pay to BSC the amount of any actual income Tax savings realized in the year such BSC Compensation Tax Item is taken into account as a result of the BSC Compensation Tax Item, it being understood that an actual income Tax saving shall only be treated as occurring in a year to the extent that the Purchaser’s actual income Tax payable in respect of such year without taking the BSC Compensation Tax Item into account is greater than the amount of actual income tax that would have been payable in such year had such BSC Compensation Tax Item not been taken into account. The Purchaser shall make such payment, reduced by all expenses (including any employment Taxes) incurred by the Purchaser or any of its Affiliates in connection with this Section 5.18, to BSC, and provide BSC with copies of the calculations of such actual income Tax savings, within ninety (90) days following the filing of the Purchaser’s income tax Return for the year in which such BSC Compensation Tax Item is realized. The Purchaser’s calculation of such Tax savings shall be binding and conclusive on the parties in the absence of manifest error. In the event that the Purchaser’s deduction of any BSC Compensation Tax Item is disallowed by any Governmental Authority in any audit, litigation, proceeding or otherwise, BSC shall repay to Purchaser the amount Purchaser determines it had previously paid to BSC in respect of such disallowed BSC Compensation Tax Item, together with any penalty, interest or other charges imposed by any Governmental Authority in connection with such disallowance and any other out of pocket expenses incurred by the Purchaser or any of its Affiliates.

(c) In connection with any BSC Compensation Tax Items, BSC and the Purchaser agree to provide each other with such cooperation and information as either of them reasonably may request of the other, as provided under Section 5.14, which cooperation shall include providing information with respect to information reporting and withholding requirements applicable to the exercise by Transferred Employees and Former Employees of options to acquire BSC capital stock and the coordination of the responsible party for such reporting and withholding requirements.

Section 5.19 Tax Treatment of Deferred Transfers. The parties agree that (i) with respect to any Purchased Asset that is to be transferred to the Purchaser pursuant to the Separation Agreement and (ii) with respect to any Deferred Asset that is to be transferred to the Purchaser on a Deferred Closing Date, a completed sale shall not be treated as occurring for Tax purposes until the relevant Facility Transfer Date or Deferred Closing Date, as applicable, on which legal title to the Purchased Asset passes to the Purchaser. Neither the Purchaser nor BSC shall take (or cause any Affiliate to take) any position to the contrary in any Tax Return or other Tax filing, or in connection with a Tax audit, litigation or other proceeding.

Section 5.20 Successor Employer. BSC, the Sellers and the Purchaser shall, to the extent possible, treat the Purchaser as a “successor employer” and BSC and the Sellers as “predecessors,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to Transferred Employees for purposes of Taxes imposed under the United States Federal Unemployment Tax Act, as amended, or the United States Federal Insurance Contributions Act, as amended. Each of the Purchaser, BSC and the Sellers agrees to adopt the “Standard Procedure” described in IRS Revenue Procedure 2004-53 and furnish a separate IRS Form W-2 to each Transferred Employee with respect to wages paid by the Purchaser, on the one hand, and BSC and the Sellers, on the other.

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Section 5.21 Risk of Loss. The risk of loss or damage by fire or other casualty to any of the Transferred Sites or Tangible Personal Property before the Closing is assumed by BSC. In the event that any of the Transferred Sites or Tangible Personal Property shall suffer any fire or casualty or any injury before the Closing, BSC agrees to (i) repair the damage (or cause the damage to be repaired by a landlord, as applicable) at its sole cost and expense before the Closing Date, (ii) assign to the Purchaser the proceeds of all insurance coverage in respect of such loss so long as such proceeds are a reasonable approximation of the cost of such repairs, or (iii) make an appropriate reduction in the Initial Purchase Price based on a reasonable approximation of the cost of such repair. Except as otherwise provided in the Separation Agreement, the risk of loss or damage by fire or other casualty to any of the Transferred Sites or Tangible Personal Property after the Closing is assumed by the Purchaser.

Section 5.22 Intercompany Arrangements. Notwithstanding any other provision of this Agreement to the contrary (other than pursuant to any Ancillary Agreement) as of the Closing, all services, commitments, agreements or other arrangements that existed prior to the Closing between BSC and any Seller or any other Affiliate of BSC with respect to the Business shall cease or be terminated. Any such cessation or termination shall be without penalty to, and shall not require any action by, the Purchaser or any of its Affiliates.

Section 5.23 Mixed Contracts. Except as may otherwise be agreed by the parties in writing, any Contract (other than any Transferred Contract) to which BSC or any Seller is a party prior to the Closing, in each case, that inures to the benefit or burden of each of the Business and the BSC Other Businesses, including those Contracts listed on Schedule 5.23 of the Disclosure Schedule (a “Mixed Contract”), shall, to the extent commercially reasonable, be separated on or after the Closing so that each of the Purchaser and BSC shall be entitled to the rights and benefits and shall assume the related portion of any Liabilities inuring to their respective businesses. If any Mixed Contract cannot be so separated, BSC and the Purchaser shall, and shall cause each of their respective Affiliates to, take such other commercially reasonable efforts to cause (i) the rights and benefits associated with that portion of each Mixed Contract that relates to the Business to be enjoyed by the Purchaser; (ii) the Liabilities associated with that portion of each Mixed Contract that relates to the Business to be borne by the Purchaser; (iii) the rights and benefits associated with that portion of each Mixed Contract that relates to the BSC Other Businesses to be enjoyed by BSC; and (iv) the Liabilities associated with that portion of each Mixed Contract that relates to the BSC Other Businesses to be borne by BSC. The costs of such separation shall be borne by the parties in proportion to the rights and benefits inuring to each of them under the Mixed Contract. Notwithstanding anything to the contrary contained herein, the Liabilities to be borne by the Purchaser under any Mixed Contracts hereunder shall not include and the Purchaser shall not assume or have any responsibility for, and BSC shall, and shall cause the Sellers to, retain and be responsible for paying, performing and discharging when due, any Excluded Liabilities set forth in Sections 2.02(b)(i) through (xiv).

Section 5.24 Schedules and Exhibits to Certain Ancillary Agreements; OUS Transfer Agreements. (a) The parties acknowledge that the schedules and exhibits specified in Schedule 5.24(a) that are attached to the forms of the Separation Agreement, the Transition Services Agreement, the Supply Agreement and the Sales Agent Agreement are subject to modification between the date hereof and the Closing Date to the extent agreed by the parties, including to provide for greater detail or specificity regarding

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the subject matter thereof. The parties agree to negotiate in good faith any such modifications to such schedules and exhibits prior to the Closing Date; provided that the parties hereby acknowledge and agree that, subject to their compliance with such obligation to negotiate in good faith, failure to agree on any modifications to such schedules and exhibits will not excuse either party from the performance of any of its obligations hereunder, including its obligation to effect the Closing on the terms and subject to the conditions set forth in Article VII.

(b) BSC and the Purchaser agree to negotiate in good faith to make any changes necessary to the form of OUS Transfer Agreement attached hereto to conform to applicable local Law, provided that the economic and legal substance of the transactions contemplated by this Agreement are not affected by such changes. In the event of any inconsistency between this Agreement and any OUS Transfer Agreement, the terms of this Agreement shall prevail; provided that in the case of any inconsistency that relates solely to the timing and specific terms of the transfer of title to one or more Purchased Assets in a particular jurisdiction, the OUS Transfer Agreement in that particular jurisdiction shall prevail.

Section 5.25 IP Docket; Assignment Documents. (a) Prior to the Closing, BSC shall provide the Purchaser with a schedule that lists all of the registration, maintenance, annuity and renewal fees, and corresponding due dates, that must be paid in order to maintain the Transferred Intellectual Property during the sixty (60) day period following the Closing. Within sixty (60) days after the Closing Date, BSC shall also deliver to the Purchaser all information and documents in its possession, including all reasonably available electronically stored information and documents, for the Purchaser to maintain continuity of prosecution of all pending applications within the Transferred Intellectual Property.

(b) Following the Closing Date and upon the written request of the Purchaser, BSC hereby agrees, at its sole expense, to use and shall cause its Sellers to use commercially reasonable efforts to promptly obtain and deliver to Purchaser any existing patent assignment or other documents demonstrating ownership by BSC or a Seller of the Transferred Intellectual Property, to the extent not already provided pursuant to Section 2.06(d).

Section 5.26 Additional Patents. (a) The Purchaser shall within ten (10) years following the Closing Date, notify BSC in writing of any patent issued, or patent application filed, prior to the Closing Date owned by or licensed to BSC or the Sellers as of the Closing Date that: (x) is neither included in the Business Intellectual Property, nor licensed to the Purchaser pursuant to the Seller IP License Agreement; and (y) the Purchaser determines may be infringed by the import, use, manufacture, offer to sell or sale of (“Covers”) a Transferred Product (which, as used in this Section 5.26, has the meaning assigned to it in the Technology Transfer Agreement), as such Transferred Product exists in, or is used or made by, the Business as conducted by BSC or the Sellers as of the Closing Date. The rights in any such patent or patent issuing from such application, as between the Parties, shall be assessed as follows:

(i) if any claim of such patent Covers a Transferred Product, or method of using or making a Transferred Product, as such Transferred

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Product exists in, or is used or made by, the Business as conducted by BSC or the Sellers as of the Closing Date, and does not also Cover another commercialized or development phase device, or the using or making of such a device, of BSC or any of its Affiliates existing on or before the Closing Date, then BSC and the Purchaser shall promptly execute (1) an assignment transferring ownership of or the license to such patent to the Purchaser, and (2) an amendment to the Purchaser IP License Agreement adding such patent as a Licensed Patent or Third Party Licensed Patent thereunder, as applicable, which assignment and amendment will be effective as of the Closing Date;

(ii) if any claim of such patent Covers a Transferred Product, or method of using or making a Transferred Product, as such Transferred Product exists in, or is used or made by, the Business as conducted by BSC or the Sellers of the Closing Date, and also Covers another commercialized or development phase device, or the using or making of such a device, of BSC or any of its Affiliates existing on or before the Closing Date, then such patent will be added to Schedule A or C of the Seller IP License Agreement, as applicable, and BSC and the Purchaser shall promptly execute an amendment to the Seller IP License Agreement, which amendment will be effective as of the Closing Date; and

(iii) if no claim of such patent Covers a Transferred Product, or method of using or making a Transferred Product, as such Transferred Product exists in, or is used or made by, the Business as conducted by BSC or the Sellers as of the Closing Date, then BSC or the Seller shall retain the exclusive right, title and interest in any such patent.

(b) If a dispute arises under this Section 5.26, regarding (i) whether or not the patent or patent application identified by the Purchaser Covers a Transferred Product, as such Transferred Product exists in, or is used or made by, the Business as conducted by BSC or the Sellers as of the Closing Date; and, if so, (ii) whether or not any claim of any such patent satisfies any one of clauses (i) – (iii) of this Section 5.26, that dispute, as well as the selection of a single arbitrator to arbitrate the dispute, will be arbitrated before the American Arbitration Association in Delaware under their Resolution of Patent Disputes rules in a binding, non-appealable arbitration proceeding.

(c) If BSC or any of the Sellers chooses or is required by an arbitrator to assign or license the rights to a patent or patent issuing from an application to the Purchaser pursuant to this Section 5.26, then (i) BSC and the Sellers shall have no liability (x) for failure of such identified patents or applications to be so included in the Business Intellectual Property or licensed pursuant to the Seller IP License Agreement, or (y) arising out of BSC’s or the Sellers’ use or encumbering of such identified patents or applications prior to receipt of such written notice from the Purchaser, (ii) such assignment or license shall only be granted to the fullest extent (if any) that BSC and the Sellers have the right to grant such assignment or (sub)license as

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of the date of such assessment, and (iii) any royalties or fees paid or payable to BSC or any of the Sellers by any third party following the Closing Date for a license or transfer of any other interest, to the extent such royalties or fees are directly attributable to the practice by such third party of a claim of or the transfer of, as applicable, any patent that is required to be assigned (but not licensed) to the Purchaser pursuant to this Section 5.26, shall be paid to the Purchaser as of the date of notice given to BSC by the Purchaser.

ARTICLE VI

EMPLOYEE MATTERS

Section 6.01 Offers of Employment and Automatic Transfers. (a) Except to the extent otherwise provided in the Transition Services Agreement, (i) as of each applicable Employee Transfer Date, the Purchaser shall, solely as required by applicable Transfer Law, automatically become the employer of the Corresponding Transfer Date Employees and (ii) as of each applicable Employee Transfer Date, and subject to (A) Purchaser’s satisfactory completion of reasonable drug testing and reasonable criminal background check screening and (B) OIG debar checking, sales representative credentialing and work authorization (including to Form I-9 documentation), as applicable and reasonably necessary, (C) execution of non-compete/confidentiality agreements with terms no more restrictive to the applicable employee than those currently in effect with respect to similarly situated employees of the Purchaser and (D) any other documents as required by applicable Law to effect employment (collectively, the “Purchaser’s Employment Contingencies”), the Purchaser shall offer employment to the Corresponding Transfer Date Employees whose employment is not required to be transferred automatically pursuant to Transfer Law. In the event that the Purchaser intends not to offer employment to a Corresponding Transfer Date Employee due to a purported failure by such Corresponding Transfer Date Employee to satisfy the Purchaser’s Employment Contingencies, then the Purchaser shall promptly inform BSC in writing of such intention and the specific grounds therefor, and shall consider in good faith any objection BSC may have to the Purchaser not offering employment to such Corresponding Transfer Date Employee. Such offer or transfer of employment initially shall be, subject to applicable Law, at salary or other base compensation rate (including sales commission rates) that is no less favorable to such Employee than the rate in effect immediately prior to such applicable Employee Transfer Date. In addition, the Purchaser shall offer employment at a location that is no more than thirty-five (35) miles from the employee’s principal place of work immediately prior to the applicable Employee Transfer Date. The Purchaser shall commence and conclude all activities necessary to effectuate satisfaction of the Purchaser Employment Contingencies with respect to the Corresponding Transfer Date Employees whose employment is not required to be transferred automatically pursuant to Transfer Law at its own cost and within the sixty (60) days prior to the applicable Employee Transfer Date or, solely with respect to the Closing Transfer Employees, within the period of time commencing on the date hereof and concluding on the Closing, provided that BSC and the Sellers shall have provided access to the applicable Corresponding Transfer Date Employees, and all employment records and files relating thereto, no later than sixty (60) days prior to the applicable Employee Transfer Date and, solely with respect to the Closing Transfer

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Employees, shall have provided to the Purchaser immediately following the date hereof, access to the Closing Transfer Employees, and all employment records and files relating thereto. BSC and the Sellers shall use their reasonable best efforts to cause the Corresponding Transfer Date Employees to accept such offers of employment that are required to be made by the Purchaser pursuant to this Section 6.01(a). In the event that the Purchaser fails to comply with any of the requirements of this Section 6.01(a), other than to the extent such failure is attributable to the failure of BSC or its Affiliates to comply with applicable Transfer Laws or the provisions of Section 6.01(b) or the Transition Services Agreement, the Purchaser shall be responsible for and indemnify, defend and hold harmless BSC and its Affiliates against any cost, obligation or liability arising therefrom under WARN (or any comparable non-U.S. Law) and the BSC Severance Pay and Layoff Notification Plan, as Amended and Restated, effective as of August 1, 2008, or any other applicable Plan; provided that BSC and its Affiliates shall be responsible for and indemnify, defend and hold harmless the Purchaser against any cost, obligation or liability to the extent attributable to a failure of BSC or its Affiliates to comply with applicable Transfer Law or the provisions of Section 6.01(b) or the Transition Services Agreement or arising from the inability of any applicant or employee to meet the Purchaser’s Employment Contingencies to the Purchaser’s satisfaction, including any claims brought by individuals for failure to become employed or continue in employment with the Purchaser’s Employment Contingencies. As used herein, “Transferred Employee” means each Corresponding Transfer Date Employee who accepts such offer or whose employment transfers automatically under applicable Transfer Laws and who, in either case, actually commences employment with the Purchaser as of the applicable Employee Transfer Date. With respect to any employee who is on short-term disability leave, workers’ compensation leave, or other authorized leave of absence as of the date of the applicable Employee Transfer Date and who accepts such offer of employment with the Purchaser or whose employment transfers automatically, such employment with the Purchaser shall commence and such employee shall become a Transferred Employee as of the date of such employee returns to active employment, subject to applicable Law.

(b) Cooperation. The parties hereto agree to cooperate fully with each other as may be or may become required, necessary, proper or advisable under this Agreement, the Transition Services Agreement or applicable Law, including applicable Transfer Law, to consummate and make effective the transactions contemplated hereby, or as may be agreed to by the parties hereof, including assistance in any meeting with, filing with or notification to, or obtaining any consent, authorization, order or approval of, (i) any Corresponding Transfer Date Employee, (ii) any works council, labor union, or employee representative, or (iii) any Governmental Authority. BSC and the Sellers shall cooperate with the Purchaser in the Purchaser’s recruitment of the Corresponding Transfer Date Employees, including (x) permitting the Purchaser reasonable and prompt access to the Corresponding Transfer Date Employees to communicate to such employees any information concerning employment offers and employment with the Purchaser in accordance with this Agreement, (y) providing on a timely basis any notices required of BSC or its Affiliates under applicable Transfer Law and, to the extent such notice addresses matters effective after the applicable Employee Transfer Date, consulting with Purchaser in respect thereof and (z) subject to applicable Law, providing prompt access to personnel files, organizational succession planning, talent review and development planning documents of such employees. BSC and the Sellers shall use all reasonable efforts to maintain favorable relations with the Corresponding Transfer Date Employees from the date

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hereof up to and including the applicable Employee Transfer Date, including taking all steps reasonably necessary to retain the services and goodwill of each such employee, and shall refrain from taking any action that could harm or damage relations with the Corresponding Transfer Date Employees or that could cause any such employee to terminate the employee’s service with BSC or any Seller prior to the applicable Corresponding Transfer Date; provided that nothing herein shall be construed as preventing BSC from enforcing its employment policies against Corresponding Transfer Date Employees in accordance with its customary practices.

Section 6.02 Employee Benefits. (a) Except as contemplated by Section 6.03 or the Transition Services Agreement, as of the applicable Employee Transfer Date, each Transferred Employee shall cease to be covered under the Plans. Except as otherwise set forth herein or in the Transition Services Agreement, as of the applicable Employee Transfer Date, the Transferred Employees shall be covered by the employee benefit plans of the Purchaser. For a period from the date of the applicable Employee Transfer Date until eighteen (18) months following such date, the Purchaser shall provide the Transferred Employees (i) who are employed in the United States by the Purchaser with a level of employee benefits substantially comparable in the aggregate to the employee benefits provided to similarly situated employees of the Seller, and (ii) who are employed by the Purchaser outside the United States with a level of employee benefits substantially comparable in the aggregate to the employee benefits provided to similarly situated employees of Purchaser, provided that, in the case of either (i) or (ii) for the avoidance of doubt, “employee benefits,” as used herein, shall not include any bonus or incentive compensation benefits.

(b) (i) Provided that BSC’s incentive and bonus plans applicable to the Transferred Employees who will be employed by the Purchaser are listed in Section 6.02(b)(i) of the Disclosure Schedule (the “Incentive Plans”), the Purchaser shall honor the percentage of target amount for each Transferred Employee, under the terms of the Incentive Plans (A) with respect to Closing Transfer Employees, through December 31, 2011, (B) with respect to the Cork Transfer Employees, the Fremont Transfer Employees, the West Valley Transfer Employees, the Deferred Closing Transfer Employees and the Delayed Transfer Employees, if the applicable Employee Transfer Date has occurred on or prior to September 30 of a given calendar year, through the end of such calendar year, and (C) with respect to the Cork Transfer Employees, the Fremont Transfer Employees, the West Valley Transfer Employees, the Deferred Closing Transfer Employees and the Delayed Transfer Employees, if the applicable Employee Transfer Date has occurred on or following October 1 of a given calendar year, through the end of the calendar year following the calendar year in which the applicable Employee Transfer Date occurred (in the case of each of (A), (B) and (C) hereof, the “Incentive Compensation Continuation Period”). The Purchaser shall be responsible for payments that are earned by the applicable Transferred Employees pursuant to the terms of the Incentive Plans during the Incentive Compensation Continuation Period, even if any such payment is required to be made during the year following such Incentive Compensation Continuation Period. Following such Incentive Compensation Continuation Period, the applicable Transferred Employees shall be covered under a bonus or incentive plan of the Purchaser that is provided to similarly situated employees of the Purchaser to the extent applicable.

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(ii) An amount equal to at least one hundred percent (100%) of the aggregate target incentive pool for the Business as set forth in the The BSC 2010 Performance Incentive Plan (the “PIP”) for the 2010 fiscal year attributable to each Closing Transfer Employee on Section 6.02(b)(ii) of the Disclosure Schedule (the “2010 Bonus Pool”) shall be paid to the Closing Transfer Employees identified on Section 6.02(b)(ii) of the Disclosure Schedule. BSC shall pay a percentage portion of the 2010 Bonus Pool equal to the greater of (i) fifty percent (50%) and (ii) a percentage equal to the percentage of the 2010 Bonus Pool that would be earned by the Closing Transfer Employees based on actual performance as determined in good faith following the end of the PIP performance year by BSC in its sole discretion, and, to the extent not paid by BSC, on or before March 15, 2011, the Purchaser shall pay (or shall cause one of its Affiliates to pay) the remainder, provided that, in no event shall Purchaser be responsible for paying in excess of fifty percent (50%) of the target bonus amount designated for each Closing Transfer Employee on Section 6.02(b)(ii) of the Disclosure Schedule. No later than March 2, 2011, BSC shall provide Purchaser with a list of each Closing Transfer Employee on Section 6.02(b)(ii) of the Disclosure Schedule and the corresponding amount of bonus that has been paid by BSC to such Closing Transfer Employee and the amount of bonus to be paid by Purchaser. For the avoidance of doubt, this Section 6.02(b)(ii) shall apply only to those Closing Transfer Employees identified on Section 6.02(b)(ii) of the Disclosure Schedule and no other Transferred Employees and shall apply in respect of 2010 only, and except as otherwise provided in this Section 6.02(b) or the Transition Services Agreement, neither Purchaser nor its Affiliates shall have any obligation in respect of wage payments to Transferred Employees in respect of the period preceding the Closing.

(iii) With respect to payments due under any sales retention bonus program of BSC or its Affiliates that is identified on Section 6.02(b)(iii) of the Disclosure Schedule, the Purchaser shall make payments to Transferred Employees, as and when they otherwise become due under such program following the Closing Date, equal to the amount otherwise due under such program (exclusive of amounts attributable to fringe or similar benefits) multiplied by a fraction, the numerator of which is the number of days in the applicable retention period following the Closing Date and the denominator of which is the number of days in the retention period; provided that in no event shall the aggregate bonus amount on which Purchaser’s payment obligation under this Section 6.02(b)(iii) is determined (before application of the proration fraction described in the preceding provisions of this Section 6.02(b)(iii)) exceed $2,150,000.

(c) For a period from the date of the applicable Employee Transfer Date until twelve (12) months following such date (the “Severance Plan Continuation Period”), the Purchaser shall honor the terms of the severance plans applicable to the Transferred Employees who are employed by the Purchaser, provided that such plans are listed in Section 6.02(c) of the

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Disclosure Schedule, and following such Severance Plan Continuation Period, the applicable Transferred Employees shall be covered under a severance plan of the Purchaser that is provided to similarly situated employees of the Purchaser, to the extent applicable.

(d) Each Transferred Employee shall (without prejudice to any rights under relevant Transfer Laws or other applicable Laws relating to deemed continuity of service) receive credit for services with BSC and its Affiliates and predecessors under the Purchaser’s employee benefit plans to the extent of participation therein for purposes of eligibility, vesting and benefit accrual solely to the extent such credit was provided to such Transferred Employee under the applicable Plan as of immediately prior to the applicable Employee Transfer Date and provided that in no event shall such service be credited to the extent it would result in the duplication of benefits or the funding thereof, or cause a Transferred Employee to receive any benefit whatsoever other than additional eligibility, vesting or benefit accrual service credits under Purchaser’s employee benefit plans (to the extent of participation therein), to the extent applicable.

Section 6.03 Existing Agreements. From and after the applicable Employee Transfer Date, the Purchaser hereby assumes and shall honor the agreements listed in Section 6.03 of the Disclosure Schedule, subject to any amendment or modification agreed to between the Purchaser and the applicable employee who is a party to such agreement.

Section 6.04 WARN. The Purchaser shall be responsible for any obligation with respect to the Transferred Employees under the Worker Adjustment Retraining and Notification Act of 1988 and any applicable state or local equivalent arising or accruing after the applicable Employee Transfer Date (collectively, “WARN”) and any comparable non-U.S. Law. Except as otherwise provided in Section 6.01(a), BSC shall be responsible for any such obligation arising or accruing before the applicable Employee Transfer Date. On or before the Closing Date, BSC and the Sellers shall provide a list of the name and site of employment of any and all employees of Seller who have experienced, or will experience, an employment loss or layoff – as defined by WARN or any comparable non-U.S. law requiring notice to employees in the event of a closing or layoff – within ninety (90) days prior to the Closing Date. BSC shall update this list up to and including the Closing Date. The parties hereto agree to cooperate in good faith to determine whether any notification may be required under WARN as a result of the transaction contemplated by this Agreement.

Section 6.05 COBRA. BSC shall be responsible for the administration of and shall retain any and all obligations and liabilities for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), with respect to the Transferred Employees and their dependents and beneficiaries for “qualifying events” occurring on or prior to the date on which the Transferred Employee becomes a Transferred Employee (for purposes of clarity, to the extent such Transferred Employees are covered under an employee benefit plan providing for such COBRA continuation benefits), and the Purchaser shall be responsible for all obligations and liabilities for COBRA continuation coverage for Transferred Employees and their dependents and beneficiaries with respect to “qualifying events” occurring after the date on which the Transferred Employee becomes a

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Transferred Employee (for purposes of clarity, to the extent such Transferred Employees are covered under an employee benefit plan providing for COBRA continuation benefits).

Section 6.06 401(k) Plans. (a) Effective as of the applicable Employee Transfer Date, no Transferred Employee shall actively participate in BSC’s 401(k) Retirement Savings Plan (“BSC’s 401(k) Plan”). On the date of the applicable Employee Transfer Date, Transferred Employees who participate in BSC’s 401(k) Plan shall immediately be 100% vested in their individual account balances under BSC’s 401(k) Plan.

(b) As soon as administratively practicable following the date of the applicable Employee Transfer Date, BSC shall advise such Transferred Employees who participated in BSC’s 401(k) Plan of their right to elect to receive a distribution of, or to directly rollover, their individual account balances in BSC’s 401(k) Plan. To the extent permitted by Law and provided that the Purchaser is reasonably satisfied that BSC’s 401(k) Plan is qualified within the meaning of Section 401(a) of the Code, as soon as practicable following the date of the applicable Employee Transfer Date, such account balances may be transferred by Transferred Employees to a defined contribution retirement plan maintained by the Purchaser (the “Purchaser’s 401(k) Plan”) in a direct rollover or rollover contribution. Service of each Transferred Employee prior to the applicable Employee Transfer Date which was recognized under BSC’s 401(k) Plan shall be credited to such Transferred Employee for purposes of eligibility and vesting under the Purchaser’s 401(k) Plan. Prior to the applicable Employee Transfer Date, the Purchaser shall amend the Purchaser’s 401(k) Plan to the extent necessary to accept direct rollovers from BSC’s 401(k) Plan and to permit Transferred Employees to make rollover contributions to the Purchaser’s 401(k) Plan.

Section 6.07 Accrued Vacation. Except as otherwise required by applicable Law, BSC shall pay to each Transferred Employee, as soon as administratively practicable, but no later than two (2) pay periods following the applicable Employee Transfer Date, a cash payment reflecting the value of such employee’s unused accrued vacation and any other paid time off calculated at the employee’s base hourly or salary rate in effect just prior to the applicable Employee Transfer Date.

Section 6.08 No Guarantee of Continued Employment; No Third-Party Rights. Notwithstanding anything contained in this Article VI or otherwise in this Agreement, nothing in this Agreement shall confer upon any Transferred Employee the right to continue in employment with the Purchaser following the applicable Employee Transfer Date, or is intended to interfere with the Purchaser’s right or ability (i) to terminate the employment of any Transferred Employee for any reason or no reason following the applicable Employee Transfer Date or (ii) subject to Section 6.02, to amend, modify or terminate any benefit plan, program, agreement or arrangement in the sole discretion of the Purchaser. The parties hereto acknowledge and agree that all provisions contained in this Article VI are included for the sole benefit of the respective parties to this Agreement and shall not create any right in any other Person, including any employees, former employees, any participant in any employee benefit plan, policy or arrangement maintained by Sellers or BSC or any beneficiary thereof.

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Section 6.09 Compliance with Law. BSC, Sellers and the Purchaser agree to comply with all applicable Laws pertaining to the subject matter of this Article VI. Without limiting the generality of the foregoing, the parties herein expressly acknowledge and agree that (i) any action ostensibly required or permitted under this Article VI shall only be required or permitted to the extent consistent with applicable Law; (ii) applicable Law may also require a party herein to take actions in addition to those it is otherwise contractually obligated to take hereunder; and (iii) any failure of a party hereto to abide by applicable Law pertaining to the subject matter of this Article VI shall be deemed a breach of this Agreement.

ARTICLE VII

CONDITIONS TO CLOSING

Section 7.01 Conditions to Obligations of BSC. The obligations of BSC to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

(a) Representations, Warranties and Covenants. (i) The representations and warranties of the Purchaser contained in this Agreement (disregarding all qualifications set forth therein relating to “materiality”) shall be true and correct in all respects both at and as of the date of this Agreement and at and as of the Closing (except that those representations and warranties that are made as of another specified date need only be so true and correct as of such specified date), except where the failure of such representations and warranties to be true and correct would not materially and adversely affect the ability of the Purchaser to carry out its obligations under, and to consummate, the transactions contemplated by this Agreement, the Purchaser IP License Agreement and the Ancillary Agreements specified in the definition of “Material Adverse Effect” (other than with respect to the representations and warranties contained in Sections 4.01, 4.02(a) and (b), 4.03 and 4.04, which shall be true and correct in all material respects); (ii) the covenants and agreements contained in this Agreement to be complied with by the Purchaser on or before the Closing shall have been complied with in all material respects; and (iii) BSC shall have received a certificate of the Purchaser signed by a duly authorized representative thereof dated as of the Closing Date certifying the matters set forth in clauses (i) and (ii) above;

(b) Governmental Approvals. (i) Any waiting period (and any extension thereof) under the HSR Act shall have expired or shall have been terminated; and (ii) any consents, authorizations, orders, approvals, declarations and filings required prior to the Closing under any applicable Antitrust Laws and identified in Section 7.01(b) of the Disclosure Schedule will have been made or obtained; and

(c) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Governmental Order (whether temporary, preliminary or permanent) that has the effect of making the transactions contemplated by this

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Agreement or the Ancillary Agreements illegal or otherwise restraining or prohibiting the consummation of such transactions.

Section 7.02 Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

(a) Representations, Warranties and Covenants. (i) The representations and warranties of BSC contained in this Agreement (disregarding all qualifications set forth therein relating to “materiality” or “Material Adverse Effect”) shall be true and correct in all respects both at and as of the date of this Agreement and at and as of the Closing (except that those representations and warranties that are made as of another specified date need only be so true and correct as of such specified date), except where the failure of such representations and warranties to be true and correct would not have a Material Adverse Effect (other than with respect to the representations and warranties contained in Sections 3.01, 3.02(a) and (b) and 3.03, which shall be true and correct in all material respects); (ii) the covenants and agreements contained in this Agreement to be complied with by BSC at or before the Closing shall have been complied with in all material respects; and (iii) the Purchaser shall have received a certificate of BSC signed by a duly authorized representative thereof dated as of the Closing Date certifying the matters set forth in clauses (i) and (ii) above;

(b) Governmental Approvals. (i) Any waiting period (and any extension thereof) under the HSR Act shall have expired or shall have been terminated, and (ii) any consents, authorizations, orders, approvals, declarations and filings required prior to the Closing under any applicable Antitrust Laws and identified in Section 7.02(b) of the Disclosure Schedule will have been made or obtained;

(c) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Governmental Order (whether temporary, preliminary or permanent) that has the effect of making the transactions contemplated by this Agreement or the Ancillary Agreements illegal or otherwise restraining or prohibiting the consummation of such transactions;

(d) No Proceeding or Litigation. No proceeding or litigation initiated by any Governmental Authority against BSC or any of the Sellers or the Purchaser or their respective Affiliates seeking to prohibit the transactions contemplated by this Agreement and the Ancillary Agreements shall be actually pending;

(e) Consents and Approvals. Purchaser shall have obtained, each in form and substance reasonably satisfactory to the Purchaser, the consents and approvals set forth on Schedule 7.02(e);

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(f) No Material Adverse Effect. No Material Adverse Effect will have occurred; and

(g) Audited Special Purpose Financial Statements. The Purchaser shall have received from BSC at least five (5) Business Days prior to the Closing Date, the Audited Special Purpose Financial Statements, which shall be, in all material respects, consistent with the Unaudited Special Purpose Financial Statements provided to the Purchaser by BSC prior to the date hereof.

ARTICLE VIII

INDEMNIFICATION

Section 8.01 Survival of Representations and Warranties. The representations and warranties of the parties hereto contained in this Agreement shall survive the Closing for a period of two (2) years after the Closing Date; provided that: (a) the representations and warranties contained in Section 3.01, Sections 3.02(a) and (b), Section 3.03, Section 3.10(b), Section 3.12(a), Section 3.22, Section 4.01, Sections 4.02(a) and (b), Section 4.03, Section 4.06 and Section 4.07 shall survive the Closing indefinitely (the foregoing, other than Section 3.10(b), the “Specified Representations and Warranties”) and (b) in respect of (i) each Transferred Site, (ii) the Purchased Assets at such site, and (iii) the Products manufactured at such site, the representations and warranties contained in Section 3.10(a) and Section 3.12(b) shall survive the Closing for a period of four (4) years after the applicable Facility Transfer Date. Claims relating to the covenants contained in Section 5.01 shall survive the Closing for a period of two (2) years after the Closing Date, and all covenants and agreements contained herein that contemplate performance following the Closing shall survive the Closing indefinitely unless the covenant or agreement specifies a term, in which case such covenant or agreement shall survive the Closing for such specified term. Any claim made by the party seeking to be indemnified within the time periods set forth in this Section 8.01 shall survive until such claim is finally and fully resolved.

Section 8.02 Indemnification by BSC. The Purchaser and its Affiliates, officers, directors, employees, agents, successors and assigns (each, a “Purchaser Indemnified Party”) shall be indemnified and held harmless by BSC for and against all losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including reasonable attorneys’ fees and expenses) suffered or incurred by them (hereinafter, a “Loss”), directly or indirectly, arising out of or resulting from: (a) the breach of any representation or warranty made by BSC contained in this Agreement (it being understood that for purposes of this Section 8.02(a) all “materiality” and “Material Adverse Effect” qualifications and exceptions contained in such representations and warranties shall be disregarded); (b) the breach of any covenant or agreement by BSC contained in this Agreement; or (c) the Excluded Liabilities. The Purchaser acknowledges and agrees that BSC shall not have any liability under any provision of this Agreement (other than Section 8.02(a)) for any Loss to the extent it relates solely to actions taken by the Purchaser and its Affiliates after the Closing Date.

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Section 8.03 Indemnification by the Purchaser. BSC and its Affiliates, officers, directors, employees, agents, successors and assigns (each, a “Seller Indemnified Party”) shall be indemnified and held harmless by the Purchaser for and against any and all Losses, directly or indirectly, arising out of or resulting from: (a) the breach of any representation or warranty made by the Purchaser contained in this Agreement (it being understood that for purposes of this Section 8.03(a) all “materiality” qualifications and exceptions contained in such representations and warranties shall be disregarded); (b) the breach of any covenant or agreement by the Purchaser contained in this Agreement; (c) the Assumed Liabilities or, with respect to a Deferred Closing Country, the Deferred Liabilities for such Deferred Closing Country from and after the applicable Deferred Closing Date; or (d) any claims by or in respect of Transferred Employees to the extent arising or otherwise attributable to the period after the applicable Employee Transfer Date, except in the case of clauses (c) and (d) for Losses, directly or indirectly, arising out of or resulting from (i) the breach of any representation or warranty made by BSC contained in this Agreement (it being understood that for purposes of this Section 8.03 all “materiality” and “Material Adverse Effect” qualifications and exceptions contained in such representations and warranties shall be disregarded), (ii) the breach of any covenant or agreement by BSC contained in this Agreement; (iii) the Excluded Liabilities or (iv) items for which BSC or its Affiliates have agreed to indemnify any of the Purchaser Indemnified Parties under the Ancillary Agreements.

Section 8.04 Limits on Indemnification. (a) No claim may be asserted nor may any Action be commenced against either party hereto for breach of any representation, warranty, covenant or agreement contained herein, unless written notice of such claim or action is received by such party describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or Action on or prior to the date on which the representation, warranty, covenant or agreement on which such claim or Action is based ceases to survive as set forth in Section 8.01.

(b) Notwithstanding anything to the contrary contained in this Agreement: (i) no Indemnifying Party shall be liable for any claim for indemnification pursuant to Section 8.02(a) or 8.03(a), as applicable, unless and until the aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Party equals or exceeds, in the case where the Purchaser is the Indemnifying Party, an amount equal to 1.5% of the Purchase Price and, in the case where BSC is the Indemnifying Party, an amount equal to 1.5% of the Purchase Price less the amount of Excess Costs paid by the Purchaser pursuant to Section 5.05, after which the Indemnifying Party shall be liable only for those Losses in excess of such amount (except in the case of any Losses for any breach of any representation or warranty contained in Section 3.02(c), Section 3.10(a), Section 3.10(b) or Section 3.12(b), in which case the Indemnifying Party shall be liable for all such Losses); (ii) no Losses may be claimed under Section 8.02(a) or 8.03(a) or shall be included in calculating the aggregate Losses set forth in clause (i) above other than Losses in excess of $150,000 resulting from any single claim or aggregated claims arising out of the same facts, events or circumstances; (iii) the maximum amount of indemnifiable Losses which may be recovered from an Indemnifying Party arising out of or resulting from the causes set forth in Section 8.02(a) or 8.03(a), as applicable, shall be an amount equal to 10% of the Purchase Price; and (iv) except (A) in the case of Third Party Claims in which an Indemnified Party pays an amount to a third party in respect of a Claim by a third

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party and (B) any breach of Section 5.06 (Retained Names and Marks), Section 5.10 (Non-Solicitation) or 5.11 (Non-Competition), neither party hereto shall have any liability under this Article VIII for any punitive, consequential, special or indirect damages, including loss of future revenue or income, or loss of business reputation or opportunity; provided that the foregoing limitations in clauses (i), (ii) and (iii) above shall not apply to any breach of Section 3.15 or the Specified Representations and Warranties; provided further that clause (iii) above shall not apply to any breach of any representation or warranty contained in Section 3.10(a), Section 3.10(b) and Section 3.12(b). In addition, no action taken by BSC or any Seller in compliance with Section 5.01(b) shall be deemed to be a breach of any representation or warranty or other covenant or agreement of BSC or any Seller under this Agreement for any purpose hereunder.

(c) For all purposes of this Article VIII, “Losses” shall be net of any insurance recoveries actually paid to the Indemnified Party or its Affiliates under any insurance policy in connection with the facts giving rise to the right of indemnification; provided, the amount of such recovery shall be reduced by any costs and expenses incurred in obtaining such recovery and by the amount of any increase in insurance premiums resulting from making the claim giving rise to such recovery.

Section 8.05 Notice of Loss; Third Party Claims; Mixed Actions. (a) An Indemnified Party shall give the Indemnifying Party notice of any matter which an Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement, within 60 days of such determination, stating the amount of the Loss, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises; provided, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that the Indemnifying Party is actually and materially prejudiced by such failure.

(b) If an Indemnified Party shall receive notice of any Action, audit, claim, demand or assessment made by any Person who is not a party to this Agreement or its Affiliates against it which may give rise to a claim for Losses under this Article VIII (each, together with any matter set forth in Section 2.02(b)(vii), a “Third Party Claim”), within 60 days of the receipt of such notice, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim; provided that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that the Indemnifying Party is actually and materially prejudiced by such failure. The Indemnifying Party shall be entitled, at its option, to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to the Indemnified Party within 45 days of the receipt of such notice from the Indemnified Party. If the Indemnifying Party elects to undertake any such defense against a Third Party Claim the Indemnified Party may, upon giving prior written notice to the Indemnifying Party, participate in such defense at its own expense. Notwithstanding the foregoing, (i) if the claim for indemnification is with respect to a criminal proceeding, action, indictment, allegation or investigation against the Indemnified Party, then to the extent the Third Party Claim relates to the foregoing, the Indemnified Party shall be entitled to conduct and control the defense of such

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criminal proceeding, action, indictment, allegation or investigation with counsel of its choosing, and the reasonable attorneys’ fees and expenses incurred by the Indemnified Party shall be borne by the Indemnifying Party, or (ii) if the Indemnified Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party, then the Indemnified Party shall be entitled to participate in the defense of such action or claim with counsel of its choosing and the reasonable attorneys’ fees and expenses incurred by the Indemnified Party shall be borne by the Indemnifying Party. The Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party shall not settle such Third Party Claim unless the Indemnifying Party consents in writing (such consent not to be unreasonably withheld or delayed). If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which may be withheld in the Indemnified Party’s sole discretion), enter into any settlement or compromise or consent to the entry of any judgment with respect to such Third Party Claim if such settlement, compromise or judgment (x) involves a finding or admission of wrongdoing by the Indemnified Party or any of its Affiliates, (y) does not include an unconditional written release by the claimant or plaintiff of the Indemnified Party and its Affiliates from all liability in respect of such Third Party Claim or (z) imposes equitable remedies or any obligation on the Indemnified Party or any of its Affiliates other than solely the payment of money damages for which the Indemnified Party will be indemnified hereunder. If the Indemnified Party assumes the defense of any Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party all witnesses, pertinent records, materials and information in the Indemnifying Party’s possession or under the Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party. If the Indemnified Party assumes the defense of any Third Party Claim, the Indemnified Party shall not settle such Third Party Claim without the prior written consent of the Indemnifying Party (such consent not to be unreasonably withheld or delayed).

(c) Notwithstanding anything to the contrary contained herein, if a Third Party Claim constitutes a Mixed Action, the parties shall jointly discuss in good faith a strategy for the conduct and control of a Mixed Action, including the selection of counsel (the “Defense Strategy”); provided that if the parties cannot agree in writing on the Defense Strategy for such Mixed Action within twenty (20) Business Days after delivery of the notice referred to above in respect of such Mixed Action, each party shall be entitled, subject to clause (i) of Section 8.05(b), to assume and control the defense of the portion of such Mixed Action for which it is responsible or otherwise may be obligated to indemnify the other party (the “Assumed Portion”); provided further that each such assuming party shall not, without the prior written consent of the other party (which may be withheld in the other party’s sole discretion), enter into any settlement or compromise or consent to the entry of any judgment with respect to such Assumed Portion if such settlement, compromise or judgment (x) involves a finding or admission of wrongdoing by either party or any of its Affiliates, (y) does not include an unconditional written release by the claimant or plaintiff of the other party and its Affiliates from

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all liability in respect of such Assumed Portion, or (z) imposes equitable remedies or any obligation on the other party or any of its Affiliates in respect of such Assumed Portion other than solely the payment of money damages for which the assuming party is responsible or the other party will be indemnified hereunder. Each party to a Mixed Action may participate in the defense of the other party’s Assumed Portion of such Mixed Action (including by having its representatives and counsel appear at all hearings, depositions and settlement negotiations related thereto), regardless of whether the Mixed Action is subsequently bifurcated or otherwise separately tried in part or whole, and will bear the costs and expenses incurred by it in connection with such participation, unless otherwise agreed in accordance with the Defense Strategy. Each party shall also cooperate with the other party in the defense of the other party’s Assumed Portion and make available to the other party, at the other party’s expense, all witnesses, pertinent records, materials and information in such party’s possession or under its control relating thereto as is reasonably required by the other party. For purposes of this Agreement, a “Mixed Action” means any Third Party Claim that a party believes is reasonably likely to include both (1) claims in respect of which it will be the Indemnified Party under this Article VIII and (2) claims (A) as to which no right of indemnification exists for such party under this Article VIII, or (B) as to which it is the Indemnifying Party under this Article VIII.

Section 8.06 Tax Treatment. To the extent permitted by Law, the parties hereto agree to treat all payments made under this Article VIII, under any other indemnity provision contained in this Agreement, and for any misrepresentations or breach of warranties or covenants, as adjustments to the Purchase Price for all Tax purposes.

Section 8.07 Remedies. The Purchaser and BSC acknowledge and agree that, (a) following the Closing, the indemnification provisions of this Article VIII shall be the sole and exclusive remedies of the Purchaser and BSC for any claims under this Agreement, provided that nothing in this Section 8.07 shall restrict or prohibit any party bringing any action for fraud, intentional misrepresentation, intentional and material breach or from seeking specific performance of any obligation hereunder, and (b) anything herein to the contrary notwithstanding, except in the case of actual fraud, no breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right on the part of the Purchaser or BSC, after the Closing Date, to rescind this Agreement or any of the Ancillary Agreements or any of the transactions contemplated hereby or thereby. Each party hereto shall, and shall cause its Affiliates to, take all reasonable steps to mitigate its Losses upon and after becoming aware of any event that could reasonably be expected to give rise to any Losses.

Section 8.08 Set-Off Rights.

(a) Other than as expressly provided in this Section 8.08, neither party hereto shall have any right to set-off any amounts determined to be owed under this Agreement (including by an Indemnifying Party to any Indemnified Party pursuant to this Article VIII) against any amount payable by such party or any of its Affiliates pursuant to this Agreement, any of the Ancillary Agreements or otherwise.

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(b) The Purchaser shall be entitled to withhold and set-off against the Milestone Payments the amount of any Third Party Claim against a Purchaser Indemnified Party that has been made in writing and in respect of which the Purchaser has sought indemnification from BSC in accordance with Sections 8.04(a) and 8.05(b) or the amount of any payment due by BSC under Section 14.06 of the Separation Agreement (a “Set-Off Claim”) subject to the terms of this Section 8.08.

(c) No set-off may be made unless the Purchaser has provided a written notice of request (a “Request Notice”) in respect of a Set-Off Claim at least forty-five (45) days prior to the date the Purchaser is required to make a Milestone Payment pursuant to Section 2.04 (a “Milestone Payment Date”), unless the Purchaser first receives notice of a Third Party Claim within such forty-five (45) day period, in which case the Purchaser shall give a Request Notice in respect of such Set-Off Claim as promptly as practicable (but in no event later than five (5) Business Days) following receipt of such notice. The Request Notice shall include (i) a description of the Purchaser’s good faith basis for determining that such Set-Off Claim gives rise to a right of indemnification under Section 8.02, and (ii) the Purchaser’s good faith estimate of the amount of Loss reasonably likely to be incurred by a Purchaser Indemnified Party in respect of such Set-Off Claim (the “Requested Set-Off Payment”).

(d) If BSC does not deliver written notice to the Purchaser disputing a Set-Off Claim or the amount of a Requested Set-Off Payment, which notice shall describe the basis for BSC’s dispute of such Set-Off Claim (a “Set-Off Dispute Notice”), by 5:00 p.m. New York time on the tenth (10^th) Business Day after BSC’s receipt of the Request Notice, then, as of the Business Day following the end of such 10 Business Day period, the Purchaser shall be entitled to withhold and set-off such Requested Set-Off Payment against the next Milestone Payment in accordance with Section 8.08(h).

(e) If BSC delivers a Set-Off Dispute Notice in accordance with Section 8.08(d), BSC and the Purchaser will attempt in good faith to resolve their dispute in respect of the Set-Off Claim. If they fail to resolve their dispute for any reason within ten (10) Business Days after BSC’s delivery of the Set-Off Dispute Notice to the Purchaser, the dispute shall be arbitrated in Wilmington, Delaware by a single arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association and the expedited procedures thereof (other than, to the extent possible, rule E-10-Compensation). BSC or the Purchaser shall submit the dispute to arbitration as promptly as practicable (but in no event later than ten (10) Business Days) after the ten Business Day period referred to above, and shall instruct the arbitrator to determine only whether the Purchaser is entitled to set-off all or any portion of the amount of the Requested Set-Off Payment in accordance with this Section 8.08. The decision of the arbitrator shall be rendered as promptly as practicable (if possible no later than thirty (30) days) after the appointment of the arbitrator, or as soon thereafter as practicable. The decision and award of the arbitrator shall be deemed final and conclusive for purposes of whether the Purchaser shall be entitled to set-off the amount of the Requested Set-Off Payment under this Section 8.08, but not in respect of any other matter relating to such Set-Off Claim, including whether any Purchaser Indemnified Party is ultimately determined to be entitled to be indemnified in respect of such

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Set-Off Claim under Section 8.02. The decision and award of the arbitrator shall be final and binding on the parties for the purpose set forth above, and may be entered and enforced in any court having jurisdiction.

(f) If the arbitrator rules that the Set-Off Claim is not a claim that entitles the Purchaser to withhold and set-off all or any portion of the Requested Set-Off Payment against the next Milestone Payment (the “Disallowed Requested Set-Off Payment”), the Purchaser shall have no right to withhold or set-off the Disallowed Requested Set-Off Payment in respect of such Set-Off Claim and, if the Requested Set-Off Payment in respect of such Set-Off Claim has previously been deposited in the Escrow Account, BSC shall be entitled to instruct the Escrow Agent to release an amount equal to the Disallowed Requested Set-Off Payment (plus any interest earned on such Disallowed Requested Set-Off Payment at a rate of interest from time to time publicly announced by Bank of America, N.A. as its prime or base rate plus 2%) to BSC from the Escrow Account in accordance with the terms of the Escrow Agreement.

(g) If the arbitrator rules that the Purchaser is entitled to set-off all or any portion of the Requested Set-Off Payment in respect of such Set-Off Claim (the “Allowed Requested Set-Off Payment”), the Purchaser shall have the right to withhold and set-off against the Milestone Payments the Allowed Requested Set-Off Payment in respect of such Set-Off Claim, and the amount of the Allowed Requested Set-Off Payment may be deposited, or if the Requested Set-Off Payment has previously been deposited, retained, in the Escrow Account in accordance with the terms of the Escrow Agreement.

(h) If BSC has not delivered a Set-Off Dispute Notice in accordance with Section 8.08(d), or if the amount of the Requested Set-Off Payment has not been determined in accordance with this Section 8.08 prior to the date of the next Milestone Payment Date, the Purchaser shall deposit an amount equal to the Requested Set-Off Payment into an escrow account (the “Escrow Account”) on the Milestone Payment Date in accordance with the terms of the Escrow Agreement. Otherwise, the amount of the Allowed Requested Set-Off Payment shall be deposited by the Purchaser in the Escrow Account on such date. The Requested Set-Off Payment or the Allowed Requested Set-Off Payment (as applicable) shall be released from the Escrow Account in accordance with the terms of the Escrow Agreement.

Section 8.09 Information; Waiver. The right to indemnification or any other remedy based on representations, warranties, covenants and obligations in this Agreement shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification or any other remedy based on such representations, warranties, covenants and obligations.

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ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

Section 9.01 Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by either BSC or the Purchaser if the Closing shall not have occurred on or before the six (6) month anniversary of the date of this Agreement (the “End Date”); provided that the right to terminate this Agreement under this Section 9.01(a) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

(b) by either the Purchaser or BSC in the event that any Governmental Order restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement shall have become final and nonappealable;

(c) by the Purchaser if BSC shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement, which would give rise to the failure of a condition set forth in Article VII and which cannot be or has not been cured within thirty (30) days following written notice thereof by the Purchaser;

(d) by BSC if the Purchaser shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement, which would give rise to the failure of a condition set forth in Article VII and which cannot be or has not been cured within thirty (30) days following written notice thereof by BSC; or

(e) by the mutual written consent of BSC and the Purchaser.

Section 9.02 Effect of Termination. In the event of termination of this Agreement as provided in Section 9.01, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto except (a) as set forth in Section 5.03 and Article X and (b) that nothing herein shall relieve either party from liability for any breach of this Agreement occurring prior to such termination.

ARTICLE X

GENERAL PROVISIONS

Section 10.01 Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial

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advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

Section 10.02 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or registered or certified mail (postage prepaid, return receipt requested) to the respective parties hereto at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02):

(a) if to BSC:

Boston Scientific Corporation

One Boston Scientific Place

Natick, MA 01760-1537

Facsimile: (508) 650-8960

Attention: General Counsel

with a copy to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022-6069

Facsimile: (212) 848-7179

Attention: Clare O’Brien

(b) if to the Purchaser:

Stryker Corporation

2825 Airview Blvd.

Kalamazoo, Michigan 49002 USA

Facsimile: (269) 385-2066

Attention: General Counsel

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

155 North Wacker Drive

Chicago, Illinois 60606

Facsimile: (312) 407-8518

Attention: Charles W. Mulaney, Jr.

Richard C. Witzel, Jr.

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Section 10.03 Public Announcements. Neither party to this Agreement shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement or otherwise communicate with any news media without the prior written consent of the other party unless otherwise required by Law or applicable stock exchange regulation, and the parties to this Agreement shall cooperate as to the timing and contents of any such press release, public announcement or communication.

Section 10.04 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic and legal substance of the transactions contemplated by this Agreement are not affected in any manner materially adverse to either party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.

Section 10.05 Entire Agreement. This Agreement, the Ancillary Agreements and the Confidentiality Agreement constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between BSC and the Purchaser with respect to the subject matter hereof and thereof.

Section 10.06 Assignment. This Agreement may not be assigned by operation of law or otherwise without the express written consent of BSC and the Purchaser (which consent may be granted or withheld in the sole discretion of BSC or the Purchaser), as the case may be; provided that the Purchaser may assign this Agreement or any of its rights and obligations hereunder to one or more Affiliates of the Purchaser (a “Purchaser Affiliate”) upon notice to BSC but without the consent of BSC, so long as any such assignment (a) shall not release the Purchaser from any obligation or liability hereunder and (b) is not likely to delay the Closing, provided that BSC acknowledges and agrees that the Purchaser may, subject to its compliance with clause (a) above, assign certain of its rights and obligations hereunder to the Purchaser Affiliates specified in Schedule 10.06.

Section 10.07 Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, BSC and the Purchaser or (b) by a waiver in accordance with Section 10.08.

Section 10.08 Waiver. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered by the other party pursuant hereto or (c) waive compliance with any of the agreements of the other party or conditions to such party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be

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construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of either party hereto to assert any of its rights hereunder shall not constitute a waiver of any of such rights. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 10.09 No Third Party Beneficiaries. Except for the provisions of Article VIII relating to Indemnified Parties, this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.

Section 10.10 Currency and Exchange Rates. Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars and all payments hereunder shall be made in United States dollars. In the event that there is any need to convert U.S. dollars into any foreign currency, or vice versa, for any purpose under this Agreement, the exchange rate shall be that published by the Wall Street Journal three (3) Business Days before the date on which the obligation is paid (or if the Wall Street Journal is not published on such date, the first date thereafter on which the Wall Street Journal is published), except as otherwise required by applicable Law (in which case, the exchange rate shall be determined in accordance with such Law).

Section 10.11 Specific Performance. The parties hereto acknowledge and agree that the parties hereto could be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached and that any non-performance or breach of this Agreement by any party hereto could not be adequately compensated by monetary damages alone and that the parties hereto would not have any adequate remedy at law. Accordingly, in addition to any other right or remedy to which any party hereto may be entitled, at law or in equity (including monetary damages), such party shall be entitled to seek enforcement of any provision of this Agreement by a decree of specific performance and to seek temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement without posting any bond or other undertaking.

Section 10.12 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to choice or conflict of law principles that would result in the application of any laws other than the laws of the State of Delaware. Except as provided in Sections 2.03(b), 5.26 and 8.08(e), all Actions arising out of or relating to this Agreement shall be heard and determined exclusively in the Chancery Court of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware and any direct appellate court therefrom). Consistent with the preceding sentence, the parties hereto hereby (a) submit to the exclusive jurisdiction of any such courts for the purpose of any Action arising out of or relating to this Agreement brought by either party hereto and (b) irrevocably waive, and

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agree not to assert as a defense, counterclaim or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above-named courts. Each of the parties hereto agrees that a final judgment in any such Action may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party agrees that notice or the service of process in any Action arising out of or relating to this Agreement shall be properly served or delivered if delivered in the manner contemplated by Section 10.02, provided that nothing in this Agreement shall affect the right of any party hereto to serve process in any other manner permitted by applicable Law.

Section 10.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BETWEEN THE PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.13.

Section 10.14 Counterparts. This Agreement may be executed and delivered (including by facsimile or pdf transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

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IN WITNESS WHEREOF, each of BSC and the Purchaser has caused this Agreement to be executed as of the date first written above by its respective officers thereunto duly authorized.

BOSTON SCIENTIFIC CORPORATION
By:	/s/ J. Raymond Elliott
Name:	J. Raymond Elliott
Title:	President and Chief Executive Officer
STRYKER CORPORATION
By:	/s/ Stephen P. MacMillan
Name:	Stephen P. MacMillan
Title:	Chairman, President and Chief
	Executive Officer

EX-21.(I)

EXHIBIT 21(i)

STRYKER CORPORATION

LIST OF SUBSIDIARIES

As of January 31, 2011

Name of Subsidiary	State or Country of Incorporation
Alcott Indemnity Company	Vermont
Applied Medical Recovery, Inc.	Arizona
Applied Medical Technologies, LLC	Arizona
Ascent Healthcare Solutions, Inc.	Delaware
Arizona Medical Recovery & Reprocessing, LLC	Arizona
Benoist Girard SAS	France
Colorado Biomedical, Inc.	Colorado
Everest Biomedical Instruments Company	Delaware
Fourth Generation, Inc.	Delaware
Gaymar Industries, Inc.	New York
Howmedica International S. de R.L.	Panama
Howmedica Osteonics Corp.	New Jersey
Image Guided Technologies, Inc.	Colorado
Link Technology, Inc.	Colorado
Medicycle, Inc.	Arizona
MicroDexterity Systems, Inc.	Delaware
MediSearch, Inc.	Puerto Rico
Nettrick Limited	Ireland
N.V. Stryker SA	Belgium
OOO “Stryker”	Russia
Osteo France SARL	France
OtisMed Corporation	California
ParaMed Corporation	Utah
Pficonprod Pty. Ltd.	Australia
PlasmaSol Corp.	Delaware
Ross Creek Medical, Inc.	Delaware
SpineCore, Inc.	Delaware
SSI Divesture, Inc.	Massachusetts
Stryker AB	Sweden
Stryker Australia LLC	Delaware
Stryker Australia Pty. Ltd.	Australia
Stryker (Barbados) Foreign Sales Corporation	Barbados
Stryker (Beijing) Healthcare Products Co. Ltd.	China
Stryker Beteiligungs GmbH	Germany
Stryker Biotech LLC	Michigan
Stryker Canada Holding Company	Canada
Stryker Canada LP	Canada
Stryker Canadian Management ULC	Canada
Stryker Capital BV	The Netherlands
Stryker China Limited	Hong Kong
Stryker Colombia SAS	Colombia
Stryker Communications, Inc.	Delaware
Stryker Corporation (Chile) y Compania Limitada	Chile
Stryker Corporation (Malaysia) Sdn. Bhd.	Malaysia
Stryker Czech Republic s.r.o.	Czech Republic
Stryker do Brasil Ltda.	Brazil
Stryker EMEA Supply Chain Services BV	The Netherlands

Stryker Far East, Inc.	Delaware
Stryker Financial Services CV	The Netherlands
Stryker France SAS	France
Stryker France Holding SNC	France
Stryker GI Ltd.	Israel
Stryker GI Services CV	The Netherlands
Stryker Global Technology Center Private Limited	India
Stryker GmbH	Austria
Stryker GmbH & Co. KG	Germany
Stryker Hellas EPE	Greece
Stryker Holdings BV	The Netherlands
Stryker Hong Kong Holdings Ltd	Hong Kong
Stryker Iberia, SL	Spain
Stryker IFSC Limited	Ireland
Stryker (India) Private Limited	India
Stryker International Holdings BV	The Netherlands
Stryker Ireland Holding	Ireland
Stryker Ireland Limited	Ireland
Stryker Italia SRL	Italy
Stryker Japan Holding KK	Japan
Stryker Japan Holdings BV	The Netherlands
Stryker Japan KK	Japan
Stryker Korea Ltd.	Korea
Stryker Leibinger GmbH & CO. KG	Germany
Stryker Luxembourg Holdings SARL	Luxembourg
Stryker Luxembourg SARL	Luxembourg
Stryker Mauritius Holding Ltd.	Mauritius
Stryker Medical Quebec LP	Canada
Stryker (Suzhou) Medical Technology Co Ltd.	China
Stryker Medtech KK	Japan
Stryker Mexico, S.A. de C.V.	Mexico
Stryker Nederland BV	The Netherlands
Stryker Newplant AG	Switzerland
Stryker New Zealand Limited	New Zealand
Stryker NV Operations Limited	Ireland
Stryker-Osteonics SA	Switzerland
Stryker Pacific Limited	Hong Kong
Stryker Polska Sp.z.o.o.	Poland
Stryker Portugal – Produtos Medicos Unipessoal, Lda.	Portugal
Stryker Puerto Rico Limited	Ireland
Stryker Real Estate Services BV	The Netherlands
Stryker Romania SRL	Romania
Stryker SA	Switzerland
Stryker Sales Corporation	Michigan
Stryker Servicios Administrativos S. de R.L. DE C.V.	Mexico
Stryker Singapore Private Limited	Singapore
Stryker South Africa (Proprietary) Limited	South Africa
Stryker Spain Holding, SL	Spain
Stryker Spine SA	Switzerland
Stryker Spine SAS	France
Stryker Trauma AG	Switzerland
Stryker Trauma GmbH	Germany
Stryker Trauma SAS	France
Stryker UK Limited	United Kingdom
Stryker U.S. Holding LLC	Delaware

Stryker Verwaltungs GmbH	Germany
Vanguard Medical Concepts, Inc.	Florida
Waterloo Bedding Co.	Canada

Stryker Corporation directly or indirectly owns 100% of the outstanding voting securities of each of the above-named subsidiaries.

EX-23.(I)

EXHIBIT 23(i)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-3 No. 333-164299) of Stryker Corporation, and

(2) Registration Statement (Form S-8 Nos. 333-78201, 333-140961 and 333-150396) pertaining to various stock option plans of Stryker Corporation;

of our reports dated February 18, 2011, with respect to the consolidated financial statements and schedule of Stryker Corporation and subsidiaries and the effectiveness of internal control over financial reporting of Stryker Corporation and subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 2010.

/s/ ERNST & YOUNG LLP

Grand Rapids, Michigan

February 18, 2011

EX-31.(I)

EXHIBIT 31(i)

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Stephen P. MacMillan, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2010 of Stryker Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 18, 2011

/s/ STEPHEN P. MACMILLAN

Stephen P. MacMillan

Chairman, President and Chief Executive Officer

EX-31.(II)

EXHIBIT 31(ii)

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Curt R. Hartman, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2010 of Stryker Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 18, 2011

/s/ CURT R. HARTMAN

Curt R. Hartman

Vice President and Chief Financial Officer

EX-32.(I)

EXHIBIT 32(i)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Stryker Corporation (the “Company”) for the year ending December 31, 2010 (the “Report”), I, Stephen P. MacMillan, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen P. MacMillan

Stephen P. MacMillan

Chairman, President and Chief Executive Officer

February 18, 2011

EX-32.(II)

EXHIBIT 32(ii)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Stryker Corporation (the “Company”) for the year ending December 31, 2010 (the “Report”), I, Curt R. Hartman, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Curt R. Hartman

Curt R. Hartman

Vice President and Chief Financial Officer

February 18, 2011