10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2010

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

Commission File No. 1-11083

BOSTON SCIENTIFIC CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	04-2695240
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

ONE BOSTON SCIENTIFIC PLACE, NATICK, MASSACHUSETTS 01760-1537
(Address of principal executive offices)

(508) 650-8000
(Registrant’s telephone number)

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

COMMON STOCK, $.01 PAR VALUE PER SHARE	NEW YORK STOCK EXCHANGE
(Title of each class)	(Name of exchange on which registered)

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: þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes: o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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: þ No o

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 shorted period that the registrant was required to submit and post such files). Yes: þ No o

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 the 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. o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

      Large accelerated filer þ Accelerated filer o Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes: o No þ

The aggregate market value of the registrant’s common stock held by non-affiliates was approximately $8.6 billion based on the closing price of the registrant’s common stock on June 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter.

The number of shares outstanding of the registrant’s common stock as of January 31, 2011 was 1,523,368,979.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its 2011 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I		3
ITEM 1.	BUSINESS	3
ITEM 1A.	RISK FACTORS	21
ITEM 1B.	UNRESOLVED STAFF COMMENTS	34
ITEM 2.	PROPERTIES	34
ITEM 3.	LEGAL PROCEEDINGS	34
ITEM 4.	[REMOVED AND RESERVED]	34
PART II		35
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	35
ITEM 6.	SELECTED FINANCIAL DATA	37
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	79
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	81
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	147
ITEM 9A.	CONTROLS AND PROCEDURES	147
ITEM 9B.	OTHER INFORMATION	147
PART III		148
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	148
ITEM 11.	EXECUTIVE COMPENSATION	148
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	148
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	148
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	148
PART IV		149
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	149
SIGNATURES		157
EX-10.11
EX-10.39
EX-10.61
EX-12
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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PART I

ITEM 1. BUSINESS

The Company

Boston Scientific Corporation is a worldwide developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties. Our mission is to improve the quality of patient care and the productivity of healthcare delivery through the development and advocacy of less-invasive medical devices and procedures. This is accomplished through the continuing refinement of existing products and procedures and the investigation and development of new technologies that are least- or less-invasive, reducing risk, trauma, procedure time and the need for aftercare; cost- and comparatively-effective and, where possible, reduce or eliminate refractory drug use. When used in this report, the terms “we,” “us,” “our” and “the Company” mean Boston Scientific Corporation and its divisions and subsidiaries.

Our history began in the late 1960s when our co-founder, John Abele, acquired an equity interest in Medi-tech, Inc., a research and development company focused on developing alternatives to surgery. In 1969, Medi-tech introduced a family of steerable catheters used in some of the first less-invasive procedures performed. In 1979, John Abele joined with Pete Nicholas to form Boston Scientific Corporation, which indirectly acquired Medi-tech. This acquisition began a period of active and focused marketing, new product development and organizational growth. Since then, we have advanced the practice of less-invasive medicine by helping physicians and other medical professionals treat a variety of diseases and conditions and improve patients’ quality of life by providing alternatives to surgery and other medical procedures that are typically traumatic to the body.

Our net sales have increased substantially since our formation over thirty years ago. Our growth has been fueled in part by strategic acquisitions and alliances designed to improve our ability to take advantage of growth opportunities in the medical device industry. On April 21, 2006, we consummated our acquisition of Guidant Corporation. With this acquisition, we became a major provider in the worldwide cardiac rhythm management (CRM) market, enhancing our overall competitive position and long-term growth potential and further diversifying our product portfolio. This acquisition has established us as one of the world’s largest cardiovascular device companies and a global leader in microelectronic therapies. This and other strategic acquisitions have helped us to add promising new technologies to our pipeline and to offer one of the broadest product portfolios in the world for use in less-invasive procedures. We believe that the depth and breadth of our product portfolio has also enabled us to compete more effectively in, and better absorb the pressures of, the current healthcare environment of cost containment, managed care, large buying groups, government contracting and hospital consolidation and will generally assist us in navigating through the complexities of the global healthcare market, including healthcare reform.

Business Strategy

Our strategy is to lead global markets for less-invasive medical devices by developing and marketing innovative products, services and therapies that address unmet patient needs, provide superior clinical outcomes and demonstrate proven economic value. We intend to do so by building and buying products we understand, through sales forces we already have. The following are the five elements of our strategic plan:

•

Prepare our People

We believe that our success will be driven by strong leadership, robust communication and the high caliber of our employees. We have strengthened our focus on talent assessment and leadership development, and are committed to developing our people and providing them with opportunities to contribute to the Company’s growth and success. Recently, we redefined the specific leadership criteria necessary for our people to allow us to win in our global marketplace. As a demonstration of our commitment to the preparation of our people, we have also developed a Leadership Academy, a set of integrated training and enrichment programs designed to support our goal of developing a culture of leadership at all levels within the organization.

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•	Optimize the Company
	We plan to adapt our existing business model to allow us to operate in a more efficient manner and allow for enhanced execution, while providing better value to hospitals, better solutions to physicians and better outcomes to patients. In 2010, we began implementing several restructuring initiatives designed to strengthen and position us for long-term success, including the integration of our Cardiovascular and CRM groups into one stronger and more competitive organization that we believe will improve our ability to deliver innovative products and technologies, leading clinical science and exceptional service; as well as the restructuring of certain other businesses and corporate functions. We are centralizing corporate research and development to refocus and strengthen our innovation efforts, and are organizing our clinical organization to take full advantage of the global resources available to conduct more cost-effective clinical studies, accelerate the time to bring new products to market, and gain access to worldwide technological developments that we can implement across our product lines. In addition, we will look to transform the way we conduct research and development, leverage low-cost geographies, and scrutinize our cost structure, which we expect will generate significant savings over the next three years.
•	Win Global Market Share
	Through our global presence, we seek to increase net sales and market share, and leverage our relationships with leading physicians and their clinical research programs. We plan to re-align our International regions to be more effective in executing our business strategy and renew our focus on selling in order to maximize our opportunities in countries whose economies and healthcare sectors are growing rapidly. We expect to invest $30 million to $40 million by the end of 2011 to introduce new products and strengthen our sales organization in emerging markets such as Brazil, China and India.
•	Expand our Sales and Marketing Focus
	We are expanding our focus on sales, using new analytics, best practices and technologies to improve our sales methods and tools. We are also increasing our global sales focus through targeted sales force expansions and through delivering new global best practice capabilities in crucial areas such as training, management, forecasting and planning, and reaching the economic customer on a global basis. We offer products in numerous product categories, which are used by physicians throughout the world in a broad range of diagnostic and therapeutic procedures. The breadth and diversity of our product lines permit medical specialists and purchasing organizations to satisfy many of their less-invasive medical device requirements from a single source. In addition, we endeavor to expand our footprint in the hospital beyond our current product offerings to provide us greater strategic mass.
•	Realign our Business Portfolio
	We are directing our research and development and business development efforts to products with higher returns and increasing our discipline and metrics to improve returns on our investments. We are realigning our business portfolio through strategic acquisitions and select divestitures in order to reduce risk, optimize operational leverage and accelerate profitable, sustainable revenue growth, while preserving our ability to meet the needs of physicians and their patients. We expect to continue to invest in our core franchises, and also investigate opportunities to further expand our presence in, and diversify into, priority growth areas including atrial fibrillation, autonomic modulation therapy, coronary artery disease, deep-brain stimulation, diabetes/obesity, endoluminal surgery, endoscopic pulmonary intervention, hypertension, peripheral vascular disease, structural heart disease, sudden cardiac arrest, and women’s health. We have recently announced several acquisitions targeting many of the above conditions and disease states, and, in January 2011, closed the sale of our Neurovascular business to Stryker Corporation. The sale of our Neurovascular business provides us with increased flexibility to fund acquisitions and repay debt.

We believe that the execution of this strategy will drive innovation, accelerate profitable revenue growth and increase shareholder value.

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Products

During 2010, our products were offered for sale by seven dedicated business groups—CRM; Cardiovascular, including our Interventional Cardiology and Peripheral Interventions businesses; Electrophysiology; Endoscopy; Urology/Women’s Health; Neuromodulation; and Neurovascular. In 2010, we began the restructuring of our organization, which we believe will allow us to operate in a more effective and efficient manner, and includes the integration of our CRM and Cardiovascular groups into a newly formed Cardiology, Rhythm and Vascular group, which includes an Endovascular unit encompassing Peripheral Interventions, Imaging and Electrophysiology.

During 2010, we derived 28 percent of our net sales from our CRM business, 42 percent from our Cardiovascular group, two percent from our Electrophysiology business, 14 percent from our Endoscopy business, six percent from our Urology/Women’s Health business, four percent from our Neuromodulation business, and four percent from our Neurovascular business. The following section describes certain of our product offerings:

Cardiac Rhythm Management

We develop, manufacture and market a variety of implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities, including:

• Implantable cardioverter defibrillator (ICD) systems used to detect and treat abnormally fast heart rhythms (tachycardia) that could result in sudden cardiac death, including implantable cardiac resynchronization therapy defibrillator (CRT-D) systems used to treat heart failure; and

• Implantable pacemaker systems used to manage slow or irregular heart rhythms (bradycardia), including implantable cardiac resynchronization therapy pacemaker (CRT-P) systems used to treat heart failure.

A key component of many of our implantable device systems is our remote LATITUDE® Patient Management System, which enables physicians to monitor device performance remotely while patients are in their homes, allowing for more frequent monitoring in order to guide treatment decisions. In 2010, we launched several new CRM products, including an upgrade to our LATITUDE® system, providing enhanced functionality, as well as our new 4-SITE lead delivery system. We have experienced continued success with our next-generation COGNIS^® CRT-D and TELIGEN® ICD systems, as well as our ALTRUA® family of pacemaker systems and, in 2011 and 2012, we will continue to execute on our product pipeline with the expected launch of our next-generation INGENIO™ pacemaker system, and our next-generation line of defibrillators, INCEPTA™, ENERGEN™ and PUNCTUA™. This product line includes new features designed to improve functionality, diagnostic capability and ease of use.

Interventional Cardiology

Coronary Stent Systems

Our broad, innovative product offerings have enabled us to become a leader in the interventional cardiology market. This leadership is due in large part to our coronary stent product offerings. Coronary stents are tiny, mesh tubes used in the treatment of coronary artery disease, which are implanted in patients to prop open arteries and facilitate blood flow to and from the heart. Our VeriFLEX™ (Liberté®) bare-metal coronary stent system is designed to enhance deliverability and conformability, particularly in challenging lesions. We have further enhanced the outcomes associated with the use of coronary stents, particularly the processes that lead to restenosis¹, through dedicated internal and external product development, strategic alliances and scientific research of drug-eluting stent systems. We are the only company in the industry to offer a two-drug platform strategy with our paclitaxel-eluting and everolimus-eluting stent system offerings, and are the industry leader for

¹ The growth of neointimal tissue within an artery after angioplasty and stenting.

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widest range of coronary stent sizes. In 2010, we launched our third-generation TAXUS® Element™ paclitaxel-eluting stent system in our Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries, and continue to sell our second-generation TAXUS® Liberté® paclitaxel-eluting stent system in the U.S. and Japan. We also market the PROMUS® everolimus-eluting stent system, currently supplied to us in the U.S. and Japan by Abbott Laboratories, as well as our next-generation internally-developed and manufactured everolimus-eluting stent system, the PROMUS® Element™ stent system, currently marketed in our EMEA region and certain Inter-Continental countries. We expect to launch our PROMUS® Element™ stent system in the U.S. and Japan in mid-2012, and our TAXUS® Element™ stent system in the U.S. (to be commercialized as ION™) mid-2011 and Japan in late 2011 or early 2012.

Coronary Revascularization

We market a broad line of products used to treat patients with atherosclerosis. Atherosclerosis, a principal cause of coronary artery obstructive disease, is characterized by a thickening of the walls of the coronary arteries and a narrowing of arterial openings caused by the progressive development of deposits of plaque. Our product offerings include balloon catheters, rotational atherectomy systems, guide wires, guide catheters, embolic protection devices, and diagnostic catheters used in percutaneous transluminal coronary angioplasty (PTCA). In 2010, we launched our Apex™ pre-dilatation balloon catheter with platinum marker bands for improved radiopacity, our NC Quantum Apex™ post-dilatation balloon catheter, developed specifically to address physicians’ needs in optimizing coronary stent deployment, which has been received very positively in the market, as well as our Kinetix™ family of guidewires. We continue to hold a strong leadership position in the PTCA balloon catheter market with an estimated 56 percent share of the U.S. market, and 38 percent worldwide.

Intraluminal Ultrasound Imaging

We market a family of intraluminal catheter-directed ultrasound imaging catheters and systems for use in coronary arteries and heart chambers as well as certain peripheral vessels. The iLab® Ultrasound Imaging System continues as our flagship console and is compatible with our full line of imaging catheters. This system is designed to enhance the diagnosis and treatment of blocked vessels and heart disorders.

Structural Heart Therapy

In January 2011, as part of our priority growth initiatives, we completed the acquisition of Sadra Medical, Inc. Sadra is developing a fully repositionable and retrievable device for percutaneous aortic valve replacement (PAVR) to treat patients with severe aortic stenosis and recently completed a series of European feasibility studies for its Lotus™ Valve System, which consists of a stent-mounted tissue valve prosthesis and catheter delivery system for guidance and placement of the valve. The low-profile delivery system and introducer sheath are designed to enable accurate positioning, repositioning and retrieval at any time prior to release of the aortic valve implant. PAVR is one of the fastest growing medical device markets.

Electrophysiology

Within our Electrophysiology business, we develop less-invasive medical technologies used in the diagnosis and treatment of rate and rhythm disorders of the heart. Included in our product offerings are radio frequency generators, intracardiac ultrasound and steerable ablation catheters, and diagnostic catheters. Our leading products include the Blazer™ line of ablation catheters, including our next-generation Blazer™ Prime ablation catheter, designed to deliver enhanced performance, responsiveness and durability, and the Chilli II® cooled ablation catheter. In January 2011, as part of our priority growth initiatives, we announced the signing of a definitive merger agreement under which we will acquire Atritech, Inc., subject to customary closing conditions. Atritech has developed a novel device designed to close the left atrial appendage in patients with atrial fibrillation who are at risk for ischemic stroke. The WATCHMAN^® Left Atrial Appendage Closure Technology, developed by Atritech, is the first device proven in a randomized clinical trial to offer an alternative to anticoagulant drugs, and is approved for use in CE Mark countries.

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Peripheral Interventions

We sell various products designed to treat patients with peripheral disease (disease which appears in blood vessels other than in the heart and in the biliary tree), including a broad line of medical devices used in percutaneous transluminal angioplasty and peripheral vascular stenting. Our peripheral product offerings include stents, balloon catheters, sheaths, wires and vena cava filters, and we hold the number one position in the worldwide Peripheral Interventions market. We market the PolarCath™ peripheral dilatation system used in CryoPlasty® Therapy, an innovative approach to the treatment of peripheral artery disease in the lower extremities. In 2010, we successfully launched several of our market-leading products internationally, including the launch in Japan of our Carotid WALLSTENT® Monorail® Endoprosthesis for the treatment of patients with carotid artery disease who are at high risk for surgery.

We also sell products designed to treat patients with non-vascular disease (disease which appears outside the blood system). Our non-vascular suite of products includes biliary stents, drainage catheters and micro-puncture sets designed to treat, diagnose and ease various forms of benign and malignant tumors. In 2010, our Express LD Stent System received U.S. Food and Drug Administration (FDA) approval for an iliac indication, and we continued to market our Express® SD Renal Monorail® premounted stent system for use as an adjunct therapy to percutaneous transluminal renal angioplasty in certain lesions of the renal arteries; as well as our Sterling® Monorail® and Over-the-Wire balloon dilatation catheter for use in the renal and lower extremity arteries, and our extensive line of Interventional Oncology product solutions.

Embolic Protection

Our FilterWire EZ™ Embolic Protection System is a low profile filter designed to capture embolic material that may become dislodged during a procedure, which could otherwise travel into the microvasculature where it could cause a heart attack or stroke. It is commercially available in the U.S., our EMEA region and certain Inter-Continental countries for multiple indications, including the treatment of disease in peripheral, coronary and carotid vessels. It is also available in the U.S. for the treatment of saphenous vein grafts and carotid artery stenting procedures.

Endoscopy

Gastroenterology

We market a broad range of products to diagnose, treat and ease a variety of digestive diseases, including those affecting the esophagus, stomach, liver, pancreas, duodenum, and colon. Common disease states include esophagitis, portal hypertension, peptic ulcers as well as esophageal, biliary, pancreatic and colonic cancer. We offer the Radial Jaw® 4 Single-Use Biopsy Forceps, which are designed to enable collection of large high-quality tissue specimens without the need to use large channel therapeutic endoscopes and, in 2010, expanded our offering of this product to include a wider variety of sizes. Our exclusive line of RX Biliary System™ devices are designed to provide greater access and control for physicians to diagnose and treat challenging conditions of the bile ducts, such as removing gallstones, opening obstructed bile ducts and obtaining biopsies in suspected tumors. We also market the Spyglass® Direct Visualization System for direct imaging of the pancreatico-biliary system. The Spyglass® System is the first single-operator cholangioscopy device that offers clinicians a direct visualization of the pancreatico-biliary system and includes supporting devices for tissue acquisition, stone management and lithotripsy. In 2010, we continued commercialization of our WallFlex® family of stents, in particular, the WallFlex® Biliary line and WallFlex® Esophageal line; and our Resolution® Clip Device, used to treat gastrointestinal bleeding. Our Resolution® Clip is the only currently-marketed mechanical clip designed to open and close, up to five times, before deployment to help enable a physician to see the effects of the clip before committing to deployment.

Interventional Bronchoscopy

We market devices to diagnose, treat and ease pulmonary disease systems within the airway and lungs. Our products are designed to help perform biopsies, retrieve foreign bodies from the airway, open narrowings of an

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airway, stop internal bleeding, and ease symptoms of some types of airway cancers. Our product line includes pulmonary biopsy forceps, transbronchial aspiration needles, cytology brushes and tracheobronchial stents used to dilate narrowed airway passages or for tumor management. In addition, as part of our priority growth initiatives, in October 2010, we completed our acquisition of Asthmatx, Inc. Asthmatx designs, manufactures and markets a less-invasive, catheter-based bronchial thermoplasty procedure for the treatment of severe persistent asthma. The Alair^® Bronchial Thermoplasty System, developed by Asthmatx, has both CE Mark and FDA approval and is the first device-based asthma treatment approved by the FDA.

Urology/Women’s Health

Our Urology/Women’s Health division develops and manufactures devices to treat various urological and gynecological disorders. We sell a variety of products designed to treat patients with urinary stone disease, stress urinary incontinence, pelvic organ prolapse and excessive uterine bleeding. We offer a full line of stone management products, including ureteral stents, wires, lithotripsy devices, stone retrieval devices, sheaths, balloons and catheters.

We continue to expand our focus on Women’s Health. We market a range of devices for the treatment of conditions such as female urinary incontinence, pelvic floor reconstruction (rebuilding of the anatomy to its original state), and menorrhagia (excessive menstrual bleeding). We offer a full breadth of mid-urethral sling products, sling materials, graft materials, pelvic floor reconstruction kits, and suturing devices. We recently launched our Genesys Hydro ThermAblator® (HTA) system, a next-generation endometrial ablation system designed to ablate the endometrial lining of the uterus in premenopausal women with menorrhagia. The Genesys HTA System features a smaller and lighter console, simplified set-up requirements, and an enhanced graphic user interface and is designed to improve operating performance.

Neuromodulation

Within our Neuromodulation business, we market the Precision® Spinal Cord Stimulation (SCS) system, used for the management of chronic pain. This system delivers pain management by applying an electrical signal to mask pain signals traveling from the spinal cord to the brain. The Precision System utilizes a rechargeable battery and features a programming system. In 2010, we received FDA approval and launched two lead splitters, as well as the Linear™ 3-4 and Linear 3-6 Percutaneous Leads for use with our SCS systems, offering a broader range of lead configurations and designed to provide physicians more treatment options for their chronic pain patients. These leads provide the broadest range of percutaneous lead configurations in the industry. We believe that we continue to have a technology advantage over our competitors with proprietary features such as Multiple Independent Current Control, which is intended to allow the physician to target specific areas of pain more precisely, and are involved in various studies designed to evaluate the use of spinal cord stimulation in the treatment of additional sources of pain. As a demonstration of our commitment to strengthening clinical evidence with spinal cord stimulation, we have initiated a trial to assess the therapeutic effectiveness and cost-effectiveness of spinal cord stimulation compared to reoperation in patients with failed back surgery syndrome. We believe that this trial could result in consideration of spinal cord stimulation much earlier in the continuum of care. In addition, in late 2010 we initiated a European clinical trial for the treatment of Parkinson’s disease using our Vercise™ deep-brain stimulation system, and, in January 2011, we completed the acquisition of Intelect Medical, Inc., a development-stage company developing advanced visualization and programming for the Vercise™ system. We believe this acquisition leverages the core architecture of our Vercise™ platform and advances the field of deep-brain stimulation.

Neurovascular

In January 2011, we closed the sale of our Neurovascular business to Stryker Corporation. This business markets a broad line of coated and uncoated detachable coils, micro-delivery stents, micro-guidewires, micro-catheters, guiding catheters and embolics to neuro-interventional radiologists and neurosurgeons to treat diseases of the neurovascular system. In 2010, we marketed the GDC® Coils (Guglielmi Detachable Coil) and Matrix® systems to treat brain aneurysms and, in late 2010, we received FDA approval for the next-generation family of detachable coils, which includes an enhanced delivery system designed to reduce coil detachment times, and began a phased

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launch of the product. We also offered the NeuroForm® stent system, and launched the Neuroform EZ™ stent system, a fourth-generation intracranial aneurysm stent system designed for use in conjunction with endovascular coiling to treat wide-necked aneurysm, and the Wingspan® Stent System with Gateway® PTA Balloon Catheter, each under a Humanitarian Device Exemption approval granted by the FDA. The Wingspan Stent System is designed to treat atherosclerotic lesions or accumulated plaque in brain arteries. Designed for the brain’s fragile vessels, the Wingspan Stent System is a self-expanding, nitinol stent sheathed in a delivery system that enables it to reach and open narrowed arteries in the brain. The Wingspan Stent System is currently the only device available in the U.S. for the treatment of intracranial atherosclerotic disease (ICAD) and is indicated for improving cerebral artery lumen diameter in patients with ICAD who are unresponsive to medical therapy.

Innovation

Our approach to innovation combines internally-developed products and technologies with those we may obtain externally through strategic acquisitions and alliances. Our research and development efforts are focused largely on the development of next-generation and novel technology offerings across multiple programs and divisions. Since 1995, we have undertaken strategic acquisitions to assemble the lines of business necessary to achieve the critical mass that allows us to continue to be a leader in the medical device industry. We expect to continue to invest in our core franchises, and also investigate opportunities to further expand our presence in, and diversify into, priority growth areas including atrial fibrillation, autonomic modulation therapy, coronary artery disease, deep-brain stimulation, diabetes/obesity, endoluminal surgery, endoscopic pulmonary intervention, hypertension, peripheral vascular disease, structural heart disease, sudden cardiac arrest, and women’s health. We have recently announced several acquisitions targeting many of the above conditions and disease states. In 2010, we completed the acquisition of Asthmatx, Inc., and in January 2011, we completed the acquisitions of Sadra Medical, Inc. and Intelect Medical, Inc., and announced the signing of a definitive merger agreement to acquire Atritech, Inc., each discussed above. There can be no assurance that technologies developed internally or acquired through acquisitions and alliances will achieve technological feasibility, obtain regulatory approvals or gain market acceptance, and any delay in the development or approval of these technologies may adversely impact our future growth.

Research and Development

Our investment in research and development is critical to driving our future growth. We expended $939 million on research and development in 2010, $1.035 billion in 2009 and $1.006 billion in 2008, representing approximately 12 to 13 percent of our net sales each year. Our investment in research and development reflects:

• regulatory compliance, clinical science, and internal research and development programs, as well as others obtained through our strategic acquisitions and alliances; and

• sustaining engineering efforts which incorporate customer feedback into continuous improvement efforts for currently marketed and next-generation products.

We have directed our development efforts toward regulatory compliance and innovative technologies designed to expand current markets or enter new markets. We are looking to transform the way we conduct research and development, leverage low-cost geographies, and scrutinize our cost structure, which we expect will generate significant savings over the next three years. Our approach to new product design and development is through focused, cross-functional teams. We believe that our formal process for technology and product development aids in our ability to offer innovative and manufacturable products in a consistent and timely manner. Involvement of the research and development, clinical, quality, regulatory, manufacturing and marketing teams early in the process is the cornerstone of our product development cycle. This collaboration allows these teams to concentrate resources on the most viable and clinically relevant new products and technologies, and focus on bringing them to market in a timely and cost-effective manner. In addition to internal development, we work with hundreds of leading research institutions, universities and clinicians around the world to develop, evaluate and clinically test our products. We believe our future success will depend upon the strength of these development efforts.

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Marketing and Sales

During 2010, we marketed our products to over 10,000 hospitals, clinics, outpatient facilities and medical offices in nearly 100 countries worldwide. The majority of our net sales are derived from countries in which we have direct sales organizations. A network of distributors and dealers who offer our products worldwide accounts for our remaining sales. We will continue to leverage our infrastructure in markets where commercially appropriate and use third parties in those markets where it is not economical or strategic to establish or maintain a direct presence. We are not dependent on any single institution and no single institution accounted for more than ten percent of our net sales in 2010 or 2009; however, large group purchasing organizations, hospital networks and other buying groups have become increasingly important to our business and represent a substantial portion of our U.S. net sales. We have a dedicated corporate sales organization in the U.S. focused principally on selling to major buying groups and integrated healthcare networks. We consistently strive to understand and exceed the expectations of our customers. Each of our business groups maintains dedicated sales forces and marketing teams focusing on physicians who specialize in the diagnosis and treatment of different medical conditions. We believe that this focused disease state management enables us to develop highly knowledgeable and dedicated sales representatives and to foster collaborative relationships with physicians. We believe that we have positive working relationships with physicians and others in the medical industry, which enable us to gain a detailed understanding of new therapeutic and diagnostic alternatives and to respond quickly to the changing needs of physicians and their patients.

International Operations

International net sales accounted for 44 percent of our net sales in 2010. Net sales and operating income attributable to our 2010 geographic regions are presented in Note P–Segment Reporting to our 2010 consolidated financial statements included in Item 8 of this Annual Report. Our international structure operates through three international business units: EMEA, consisting of Europe, the Middle East and Africa; Japan; and Inter-Continental, consisting of our Asia Pacific and the Americas reporting units. Maintaining and expanding our international presence is an important component of our long-term growth plan. Through our international presence, we seek to increase net sales and market share, leverage our relationships with leading physicians and their clinical research programs, accelerate the time to bring new products to market, and gain access to worldwide technological developments that we can implement across our product lines. We plan to invest $30 million to $40 million through the end of 2011 to introduce new products and strengthen our sales capabilities in emerging markets such as Brazil, China and India. A discussion of the risks associated with our international operations is included in Item 1A of this Annual Report.

As of December 31, 2010, we had six international manufacturing facilities, including three in Ireland, two in Costa Rica and one in Puerto Rico. Approximately 55 percent of our products sold worldwide during 2010 were manufactured at these facilities. Additionally, we maintain international research and development capabilities in Ireland, as well as physician training centers in France and Japan.

Manufacturing and Raw Materials

We are focused on continuously improving our supply chain effectiveness, strengthening our manufacturing processes and increasing operational efficiencies within our organization. By shifting global manufacturing along product lines, we are able to leverage our existing resources and concentrate on new product development, including the enhancement of existing products, and their commercial launch. We are implementing new systems designed to provide improved quality and reliability, service, greater efficiency and lower supply chain costs, and have substantially increased our focus on process controls and validations, supplier controls, distribution controls and providing our operations teams with the training and tools necessary to drive continuous improvement in product quality. In addition, we continue to focus on examining our operations and general business activities to identify cost-improvement opportunities in order to enhance our operational effectiveness, including our Plant Network Optimization program and our recently completed 2007 Restructuring plan, discussed in Item 7 of this Annual Report.

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Our products are designed and manufactured in technology centers around the world, either by us or third parties. In most cases, the manufacturing of our products is concentrated in one or a few locations. We consistently monitor our inventory levels, manufacturing and distribution capabilities, and maintain recovery plans to address potential disruptions that we may encounter; however, any significant interruption in our ability to manufacture these products over an extended duration may result in delays in our ability to resume production of affected products, due to needs for regulatory approvals. As a result, we may suffer loss of market share, which we may be unable to recapture, and harm to our reputation, which could adversely affect our results of operations and financial condition.

Many components used in the manufacture of our products are readily fabricated from commonly available raw materials or off-the-shelf items available from multiple supply sources. Certain items are custom made to meet our specifications. We believe that in most cases, redundant capacity exists at our suppliers and that alternative sources of supply are available or could be developed within a reasonable period of time. We also have an on-going program to identify single-source components and to develop alternative back-up supplies and we regularly re-address the adequacy and abilities of our suppliers to meet our needs. However, in certain cases, we may not be able to quickly establish additional or replacement suppliers for specific materials, components or products, largely due to the regulatory approval system and the complex nature of our manufacturing processes and those of our suppliers. A reduction or interruption in supply, an inability to develop and validate alternative sources if required, or a significant increase in the price of raw materials, components or products could adversely affect our operations and financial condition, particularly materials or components related to our CRM products and drug-eluting stent systems. In addition, our products require sterilization prior to sale and we utilize a mix of internal resources and third-party vendors to perform this service. We believe we have redundant capabilities that are sufficient to sterilize our products; however, to the extent we or our third-party sterilizers are unable to sterilize our products, whether due to capacity, regulatory or other constraints, we may be unable to transition to other providers in a timely manner, which could have an adverse impact on our operations.

Certain products are manufactured for us by third parties. We are currently reliant on Abbott Laboratories for our supply of everolimus-eluting stent systems in the U.S. and Japan. Our supply agreement with Abbott for everolimus-eluting stent systems in these regions extends through the end of the second quarter of 2012. At present, we believe that our supply of everolimus-eluting stent systems from Abbott, coupled with our current launch plans for our next-generation internally-developed and manufactured everolimus-eluting stent system in these regions, is sufficient to meet customer demand. However, any production or capacity issues that affect Abbott’s manufacturing capabilities or our process for forecasting, ordering and receiving shipments may impact the ability to increase or decrease our level of supply in a timely manner; therefore, our supply of everolimus-eluting stent systems supplied to us by Abbott may not align with customer demand, which could have an adverse effect on our operating results. Further, a delay in the launch of our internally-developed and manufactured next-generation PROMUS® Element™ everolimus-eluting stent system in the U.S. and Japan, currently expected in mid-2012, could result in an inability to meet customer demand for everolimus-eluting stent systems. We launched our PROMUS® Element™ stent system in our EMEA region and certain Inter-Continental countries in the fourth quarter of 2009, quickly gaining market share, exiting 2010 with approximately one quarter share of the drug-eluting stent market in EMEA.

Quality Assurance

In January 2006, we received a corporate warning letter from the FDA notifying us of serious regulatory problems at three of our facilities and advising us that our corporate-wide corrective action plan relating to three site-specific warning letters issued to us in 2005 was inadequate. We identified solutions to the quality system issues cited by the FDA and implemented those solutions throughout our organization. During 2008, the FDA reinspected a number of our facilities and, in October 2008, informed us that our quality system was in substantial compliance with its Quality System Regulations. In November 2009 and January 2010, the FDA reinspected two of our sites to follow up on observations from the 2008 FDA inspections. Both of these FDA inspections confirmed that all issues at the sites have been resolved and all restrictions related to the corporate warning letter were removed. On August 11, 2010, we were notified by the FDA that the corporate warning letter had been lifted.

We are committed to providing high quality products to our customers. To meet this commitment, we have implemented updated quality systems and concepts throughout our organization. Our quality system starts with the initial product specification and continues through the design of the product, component specification process and the manufacturing, sale and servicing of the product. Our quality system is intended to build in quality and process control and to utilize continuous improvement concepts throughout the product life. These systems are designed to enable us to satisfy the various international quality system regulations, including those of the FDA

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with respect to products sold in the U.S. All of our manufacturing facilities, including our U.S. and European distribution centers, are certified under the ISO13485:2003 quality system standard, established by the International Standards Organization, for medical devices, which requires, among other items, an implemented quality system that applies to component quality, supplier control, product design and manufacturing operations. This certification can be obtained only after a complete audit of a company’s quality system by an independent outside auditor. Maintenance of the certification requires that these facilities undergo periodic re-examination.

In addition, we maintain an on-going initiative to seek ISO14001 certification at our plants around the world. ISO14001 is a globally recognized standard for Environmental Management Systems, established by the International Standards Organization, which provides a voluntary framework to identify key environmental aspects associated with our business. We engage in continuous environmental performance improvement efforts, and at present, ten of our 14 manufacturing and distribution facilities have attained ISO14001 certification. We are committed to achieving ISO14001 certification at all of our manufacturing facilities and Tier I distribution centers worldwide.

Competition

We encounter significant competition across our product lines and in each market in which we sell our products from various companies, some of which may have greater financial and marketing resources than we do. Our primary competitors include Johnson & Johnson (including its subsidiary, Cordis Corporation); Medtronic, Inc.; Abbott Laboratories; and St. Jude Medical, Inc.; as well as a wide range of medical device companies that sell a single or limited number of competitive products or participate in only a specific market segment. We also face competition from non-medical device companies, such as pharmaceutical companies, which may offer alternative therapies for disease states intended to be treated using our products.

We believe that our products compete primarily on their ability to safely and effectively perform diagnostic and therapeutic procedures in a less-invasive manner, including clinical outcomes, ease of use, comparative effectiveness, reliability and physician familiarity. In the current environment of managed care, economically-motivated buyers, consolidation among healthcare providers, increased competition and declining reimbursement rates, we have been increasingly required to compete on the basis of price, value, reliability and efficiency. We believe the current global economic conditions and healthcare reform measures could put additional competitive pressure on us, including on our average selling prices, overall procedure rates and market sizes. We recognize that our continued competitive success will depend upon our ability to offer products with differentiated clinical outcomes; create or acquire innovative, scientifically advanced technology; apply our technology cost-effectively and with superior quality across product lines and markets; develop or acquire proprietary products; attract and retain skilled personnel; obtain patent or other protection for our products; obtain required regulatory and reimbursement approvals; continually enhance our quality systems; manufacture and successfully market our products either directly or through outside parties; and supply sufficient inventory to meet customer demand.

Regulatory Environment

The medical devices that we manufacture and market are subject to regulation by numerous regulatory bodies, including the FDA and comparable international regulatory agencies. These agencies require manufacturers of medical devices to comply with applicable laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution of medical devices. Devices are generally subject to varying levels of regulatory control, the most comprehensive of which requires that a clinical evaluation be conducted before a device receives approval for commercial distribution.

In the U.S., approval to distribute a new device generally can be met in one of three ways. The first process requires that a pre-market notification (510(k) Submission) be made to the FDA to demonstrate that the device is as safe and effective as, or substantially equivalent to, a legally marketed device that is not subject to pre-market approval (PMA), i.e., the “predicate” device. An appropriate predicate device for a pre-market notification is one that (i) was legally marketed prior to May 28, 1976, (ii) was approved under a PMA but then subsequently reclassified from Class III to Class II or I, or (iii) has been found to be substantially equivalent and cleared for

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commercial distribution under a 510(k) Submission. Applicants must submit descriptive data and, when necessary, performance data to establish that the device is substantially equivalent to a predicate device. In some instances, data from human clinical trials must also be submitted in support of a 510(k) Submission. If so, these data must be collected in a manner that conforms to the applicable Investigational Device Exemption (IDE) regulations. The FDA must issue an order finding substantial equivalence before commercial distribution can occur. Changes to existing devices covered by a 510(k) Submission that are not significant can generally be made without additional 510(k) Submissions. Changes that could significantly affect the safety or effectiveness of the device, such as significant changes in designs or materials, may require a new 510(k) with data to support that the modified device remains substantially equivalent. In August 2010, the FDA released numerous draft proposals on the 510(k) process aimed at increasing transparency and streamlining the process, while adding more scientific rigor to the review process. In January 2011, the FDA released the implementation plan for changes to the 510(k) Submission program, which includes additional training of FDA staff, the creation of various guidance documents intended to provide greater clarity to certain processes, as well as various internal changes to the FDA’s procedures. We have a portfolio of products that includes numerous Class II medical devices. Several of the FDA’s proposals could increase the regulatory burden on our industry, including those that could increase the cost, complexity and time to market for certain high-risk Class II medical devices.

The second process requires the submission of an application for PMA to the FDA to demonstrate that the device is safe and effective for its intended use as manufactured. This approval process applies to certain Class III devices. In this case, two steps of FDA approval are generally required before marketing in the U.S. can begin. First, we must comply with the applicable IDE regulations in connection with any human clinical investigation of the device in the U.S. Second, the FDA must review our PMA application, which contains, among other things, clinical information acquired under the IDE. The FDA will approve the PMA application if it finds that there is a reasonable assurance that the device is safe and effective for its intended purpose.

The third process requires that an application for a Humanitarian Device Exemption (HDE) be made to the FDA for the use of a Humanitarian Use Device (HUD). A HUD is intended to benefit patients by treating or diagnosing a disease or condition that affects, or is manifested in, fewer than 4,000 individuals in the U.S. per year. The application submitted to the FDA for an HDE is similar in both form and content to a PMA application, but is exempt from the effectiveness requirements of a PMA. This approval process demonstrates that there is no comparable device available to treat or diagnose the condition, the device will not expose patients to unreasonable or significant risk, and the benefits to health from use outweigh the risks. The HUD provision of the regulation provides an incentive for the development of devices for use in the treatment or diagnosis of diseases affecting smaller patient populations.

The FDA can ban certain medical devices; detain or seize adulterated or misbranded medical devices; order repair, replacement or refund of these devices; and require notification of health professionals and others with regard to medical devices that present unreasonable risks of substantial harm to the public health. The FDA may also enjoin and restrain certain violations of the Food, Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to medical devices, or initiate action for criminal prosecution of such violations. International sales of medical devices manufactured in the U.S. that are not approved by the FDA for use in the U.S., or that are banned or deviate from lawful performance standards, are subject to FDA export requirements. Exported devices are subject to the regulatory requirements of each country to which the device is exported. Some countries do not have medical device regulations, but in most foreign countries, medical devices are regulated. Frequently, regulatory approval may first be obtained in a foreign country prior to application in the U.S. to take advantage of differing regulatory requirements. Most countries outside of the U.S. require that product approvals be recertified on a regular basis, generally every five years. The recertification process requires that we evaluate any device changes and any new regulations or standards relevant to the device and conduct appropriate testing to document continued compliance. Where recertification applications are required, they must be approved in order to continue selling our products in those countries.

In the European Union, we are required to comply with applicable medical device directives (including the Medical Devices Directive and the Active Implantable Medical Devices Directive) and obtain CE Mark certification in order to market medical devices. The CE Mark certification, granted following approval from an independent notified body, is an international symbol of adherence to quality assurance standards and

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compliance with applicable European Medical Devices Directives. We are also required to comply with other foreign regulations such as the requirement that we obtain approval from the Japanese Ministry of Health, Labor and Welfare (MHLW) before we can launch new products in Japan. The time required to obtain these foreign approvals to market our products may vary from U.S. approvals, and requirements for these approvals may differ from those required by the FDA.

We are also subject to various environmental laws, directives and regulations both in the U.S. and abroad. Our operations, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. We do not believe that compliance with environmental laws will have a material impact on our capital expenditures, earnings or competitive position. However, given the scope and nature of these laws, there can be no assurance that environmental laws will not have a material impact on our results of operations. We assess potential environmental contingent liabilities on a regular basis. At present, we are not aware of any such liabilities that would have a material impact on our business.

We believe that sound environmental, health and safety performance contributes to our competitive strength while benefiting our customers, shareholders and employees. We are committed to continuous improvement in these areas by reducing pollution, the depletion of natural resources, and our overall environmental footprint. Specifically, we are working to optimize energy and resource usage, ultimately reducing greenhouse gas emissions and waste. We are certified to the FTSE4Good Corporate Social Responsibility Index, managed by The Financial Times and the London Stock Exchange, which measures the performance of companies that meet globally recognized standards of corporate responsibility. This certification recognizes our dedication to those standards, and it places us in a select group of companies with a demonstrated commitment to responsible business practices and sound environmental policies.

Government Affairs

We maintain a global Government Affairs presence, headquartered in Washington D.C., to actively monitor and influence a myriad of legislative and administrative policies impacting us, both on a domestic and an international front. The Government Affairs office works closely with members of Congress, key Congressional committee staff and White House and Administration staff, which facilitates our active engagement on issues affecting our business. Our proactive approach and depth of political and policy expertise are aimed at having our positions heard by federal, state and global decision-makers, while also advancing our business objectives by educating policymakers on our positions, key priorities and the value of our technologies. The Government Affairs office also manages our political action committee and works closely with trade groups on issues affecting our industry and healthcare in general.

Healthcare Reform and Current Economic Climate

Political, economic and regulatory influences are subjecting the healthcare industry to potential fundamental changes that could substantially affect our results of operations. Government and private sector initiatives to limit the growth of healthcare costs, including price regulation, competitive pricing, coverage and payment policies, comparative effectiveness of therapies, technology assessments and managed-care arrangements, are continuing in many countries where we do business, including the U.S. These changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective treatments. Although we believe our less-invasive products and technologies generate favorable clinical outcomes, value and cost efficiency, the resources necessary to demonstrate comparative effectiveness may be significant. In addition, uncertainty remains regarding proposed significant reforms to the U.S. healthcare system.

Further, certain state governments have recently enacted, and the federal government has proposed, legislation aimed at increasing transparency in relationships between industry and healthcare professionals (HCPs). As a result, we are required by law to report many types of direct and indirect payments and other transfers of value to HCPs licensed by certain states and expect that we will have to make similar reports at the federal level in the near future. We have devoted substantial time and financial resources in order to develop and implement enhanced structure, policies, systems and processes in order to comply with these legal and regulatory

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requirements. These systems are designed to provide enhanced visibility and consistency across our businesses with respect to our interactions with healthcare professionals. Implementation of these policies, systems and processes, or failure to comply with these policies could have a negative impact on our results of operations.

Additionally, our results of operations could be substantially affected by global economic factors and local operating and economic conditions. Our customers may experience financial difficulties or be unable to borrow money to fund their operations which may adversely impact their ability or decision to purchase our products, particularly capital equipment, or to pay for our products they do purchase on a timely basis, if at all. We cannot predict to what extent global economic conditions and the increased focus on healthcare systems and costs in the U.S. and abroad may negatively impact our average selling prices, our net sales and profit margins, procedural volumes and reimbursement rates from third-party payors.

Third-Party Coverage and Reimbursement

Our products are purchased principally by hospitals, physicians and other healthcare providers around the world that typically bill various third-party payors, including governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care programs, for the healthcare services provided to their patients. Third-party payors may provide or deny coverage for certain technologies and associated procedures based on independently determined assessment criteria. Reimbursement by third-party payors for these services is based on a wide range of methodologies that may reflect the services’ assessed resource costs, clinical outcomes and economic value. These reimbursement methodologies confer different, and sometimes conflicting, levels of financial risk and incentives to healthcare providers and patients, and these methodologies are subject to frequent refinements. Third-party payors are also increasingly adjusting reimbursement rates, often downwards, and challenging the prices charged for medical products and services. There can be no assurance that our products will be covered automatically by third-party payors, that reimbursement will be available or, if available, that the third-party payors’ coverage policies will not adversely affect our ability to sell our products profitably.

Initiatives to limit the growth of healthcare costs, including price regulation, are also underway in many countries in which we do business. Implementation of cost containment initiatives and healthcare reforms in significant markets such as the U.S., Japan, Europe and other international markets may limit the price of, or the level at which reimbursement is provided for, our products and may influence a physician’s selection of products used to treat patients.

Proprietary Rights and Patent Litigation

We rely on a combination of patents, trademarks, trade secrets and non-disclosure agreements to protect our intellectual property. We generally file patent applications in the U.S. and foreign countries where patent protection for our technology is appropriate and available. As of December 31, 2010, we held more than 15,000 patents, and had approximately 9,000 patent applications pending worldwide that cover various aspects of our technology. In addition, we hold exclusive and non-exclusive licenses to a variety of third-party technologies covered by patents and patent applications. There can be no assurance that pending patent applications will result in the issuance of patents, that patents issued to or licensed by us will not be challenged or circumvented by competitors, or that these patents will be found to be valid or sufficiently broad to protect our technology or to provide us with a competitive advantage. In the aggregate, these intellectual property assets and licenses are of material importance to our business; however, we believe that no single patent, technology, trademark, intellectual property asset or license, except for those relating to our drug-eluting coronary stent systems, is material in relation to our business as a whole.

We rely on non-disclosure and non-competition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary technology. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets and proprietary knowledge.

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There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry, particularly in the areas in which we compete. We continue to defend ourselves against claims and legal actions alleging infringement of the patent rights of others. Adverse determinations in any patent litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties, and, if licenses are not available, prevent us from manufacturing, selling or using certain of our products, which could have a material adverse effect on our business. Additionally, we may find it necessary to initiate litigation to enforce our patent rights, to protect our trade secrets or know-how and to determine the scope and validity of the proprietary rights of others. Patent litigation can be costly and time-consuming, and there can be no assurance that our litigation expenses will not be significant in the future or that the outcome of litigation will be favorable to us. Accordingly, we may seek to settle some or all of our pending litigation, particularly to manage risk over time. Settlement may include cross licensing of the patents that are the subject of the litigation as well as our other intellectual property and may involve monetary payments to or from third parties.

See Item 3 and Note L – Commitments and Contingencies to our 2010 consolidated financial statements included in Item 8 of this Annual Report for a discussion of intellectual property and other litigation and proceedings in which we are involved. In management’s opinion, we are not currently involved in any legal proceeding other than those specifically identified in Note L, which, individually or in the aggregate, could have a material effect on our financial condition, results of operations or liquidity.

Risk Management

The testing, marketing and sale of human healthcare products entails an inherent risk of product liability claims. In the normal course of business, product liability and securities claims are asserted against us. Product liability and securities claims may be asserted against us in the future related to events unknown at the present time. We are substantially self-insured with respect to product liability and intellectual property infringement claims. We maintain insurance policies providing limited coverage against securities claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, securities and commercial litigation and other litigation in the future, regardless of outcome, could have a material adverse effect on our business. We believe that our risk management practices, including limited insurance coverage, are reasonably adequate to protect against anticipated product liability and securities litigation losses. However, unanticipated catastrophic losses could have a material adverse impact on our financial position, results of operations and liquidity.

Employees

As of December 31, 2010, we had approximately 25,000 employees, including approximately 13,000 in operations; 6,000 in selling, marketing and distribution; 4,000 in clinical, regulatory and research and development; and 2,000 in administration. Of these employees, we employed approximately 10,000 outside the U.S., approximately 7,000 of whom are in the operations function. We believe that the continued success of our business will depend, in part, on our ability to attract and retain qualified personnel, and we are committed to developing our people and providing them with opportunities to contribute to our growth and success.

Community Outreach

In line with our corporate mission to improve the quality of patient care and the productivity of healthcare delivery, we are committed to making more possible in the communities where we live and work. We bring this commitment to life by supporting global, national and local health and education initiatives, striving to improve patient advocacy, adhering to strong ethical standards that deliver on our commitments, and minimizing our impact on the environment. A prominent example of our ongoing commitment to patients is our Close the Gap program, which addresses disparities in cardiovascular care for the underserved patient populations of women, black Americans, and Latino Americans. Close the Gap increases awareness of cardiovascular risk factors, teaches healthcare providers about cultural beliefs and barriers to treatment, and advocates for measures that help ensure all patients receive the cardiovascular care they need.

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Through the Boston Scientific Foundation, we fund non-profit organizations in our local communities and medical education fellowships at institutions throughout the U.S. Our community grants support programs aimed at improving the lives of those with unmet needs by engaging in partnerships that promote long-term, systemic change. The Foundation is committed to funding organizations focused on increasing access to quality healthcare and improving educational opportunities, particularly with regards to science, technology, engineering and math. We have committed to contributing $15 million to our Close the Gap program and Science, Technology, Engineering and Math (STEM) education over the next three years.

Seasonality

Our worldwide sales do not reflect any significant degree of seasonality; however, customer purchases have historically been lighter in the third quarter of the year, as compared to other quarters. This reflects, among other factors, lower demand during summer months, particularly in European countries.

Available Information

Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our website (www.bostonscientific.com) as soon as reasonably practicable after we electronically file the material with or furnish it to the U.S. Securities and Exchange Commission (SEC). Printed copies of these posted materials are also available free of charge to shareholders who request them in writing from Investor Relations, One Boston Scientific Place, Natick, MA 01760-1537. Information on our website or connected to our website is not incorporated by reference into this Annual Report.

Safe Harbor for Forward-Looking Statements

Certain statements that we may make from time to time, including statements contained in this report and information incorporated by reference into this report, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “may,” “estimate,” “intend” and similar words. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. These forward-looking statements include, among other things, statements regarding our financial performance; our growth strategy; our intentions and expectations regarding our business strategy; the completion of planned acquisitions, divestitures and strategic investments, as well as integration of acquired businesses; our ability to successfully separate our Neurovascular business; the timing and impact of our restructuring initiatives, expected costs and cost savings; our intention not to pay dividends and to instead use our cash flow to repay debt and invest in our business; changes in the market and our market share; product development and iterations; timing of regulatory approvals; our regulatory and quality compliance; expected research and development efforts and the reallocation of research and development expenditures; new and existing product launches, including their timing in new geographies and their impact on our market share and financial position; our sales and marketing strategy and our investments in our sales organization; reimbursement practices; our market position in the marketplace for our products; our initiatives regarding plant certifications and reductions; the ability of our suppliers and sterilizers to meet our requirements; our ability to meet customer demand for our products; the effect of new accounting pronouncements on our financial results; competitive pressures; the impact of new or recently enacted excise taxes; the effect of proposed tax laws; the outcome of matters before taxing authorities; our tax position; intellectual property, governmental proceedings and litigation matters; anticipated expenses and capital expenditures and our ability to finance them; and our ability to meet the financial covenants required by our term loan and revolving credit facility, or to renegotiate the terms of or obtain waivers for compliance with those covenants. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements. As a result, readers are cautioned not to place undue reliance on any of our forward-looking statements.

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Except as required by law, we do not intend to update any forward-looking statements even if new information becomes available or other events occur in the future. We have identified these forward-looking statements, which are based on certain risks and uncertainties, including the risk factors described in Item 1A of this Annual Report. Factors that could cause actual results to differ materially from those expressed in forward-looking statements are contained below and described further in Item 1A.

CRM Business

• Our ability to minimize loss of and recapture market share following the ship hold and product removal of our ICD and CRT-D systems in the U.S.;

• Our ability to retain and attract key members of our CRM sales force and other key CRM personnel, particularly following the ship hold and product removal of our ICD and CRT-D systems in the U.S.;

• Our estimates for the U.S. and worldwide CRM markets, as well as our ability to increase CRM net sales and recapture market share;

• The overall performance of, and referring physician, implanting physician and patient confidence in, our and our competitors’ CRM products and technologies, including our COGNIS^® CRT-D and TELIGEN^® ICD systems and our LATITUDE^® Patient Management System;

• The results of CRM clinical trials and market studies undertaken by us, our competitors or other third parties;

• Our ability to successfully launch next-generation products and technology features worldwide, including our INGENIO™ pacemaker system and our next-generation INCEPTA™, ENERGEN™ and PUNCTUA™ defibrillators in additional geographies;

• Our ability to grow sales of both new and replacement implant units;

• Competitive offerings in the CRM market and related declines in average selling prices, as well as the timing of receipt of regulatory approvals to market existing and anticipated CRM products and technologies; and

• Our ability to avoid disruption in the supply of certain components, materials or products; or to quickly secure additional or replacement components, materials or products on a timely basis.

Coronary Stent Business

• Volatility in the coronary stent market, our estimates for the worldwide coronary stent market, our ability to increase coronary stent system net sales, competitive offerings and the timing of receipt of regulatory approvals, both in the U.S. and internationally, to market existing and anticipated drug-eluting stent technology and other stent platforms;

• Our ability to successfully launch next-generation products and technology features, including our PROMUS^® Element™ and TAXUS^® Element™ stent systems in additional geographies;

• The results of coronary stent clinical trials undertaken by us, our competitors or other third parties;

• Our ability to maintain or expand our worldwide market positions through reinvestment in our two drug-eluting stent programs;

• Our ability to manage the mix of net sales of everolimus-eluting stent systems supplied to us by Abbott relative to our total drug-eluting stent system net sales and to launch on-schedule in the U.S. and Japan our PROMUS® Element™ next-generation internally-developed and manufactured everolimus-eluting stent system with gross profit margins more comparable to our TAXUS^® stent systems;

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• Our share of the U.S. and worldwide drug-eluting stent markets, the average number of stents used per procedure, average selling prices, and the penetration rate of drug-eluting stent technology in the U.S. and international markets;

• The overall performance of, and continued physician confidence in, our and other drug-eluting stent systems;

• Our reliance on Abbott’s manufacturing capabilities and supply chain in the U.S. and Japan, and our ability to align our everolimus-eluting stent system supply from Abbott with customer demand in these regions;

• Enhanced requirements to obtain regulatory approval in the U.S. and around the world and the associated impact on new product launch schedules and the cost of product approval and compliance; and

• Our ability to retain and attract key members of our cardiology sales force and other key personnel.

Other Businesses

• The overall performance of, and continued physician confidence in, our products and technologies;

• Our ability to successfully launch next-generation products and technology features in a timely manner;

• The results of clinical trials undertaken by us, our competitors or other third parties; and

• Our ability to maintain or expand our worldwide market positions through investments in next-generation technologies.

Litigation and Regulatory Compliance

• Risks generally associated with our regulatory compliance and quality systems in the U.S. and around the world;

• Our ability to minimize or avoid future field actions or FDA warning letters relating to our products and the on-going inherent risk of potential physician advisories or field actions related to medical devices;

• Heightened global regulatory enforcement arising from political and regulatory changes as well as economic pressures;

• The effect of our litigation and risk management practices, including self-insurance, and compliance activities on our loss contingencies, legal provision and cash flows;

• The impact of, diversion of management attention, and costs to resolve, our stockholder derivative and class action, patent, product liability, contract and other litigation, governmental investigations and legal proceedings;

• Costs associated with our on-going compliance and quality activities and sustaining organizations;

• The impact of increased pressure on the availability and rate of third-party reimbursement for our products and procedures worldwide; and

• Legislative or regulatory efforts to modify the product approval or reimbursement process, including a trend toward demonstrating clinical outcomes, comparative effectiveness and cost efficiency.

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Innovation

• Our ability to complete planned clinical trials successfully, to obtain regulatory approvals and to develop and launch products on a timely basis within cost estimates, including the successful completion of in-process projects from purchased research and development;

• Our ability to manage research and development and other operating expenses consistent with our expected net sales growth;

• Our ability to develop and launch next-generation products and technologies successfully across all of our businesses;

• Our ability to fund with cash or common stock any acquisitions or alliances, or to fund contingent payments associated with these acquisitions or alliances;

• Our ability to achieve benefits from our focus on internal research and development and external alliances and acquisitions as well as our ability to capitalize on opportunities across our businesses;

• Our failure to succeed at, or our decision to discontinue, any of our growth initiatives, as well as competitive interest in the same or similar technologies;

• Our ability to integrate the strategic acquisitions we have consummated or may consummate in the future;

• Our ability to prioritize our internal research and development project portfolio and our external investment portfolio to identify profitable revenue growth opportunities and keep expenses in line with expected revenue levels, or our decision to sell, discontinue, write down or reduce the funding of any of these projects;

• The timing, size and nature of strategic initiatives, market opportunities and research and development platforms available to us and the ultimate cost and success of these initiatives; and

• Our ability to successfully identify, develop and market new products or the ability of others to develop products or technologies that render our products or technologies noncompetitive or obsolete.

International Markets

• Our dependency on international net sales to achieve growth;

• Changes in our international structure and leadership;

• Risks associated with international operations, including compliance with local legal and regulatory requirements as well as changes in reimbursement practices and policies;

• Our ability to maintain or expand our worldwide market positions through investments in emerging markets;

• The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses and resulting margins; and

• Uncertainties related to economic conditions.

Liquidity

• Our ability to generate sufficient cash flow to fund operations, capital expenditures, litigation settlements

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and strategic investments and acquisitions, as well as to effectively manage our debt levels and covenant compliance;

• Our ability to access the public and private capital markets when desired and to issue debt or equity securities on terms reasonably acceptable to us;

• Our ability to resolve open tax matters favorably and realize substantially all of our deferred tax assets and the impact of changes in tax laws; and

• The impact of examinations and assessments by domestic and international taxing authorities on our tax provision, financial condition or results of operations.

Strategic Initiatives

• Our ability to implement, fund, and achieve timely and sustainable cost improvement measures consistent with our expectations, including our 2010 Restructuring plan and Plant Network Optimization program;

• Our ability to maintain or expand our worldwide market positions in the various markets in which we compete or seek to compete, as we diversify our product portfolio and focus on emerging markets;

• Risks associated with significant changes made or to be made to our organizational structure pursuant to our 2010 Restructuring plan and Plant Network Optimization program, or to the membership and responsibilities of our executive committee or Board of Directors;

• Our ability to direct our research and development efforts to conduct more cost-effective clinical studies, accelerate the time to bring new products to market, and develop products with higher returns;

• The successful separation of divested businesses, including the performance of related transition services;

• Our ability to retain and attract key employees and avoid business disruption and employee distraction as we execute our global compliance program, restructuring plans and divestitures of assets or businesses; and

• Our ability to maintain management focus on core business activities while also concentrating on implementing strategic and restructuring initiatives.

Several important factors, in addition to the specific risk factors discussed in connection with forward-looking statements individually and the risk factors described in Item 1A under the heading “Risk Factors,” could affect our future results and growth rates and could cause those results and rates to differ materially from those expressed in the forward-looking statements and the risk factors contained in this report. These additional factors include, among other things, future economic, competitive, reimbursement and regulatory conditions; new product introductions; demographic trends; intellectual property, litigation and government investigations; financial market conditions; and future business decisions made by us and our competitors, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Therefore, we wish to caution each reader of this report to consider carefully these factors as well as the specific factors discussed with each forward-looking statement and risk factor in this report and as disclosed in our filings with the SEC. These factors, in some cases, have affected and in the future (together with other factors) could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the statements expressed in this Annual Report.

ITEM 1A. RISK FACTORS

In addition to the other information contained in this Annual Report and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, cash flows or

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results of operations could be materially adversely affected by any of these risks. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements set forth at the end of Item 1 of this Annual Report. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition, cash flows or results of operations.

We face various risks and uncertainties as a result of the ship hold and removal of field inventory of all implantable cardioverter defibrillator (ICD) and cardiac resynchronization therapy defibrillator (CRT-D) systems offered by our Cardiac Rhythm Management (CRM) business in the U.S., which we announced on March 15, 2010. Those risks and uncertainties include harm to our business, reputation, financial condition and results of operations.

On March 15, 2010, we announced the ship hold and removal of field inventory of all ICD systems and CRT-D systems offered by our CRM division in the U.S., after determining that certain instances of changes in the manufacturing process related to these products were not submitted for approval to the U.S. Food and Drug Administration (FDA). We have since submitted the required documentation and, on April 15, 2010, we resumed U.S. distribution of our COGNIS® CRT-D systems and TELIGEN® ICD systems, and, on May 21, 2010, we resumed U.S. distribution of all of our remaining CRT-D and ICD devices, in each case following required FDA clearance. As a result of these actions, we have suffered and may continue to suffer loss of market share for these products in the U.S. While we continue to work on recapturing lost market share, our on-going net sales and results of operations will likely continue to be negatively impacted. We may be unable to minimize this impact, or to offset with the release of future products, and we may suffer on-going harm to our reputation, among other risks and uncertainties, each of which may have an adverse impact on our business, financial condition and results of operations.

Declines in average selling prices for our products, particularly our drug-eluting coronary stent systems, may materially adversely affect our results of operations.

We have experienced pricing pressures across many of our businesses due to competitive activity, increased market power of our customers as the healthcare industry consolidates, economic pressures experienced by our customers, and the impact of managed care organizations and other third-party payors. Competitive pricing pressures, including aggressive pricing offered by market entrants, have particularly affected our drug-eluting coronary stent system offerings. We estimate that the average selling price of our drug-eluting stent systems in the U.S. decreased nine percent in 2010 as compared to the prior year. Continued declines in average selling prices of our products due to pricing pressures may have an adverse impact on our results of operations.

We derive a significant portion of our net sales from the sale of drug-eluting coronary stent systems and CRM products. Declines in market size, average selling prices, procedural volumes, and our share of the markets in which we compete; increased competition; market perceptions of studies published by third parties; interruption in supply of everolimus-eluting stent systems in the U.S. and Japan; changes in our sales personnel; or product launch delays may materially adversely affect our results of operations and financial condition, including potential future write-offs of our goodwill and other intangible assets balances.

Net sales from drug-eluting coronary stent systems represented approximately 20 percent of our consolidated net sales during 2010. In 2010, lower average selling prices driven by competitive and other pricing pressures resulted in a decline in our share of the U.S. drug-eluting stent market, as well as an overall decrease in the size of the market. Recent competitive launches and clinical trial enrollment limiting our access to certain drug-eluting stent system customers negatively impacted our share of the worldwide drug-eluting stent market. There can be no assurance that these and other factors will not further impact our share of the U.S. or worldwide drug-eluting stent markets, that we will regain share of the U.S. or worldwide drug-eluting stent markets, or that the size of the U.S. drug-eluting stent market will reach previous levels or will not decline further, all of which could materially adversely affect our results of operations or financial condition. In addition, we expect to launch our internally-developed and manufactured next-generation everolimus-eluting stent system, the PROMUS® Element™ platinum chromium coronary stent system, in the U.S. and Japan in mid-2012, and we expect to launch our next-generation TAXUS® Element™ stent system in the U.S. in mid-2011 and Japan in late 2011 or early 2012. A delay in the timing of the launch of next-generation products may result in a further decline in our market share and have an adverse impact on our results of operations.

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We share, with Abbott Laboratories, rights to everolimus-eluting stent technology, and are reliant on Abbott for our supply of PROMUS^® everolimus-eluting stent systems in the U.S. and Japan. Any production or capacity issues that affect Abbott’s manufacturing capabilities or our process for forecasting, ordering and receiving shipments may impact our ability to increase or decrease the level of supply to us in a timely manner; therefore, our supply of everolimus-eluting stent systems supplied to us by Abbott may not align with customer demand. Our supply agreement for the PROMUS® stent system from Abbott extends through the end of the second quarter of 2012 in the U.S. and Japan. Our inability to obtain regulatory approval and timely launch our PROMUS® Element stent system in these regions could result in an inability to meet customer demand for everolimus-eluting stent systems and may materially adversely affect our results of operations or financial condition.

Net sales from our CRM group represented approximately 28 percent of our consolidated net sales in 2010. Worldwide CRM market growth rates, including the U.S. ICD market, remain low. Further, physician reaction to study results published by the Journal of the American Medical Association regarding evidence-based guidelines for ICD implants and the U.S. Department of Justice investigation into ICD implants may have a negative impact on the size of the CRM market. Our U.S. ICD sales represented approximately 48 percent of our worldwide CRM net sales in 2010, and any changes in this market could have a material adverse effect on our financial condition or results of operations. We have suffered, and may continue to suffer, loss of net sales and market share in the U.S. due to the ship hold and removal of field inventory of all of our ICDs and CRT-Ds offered in the U.S., which we announced on March 15, 2010. There can be no assurance that the size of the CRM market will increase above existing levels or that we will be able to increase CRM market share or increase net sales in a timely manner, if at all. Decreases in market size or our share of the CRM market and decreases in net sales from our CRM products could have a significant impact on our financial condition or results of operations. In addition, our inability to increase our worldwide CRM net sales could result in future goodwill and other intangible asset impairment charges. We expect to launch our next-generation wireless pacemaker in our Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries during the second half of 2011, and in the U.S. in late 2011 or early 2012. Variability in the timing of the launch of next-generation products may result in excess or expired inventory positions and future inventory charges, which may result in a loss of market share and adversely impact our results of operations.

The profit margin of everolimus-eluting stent systems supplied to us by Abbott Laboratories, including any improvements or iterations approved for sale during the term of the applicable supply arrangements and of the type that could be approved by a supplement to an approved FDA pre-market approval, is significantly lower than that of our TAXUS® stent systems, TAXUS® Element™ stent systems and PROMUS® Element™ stent systems, and an increase in sales of everolimus-eluting stent systems supplied to us by Abbott relative to TAXUS® stent system, TAXUS® Element™ stent system and PROMUS® Element™ stent system net sales may continue to adversely impact our gross profit and operating profit margins. The price we pay Abbott for our supply of everolimus-eluting stent systems supplied to us by Abbott is further impacted by our arrangements with Abbott and is subject to retroactive adjustment, which may also negatively impact our profit margins.

As a result of the terms of our supply arrangement with Abbott, the gross profit and operating profit margin of everolimus-eluting stent systems supplied to us by Abbott, including any improvements or iterations approved for sale during the term of the applicable supply arrangements and of the type that could be approved by a supplement to an approved FDA pre-market approval, are significantly lower than that of our TAXUS® stent system, TAXUS® Element™ stent system and PROMUS® Element™ stent system. Therefore, if sales of everolimus-eluting stent systems supplied to us by Abbott continue to increase in relation to our total drug-eluting stent system sales, our profit margins will continue to decrease. Further, the price we pay for our supply of everolimus-eluting stent systems supplied to us by Abbott is determined by our contracts with Abbott. Our cost is based, in part, on previously fixed estimates of Abbott’s manufacturing costs for everolimus-eluting stent systems and third-party reports of our average selling price of these stent systems. Amounts paid pursuant to this pricing arrangement are subject to a retroactive adjustment approximately every two years based on their actual costs to manufacture these stent systems for us and our average selling price of everolimus-eluting stent systems supplied to us by Abbott. Pursuant to these adjustments, we may make a payment to Abbott based on the differences between their actual manufacturing costs and the contractually stipulated manufacturing costs and differences between our actual average selling price and third-party reports of our average selling price, in each

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case, with respect to our purchases of everolimus-eluting stent systems from Abbott. As a result, our profit margins in the years in which we record payments related to purchases of everolimus-eluting stent systems from Abbott may decrease.

Consolidation in the healthcare industry could lead to increased demands for price concessions or the exclusion of some suppliers from certain of our significant market segments, which could have an adverse effect on our business, financial condition or results of operations.

The cost of healthcare has risen significantly over the past decade and numerous initiatives and reforms by legislators, regulators and third-party payors to curb these costs have resulted in a consolidation trend in the healthcare industry, including hospitals. This consolidation has resulted in greater pricing pressures, decreased average selling prices, and the exclusion of certain suppliers from important market segments as group purchasing organizations, independent delivery networks and large single accounts continue to consolidate purchasing decisions for some of our hospital customers. While our strategic initiatives include measures to address these trends, there can be no assurance that these measures will succeed. We expect that market demand, government regulation, third-party reimbursement policies, government contracting requirements, and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers and competitors, which may reduce competition and continue to exert further downward pressure on the prices of our products and adversely impact our business, financial condition or results of operations.

We face intense competition and may not be able to keep pace with the rapid technological changes in the medical devices industry, which could have an adverse effect on our business, financial condition or results of operations.

The medical device markets in which we primarily participate are highly competitive. We encounter significant competition across our product lines and in each market in which our products are sold from various medical device companies, some of which may have greater financial and marketing resources than we do. Our primary competitors include Johnson & Johnson (including its subsidiary, Cordis Corporation); Medtronic, Inc.; Abbott Laboratories; and St. Jude Medical, Inc.; as well as a wide range of companies that sell a single or a limited number of competitive products or which participate in only a specific market segment. We also face competition from non-medical device companies, including pharmaceutical companies, which may offer alternative therapies for disease states intended to be treated using our products.

Additionally, the medical device market is characterized by extensive research and development, and rapid technological change. Developments by other companies of new or improved products, processes or technologies may make our products or proposed products obsolete or less competitive and may negatively impact our net sales. We are required to devote continued efforts and financial resources to develop or acquire scientifically advanced technologies and products, apply our technologies cost-effectively across product lines and markets, attract and retain skilled development personnel, obtain patent and other protection for our technologies and products, obtain required regulatory and reimbursement approvals and successfully manufacture and market our products consistent with our quality standards. If we fail to develop new products or enhance existing products, it could have a material adverse effect on our business, financial condition or results of operations.

Because we derive a significant amount of our net sales from international operations and a significant percentage of our future growth is expected to come from international operations, changes in international economic or regulatory conditions could have a material impact on our business, financial condition or results of operations.

Sales outside the U.S. accounted for approximately 44 percent of our net sales in 2010. Additionally, a significant percentage of our future growth is expected to come from international operations, including from investments in emerging markets such as Brazil, China and India. As a result, our sales growth and operating profits from our international operations may be limited by risks and uncertainties related to economic conditions in these regions, foreign currency fluctuations, interest rate fluctuations, regulatory and reimbursement approvals, competitive offerings, infrastructure development, rights to intellectual property and our ability to implement our overall business strategy. Further, international markets are also being affected by economic pressure to contain

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reimbursement levels and healthcare costs; and international markets may also be impacted by foreign government efforts to understand healthcare practices and pricing in other countries, which could result in increased pricing transparency across geographies and pressure to harmonize reimbursement and ultimately reduce the selling prices of our products. Certain foreign governments may allow favorable reimbursements for locally-manufactured products, which may put us at a competitive disadvantage and negatively affect our market share. The trend in countries around the world, including Japan, toward more stringent regulatory requirements for product clearance, changing reimbursement models and more rigorous inspection and enforcement activities has generally caused or may cause medical device manufacturers to experience more uncertainty, delay, risk and expense. In addition, most international jurisdictions have adopted regulatory approval and periodic renewal requirements for medical devices, and we must comply with these requirements in order to market our products in these jurisdictions. Any significant changes in the competitive, political, legal, regulatory, reimbursement or economic environment where we conduct international operations may have a material impact on our business, financial condition or results of operations. We have recently realigned our international structure and are devoting resources to focus on increasing net sales in emerging markets. Sales practices in certain international markets may be inconsistent with our desired business practices and U.S. legal requirements, which may impact our ability to expand as planned.

We incurred substantial indebtedness in connection with our acquisition of Guidant and if we are unable to manage our debt levels, it could have an adverse effect on our financial condition or results of operations.

We had total debt of $5.438 billion as of December 31, 2010, attributable in large part to our 2006 acquisition of Guidant Corporation. During 2010, we completed the refinancing of the majority of our 2011 debt maturities, establishing a $1.0 billion term loan and syndicating a new $2.0 billion revolving credit facility, and prepaid in full our $900 million loan from Abbott Laboratories and all $600 million of our senior notes due in June 2011. Additionally, in January 2011, we prepaid $250 million of our senior notes due in January 2011 and borrowed $250 million under our credit and security facility secured by our U.S. trade receivables, using the proceeds to pre-pay all $100 million of our 2011 term loan maturities and $150 million of our 2012 term loan maturities. As part of our strategy to increase operational leverage and continue to strengthen our financial flexibility, we are continuing to assess opportunities for improved operational effectiveness and efficiency, closed the sale of our Neurovascular business and implemented other strategic initiatives to generate proceeds that would be available for debt repayment. There can be no assurance that we will be able to repay our indebtedness. Further, certain of our current credit ratings are below investment grade and our inability to regain investment grade credit ratings could increase our cost of borrowing funds in the future. Any disruption in our cash flow or our ability to effectively manage our debt levels could have an adverse effect on our financial condition or results of operations. In addition, our term loan and revolving credit facility agreement contains financial covenants that require us to maintain specified financial ratios. If we are unable to satisfy these covenants, we may be required to obtain waivers from our lenders and no assurance can be made that our lenders would grant such waivers on favorable terms or at all, and we could be required to repay any borrowings under this facility on demand.

We may record future goodwill impairment charges related to one or more of our business units, which could materially adversely impact our results of operations.

We test our April 1 goodwill balances for impairment during the second quarter of each year, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. We assess goodwill for impairment at the reporting unit level and, in evaluating the potential for impairment of goodwill, we make assumptions regarding estimated revenue projections, growth rates, cash flows and discount rates. In 2010, we recorded a goodwill impairment charge of $1.817 billion associated with our U.S. CRM reporting unit. In addition, as a result of signing of a definitive agreement to sell our Neurovascular business, we performed an interim impairment test on our international reporting units, excluding the assets of that business, and determined that the remaining goodwill balances were not impaired. However, we have identified four reporting units with a material amount of goodwill that are at higher risk of potential failure of the first step of the impairment test in future reporting periods. These reporting units include our U.S. CRM unit, our U.S. Cardiovascular unit, our U.S. Neuromodulation unit, and our EMEA region, which together hold approximately $9 billion of allocated goodwill. Although we use consistent methodologies in developing the assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates are uncertain by nature and

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can vary from actual results. For each of these reporting units, relatively small declines in the future performance and cash flows of the reporting unit or small changes in other key assumptions may result future goodwill impairment charges, which could materially adversely impact our results of operations.

Failure to integrate acquired businesses into our operations successfully could adversely affect our business.

As part of our strategy to realign our business portfolio, we have recently completed or announced several acquisitions and may pursue additional acquisitions in the future. Our integration of the operations of acquired businesses requires significant efforts, including the coordination of information technologies, research and development, sales and marketing, operations, manufacturing and finance. These efforts result in additional expenses and involve significant amounts of management’s time. Factors that will affect the success of our acquisitions include the strength of the acquired companies’ underlying technology and ability to execute, results of clinical trials, regulatory approvals and reimbursement levels of the acquired products and related procedures, our ability to adequately fund acquired in-process research and development projects and retain key employees, and our ability to achieve synergies with our acquired companies, such as increasing sales of our products, achieving cost savings and effectively combining technologies to develop new products. Our failure to manage successfully and coordinate the growth of the combined acquired companies could have an adverse impact on our business. In addition, we cannot be certain that the businesses we acquire will become profitable or remain so and if our acquisitions are not successful, we may record related asset impairment charges in the future.

We may not be successful in our strategy relating to future strategic acquisitions of, investments in, or alliances with, other companies and businesses, which have been a significant source of historical growth for us, and will be key to our diversification into new markets and technologies.

Our strategic acquisitions, investments and alliances are intended to further expand our ability to offer customers effective, high quality medical devices that satisfy their interventional needs. If we are unsuccessful in our acquisitions, investments and alliances, we may be unable to grow our business. These acquisitions, investments and alliances have been a significant source of our growth. The success of our strategy relating to future acquisitions, investments or alliances will depend on a number of factors, including:

• our ability to identify suitable opportunities for acquisition, investment or alliance, if at all;

• our ability to finance any future acquisition, investment or alliance on terms acceptable to us, if at all;

• whether we are able to establish an acquisition, investment or alliance on terms that are satisfactory to us, if at all; and

• intellectual property and litigation related to these technologies.

Any potential future acquisitions we consummate may be dilutive to our earnings and may require additional debt or equity financing, depending on size or nature.

We may not realize the expected benefits from our restructuring and Plant Network Optimization initiatives; our long-term expense reduction programs may result in an increase in short-term expense; and our efforts may lead to additional unintended consequences.

In February 2010, we announced our 2010 Restructuring plan designed to strengthen and position us for long-term success. Key activities under the plan include the integration of our Cardiovascular and CRM businesses, as well as the restructuring of certain other businesses and corporate functions; the centralization of our research and development organization; the realignment of our international structure; and the reprioritization and diversification of our product portfolio. In connection with this plan and our strategy to reduce risk, increase operational leverage, realign our business portfolio and accelerate profitable revenue growth, we recently closed the sale of our Neurovascular business and may explore opportunities to divest additional select businesses or assets in the future. However, our ability to complete further divestitures may be limited by the inability to locate a buyer or to agree to terms that are favorable to us. Additionally, in January 2009, we announced our Plant Network

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Optimization program, aimed at simplifying our plant network, reducing our manufacturing costs and improving gross margins. Cost reduction initiatives under both plans include cost improvement measures, including resource reallocations, head count reductions, the sale of certain non-strategic assets and efforts to streamline our business, among other actions. These measures could yield unintended consequences, such as distraction of our management and employees, business disruption, attrition beyond our planned reduction in workforce and reduced employee productivity. We may be unable to attract or retain key personnel. Attrition beyond our planned reduction in workforce or a material decrease in employee morale or productivity could negatively affect our business, sales, financial condition and results of operations. In addition, head count reductions may subject us to the risk of litigation, which could result in substantial cost. Moreover, our expense reduction programs result in charges and expenses that impact our operating results. We cannot guarantee that these measures, or other expense reduction measures we take in the future, will result in the expected cost savings.

The divestiture of our Neurovascular business could pose significant risks and may materially adversely affect our business, financial condition and operating results.

As part of our strategy to realign our business portfolio, in January 2011, we closed the sale of our Neurovascular business to Stryker Corporation. The divestiture of this business may involve a number of risks, including the diversion of management and employee attention and significant costs and expenses, particularly unexpected costs and delays occurring during the period of separation. In addition, we will provide post-closing services through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of approximately 24 months following the closing of the transaction, subject to extension, and could involve the expenditure of significant employee resources, among other resources, and under which we will be reliant on third parties for the provision of services. Our inability to effectively manage the post-separation activities and events could adversely affect our business, financial condition and results of operations.

Current economic conditions could adversely affect our results of operations.

The recent global financial crisis caused extreme disruption in the financial markets, including severely diminished liquidity and credit availability. There can be no assurance that there will not be further deterioration in the global economy. Our customers may experience financial difficulties or be unable to borrow money to fund their operations which may adversely impact their ability or decision to purchase our products, particularly capital equipment, or to pay for our products they do purchase on a timely basis, if at all. For example, our net sales have been adversely impacted by reductions in procedural volumes due to unemployment levels and other economic factors, and these reductions may continue. Further, we have experienced significant delays in the collectability of receivables in certain international countries and there can be no assurance that these payments will ultimately be collected. Conditions in the financial markets and other factors beyond our control may also adversely affect our ability to borrow money in the credit markets and to obtain financing for acquisitions or other general corporate and commercial purposes. The strength and timing of any economic recovery remains uncertain, and we cannot predict to what extent the global economic slowdown may negatively impact our average selling prices, our net sales and profit margins, procedural volumes and reimbursement rates from third party payors. In addition, current economic conditions may adversely affect our suppliers, leading them to experience financial difficulties or to be unable to borrow money to fund their operations, which could cause disruptions in our ability to produce our products.

Healthcare policy changes, including recently passed healthcare reform legislation, may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Political, economic and regulatory influences are subjecting the healthcare industry to potential fundamental changes that could substantially affect our results of operations. Government and private sector initiatives to limit the growth of healthcare costs, including price regulation, competitive pricing, coverage and payment policies, comparative effectiveness of therapies, technology assessments and managed-care arrangements, are continuing in many countries where we do business, including the U.S. These changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective treatments. Our strategic initiatives include measures to address this trend; however, there can be no assurance that any of our strategic measures will successfully address this trend.

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The Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act of 2010 were enacted into law in the U.S. in March 2010. As a U.S. headquartered company with significant sales in the U.S., this healthcare reform legislation will materially impact us. Certain provisions of the legislation will not be effective for a number of years, there are many programs and requirements for which the details have not yet been fully established or consequences not fully understood, and it is unclear what the full impact of the legislation will be. The legislation imposes on medical device manufacturers a 2.3 percent excise tax on U.S. sales of Class I, II and III medical devices beginning in 2013. U.S. net sales represented 56 percent of our worldwide net sales in 2010 and, therefore, this tax burden may have a material, negative impact on our results of operations and our cash flows. Other provisions of this legislation, including Medicare provisions aimed at improving quality and decreasing costs, comparative effectiveness research, an independent payment advisory board, and pilot programs to evaluate alternative payment methodologies, could meaningfully change the way healthcare is developed and delivered, and may adversely affect our business and results of operations. Further, we cannot predict what healthcare programs and regulations will be ultimately implemented at the federal or state level, or the effect of any future legislation or regulation in the U.S. or internationally. However, any changes that lower reimbursements for our products or reduce medical procedure volumes could adversely affect our business and results of operations.

Healthcare cost containment pressures and legislative or administrative reforms resulting in restrictive reimbursement practices of third-party payors or preferences for alternate therapies could decrease the demand for our products, the prices which customers are willing to pay for those products and the number of procedures performed using our devices, which could have an adverse effect on our business, financial condition or results of operations.

Our products are purchased principally by hospitals, physicians and other healthcare providers around the world that typically bill various third-party payors, including governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care programs, for the healthcare services provided to their patients. The ability of customers to obtain appropriate reimbursement for their products and services from private and governmental third-party payors is critical to the success of medical technology companies. The availability of reimbursement affects which products customers purchase and the prices they are willing to pay. Reimbursement varies from country to country and can significantly impact the acceptance of new products and services. After we develop a promising new product, we may find limited demand for the product unless reimbursement approval is obtained from private and governmental third-party payors. Further legislative or administrative reforms to the reimbursement systems in the U.S., Japan, or other international countries in a manner that significantly reduces reimbursement for procedures using our medical devices or denies coverage for those procedures, including price regulation, competitive pricing, coverage and payment policies, comparative effectiveness of therapies, technology assessments and managed-care arrangements, could have a material adverse effect on our business, financial condition or results of operations.

Major third-party payors for hospital services in the U.S. and abroad continue to work to contain healthcare costs. The introduction of cost containment incentives, combined with closer scrutiny of healthcare expenditures by both private health insurers and employers, has resulted in increased discounts and contractual adjustments to hospital charges for services performed, has lead to increased physician employment by hospitals in the U.S., and has shifted services between inpatient and outpatient settings. Initiatives to limit the increase of healthcare costs, including price regulation, are also underway in several countries in which we do business. Hospitals or physicians may respond to these cost-containment pressures by substituting lower cost products or other therapies for our products. In connection with Guidant’s product recalls, certain third-party payors have sought, and others may seek, recourse against us for amounts previously reimbursed.

We are subject to extensive and dynamic medical device regulation, which may impede or hinder the approval or sale of our products and, in some cases, may ultimately result in an inability to obtain approval of certain products or may result in the recall or seizure of previously approved products.

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Our products, marketing, sales and development activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic Act (FDC Act), by comparable agencies in foreign countries, and by other regulatory agencies and governing bodies. Under the FDC Act, medical devices must receive FDA clearance or approval before they can be commercially marketed in the U.S. The FDA has recently been reviewing its clearance process in an effort to make it more rigorous, and there have been a number of recommendations made by various task forces and working groups to change the 510(k) Submission program. Some of these proposals, if enacted, could increase the level and complexity of premarket data requirements for certain higher-risk Class II products. Others could increase the cost of maintaining the legal status of Class II devices entered into the market via 510(k) Submissions. We have a portfolio of products that includes numerous Class II medical devices. If implemented as currently proposed, the changes to the 510(k) Submission program could substantially increase the cost, complexity and time to market for certain higher-risk Class II medical devices. In addition, most major markets for medical devices outside the U.S. require clearance, approval or compliance with certain standards before a product can be commercially marketed. The process of obtaining marketing approval or clearance from the FDA for new products, or with respect to enhancements or modifications to existing products, could:

• take a significant period of time;

• require the expenditure of substantial resources;

• involve rigorous pre-clinical and clinical testing, as well as increased post-market surveillance;

• require changes to products; and

• result in limitations on the indicated uses of products.

Countries around the world have adopted more stringent regulatory requirements than in the past and that have added or are expected to add to the delays and uncertainties associated with new product releases, as well as the clinical and regulatory costs of supporting those releases. Even after products have received marketing approval or clearance, product approvals and clearances by the FDA can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial approval. There can be no assurance that we will receive the required clearances for new products or modifications to existing products on a timely basis or that any approval will not be subsequently withdrawn or conditioned upon extensive post-market study requirements.

In addition, regulations regarding the development, manufacture and sale of medical devices are subject to future change. We cannot predict what impact, if any, those changes might have on our business. Failure to comply with regulatory requirements could have a material adverse effect on our business, financial condition and results of operations. Later discovery of previously unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory clearances, seizures or recalls of products, physician advisories or other field actions, operating restrictions and/or criminal prosecution. We may also initiate field actions as a result of a failure to strictly comply with our internal quality policies. The failure to receive product approval clearance on a timely basis, suspensions of regulatory clearances, seizures or recalls of products, physician advisories or other field actions, or the withdrawal of product approval by the FDA could have a material adverse effect on our business, financial condition or results of operations.

Our products, including those of our cardiovascular businesses, are continually subject to clinical trials conducted by us, our competitors or other third parties, the results of which may be unfavorable, or perceived as unfavorable by the market, and could have a material adverse effect on our business, financial condition or results of operations.

As a part of the regulatory process of obtaining marketing clearance for new products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations and trial endpoints. Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors or by third parties, or the market’s perception of this clinical data, may adversely impact our ability

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to obtain product approvals, our position in, and share of, the markets in which we participate and our business, financial condition, results of operations or future prospects.

Our future growth is dependent upon the development of new products, which requires significant research and development, clinical trials and regulatory approvals, all of which are very expensive and time-consuming and may not result in commercially viable products.

In order to develop new products and improve current product offerings, we focus our research and development programs largely on the development of next-generation and novel technology offerings across multiple programs and businesses. We expect to launch our internally-manufactured next-generation everolimus-eluting stent system, the PROMUS® Element™ platinum chromium coronary stent, in the U.S. and Japan in mid-2012, subject to regulatory approval. In addition, we expect to continue to invest in our CRM technologies, including our LATITUDE® Patient Management System and our next-generation products and technologies. If we are unable to develop and launch these and other products as anticipated, our ability to maintain or expand our market position in the drug-eluting stent and CRM markets may be materially adversely impacted. Further, we are continuing to investigate, and have completed several acquisitions involving, opportunities to further expand our presence in, and diversify into, areas including, but not limited to, atrial fibrillation, underserved defibrillator populations, coronary artery disease, peripheral vascular disease, structural heart disease, hypertension, women’s health, endoluminal surgery, diabetes/obesity, endoscopic pulmonary intervention and deep-brain stimulation. Expanding our focus beyond our current businesses is expensive and time-consuming. Further, there can be no assurance that we will be able to access these technologies on terms favorable to us, or that these technologies will achieve commercial feasibility, obtain regulatory approval or gain market acceptance. A delay in the development or approval of these technologies or our decision to reduce our investments may adversely impact the contribution of these technologies to our future growth.

The medical device industry is experiencing greater scrutiny and regulation by governmental authorities and is the subject of numerous investigations, often involving marketing and other business practices. These investigations could result in the commencement of civil and criminal proceedings; substantial fines, penalties and administrative remedies; divert the attention of our management; impose administrative costs and have an adverse effect on our financial condition, results of operations and liquidity; and may lead to greater governmental regulation in the future.

The medical devices we design, develop, manufacture and market are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities. These authorities have been increasing their scrutiny of our industry. We have received subpoenas and other requests for information from Congress and other state and federal governmental agencies, including, among others, the U.S. Department of Justice (DOJ), the Office of Inspector General of the Department of Health and Human Services (HHS), and the Department of Defense. These investigations relate primarily to financial arrangements with healthcare providers, regulatory compliance and product promotional practices. We are cooperating with these investigations and are responding to these requests. We cannot predict when the investigations will be resolved, the outcome of these investigations or their impact on us. An adverse outcome in one or more of these investigations could include the commencement of civil and criminal proceedings; substantial fines, penalties and administrative remedies, including exclusion from government reimbursement programs, entry into Corporate Integrity Agreements (CIAs) with governmental agencies and amendments to existing CIAs. In addition, resolution of any of these matters could involve the imposition of additional and costly compliance obligations. For example, in 2009, we entered into a civil settlement with the DOJ regarding the DOJ’s investigation relating to certain post-market surveys conducted by Guidant Corporation before we acquired Guidant in 2006. As part of the settlement, we entered into a CIA with the Office of Inspector General for HHS. The CIA requires enhancements to certain compliance procedures related to financial arrangements with healthcare providers. The obligations imposed upon us by the CIA and cooperation with ongoing investigations will involve employee resources costs and diversion of employee focus. Cooperation typically also involves document production costs. We may incur greater future costs to fulfill the obligations imposed upon us by the CIA. Further, the CIA, and if any of the ongoing investigations continue over a long period of time, could further divert the attention of management from the day-to-day operations of our business and impose significant additional administrative burdens on us. These potential consequences, as well as any adverse outcome from these investigations, could have a material adverse effect on our financial condition, results of operations and liquidity.

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In addition, certain state governments (including that of Massachusetts, where we are headquartered) have enacted, and the federal government has proposed, legislation aimed at increasing transparency of our interactions with healthcare professionals (HCPs). As a result, we are required by law to disclose payments and other transfers for value to HCPs licensed by certain states and expect similar requirements at the federal level in the future. Any failure to comply with the enhanced legal and regulatory requirements could impact our business. In addition, we devoted substantial additional time and financial resources to further develop and implement enhanced structure, policies, systems and processes to comply with enhanced legal and regulatory requirements, which may also impact our business.

Further, recent Supreme Court case law has clarified that the FDA’s authority over medical devices preempts state tort laws, but legislation has been introduced at the Federal level to allow state intervention, which could lead to increased and inconsistent regulation at the state level. We anticipate that the government will continue to scrutinize our industry closely and that we will be subject to more rigorous regulation by governmental authorities in the future.

Changes in tax laws, unfavorable resolution of tax contingencies, or exposure to additional income tax liabilities could have a material impact on our financial condition, results of operations and liquidity.

We are subject to income taxes as well as non-income based taxes, in both the U.S. and various foreign jurisdictions. We are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision and have established contingency reserves for material, known tax exposures, including potential tax audit adjustments related to transfer pricing in connection with the technology license agreements between domestic and foreign subsidiaries of Guidant Corporation, in relation to which we recently received Notices of Deficiency from the Internal Revenue Service for the 2001-2003 tax years. However, there can be no assurance that we will accurately predict the outcomes of these audits or issues raised by tax authorities will be resolved at a financial cost that does not exceed our related reserves, and the actual outcomes of these audits could have a material impact on our results of operations or financial condition. Additionally, changes in tax laws or tax rulings could materially impact our effective tax rate. For example, proposals for fundamental U.S. corporate tax reform, if enacted, could have a significant adverse impact on our future results of operations. In addition, the recently enacted Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 impose on medical device manufacturers a 2.3 percent excise tax on U.S. sales of Class I, II and III medical devices beginning in 2013. U.S. net sales represented 56 percent of our worldwide net sales in 2010 and, therefore, this tax burden may have a material, negative impact on our results of operations and our cash flows.

We may not effectively be able to protect our intellectual property rights, which could have a material adverse effect on our business, financial condition or results of operations.

The medical device market in which we primarily participate is largely technology driven. Physician customers, particularly in interventional cardiology, have historically moved quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation is inherently complex and unpredictable. Furthermore, appellate courts can overturn lower court patent decisions.

In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only of individual cases, but also of a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies.

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Several third parties have asserted that our current and former product offerings infringe patents owned or licensed by them. We have similarly asserted that products sold by our competitors infringe patents owned or licensed by us. Adverse outcomes in one or more of the proceedings against us could limit our ability to sell certain products in certain jurisdictions, or reduce our operating margin on the sale of these products and could have a material adverse effect on our financial condition, results of operations or liquidity.

Patents and other proprietary rights are and will continue to be essential to our business, and our ability to compete effectively with other companies will be dependent upon the proprietary nature of our technologies. We rely upon trade secrets, know-how, continuing technological innovations, strategic alliances and licensing opportunities to develop, maintain and strengthen our competitive position. We pursue a policy of generally obtaining patent protection in both the U.S. and abroad for patentable subject matter in our proprietary devices and attempt to review third-party patents and patent applications to the extent publicly available in order to develop an effective patent strategy, avoid infringement of third-party patents, identify licensing opportunities and monitor the patent claims of others. We currently own numerous U.S. and foreign patents and have numerous patent applications pending. We also are party to various license agreements pursuant to which patent rights have been obtained or granted in consideration for cash, cross-licensing rights or royalty payments. No assurance can be made that any pending or future patent applications will result in the issuance of patents, that any current or future patents issued to, or licensed by, us will not be challenged or circumvented by our competitors, or that our patents will not be found invalid. In addition, we may have to take legal action in the future to protect our patents, trade secrets or know-how or to assert them against claimed infringement by others. Any legal action of that type could be costly and time consuming and no assurances can be made that any lawsuit will be successful. We are generally involved as both a plaintiff and a defendant in a number of patent infringement and other intellectual property-related actions.

The invalidation of key patents or proprietary rights that we own, or an unsuccessful outcome in lawsuits to protect our intellectual property, could have a material adverse effect on our business, financial condition or results of operations.

Pending and future intellectual property litigation could be costly and disruptive to us.

We operate in an industry that is susceptible to significant intellectual property litigation and, in recent years, it has been common for companies in the medical device field to aggressively challenge the patent rights of other companies in order to prevent the marketing of new devices. We are currently the subject of various patent litigation proceedings and other proceedings described in more detail under Item 3. Legal Proceedings and Note L- Commitments and Contingencies to our 2010 consolidated financial statements included in Item 8 of this Annual Report. Intellectual property litigation is expensive, complex and lengthy and its outcome is difficult to predict. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial condition, results of operation or liquidity. Pending or future patent litigation may result in significant royalty or other payments or injunctions that can prevent the sale of products and may significantly divert the attention of our technical and management personnel. In the event that our right to market any of our products is successfully challenged, we may be required to obtain a license on terms which may not be favorable to us, if at all. If we fail to obtain a required license or are unable to design around a patent, our business, financial condition or results of operations could be materially adversely affected.

Pending and future product liability claims and other litigation, including private securities litigation, shareholder derivative suits and contract litigation, may adversely affect our business, reputation and ability to attract and retain customers.

The design, manufacture and marketing of medical devices of the types that we produce entail an inherent risk of product liability claims. Many of the medical devices that we manufacture and sell are designed to be implanted in the human body for long periods of time or indefinitely. A number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to these or other products that we manufacture or sell, including component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information. These factors could result in product liability claims, a recall of one or more

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of our products or a safety alert relating to one or more of our products. Product liability claims may be brought by individuals or by groups seeking to represent a class.

The outcome of litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate amounts, including not only actual damages, but also punitive damages. The magnitude of the potential losses relating to these lawsuits may remain unknown for substantial periods of time. In addition, the cost to defend against any future litigation may be significant. Further, we are substantially self-insured with respect to product liability and intellectual property infringement claims. We maintain insurance policies providing limited coverage against securities claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims and adverse decisions. Product liability claims, securities and commercial litigation and other litigation in the future, regardless of the outcome, could have a material adverse effect on our financial condition, results of operations or liquidity.

Any failure to meet regulatory quality standards applicable to our manufacturing and quality processes could have an adverse effect on our business, financial condition and results of operations.

As a medical device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with its Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. In addition, the Federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections by the FDA which may result in observations on Form 483, and in some cases warning letters, that require corrective action. In the European Community, we are required to maintain certain International Standards Organization (ISO) certifications in order to sell our products and must undergo periodic inspections by notified bodies to obtain and maintain these certifications. If we, or our manufacturers, fail to adhere to quality system regulations or ISO requirements, this could delay production of our products and lead to fines, difficulties in obtaining regulatory clearances, recalls, enforcement actions, including injunctive relief or consent decrees, or other consequences, which could, in turn, have a material adverse effect on our financial condition or results of operations.

Interruption of our manufacturing operations could adversely affect our results of operations and financial condition.

Our products are designed and manufactured in technology centers around the world, either by us or third parties. In most cases, the manufacturing of our products is concentrated in one or a few locations. Factors such as a failure to follow specific internal protocols and procedures, equipment malfunction, environmental factors or damage to one or more of our facilities could adversely affect our ability to manufacture our products. In the event of an interruption in manufacturing, we may be unable to quickly move to alternate means of producing affected products or to meet customer demand. In some instances, for example, if the interruption is a result of a failure to follow regulatory protocols and procedures, we may experience delays in resuming production of affected products due primarily to needs for regulatory approvals. As a result, we may suffer loss of market share, which we may be unable to recapture, and harm to our reputation, which could adversely affect our results of operations and financial condition.

We rely on external manufacturers to supply us with certain materials, components and products. Any disruption in our sources of supply or the price of inventory supplied to us could adversely impact our production efforts and could materially adversely affect our business, financial condition or results of operations.

We purchase many of the materials and components used in manufacturing our products, some of which are custom made from third-party vendors. Certain supplies are purchased from single-sources due to quality considerations, expertise, costs or constraints resulting from regulatory requirements. In the event of a disruption

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in supply, we may not be able to establish additional or replacement suppliers for certain components, materials or products in a timely manner largely due to the complex nature of our and many of our suppliers’ manufacturing processes. In addition, our products require sterilization prior to sale and we rely on a mix of internal resources and third-party vendors to perform this service. Production issues, including capacity constraint; the inability to sterilize our products; quality issues affecting us or our suppliers; an inability to develop and validate alternative sources if required; or a significant increase in the price of materials or components could adversely affect our results of operations and financial condition.

Our share price will fluctuate, and accordingly, the value of an investment in our common stock may also fluctuate.

Stock markets in general, and our common stock in particular, have experienced significant price and volume volatility over recent years. The market price and trading volume of our common stock may continue to be subject to significant fluctuations due not only to general stock market conditions, but also to variability in the prevailing sentiment regarding our operations or business prospects, as well as, among other things, changing investment priorities of our shareholders.

ITEM 1B.     UNRESOLVED STAFF COMMENTS

None.

ITEM 2.     PROPERTIES

Our world headquarters are located in Natick, Massachusetts, with additional support provided from regional headquarters located in Tokyo, Japan and Paris, France. As of December 31, 2010, our principal manufacturing and technology centers were located in Minnesota, California, Florida, Indiana, and Utah within the U.S; as well as internationally in Ireland, Costa Rica and Puerto Rico. Our products are distributed worldwide from customer fulfillment centers in Massachusetts, The Netherlands and Japan. As of December 31, 2010, we maintained 14 manufacturing facilities, including eight in the U.S., three in Ireland, two in Costa Rica, and one in Puerto Rico, as well as various distribution and technology centers around the world. Many of these facilities produce and manufacture products for more than one of our divisions and include research facilities. The following is a summary of our facilities as of December 31, 2010 (in approximate square feet):

	Owned		Leased		Total
U.S.		5,386,000		1,141,000		6,527,000
International		1,513,000		960,000		2,473,000
		6,899,000		2,101,000		9,000,000

In connection with our Plant Network Optimization program, described in Items 1 and 8 of this Annual Report, we intend to close one of our manufacturing plants in the U.S. by the end of 2012, representing a total of approximately 350,000 owned square feet. In addition, as part of the January 2011 sale of our Neurovascular business to Stryker Corporation, we intend to transfer portions of certain owned and leased facilities to Stryker. We regularly evaluate the condition and capacity of our facilities to ensure they are suitable for the development, manufacturing, and marketing of our products, and provide adequate capacity for current and expected future needs.

ITEM 3.     LEGAL PROCEEDINGS

See Note L–Commitments and Contingencies to our 2010 consolidated financial statements included in Item 8 of this Annual Report.

ITEM 4.     [REMOVED AND RESERVED]

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PART II

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

Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol “BSX.” The following table provides the market range for the closing price of our common stock for each of the last eight quarters based on reported sales prices on the NYSE.

	High		Low
2010
First Quarter	$	9.62	$	6.80
Second Quarter		7.35		5.44
Third Quarter		6.59		5.13
Fourth Quarter		7.85		5.97
2009
First Quarter	$	9.41	$	6.14
Second Quarter		10.42		8.05
Third Quarter		11.75		9.63
Fourth Quarter		10.29		7.99

The closing price of our common stock on February 10, 2011 was $6.91.

We did not pay a cash dividend in 2010 or 2009. We currently do not intend to pay dividends, and intend to retain all of our earnings to repay indebtedness and invest in the continued growth of our business. We may consider declaring and paying a dividend in the future; however, there can be no assurance that we will do so.

We did not repurchase any of our common stock in 2010 or 2009. There are approximately 37 million remaining under previous share repurchase authorizations, which do not expire.

As of February 10, 2011, there were 17,524 holders of record of our common stock.

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Stock Performance Graph

The graph below compares the five-year total return to stockholders on our common stock with the return of the Standard & Poor’s (S&P) 500 Stock Index and the S&P Health Care Equipment Index. The graph assumes $100 was invested in our common stock in each of the named indices on December 31, 2005, and that all dividends were reinvested.

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ITEM 6.     SELECTED FINANCIAL DATA

FIVE-YEAR SELECTED FINANCIAL DATA
(in millions, except per share data)

Operating Data

Year Ended December 31,	2010			2009			2008			2007			2006
Net sales	$	7,806		$	8,188		$	8,050		$	8,357		$	7,821
Gross profit		5,207			5,612			5,581			6,015			5,614
Total operating expenses		5,863			6,506			7,086			6,029			8,563
Operating loss		(656	)		(894	)		(1,505	)		(14	)		(2,949	)
Loss before income taxes		(1,063	)		(1,308	)		(2,031	)		(569	)		(3,535	)
Net loss		(1,065	)		(1,025	)		(2,036	)		(495	)		(3,577	)
Net loss per common share:
Basic	$	(0.70	)	$	(0.68	)	$	(1.36	)	$	(0.33	)	$	(2.81	)
Assuming dilution	$	(0.70	)	$	(0.68	)	$	(1.36	)	$	(0.33	)	$	(2.81	)

Balance Sheet Data

As of December 31,	2010		2009		2008		2007		2006
Cash, cash equivalents and marketable securities	$	213	$	864	$	1,641	$	1,452	$	1,668
Working capital*		1,006		1,577		2,219		2,691		3,399
Total assets		22,128		25,177		27,139		31,197		30,882
Borrowings (long-term and short-term)		5,438		5,918		6,745		8,189		8,902
Stockholders’ equity		11,296		12,301		13,174		15,097		15,298
Book value per common share	$	7.43	$	8.14	$	8.77	$	10.12	$	10.37

* In 2010, we reclassified certain assets to the ‘assets held for sale’ caption in our consolidated balance sheets. These assets are labeled as ‘current’ to give effect to the short term nature of those assets that were divested in the first quarter of 2011 in connection with the sale of our Neurovascular business, or assets that are expected to be sold in 2011. We have reclassified 2009 balances for comparative purposes on the face of the consolidated balance sheets, as well as in the working capital metric above. We have not restated working capital for these items in years prior to 2009 above.

See also the notes to our 2010 consolidated financial statements included in Item 8 of this Annual Report.

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

The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Annual Report.

Executive Summary

Financial Highlights and Trends

In 2010, we generated net sales of $7.806 billion, as compared to $8.188 billion in 2009, a decrease of $382 million, or five percent. Foreign currency fluctuations contributed $62 million to our net sales in 2010, as compared to 2009. Excluding the impact of foreign currency, our net sales decreased $444 million, or five percent, as compared to the prior year. This decrease was attributable in part to the ship hold and removal of field inventory of all implantable cardioverter defibrillator (ICD) systems and cardiac resynchronization therapy defibrillator (CRT-D) systems offered by our Cardiac Rhythm Management (CRM) division in the U.S., which we announced on March 15, 2010, after determining that certain instances of changes in the manufacturing process related to these products were not submitted for approval to the U.S. Food and Drug Administration (FDA). We have since submitted the required documentation and, on April 15, 2010, we received clearance from the FDA for certain of the manufacturing changes and immediately resumed distribution of our COGNIS® CRT-D systems and TELIGEN® ICD systems, which represent virtually all of our defibrillator implant volume in the U.S. We returned earlier generations of these products to the U.S. market on May 21, 2010, following required FDA clearance. We are working with our physician and patient customers to recapture market share lost as a result of the ship hold and have experienced better-than-expected recovery to date. However, our U.S. CRM net sales decreased $237 million in 2010, as compared to our market share exiting 2009, and we estimate that our U.S. defibrillator market share decreased approximately 300 basis points exiting 2010, as compared to the prior year, due primarily to these product actions.

In addition, throughout 2010 we continued to experience competitive and other pricing pressures across our businesses and, particularly, on our drug-eluting coronary stent system offerings. Net sales of our drug-eluting coronary stent systems decreased $171 million in 2010, as compared to 2009, and we estimate that the average selling price of our drug-eluting stent systems in the U.S. decreased nine percent in 2010, as compared to the prior year. Further, our net sales have been adversely impacted by reductions in procedural volumes, due to unemployment levels and other economic factors.

During 2010, net sales from our Endoscopy, Urology/Women’s Health, and Neuromodulation businesses increased $117 million, or eight percent, as compared to 2009, on the strength of new product introductions, increased sales investments and further expansion into international markets. Refer to the Business and Market Overview and Results of Operations sections for more discussion of our net sales by division and region.

Our reported net loss in 2010 was $1.065 billion, or $0.70 per share, and was driven primarily by a goodwill impairment charge related to our U.S. CRM reporting unit following the ship hold and product removal actions described above. Our reported results for 2010 included goodwill and intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items and amortization expense (after-tax) of $2.116 billion, or $1.39 per share. Excluding these items, net income for 2010 was $1.051 billion, or $0.69 per share. Our reported net loss in 2009 was $1.025 billion, or $0.68 per share. Our reported results for 2009 included intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items and amortization expense of $2.207 billion (after-tax), or $1.46 per share. Excluding these items, net income for 2009 was $1.182 billion, or $0.78 per share.

Net income and net income per share that exclude certain items are not measures prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). See Additional Information for an explanation of management’s use of these non-GAAP measures. The following is a reconciliation of our results of operations prepared in accordance with U.S. GAAP to those adjusted results considered by management. Refer to Results of Operations for a discussion of each reconciling item:

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	Year Ended December 31, 2010
				Tax						Impact per
in millions, except per share data	Pre-Tax			Impact			After-Tax			share
GAAP results	$	(1,063	)	$	(2	)	$	(1,065	)	$	(0.70	)
Non-GAAP adjustments:
Goodwill impairment charge		1,817						1,817			1.20		*
Intangible asset impairment charges		65			(10	)		55			0.03		*
Acquisition-related credits		(245	)		34			(211	)		(0.13	)	*
Divestiture-related charges		2						2			0.00		*
Restructuring-related charges		169			(48	)		121			0.08		*
Litigation-related net credits		(104	)		27			(77	)		(0.05	)	*
Discrete tax items					(11	)		(11	)		(0.01	)	*
Amortization expense		513			(93	)		420			0.27		*
Adjusted results	$	1,154		$	(103	)	$	1,051		$	0.69

* Assumes dilution of 10.0 million shares for the year ended December 31, 2010 for all or a portion of these non-GAAP adjustments.

	Year Ended December 31, 2009
				Tax						Impact per
in millions, except per share data	Pre-Tax			Impact			After-Tax			share
GAAP results	$	(1,308	)	$	283		$	(1,025	)	$	(0.68	)
Non-GAAP adjustments:
Intangible asset impairment charges		12			(2	)		10			0.01
Acquisition-related charges		21			(1	)		20			0.01
Divestiture-related credits		(8	)		1			(7	)		0.00
Restructuring-related charges		130			(33	)		97			0.06
Litigation-related net charges		2,022			(251	)		1,771			1.17		*
Discrete tax items					(106	)		(106	)		(0.07	)	*
Amortization expense		511			(89	)		422			0.28		*
Adjusted results	$	1,380		$	(198	)	$	1,182		$	0.78

* Assumes dilution of 8.0 million shares for the year ended December 31, 2009 for all or a portion of these non-GAAP adjustments.

Cash generated by operating activities was $325 million in 2010 and $835 million in 2009, and included approximately $1.6 billion of litigation-related net payments in 2010, as compared to approximately $800 million in 2009, as well as the receipt of an acquisition-related milestone payment of $250 million. Our cash generated by operations continues to be a significant source of funds for servicing our outstanding debt obligations and investing in our growth. As of December 31, 2010, we had total debt of $5.438 billion, cash and cash equivalents of $213 million and working capital of $1.006 billion. During 2010, we completed the refinancing of the majority of our 2011 debt maturities, establishing a $1.0 billion term loan and syndicating a new $2.0 billion revolving credit facility, and prepaid in full our $900 million loan from Abbott and all $600 million of our senior notes due in June 2011. Further, in January 2011, we paid at maturity $250 million of our senior notes. In 2009, Standard & Poor’s upgraded our credit rating to investment grade with a stable outlook. In 2010, Fitch Ratings upgraded our outlook to positive from stable, and Moody’s raised our liquidity rating to its highest level. We believe these rating improvements reflect the strength of our product portfolio, our commitment to debt reduction, our improving financial fundamentals, and the progress we are making towards driving profitable sales growth.

Recent Events

As part of our strategy, we are realigning our business portfolio through select divestitures and targeted acquisitions in order to reduce risk, optimize operational leverage and accelerate profitable, sustainable revenue growth, while preserving our ability to meet the needs of physicians and their patients. We have recently announced several acquisitions targeting many of our priority growth areas, and, in January 2011, closed the sale of our Neurovascular business to Stryker Corporation.

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Acquisitions

We expect to continue to invest in our core franchises, and are also investigating opportunities to further expand our presence in, and diversify into, priority growth areas including atrial fibrillation, autonomic modulation therapy, coronary artery disease, deep-brain stimulation, diabetes/obesity, endoluminal surgery, endoscopic pulmonary intervention, hypertension, peripheral vascular disease, structural heart disease, sudden cardiac arrest, and women’s health. In late 2010 and early 2011, we announced the acquisitions of Asthmatx, Inc.; Sadra Medical, Inc.; Atritech, Inc.; and Intelect Medical, Inc., targeting many of the above conditions and disease states. Each of these acquisitions is discussed in the Business and Market Overview section below.

Business Divestiture

In January 2011, we closed the sale of our Neurovascular business to Stryker Corporation for a purchase price of $1.5 billion in cash. We received $1.450 billion at closing, including an upfront payment of $1.426 billion, and $24 million which was placed into escrow to be released upon the completion of local closings in certain foreign jurisdictions, and will receive an additional $50 million contingent upon the transfer or separation of certain manufacturing facilities, which we expect will be completed over a period of approximately 24 months. We will provide transitional services through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of up to 24 months following the closing of the transaction, subject to extension. Due to our continuing involvement in the operations of the Neurovascular business, the divestiture does not meet the criteria for presentation as a discontinued operation. Refer to Note C – Divestitures and Assets Held for Sale to our 2010 consolidated financial statements included in Item 8 of this Annual Report for more information.

Business and Market Overview

Cardiac Rhythm Management (CRM)

Our CRM division develops, manufactures and markets a variety of implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities. Worldwide net sales of these products of $2.180 billion represented approximately 28 percent of our consolidated net sales in 2010. Our worldwide CRM net sales decreased $233 million, or ten percent, in 2010, as compared to 2009. Foreign currency fluctuations did not materially impact our CRM net sales in 2010, as compared to the prior year. This decrease was driven primarily by the negative impact of the ship hold and product removal actions associated with our ICD and CRT-D systems earlier in the year. We experienced market share loss in the U.S. as a result of these actions; however, we believe that our products, including our COGNIS® CRT-D and TELIGEN® ICD systems, among the world’s smallest and thinnest high-energy devices, will continue to be successful in the global market.

While we have recaptured a portion of our lost market share, the extent and timing of our recovery is difficult to predict. We estimate that our U.S. defibrillator market share exiting 2010 decreased approximately 300 basis points, as compared to our market share exiting 2009, due primarily to these product actions. Further, overall expectations of future CRM market growth have declined, driven primarily by competitive and other pricing pressures, as well as fewer launches of market-expanding technologies than previously anticipated. We estimate that the worldwide CRM market approximated $11.4 billion in 2010, representing a slight increase over the 2009 market size of $11.1 billion. In addition, physician reaction to study results published by the Journal of the American Medical Association regarding evidence-based guidelines for ICD implants and the U.S. Department of Justice investigation into ICD implants may have a negative impact on the CRM market. However, in September 2010, we received FDA approval for an exclusive expanded indication for use of our CRT-D systems with certain patients in earlier stages of heart failure. We believe this indication could potentially create an opportunity to expand the worldwide CRM market by approximately $250 million to $350 million over the next few years, and further enhance our position within that market.

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The following are the components of our worldwide CRM net sales:

	Year Ended						Year Ended
(in millions)	December 31, 2010						December 31, 2009
	U.S.		International		Total		U.S.		International		Total
Defibrillator systems	$	1,037	$	562	$	1,599	$	1,248	$	544	$	1,792
Pacemaker systems		320		261		581		346		275		621
CRM products	$	1,357	$	823	$	2,180	$	1,594	$	819	$	2,413

Our U.S. CRM net sales decreased $237 million, or 15 percent, in 2010 as compared to 2009, driven primarily by the ship hold and product removal actions involving our ICD and CRT-D systems, discussed above. We are committed to advancing our technologies to strengthen our CRM business. In 2010, we continued to execute on our product pipeline and expect to launch our next-generation line of defibrillators in the U.S. in late 2011 or early 2012, which include new features designed to improve functionality, diagnostic capability and ease of use. Due in part to anticipated changes to current FDA regulatory requirements industry-wide, which would increase the number of patients and length of time needed for certain clinical studies, we now expect to launch our next-generation INGENIO™ pacemaker system, which leverages the strength of our high-voltage platform and will be compatible with our LATITUDE® Patient Management System, in the U.S. in late 2011 or early 2012, depending on final FDA requirements. Refer to Regulatory Environment included in Item 1 of this Annual Report for more information.

Our international CRM net sales increased $4 million, or less than one percent, in 2010, as compared to 2009. International net sales of our defibrillator systems increased $18 million, or three percent, in 2010, as compared to 2009, driven by strong market acceptance of our COGNIS® CRT-D and TELIGEN® ICD systems, and our recently-launched 4-SITE lead delivery system. In addition, in July 2009, we received CE Mark approval for our LATITUDE® Patient Management System and have since launched this technology in the majority of our European markets. The LATITUDE® technology, which is designed to enable physicians to monitor device performance remotely while patients are in their homes, is a key component of many of our CRM systems. In late 2010, we received CE Mark approval for our next-generation line of defibrillators, INCEPTA™, ENERGEN™ and PUNCTUA™, and plan to launch these products in our Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries in the first half of 2011. These products provide physicians and their patients with more options to customize therapy and enhance our market advantage in size, shape and longevity. We also plan to launch our next-generation INGENIO™ pacemaker system in these regions in the second half of 2011 and believe that these launches position us well within the worldwide CRM market.

Net sales from our CRM products represent a significant source of our overall net sales. Therefore, increases or decreases in our CRM net sales could have a significant impact on our results of operations. The variables that may impact the size of the CRM market and/or our share of that market include, but are not limited to:

• our ability to retain and attract key members of our CRM sales force and other key CRM personnel;

• our ability to recapture lost market share following the ship hold and product removal of our ICD and CRT-D systems in the U.S.;

• the impact of market and economic conditions on average selling prices and the overall number of procedures performed;

• the ability of CRM manufacturers to maintain the trust and confidence of the implanting physician community, the referring physician community and prospective patients in CRM technologies;

• future product field actions or new physician advisories by us or our competitors;

• our ability to successfully develop and launch next-generation products and technology;

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• clinical trials that may provide opportunities to expand indications for use, particularly in light of anticipated changes to current FDA regulatory requirements industry-wide;

• variations in clinical results, reliability or product performance of our and our competitors’ products;

• delayed or limited regulatory approvals and unfavorable reimbursement policies; and

• new competitive launches.

Coronary Stent Systems

Our coronary stent system offerings include the VeriFLEX™ (Liberté®) bare-metal coronary stent system, designed to enhance deliverability and conformability, particularly in challenging lesions, as well as drug-eluting coronary stent systems. We are the only company in the industry to offer a two-drug platform strategy, which has enabled us to maintain our leadership position in the drug-eluting stent market. We currently market our TAXUS® paclitaxel-eluting stent line, including our third-generation TAXUS® Element™ stent system, launched in our EMEA region and certain Inter-Continental countries during the second quarter of 2010. The CE Mark approval for our TAXUS® Element™ stent system includes a specific indication for treatment in diabetic patients. We also offer our everolimus-eluting stent line, consisting of the PROMUS® stent system, currently supplied to us by Abbott Laboratories, and our next-generation internally-developed and manufactured everolimus-eluting stent system, the PROMUS® Element™ stent system, which we launched in our EMEA region and certain Inter-Continental countries in the fourth quarter of 2009. In September 2010, we received CE Mark approval for expanded indications for the use of our PROMUS® Element™ stent system in diabetic and heart attack patients. Our Element™ stent platform incorporates a unique platinum chromium alloy designed to offer greater radial strength and flexibility than older alloys, enhanced visibility and reduced recoil. The innovative stent design improves deliverability and allows for more consistent lesion coverage and drug distribution. These product offerings demonstrate our commitment to drug-eluting stent market leadership and continued innovation. We expect to launch our TAXUS® Element™ stent system in the U.S. (to be commercialized as ION™) in mid-2011 and Japan in late 2011 or early 2012. We expect to launch our PROMUS® Element™ stent system in the U.S. and Japan in mid-2012.

Net sales of our coronary stent systems, including bare-metal stent systems, of $1.670 billion represented approximately 21 percent of our consolidated net sales in 2010. Worldwide sales of these products decreased $209 million, or 11 percent, in 2010, as compared to the prior year. Excluding the impact of foreign currency fluctuations, which contributed $26 million to our coronary stent system net sales in 2010, as compared to 2009, net sales of these products decreased 12 percent, as compared to the prior year. Despite continued competition and pricing pressures resulting in a decline in sales of these products, we maintained our leadership position in 2010 with an estimated 36 percent share of the worldwide drug-eluting stent market, as compared to 41 percent in 2009. We estimate that the worldwide coronary stent market approximated $5.0 billion in 2010, consistent with the 2009 market size. The size of the coronary stent market is driven primarily by the number of percutaneous coronary intervention (PCI) procedures performed, as well as the percentage of those in which stents are implanted; the number of devices used per procedure; average selling prices; and the drug-eluting stent penetration rate².

²   A measure of the mix between bare-metal and drug-eluting stents used across procedures.

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The following are the components of our worldwide coronary stent system sales:

	Year Ended						Year Ended
(in millions)	December 31, 2010						December 31, 2009
	U.S.		International		Total		U.S.		International		Total
TAXUS®	$	277	$	223	$	500	$	431	$	596	$	1,027
PROMUS®		528		282		810		480		201		681
PROMUS® Element™				227		227
Drug-eluting stent systems		805		732		1,537		911		797		1,708
Bare-metal stent systems		44		89		133		57		114		171
	$	849	$	821	$	1,670	$	968	$	911	$	1,879

Our U.S. net sales of drug-eluting stent systems decreased $106 million, or 12 percent, in 2010, as compared to 2009. This decrease resulted primarily from a decline in our share of the U.S. drug-eluting stent market, as well as an overall decrease in the size of this market, resulting principally from lower average selling prices driven by competitive and other pricing pressures. We estimate our share of the U.S. drug-eluting stent market approximated 46 percent for the last five quarters, as compared to an average of 49 percent during 2009, and estimate that the average selling price of drug-eluting stent systems in the U.S. decreased approximately nine percent in 2010, as compared to 2009. This decline was due primarily to lower sales of our TAXUS® drug-eluting stent systems, which we believe was due to customer perceptions of data from a single-center, non-double-blinded, underpowered study sponsored by one of our competitors. We believe that average drug-eluting stent penetration rates in the U.S. were 77 percent in 2010, as compared to an average of 75 percent during 2009, which partially offset the impact of lower average selling prices on the size of the U.S. drug-eluting stent market. We believe we have maintained our leadership position in this market due to the success of our two-drug platform strategy and the breadth of our product offerings, including the industry’s widest range of coronary stent sizes.

Our international drug-eluting stent system net sales decreased $65 million, or eight percent, in 2010, as compared to 2009. Net sales of our drug-eluting stent systems in Japan decreased $49 million, or 19 percent, in 2010, as compared to the prior year and our estimated share of the drug-eluting stent market in Japan declined to an average of 39 percent in 2010 (exiting at 36 percent), as compared to an average of 49 percent in 2009 (exiting at 44 percent). We believe that aggressive pricing offered by market entrants and clinical trial enrollment limiting our access to certain customers contributed to the decline in our market share in Japan in 2010, as compared to the prior year. This decrease was partially offset by our first quarter 2010 launch of the PROMUS® stent system in Japan, enabling us to begin the execution of our two-drug platform strategy in this region. Our net sales of drug-eluting stent systems in our EMEA region decreased $26 million, or eight percent in 2010, as compared to 2009, due primarily to declines in average selling prices, partially offset by increased penetration rates. However, in the second quarter of 2010, we launched our third-generation TAXUS® Element™ stent system in our EMEA region and certain Inter-Continental countries. We believe that this launch, coupled with the November 2009 launch of our PROMUS® Element™ stent system, which has quickly gained market share, exiting 2010 with approximately one quarter share of the drug-eluting stent market in EMEA, position us well in this market going forward. Net sales of drug-eluting stent systems in our Inter-Continental region increased $10 million, or five percent, driven by an increase in penetration rates and procedural volume.

We market the PROMUS® everolimus-eluting coronary stent system, a private-labeled XIENCE V® stent system supplied to us by Abbott Laboratories. As of the closing of Abbott’s 2006 acquisition of Guidant Corporation’s vascular intervention and endovascular solutions businesses, we obtained a perpetual license to the intellectual property used in Guidant’s drug-eluting stent system program purchased by Abbott. We believe that being the only company to offer two distinct drug-eluting stent platforms provides us a considerable advantage in the drug-eluting stent market and has enabled us to sustain our worldwide leadership position. However, under the terms of our supply arrangement with Abbott, the gross profit and operating profit margin of everolimus-eluting stent systems supplied to us by Abbott, including any improvements or iterations approved for sale during the term of the applicable supply arrangements and of the type that could be approved by a supplement to an approved FDA pre-market approval, is significantly lower than that of our TAXUS® and PROMUS® Element™ stent systems. Specifically, the PROMUS® stent system has operating profit margins that approximate half of our TAXUS® stent system operating profit margin. Therefore, if sales of everolimus-eluting stent systems supplied to

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us by Abbott increase in relation to our total drug-eluting stent system sales, our profit margins will decrease. Refer to our Gross Profit discussion for more information on the impact this sales mix has had on our gross profit margins. Our internally-developed and manufactured PROMUS® Element™ everolimus-eluting stent system, launched in our EMEA region and certain Inter-Continental countries in the fourth quarter of 2009, generates gross profit margins more favorable than the PROMUS® stent system and we expect will positively affect our overall gross profit and operating profit margins in these regions as sales shift from PROMUS® to PROMUS® Element™.

Further, the price we pay for our supply of everolimus-eluting stent systems from Abbott is determined by contracts with Abbott and is based, in part, on previously fixed estimates of Abbott’s manufacturing costs for everolimus-eluting stent systems and third-party reports of our average selling price of these stent systems. Amounts paid pursuant to this pricing arrangement are subject to a retroactive adjustment approximately every two years based on Abbott’s actual costs to manufacture these stent systems for us and our average selling price of everolimus-eluting stent systems supplied to us by Abbott. Our gross profit margin may be positively or negatively impacted in the future as a result of this adjustment process.

We are currently reliant on Abbott for our supply of everolimus-eluting stent systems in the U.S. and Japan. Our supply agreement with Abbott for everolimus-eluting stent systems in the U.S. and Japan extends through the end of the second quarter of 2012. At present, we believe that our supply of everolimus-eluting stent systems from Abbott, coupled with our current launch plans for our internally-developed and manufactured PROMUS® Element™ everolimus-eluting stent system, is sufficient to meet customer demand. However, any production or capacity issues that affect Abbott’s manufacturing capabilities or our process for forecasting, ordering and receiving shipments may impact the ability to increase or decrease our level of supply in a timely manner; therefore, our supply of everolimus-eluting stent systems supplied to us by Abbott may not align with customer demand, which could have an adverse effect on our operating results. Further, a delay in the launch of our internally-developed and manufactured PROMUS® Element™ everolimus-eluting stent system in the U.S. and Japan, currently expected in mid-2012, could result in an inability to meet customer demand for everolimus-eluting stent systems.

Historically, the worldwide coronary stent market has been dynamic and highly competitive with significant market share volatility. In addition, in the ordinary course of our business, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations and trial end points. Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, our competitors or third parties, or the market’s perception of these clinical data, may adversely impact our position in, and share of, the drug-eluting stent market and may contribute to increased volatility in the market.

We believe that we can sustain our leadership position within the worldwide drug-eluting stent market in the foreseeable future for a variety of reasons, including:

• our two-drug platform strategy, including specialty stent sizes;

• the broad and consistent long-term results of our TAXUS® clinical trials, and the favorable results of the XIENCE V®/PROMUS® and PROMUS® Element™ stent system clinical trials to date;

• the performance benefits of our current and future technology;

• the strength of our pipeline of drug-eluting stent products, including our PROMUS® Element™ and TAXUS® Element™ stent systems, in additional geographies;

• our overall position in the worldwide interventional medicine market and our experienced interventional cardiology sales force; and

• the strength of our clinical, selling, marketing and manufacturing capabilities.

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However, a decline in net sales from our drug-eluting stent systems could have a significant adverse impact on our operating results and operating cash flows. The most significant variables that may impact the size of the drug-eluting stent market and our position within this market include, but are not limited to:

• the impact of competitive pricing pressure on average selling prices of drug-eluting stent systems available in the market;

• the impact and outcomes of on-going and future clinical results involving our or our competitors’ products, including those trials sponsored by our competitors, or perceived product performance of our or our competitors’ products;

• physician and patient confidence in our current and next-generation technology;

• our ability to successfully launch next-generation products and technology features, including the PROMUS® Element™ and TAXUS® Element™ stent systems in additional geographies;

• changes in drug-eluting stent penetration rates, the overall number of PCI procedures performed and the average number of stents used per procedure;

• delayed or limited regulatory approvals and unfavorable reimbursement policies;

• new competitive product launches; and

• the outcome of intellectual property litigation.

During 2009 and early 2010, we successfully negotiated closure of several long-standing legal matters, including multiple matters with Johnson & Johnson; all outstanding litigation between us and Medtronic, Inc. with respect to interventional cardiology and endovascular repair cases; and all outstanding litigation between us and Bruce Saffran, M.D., Ph.D. However, there continues to be significant intellectual property litigation particularly in the coronary stent market. In particular, although we have resolved multiple litigation matters with Johnson & Johnson, we continue to be involved in patent litigation with them, particularly relating to drug-eluting stent systems. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operations or liquidity.

Interventional Cardiology (excluding coronary stent systems)

In addition to coronary stent systems, our Interventional Cardiology business markets balloon catheters, rotational atherectomy systems, guide wires, guide catheters, embolic protection devices, and diagnostic catheters used in percutaneous transluminal coronary angioplasty (PTCA) procedures, as well as ultrasound imaging systems. Our worldwide net sales of these products decreased to $932 million in 2010, as compared to $980 million in 2009, a decrease of $48 million, or five percent. Excluding the impact of foreign currency fluctuations which contributed $12 million to our Interventional Cardiology (excluding coronary stent systems) net sales in 2010, as compared to the prior year, net sales of these products decreased $60 million, or six percent. Our U.S. net sales of these products were $394 million in 2010, as compared to $409 million in 2009. Our international net sales of these products were $538 million in 2010, as compared to $571 million for the prior year. This decrease was the result of a delay in new product introductions, pricing pressures and competitive product launches. We continue to hold a strong leadership position in the PTCA balloon catheter market, maintaining an estimated 56 percent average share of the U.S. market and 38 percent worldwide in 2010. We have executed and are planning a number of additional new product launches during 2011, including the full launch of our Apex™ pre-dilatation balloon catheter with platinum marker bands for improved radiopacity, launched in limited markets during the second quarter of 2010. In June 2010, we launched the NC Quantum Apex™ post-dilatation balloon catheter, developed specifically to address physicians’ needs in optimizing coronary stent deployment, which has been received positively in the market. In addition, we began a phased launch of our Kinetix™ family of guidewires in the U.S., our EMEA region and certain Inter-Continental countries in April 2010.

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As part of our strategic plan, we are investigating opportunities to further expand our presence in, and diversify into, other areas and disease states, including structural heart. In January 2011, we completed the acquisition of Sadra Medical, Inc. Sadra is developing a repositionable and retrievable device for percutaneous aortic valve replacement (PAVR) to treat patients with severe aortic stenosis and recently completed a series of European feasibility studies for its Lotus™ Valve System, which consists of a stent-mounted tissue valve prosthesis and catheter delivery system for guidance and placement of the valve. The low-profile delivery system and introducer sheath are designed to enable accurate positioning, repositioning and retrieval at any time prior to release of the aortic valve implant. PAVR is one of the fastest growing medical device markets.

Peripheral Interventions

Our Peripheral Interventions business product offerings include stents, balloon catheters, sheaths, wires and vena cava filters, which are used to diagnose and treat peripheral vascular disease, and we continue to hold the number one position in the worldwide Peripheral Interventions market. Our worldwide net sales of these products increased to $669 million in 2010, as compared to $661 million in 2009, an increase of $8 million, or one percent. Excluding the impact of foreign currency fluctuations, which contributed $6 million to our Peripheral Interventions net sales in 2010, as compared the prior year, net sales of these products increased $2 million, or less than one percent, as compared to 2009. Our U.S. net sales of these products were $310 million in 2010, as compared to $320 million for the prior year. Our international net sales were $359 million in 2010, as compared to $341 million in 2009, driven by several international product launches, including the second quarter 2010 launch in Japan of our Carotid WALLSTENT® Monorail® Endoprosthesis. We look forward to new product launches, including our next-generation percutaneous transluminal angioplasty balloon, expected in the second half of 2011 and believe that these launches, coupled with the strength of our Express® SD Renal Monorail® premounted stent system; our Express LD Stent System, which received FDA approval in the first quarter of 2010 for an iliac indication; our Sterling® Monorail® and Over-the-Wire balloon dilatation catheter and our extensive line of Interventional Oncology product solutions, will continue to position us well in the growing Peripheral Interventions market.

Electrophysiology

We develop less-invasive medical technologies used in the diagnosis and treatment of rate and rhythm disorders of the heart. Our leading products include the Blazer™ line of ablation catheters, including our next-generation Blazer™ Prime ablation catheter, designed to deliver enhanced performance, responsiveness and durability, which we launched in the U.S. in the fourth quarter of 2009. Worldwide net sales of our Electrophysiology products decreased to $147 million in 2010, as compared to $149 million in 2009, a decrease of $2 million, or two percent, due principally to product availability constraints with our Chilli II™ catheter line. Foreign currency fluctuations did not materially impact our Electrophysiology net sales in 2010, as compared to the prior year. Our U.S. net sales of these products were $112 million, as compared to $116 million for the prior year, and our international net sales were $35 million in 2010, as compared to $33 million in 2009. We have begun a limited launch of our Blazer™ Prime ablation catheter in the U.S., our EMEA region and certain Inter-Continental countries, and believe that with the increasing adoption of this technology and other upcoming product launches, we are well-positioned within the Electrophysiology market. As part of our strategic plan, we are investigating opportunities to further expand our presence in, and diversify into, other areas and disease states, including atrial fibrillation. In January 2011, we announced the signing of a definitive merger agreement under which we will acquire Atritech, Inc., subject to customary closing conditions. Atritech has developed a novel device designed to close the left atrial appendage in patients with atrial fibrillation who are at risk for ischemic stroke. The WATCHMAN® Left Atrial Appendage Closure Technology, developed by Atritech, is the first device proven in a randomized clinical trial to offer an alternative to anticoagulant drugs, and is approved for use in CE Mark countries.

Endoscopy

Our Endoscopy division develops and manufactures devices to treat a variety of medical conditions including diseases of the digestive and pulmonary systems. Our worldwide net sales of these products increased to $1.079 billion in 2010, as compared to $1.006 billion in 2009, an increase of $73 million, or seven percent.

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Excluding the impact of foreign currency fluctuations, which contributed $9 million to our Endoscopy net sales in 2010, as compared to the prior year, net sales of these products increased $64 million, or six percent, as compared to 2009. Our U.S. net sales of these products were $541 million in 2010, as compared to $517 million for the prior year, and our international net sales were $538 million in 2010, as compared to $489 million in 2009. These increases were due primarily to higher net sales within our stent franchise, driven by the continued commercialization and adoption of our WallFlex® family of stents, in particular, the WallFlex Biliary line and WallFlex Esophageal line. In addition, our hemostasis franchise net sales benefited from increased utilization of our Resolution^® Clip Device, an endoscopic mechanical clip to treat gastrointestinal bleeding, and our biliary franchise drove solid growth on the strength of our rapid exchange biliary devices. During 2010, we introduced expanded sizes of our Radial® Jaw 4 biopsy forceps, and have launched a number of new products targeting the biliary interventional market. As part of our strategic plan, we are investigating opportunities to further expand our presence in, and diversify into, other areas and disease states, including endoscopic pulmonary intervention. On October 26, 2010, we completed our acquisition of Asthmatx, Inc. Asthmatx designs, manufactures and markets a less-invasive, catheter-based bronchial thermoplasty procedure for the treatment of severe persistent asthma. The Alair^® Bronchial Thermoplasty System, developed by Asthmatx, has both CE Mark and FDA approval and is the first device-based asthma treatment approved by the FDA. We expect this technology to strengthen our existing offering of pulmonary devices and contribute to the mid- to long-term growth and diversification of the Endoscopy business.

Urology/Women’s Health

Our Urology/Women’s Health division develops and manufactures devices to treat various urological and gynecological disorders. Our worldwide net sales of these products increased to $481 million in 2010 from $456 million in 2009, an increase of $25 million, or five percent. Foreign currency fluctuations did not materially impact our Urology/Women’s Health net sales in 2010, as compared to the prior year. Our U.S. net sales of these products were $365 million in 2010, as compared to $353 million in 2009, and our international net sales were $116 million in 2010, as compared to $103 million for the prior year. These increases were driven by new product introductions and increased sales investments. In 2011, we plan to expand the launch of our recently-approved Genesys Hydro ThermAblator® (HTA) system, a next-generation endometrial ablation system designed to ablate the endometrial lining of the uterus in premenopausal women with menorrhagia. The Genesys HTA System features a smaller and lighter console, simplified set-up requirements, and an enhanced graphic user interface and is designed to improve operating performance. We believe this new product offering will enable us to increase our share of this market.

Neuromodulation

Within our Neuromodulation business, we market the Precision® Spinal Cord Stimulation (SCS) system, used for the management of chronic pain. Our worldwide net sales of Neuromodulation products increased to $304 million in 2010, as compared to $285 million in 2009, an increase of $19 million, or seven percent. Foreign currency fluctuations did not materially impact our Neuromodulation net sales in 2010, as compared to the prior year. Our U.S. net sales of these products were $288 million in 2010 as compared to $271 million for the prior year, and our international net sales of these products were $16 million in 2010, as compared to $14 million in 2009, driven by an increase in procedural volume and new product launches. In 2010, we received FDA approval and launched two lead splitters, as well as the Linear™ 3-4 and Linear 3-6 Percutaneous Leads for use with our SCS systems, offering a broader range of lead configurations and designed to provide physicians more treatment options for their chronic pain patients. These represent the broadest range of percutaneous lead configurations in the industry. We believe that we continue to have a technology advantage over our competitors with proprietary features such as Multiple Independent Current Control, which is intended to allow the physician to target specific areas of pain more precisely, and are involved in various studies designed to evaluate the use of spinal cord stimulation in the treatment of additional sources of pain. As a demonstration of our commitment to strengthening clinical evidence with spinal cord stimulation, we have initiated a trial to assess the therapeutic effectiveness and cost-effectiveness of spinal cord stimulation compared to reoperation in patients with failed back surgery syndrome. We believe that this trial could result in consideration of spinal cord stimulation much earlier in the continuum of care. In addition, in late 2010 we initiated a European clinical trial for the treatment of Parkinson’s disease using our Vercise™ deep-brain stimulation system, and, in January 2011, we completed the

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acquisition of Intelect Medical, Inc., a development-stage company developing advanced visualization and programming for the Vercise™ system. We believe this acquisition leverages the core architecture of our Vercise™ platform and advances the field of deep-brain stimulation.

Neurovascular

In January 2011, we closed the sale our Neurovascular business to Stryker Corporation. We will provide transitional services through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of up to 24 months following the closing of the transaction, subject to extension, and we will recognize net sales on the sale of Neurovascular products in certain countries during this period. Our future sales of Neurovascular products to Stryker will be significantly lower than our 2010 Neurovascular net sales and will be at significantly reduced gross margins. The Neurovascular business markets a broad line of coated and uncoated detachable coils, micro-delivery stents, micro-guidewires, micro-catheters, guiding catheters and embolics to neuro-interventional radiologists and neurosurgeons to treat diseases of the neurovascular system. Our worldwide net sales of Neurovascular products decreased to $340 million in 2010, as compared to $348 million in 2009, a decrease of $8 million, or two percent. Excluding the impact of foreign currency fluctuations, which contributed $7 million to Neurovascular net sales in 2010, as compared to the prior year, net sales of these products decreased $15 million, or four percent, in 2010, as compared to 2009. Our U.S. net sales of these products were $120 million, as compared to $125 million for the prior year, and our international net sales were $220 million in 2010, as compared to $223 million in 2009. These decreases resulted primarily from new competitive launches and a delay in the launch of the next-generation family of detachable coils, as well the impact of a field action initiated during the third quarter with respect to selective lots of the Matrix® Detachable Coil. However, in October 2010, we received FDA approval for the next-generation family of detachable coils, which includes an enhanced delivery system designed to reduce coil detachment times and began a phased launch of the product in 2010. In 2010, we also launched the Neuroform EZ™ stent system, the fourth-generation intracranial aneurysm stent system designed for use in conjunction with endovascular coiling to treat wide-necked aneurysms, in the U.S. and our EMEA region.

FDA Matters

In January 2006, we received a corporate warning letter from the FDA notifying us of serious regulatory problems at three of our facilities and advising us that our corporate-wide corrective action plan relating to three site-specific warning letters issued to us in 2005 was inadequate. We identified solutions to the quality system issues cited by the FDA and implemented those solutions throughout our organization. During 2008, the FDA reinspected a number of our facilities and, in October 2008, informed us that our quality system was in substantial compliance with its Quality System Regulations. In November 2009 and January 2010, the FDA reinspected two of our sites to follow-up on observations from the 2008 FDA inspections. Both of these FDA inspections confirmed that all issues at the sites have been resolved and all restrictions related to the corporate warning letter were removed. On August 11, 2010, we were notified by the FDA that the corporate warning letter had been lifted.

In August 2010, the FDA released numerous draft proposals on the 510(k) process aimed at increasing transparency and streamlining the process, while adding more scientific rigor to the review process. In January 2011, the FDA released the implementation plan for changes to the 510(k) Submission program, which includes additional training of FDA staff, the creation of various guidance documents intended to provide greater clarity to certain processes, as well as various internal changes to the FDA’s procedures. We have a portfolio of products that includes numerous Class II medical devices. Several of the FDA’s proposals could increase the regulatory burden on our industry, including those that could increase the cost, complexity and time to market for certain high-risk Class II medical devices.

Restructuring Initiatives

We are a diversified worldwide medical device leader and hold number one or two positions in the majority of the markets in which we compete. Since our inception, we have generated significant revenue growth driven by product innovation, strategic acquisitions and robust investments in research and development. We generate

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strong cash flow, which has enabled us to reduce our debt obligations and further invest in our growth. On an on-going basis, we monitor the dynamics of the economy, the healthcare industry, and the markets in which we compete; and we continue to assess opportunities for improved operational effectiveness and efficiency, and better alignment of expenses with revenues, while preserving our ability to make the investments in research and development projects, capital and our people that are essential to our long-term success. As a result of these assessments, we have undertaken various restructuring initiatives in order to enhance our growth potential and position us for long-term success. These initiatives are described below, and additional information can be found in Results of Operations and Note I – Restructuring-related Activities to our 2010 consolidated financial statements included in Item 8 of this Annual Report.

2010 Restructuring plan

On February 6, 2010, our Board of Directors approved, and we committed to, a series of management changes and restructuring initiatives (the 2010 Restructuring plan) designed to focus our business, drive innovation, accelerate profitable revenue growth and increase both accountability and shareholder value. Key activities under the plan include the integration of our Cardiovascular and CRM businesses, as well as the restructuring of certain other businesses and corporate functions; the centralization of our research and development organization; the re-alignment of our international structure to reduce our administrative costs and invest in expansion opportunities including significant investments in emerging markets; and the reprioritization and diversification of our product portfolio. We estimate that the execution of this plan will result in gross reductions in pre-tax operating expenses of approximately $200 million to $250 million, once completed in 2012. We expect to reinvest a portion of the savings into customer-facing and other activities to help drive future sales growth and support the business. Activities under the 2010 Restructuring plan were initiated in the first quarter of 2010 and are expected to be substantially complete by the end of 2012. We expect the execution of the 2010 Restructuring plan will result in the elimination of approximately 1,000 to 1,300 positions worldwide.

Plant Network Optimization

In January 2009, our Board of Directors approved, and we committed to, a Plant Network Optimization program, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The program is a complement to our 2007 Restructuring plan, discussed below, and is intended to improve overall gross profit margins. We estimate that the program will result in annualized run-rate reductions of manufacturing costs of approximately $65 million exiting 2012. These savings are in addition to the estimated $35 million of annual reductions of manufacturing costs from activities under our 2007 Restructuring plan, discussed below. Activities under the Plant Network Optimization program were initiated in the first quarter of 2009 and are expected to be substantially complete by the end of 2012.

2007 Restructuring plan

In October 2007, our Board of Directors approved, and we committed to, an expense and head count reduction plan (the 2007 Restructuring plan). The plan was intended to bring expenses in line with revenues as part of our initiatives to enhance short- and long-term shareholder value. Key activities under the plan included the restructuring of several businesses, corporate functions and product franchises in order to better utilize resources, strengthen competitive positions, and create a more simplified and efficient business model; the elimination, suspension or reduction of spending on certain research and development projects; and the transfer of certain production lines among facilities. The execution of this plan enabled us to reduce research and development and selling, general and administrative expenses by an annualized run rate of approximately $500 million exiting 2008. We have partially reinvested our savings from these initiatives into targeted head count increases, primarily in customer-facing positions. In addition, we expect reductions of annualized run-rate manufacturing costs of approximately $35 million exiting 2010 as a result of transfers of certain production lines. Due to the longer term nature of these initiatives, we do not expect to achieve the full benefit of these reductions in manufacturing costs until 2012. We initiated activities under the plan in the fourth quarter of 2007. The transfer of certain production lines contemplated under the 2007 Restructuring plan was completed as of December 31, 2010; all other major

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activities under the plan, with the exception of final production line transfers, were completed as of December 31, 2009.

Healthcare Reform

The Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act were enacted into law in the U.S. in 2010. Certain provisions of the legislation will not be effective for a number of years and there are many programs and requirements for which the details have not yet been fully established or consequences not fully understood, and it is unclear what the full impact will be from the legislation. The legislation imposes on medical device manufacturers a 2.3 percent excise tax on U.S. sales of Class I, II and III medical devices beginning in 2013. U.S. net sales represented 56 percent of our worldwide net sales in 2010 and, therefore, this tax burden may have a material negative impact on our results of operations and cash flows. Other provisions of this legislation, including Medicare provisions aimed at improving quality and decreasing costs, comparative effectiveness research, an independent payment advisory board, and pilot programs to evaluate alternative payment methodologies, could meaningfully change the way healthcare is developed and delivered, and may adversely affect our business and results of operations. Further, we cannot predict what healthcare programs and regulations will be ultimately implemented at the federal or state level, or the effect of any future legislation or regulation in the U.S. or internationally. However, any changes that lower reimbursements for our products or reduce medical procedure volumes could adversely affect our business and results of operations.

Results of Operations

Net Sales

We manage our international operating segments on a constant currency basis, and we manage market risk from currency exchange rate changes at the corporate level. Management excludes the impact of foreign exchange for purposes of reviewing regional and divisional revenue growth rates to facilitate an evaluation of current operating performance and comparison to past operating performance. To calculate revenue growth rates that exclude the impact of currency exchange, we convert current period and prior period net sales from local currency to U.S. dollars using current period currency exchange rates. The regional constant currency growth rates in the tables below can be recalculated from our net sales by reportable segment as presented in Note P – Segment Reporting to our 2010 consolidated financial statements included in Item 8 of this Annual Report. As of December 31, 2010, we had four reportable segments based on geographic regions: the United States; EMEA, consisting of Europe, the Middle East and Africa; Japan; and Inter-Continental, consisting of our Asia Pacific and the Americas operating segments. The reportable segments represent an aggregate of all operating divisions within each segment.

The following tables provide our worldwide net sales by region and the relative change on an as reported and constant currency basis:

							2010 versus 2009						2009 versus 2008
							As Reported			Constant			As Reported			Constant
	Year Ended December 31,						Currency			Currency			Currency			Currency
(in millions)	2010		2009		2008		Basis			Basis			Basis			Basis
United States	$	4,335	$	4,675	$	4,487		(7)	%		(7)	%		4	%		4	%
EMEA		1,759		1,837		1,960		(4)	%		(1)	%		(6)	%		1	%
Japan		968		988		861		(2)	%		(8)	%		15	%		4	%
Inter-Continental		740		677		673		9	%		1	%		1	%		8	%
International		3,467		3,502		3,494		(1)	%		(3)	%		0	%		3	%
Subtotal		7,802		8,177		7,981		(5)	%		(5)	%		2	%		4	%
Divested Businesses		4		11		69		N/A			N/A			N/A			N/A
Worldwide	$	7,806	$	8,188	$	8,050		(5)	%		(5)	%		2	%		3	%

The following table provides our worldwide net sales by division and the relative change on an as reported and constant currency basis.

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							2010 versus 2009						2009 versus 2008
							As Reported			Constant			As Reported			Constant
	Year Ended December 31,						Currency			Currency			Currency			Currency
(in millions)	2010		2009		2008		Basis			Basis			Basis			Basis
Cardiac Rhythm Management	$	2,180	$	2,413	$	2,286		(10)	%		(10)	%		6	%		7	%
Interventional Cardiology		2,602		2,859		2,879		(9)	%		(10)	%		(1)	%		0	%
Peripheral Interventions		669		661		684		1	%		0	%		(3)	%		(2)	%
Cardiovascular Group		3,271		3,520		3,563		(7)	%		(8)	%		(1)	%		0	%
Electrophysiology		147		149		153		(2)	%		(2)	%		(2)	%		(1)	%
Neurovascular		340		348		360		(2)	%		(4)	%		(3)	%		(2)	%
Endoscopy		1,079		1,006		943		7	%		6	%		7	%		8	%
Urology/Women’s Health		481		456		431		5	%		5	%		6	%		6	%
Neuromodulation		304		285		245		7	%		7	%		17	%		17	%
Subtotal		7,802		8,177		7,981		(5)	%		(5)	%		2	%		4	%
Divested Businesses		4		11		69		N/A			N/A			N/A			N/A
Worldwide	$	7,806	$	8,188	$	8,050		(5)	%		(5)	%		2	%		3	%

The divisional constant currency growth rates in the tables above can be recalculated from the reconciliations provided below. Growth rates are based on actual, non-rounded amounts and may not recalculate precisely. Please see Additional Information for further information regarding management’s use of these non-GAAP measures.

	2010 Net Sales as compared to 2009									2009 Net Sales as compared to 2008
	Change						Estimated			Change						Estimated
	As Reported			Constant			Impact of			As Reported			Constant			Impact of
	Currency			Currency			Foreign			Currency			Currency			Foreign
in millions	Basis			Basis			Currency			Basis			Basis			Currency
Cardiac Rhythm Management	$	(233	)	$	(230	)	$	(3	)	$	127		$	168		$	(41	)
Interventional Cardiology		(257	)		(295	)		38			(20	)		2			(22	)
Peripheral Interventions		8			2			6			(23	)		(13	)		(10	)
Cardiovascular Group		(249	)		(293	)		44			(43	)		(11	)		(32	)
Electrophysiology		(2	)		(3	)		1			(4	)		(3	)		(1	)
Neurovascular		(8	)		(15	)		7			(12	)		(8	)		(4	)
Endoscopy		73			64			9			63			74			(11	)
Urology/ Women’s Health		25			21			4			25			27			(2	)
Neuromodulation		19			19			0			40			41			(1	)
Subtotal		(375	)		(437	)		62			196			288			(92	)
Divested Businesses		(7	)		(7	)		0			(58	)		(58	)		0
Worldwide	$	(382	)	$	(444	)	$	62		$	138		$	230		$	(92	)

U.S. Net Sales

During 2010, our U.S. net sales decreased $340 million, or seven percent, as compared to 2009. The decrease was driven primarily by lower U.S. CRM net sales of $237 million, due primarily to the ship hold and product removal actions impacting our ICD and CRT-D systems discussed above, as well as a decline in U.S. coronary stent system net sales of $119 million, due primarily to a decline in our share of the U.S. drug-eluting stent market as well as lower average selling prices. In addition, U.S. net sales of our Interventional Cardiology (excluding coronary stent systems) business decreased $15 million in 2010, as compared to the prior year. These decreases were partially offset by increases of U.S. net sales in 2010 from our Endoscopy business of $24 million, $12 million attributable to our Urology/Women’s Health business, and $17 million of growth in our Neuromodulation

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business, as compared to 2009. Refer to the Business and Market Overview section for further discussion of our net sales.

During 2009, our U.S. net sales increased $188 million, or four percent, as compared to 2008. The increase was driven primarily by an increase in U.S. CRM net sales of $125 million and an increase of $47 million in U.S. net sales of our coronary stent systems. In addition, U.S. net sales in 2009 from our Endoscopy business grew $40 million, our Urology/Women’s Health net sales increased $18 million, and our Neuromodulation division increased U.S. net sales $37 million in 2009, as compared to 2008. These increases were partially offset by declines in U.S. net sales from our Interventional Cardiology (excluding coronary stent systems) business of $52 million and a decrease of $16 million in Peripheral Interventions U.S. net sales in 2009, as compared to the prior year.

International Net Sales

During 2010, our international net sales decreased $35 million, or one percent, as compared to 2009. Foreign currency fluctuations contributed $62 million to our international net sales in 2010, as compared to the prior year. Excluding the impact of foreign currency fluctuations, net sales in our EMEA region decreased $21 million, or one percent, in 2010, as compared the prior year. Our net sales in Japan decreased $81 million, or eight percent, excluding the impact of foreign currency fluctuations in 2010, as compared to 2009, due primarily to competitive launches of drug-eluting stent system technology and clinical trial enrollment limiting our access to certain drug-eluting stent system customers, as well as reductions in average selling prices. Net sales in our Inter-Continental region, excluding the impact of foreign currency fluctuations, increased $5 million, or one percent, in 2010, as compared to the prior year. Refer to the Business and Market Overview section for further discussion of our net sales.

During 2009, our international net sales increased $8 million, or less than one percent, as compared to 2008. Foreign currency fluctuations contributed a negative $92 million to our international net sales, as compared to the prior year. Excluding the impact of foreign currency fluctuations, net sales in our EMEA region increased $11 million, or one percent, in 2009, as compared to 2008. Our net sales in Japan increased $37 million, or four percent, excluding the impact of foreign currency fluctuations in 2009, as compared to 2008, due primarily to an increase in coronary stent system sales following the launch of our second-generation TAXUS^® Liberté^® stent system in that region. Net sales in our Inter-Continental region increased $52 million, or eight percent, excluding the impact of foreign currency fluctuations, in 2009, as compared to the prior year.

Gross Profit

Our gross profit was $5.207 billion in 2010, $5.612 billion in 2009, and $5.581 billion in 2008. As a percentage of net sales, our gross profit decreased to 66.7 percent in 2010, as compared to 68.5 percent in 2009 and 69.3 percent in 2008. The following is a reconciliation of our gross profit margins and a description of the drivers of the change from period to period:

	Year Ended December 31,
	2010			2009
Gross profit - prior year		68.5	%		69.3	%
Drug-eluting stent system sales mix and pricing		(1.7)	%		(1.4)	%
Impact of CRM ship hold		(0.4)	%
Net impact of foreign currency		0.1	%		0.9	%
All other		0.2	%		(0.3)	%
Gross profit - current year		66.7	%		68.5	%

The primary factor contributing to the reduction in our gross profit margin during 2010 and 2009, as compared to the prior years, was, in each year, a further decrease in sales of our higher-margin TAXUS® drug-eluting stent systems and an increasing shift towards the PROMUS® stent system, as well as declines in the average selling prices of drug-eluting stent systems. Sales of the PROMUS® stent system represented approximately 52 percent of our worldwide drug-eluting stent system sales in 2010, 40 percent in 2009, and 19 percent in 2008. As a result of the terms of our supply arrangement with Abbott, the gross profit margin of a PROMUS® stent system, supplied to us by Abbott, is significantly lower than that of our TAXUS® stent system. In the fourth quarter of 2009, we launched our next-generation internally-developed and manufactured PROMUS® Element™ everolimus-eluting

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stent system in our EMEA region and certain Inter-Continental countries. This product generates gross profit margins more favorable than the PROMUS® stent system, and has positively affected our overall gross profit and operating profit margins. We expect to launch our PROMUS® Element™ stent system in the U.S. and Japan in mid-2012. In addition, the average selling prices of drug-eluting stent systems have decreased, including an estimated nine percent decline in the U.S., in 2010, as compared to 2009. Our gross profit margin in 2010 was also negatively impacted by the ship hold and product removal actions associated with our U.S. CRM business previously discussed.

We expect our gross profit, as a percentage of net sales, will continue to be negatively impacted by declines in average selling prices across our businesses. In addition, our 2011 gross profit percentage will be negatively impacted as a result of our expected low-margin sales of Neurovascular product to Stryker under the terms of our transitional supply agreements.

Operating Expenses

The following table provides a summary of certain of our operating expenses:

	Year Ended December 31,
	2010				2009				2008
			% of Net				% of Net				% of Net
(in millions)	$		Sales		$		Sales		$		Sales
Selling, general and administrative expenses		2,580		33.1		2,635		32.2		2,589		32.2
Research and development expenses		939		12.0		1,035		12.6		1,006		12.5
Royalty expense		185		2.4		191		2.3		203		2.5

Selling, General and Administrative (SG&A) Expenses

In 2010, our SG&A expenses decreased $55 million, or two percent, as compared to 2009. This decrease was related primarily to savings from our restructuring initiatives driven by lower head count and lower consulting and travel spending, as compared to the prior year. These decreases were partially offset by an $11 million unfavorable impact from foreign currency fluctuations. As a percentage of net sales, our SG&A expenses were slightly higher than 2009 due to the impact of maintaining compensation levels for our U.S. CRM sales force, despite the reduction in our net sales of our CRM products in the U.S. We plan to increase our investment in SG&A in 2011 to introduce new products; strengthen our sales organization in emerging markets such as Brazil, China and India; and to support our acquired businesses; as a result, our SG&A expenses are likely to increase slightly as a percentage of net sales in 2011, as compared to 2010.

In 2009, our SG&A expenses increased by $46 million, or two percent, as compared to 2008. This increase was related primarily to the addition of direct selling expenses and head count, including expanding our global sales force and an increase in costs associated with various litigation-related matters. These increases were partially offset by a benefit from foreign currency fluctuations of approximately $22 million.

Research and Development (R&D) Expenses

In 2010, our R&D expenses decreased $96 million, or nine percent, as compared to 2009. This decrease was due to the on-going re-prioritization of R&D projects and the re-allocation of spending as part of our efforts to focus on products with higher returns, as well as the delay of certain of our clinical trials. We remain committed to advancing medical technologies and investing in meaningful research and development projects across our businesses in order to maintain a healthy pipeline of new products that we believe will contribute to profitable sales growth.

In 2009, our R&D expenses increased $29 million, or three percent, as compared to 2008. As a percentage of net sales, our R&D expenses in 2009 were relatively flat with the prior year.

Royalty Expense

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In 2010, our royalty expense decreased $6 million, or three percent, as compared to 2009. This decrease was due primarily to lower sales of our drug-eluting coronary stent systems, partially offset by the continued shift in the mix of our drug-eluting stent system sales towards the PROMUS^® and PROMUS® Element™ stent systems. The royalty rate applied to sales of these stent systems is, on average, higher than that associated with sales of our TAXUS^® stent systems.

In 2009, our royalty expense decreased $12 million, or six percent, as compared to 2008. The decrease was primarily the result of a reduction in royalty expense of $29 million attributable to the expiration of a CRM royalty agreement during the first quarter of 2009. Partially offsetting this decrease was an increase in royalty expense of $20 million as a result of an increase in sales of our drug-eluting stent systems, as well as the shift in the mix of our drug-eluting stent system sales towards the PROMUS^® stent system, following its launch in the U.S. in mid-2008.

Loss on Program Termination

In the second quarter of 2009, we discontinued one of our internal R&D programs in order to focus on those with a higher likelihood of success. As a result, we recorded a pre-tax loss of $16 million, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 420, Exit or Disposal Cost Obligations (formerly FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities), associated with future payments that we believe we remain contractually obligated to make. We continue to focus on developing new technologies that we believe will contribute to profitable sales growth in the future and do not believe that the cancellation of this program will have a material adverse impact on our future results of operations or cash flows.

Amortization Expense

Amortization expense was $513 million in 2010, as compared to $511 million in 2009, an increase of $2 million, or less than one percent. This non-cash charge is excluded by management for purposes of evaluating operating performance and assessing liquidity.

Amortization expense was $511 million in 2009, as compared to $543 million in 2008, a decrease of $32 million, or six percent. This decrease was due primarily to the impact of certain Interventional Cardiology-related intangible assets reaching the end of their accounting useful life during 2008, as well as the write-down of certain intangible assets to their fair values in 2009 and 2008, described in Other Intangible Asset Impairment Charges below.

Goodwill Impairment Charges

We test our April 1 goodwill balances during the second quarter of each year for impairment, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The ship hold and product removal actions associated with our U.S. ICD and CRT-D products, which we announced on March 15, 2010, and the expected corresponding financial impact on our operations created an indication of potential impairment of the goodwill balance attributable to our U.S. CRM reporting unit. Therefore, we performed an interim impairment test in accordance with our accounting policies and recorded a goodwill impairment charge of $1.817 billion, on both a pre-tax and after-tax basis, associated with our U.S. CRM reporting unit. This charge does not impact our compliance with our debt covenants or our cash flows, and is excluded by management for purposes of evaluating operating performance and assessing liquidity.

At the time we performed our interim goodwill impairment test, we estimated that our U.S. defibrillator market share would decrease approximately 400 basis points exiting 2010 as a result of the ship hold and product removal actions, as compared to our market share exiting 2009, and that these actions would negatively impact our 2010 U.S. CRM revenues by approximately $300 million. In addition, we expected that, our on-going U.S. CRM net sales and profitability would likely continue to be adversely impacted as a result of the ship hold and product removal actions. Therefore, as a result of these product actions, as well as lower expectations of market growth in new areas and increased competitive and other pricing pressures, we lowered our estimated average U.S. CRM net sales growth rates within our 15-year discounted cash flow (DCF) model, as well as our terminal

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value growth rate, by approximately a couple of hundred basis points to derive the fair value of the U.S. CRM reporting unit. The reduction in our forecasted 2010 U.S. CRM net sales, the change in our expected sales growth rates thereafter and the reduction in profitability as a result of the recently enacted excise tax on medical device manufacturers were several key factors contributing to the impairment charge. Partially offsetting these factors was a 50 basis point reduction in our estimated market-participant risk-adjusted weighted-average cost of capital (WACC) used in determining our discount rate.

In the second quarter of 2010, we performed our annual goodwill impairment test for all of our reporting units. We updated our U.S. CRM assumptions to reflect our market share position at that time, our most recent operational budgets and long range strategic plans. In conjunction with our annual test, the fair value of each reporting unit exceeded its carrying value, with the exception of our U.S. CRM reporting unit. Based on the remaining book value of our U.S. CRM reporting unit following the goodwill impairment charge, the carrying value of our U.S. CRM business unit continues to exceed its fair value, due primarily to the book value of amortizable intangible assets allocated to this reporting unit. The book value of our amortizable intangible assets which have been allocated to our U.S. CRM reporting unit is approximately $3.5 billion as of December 31, 2010. We tested these amortizable intangible assets for impairment on an undiscounted cash flow basis as of March 31, 2010, and determined that these assets were not impaired, and there have been no impairment indicators related to these assets subsequent to that test. The assumptions used in our annual goodwill impairment test related to our U.S. CRM reporting unit were substantially consistent with those used in our first quarter interim impairment test; therefore, it was not deemed necessary to proceed to the second step of the impairment test in the second quarter of 2010.

In the fourth quarter of 2010, we performed an interim impairment test on our international reporting units as a result of the announced divestiture of our Neurovascular business. We allocated a portion of our goodwill from our each of our international reporting units to the Neurovascular business. We then tested each of our international reporting units for impairment in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Our testing did not identify any reporting units whose carrying values exceeded their calculated fair values. Refer to Critical Accounting Estimates for a discussion of our goodwill balances as of December 31, 2010, including our assessment of reporting units with a higher risk of future impairment.

During the fourth quarter of 2008, the decline in our stock price and our market capitalization created an indication of potential impairment of our goodwill balance. Therefore, we performed an interim impairment test and recorded a $2.613 billion goodwill impairment charge associated with our U.S. CRM reporting unit. The impact of economic conditions, and the related increase in volatility in the equity and credit markets, on our risk-adjusted weighted-average cost of capital, along with reductions in market demand for products in our U.S. CRM reporting unit relative to our assumptions at the time of our acquisition of Guidant, were the key factors contributing to the impairment charge.

Intangible Asset Impairment Charges

During the first quarter of 2010, due to lower than anticipated net sales of one of our Peripheral Interventions technology offerings, as well as changes in our expectations of future market acceptance of this technology, we lowered our sales forecasts associated with the product. In addition, during the third quarter of 2010, as part of our initiatives to reprioritize and diversify our product portfolio, we discontinued one of our internal research and development programs to focus on those with a higher likelihood of success. As a result of these factors, we tested the related intangible assets for impairment and recorded $65 million of intangible asset impairment charges during 2010 to write down the balance of these intangible assets to their fair value. We do not believe that these impairments, or the factors causing these impairments, will have a material impact on our future operations or cash flows.

In 2009, we recorded intangible asset impairment charges of $12 million, associated primarily with lower than anticipated market penetration of one of our Urology technology offerings. We do not believe that these impairments will have a material impact on our future operations or cash flows.

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In 2008, we recorded intangible asset impairment charges of $177 million, including a $131 million write-down of certain of our Peripheral Interventions-related intangible assets, and a $46 million write-down of certain Urology-related intangible assets. We do not believe that the write-down of these assets will have a material impact on future operations or cash flows.

These non-cash charges are excluded by management for purposes of evaluating operating performance and assessing liquidity. Refer to Critical Accounting Estimates and Note D - Goodwill and Other Intangible Assets to our 2010 consolidated financial statements included in Item 8 of this Annual Report for more information on our intangible asset impairment charges.

Purchased Research and Development

On January 1, 2009, we adopted the provisions of FASB Statement No. 141(R), Business Combinations (codified within ASC Topic 805, Business Combinations). Among other changes to accounting for business combinations, Statement No. 141(R) superseded FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, which required research and development assets acquired in a business combination that had no alternative future use to be measured at their fair values and expensed at the acquisition date. Statement No. 141(R) now requires that purchased research and development acquired in a business combination be recognized as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. Accordingly, we have accounted for purchased research and development acquired in connection with our 2010 business combinations as intangible assets in our 2010 consolidated financial statements included in Item 8 of this Annual Report.

Our policy is to record certain costs associated with strategic investments outside of business combinations as purchased research and development. Our adoption of Statement No. 141(R) (Topic 805) did not change this policy with respect to asset purchases. In accordance with this policy, we recorded purchased research and development charges of $21 million in 2009, associated with entering certain licensing and development arrangements. Since the technology purchases did not involve the transfer of processes or outputs as defined by Statement No. 141(R) (Topic 805), the transactions did not qualify as business combinations.

In 2008, we recorded $43 million of purchased research and development charges, including $17 million associated with our acquisition of Labcoat, Ltd., $8 million attributable to our acquisition of CryoCor, Inc., and $18 million associated with entering certain licensing and development arrangements. These acquisition-related charges are excluded by management for purposes of evaluating operating performance and assessing liquidity.

Contingent Consideration Expense

In connection with our 2010 acquisitions, we may be required to pay future consideration that is contingent upon the achievement of certain revenue-based milestones. As of the respective acquisition dates, we recorded total contingent liabilities of $69 million, representing the estimated fair value of the contingent consideration we expect to pay to the former shareholders of the acquired businesses. In accordance with ASC Topic 805, we re-measure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of revenue estimates. During 2010, we recorded expense of $2 million representing the increase in the estimated fair value of this obligation. This acquisition-related charge is excluded by management for purposes of evaluating operating performance and assessing liquidity.

Acquisition-related Milestone

In connection with Abbott Laboratories’ 2006 acquisition of Guidant’s vascular intervention and endovascular solutions businesses, Abbott agreed to pay us a milestone payment of $250 million upon receipt of an approval from the Japanese Ministry of Health, Labor and Welfare (MHLW) to market the XIENCE V^® stent system in Japan. The MHLW approved the XIENCE V^® stent system in the first quarter of 2010 and we received the

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milestone payment from Abbott, which we recorded as a $250 million pre-tax gain. This non-recurring acquisition-related credit is excluded by management for purposes of evaluating operating performance and assessing liquidity.

Gain on Divestitures

During 2008, we recorded a $250 million gain in connection with the sale of our Fluid Management and Venous Access businesses and our TriVascular EVAR program. This divestiture-related gain is excluded by management for purposes of evaluating operating performance and assessing liquidity. Refer to Note C – Divestitures and Assets Held for Sale to our 2010 consolidated financial statements included in Item 8 of this Annual Report for more information on these transactions.

Restructuring Charges and Restructuring-related Activities

In October 2007, our Board of Directors approved, and we committed to, an expense and head count reduction plan (the 2007 Restructuring plan). The plan was intended to bring expenses in line with revenues as part of our initiatives to enhance short- and long-term shareholder value. Key activities under the plan included the restructuring of several businesses, corporate functions and product franchises in order to better utilize resources, strengthen competitive positions, and create a more simplified and efficient business model; the elimination, suspension or reduction of spending on certain research and development projects; and the transfer of certain production lines among facilities. The execution of this plan enabled us to reduce research and development and selling, general and administrative expenses by an annualized run rate of approximately $500 million exiting 2008. We have partially reinvested our savings from these initiatives into targeted head count increases, primarily in customer-facing positions. In addition, the plan has reduced annualized run-rate reductions of manufacturing costs by approximately $35 million exiting 2010 as a result of transfers of certain production lines. We initiated activities under the plan in the fourth quarter of 2007. The transfer of certain production lines contemplated under the 2007 Restructuring plan was completed as of December 31, 2010; all other major activities under the plan, with the exception of final production line transfers, were completed as of December 31, 2009.

The execution of this plan resulted in total pre-tax expenses of $427 million and required cash outlays of $380 million, of which we have paid $370 million to date. We recorded a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of total costs associated with the plan by major type of cost:

Type of cost	Total amount incurred
Restructuring charges:
Termination benefits	$204 million
Fixed asset write-offs	$31 million
Other (1)	$67 million
Restructuring-related expenses:
Retention incentives	$66 million
Accelerated depreciation	$16 million
Transfer costs (2)	$43 million
	$427 million

(1)	Consists primarily of consulting fees, contractual cancellations, relocation costs and other costs.
(2)	Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight and product line validations.

In January 2009, our Board of Directors approved, and we committed to, a Plant Network Optimization program, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The program is a complement to our 2007 Restructuring plan, discussed above, and is intended to improve overall gross profit margins. We estimate that the program will result in annualized run-rate reductions of manufacturing costs of approximately $65 million exiting 2012. These savings are in addition to the estimated $35 million of annual reductions of manufacturing

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costs from activities under our 2007 Restructuring plan. Activities under the Plant Network Optimization program were initiated in the first quarter of 2009 and are expected to be substantially complete by the end of 2012. Activities under the Plant Network Optimization program were initiated in the first quarter of 2009 and are expected to be substantially complete by the end of 2012.

We expect that the execution of the Plant Network Optimization program will result in total pre-tax charges of approximately $135 million to $150 million, and that approximately $115 million to $125 million of these charges will result in cash outlays, of which we have made payments of $40 million to date. We have recorded related costs of $79 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of our estimates of costs associated with the Plant Network Optimization program by major type of cost:

	Total estimated amount expected to
Type of cost	be incurred
Restructuring charges:
Termination benefits	$30 million to $35 million
Restructuring-related expenses:
Accelerated depreciation	$20 million to $25 million
Transfer costs (1)	$85 million to $90 million
	$135 million to $150 million

(1) Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight, idle facility and product line validations.

On February 6, 2010, our Board of Directors approved, and we committed to, a series of management changes and restructuring initiatives (the 2010 Restructuring plan) designed to focus our business, drive innovation, accelerate profitable revenue growth and increase both accountability and shareholder value. Key activities under the plan include the integration of our Cardiovascular and CRM businesses, as well as the restructuring of certain other businesses and corporate functions; the centralization of our research and development organization; the re-alignment of our international structure to reduce our administrative costs and invest in expansion opportunities including significant investments in emerging markets; and the reprioritization and diversification of our product portfolio. We estimate that the execution of this plan will result in gross reductions in pre-tax operating expenses of approximately $200 million to $250 million, once completed in 2012. We expect to reinvest a portion of the savings into customer-facing and other activities to help drive future sales growth and support the business. Activities under the 2010 Restructuring plan were initiated in the first quarter of 2010 and are expected to be substantially complete by the end of 2012. We expect the execution of the 2010 Restructuring plan will result in the elimination of approximately 1,000 to 1,300 positions worldwide by the end of 2012.

We estimate that the 2010 Restructuring plan will result in total pre-tax charges of approximately $180 million to $200 million, and that approximately $165 million to $175 million of these charges will result in cash outlays, of which we have made payments of $69 million to date. We have recorded related costs of $110 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of our expected total costs associated with the plan by major type of cost:

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	Total estimated amount expected to
Type of cost	be incurred
Restructuring charges:
Termination benefits	$95 million to $100 million
Fixed asset write-offs	$10 million to $15 million
Other (1)	$55 million to $60 million
Restructuring-related expenses:
Other (2)	$20 million to $25 million
	$180 million to $200 million

(1)	Includes primarily consulting fees and costs associated with contractual cancellations.
(2)	Comprised of other costs directly related to restructuring plan, including accelerated depreciation and infrastructure-related costs.

We recorded restructuring charges pursuant to our restructuring plans of $116 million during 2010, $63 million during 2009, and $78 million during 2008. In addition, we recorded expenses within other lines of our accompanying consolidated statements of operations related to our restructuring initiatives of $53 million during 2010, $67 million during 2009, and $55 million during 2008. The following presents these costs by major type and line item within our 2010 consolidated statements of operations included in Item 8 of this Annual Report, as well as by program:

Year Ended December 31, 2010

	Termination		Retention	Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives	Depreciation		Costs		Write-offs		Other		Total
Restructuring charges	$	70						$	11	$	35	$	116
Restructuring-related expenses:
Cost of products sold				$	7	$	41						48
Selling, general and administrative expenses											5		5
Research and development expenses
					7		41				5		53
	$	70		$	7	$	41	$	11	$	40	$	169

	Termination		Retention	Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives	Depreciation		Costs		Write-offs		Other		Total
2010 Restructuring plan	$	66						$	11	$	33	$	110
Plant Network Optimization program		4		$	7	$	28						39
2007 Restructuring plan							13				7		20
	$	70		$	7	$	41	$	11	$	40	$	169

Year Ended December 31, 2009

	Termination		Retention		Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives		Depreciation		Costs		Write-offs		Other		Total
Restructuring charges	$	34							$	13	$	16	$	63
Restructuring-related expenses:
Cost of products sold			$	5	$	8	$	37						50
Selling, general and administrative expenses				10		3						1		14
Research and development expenses				3										3
				18		11		37				1		67
	$	34	$	18	$	11	$	37	$	13	$	17	$	130

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	Termination		Retention		Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives		Depreciation		Costs		Write-offs		Other		Total
Plant Network Optimization program	$	22			$	6	$	12					$	40
2007 Restructuring plan		12	$	18		5		25	$	13	$	17		90
	$	34	$	18	$	11	$	37	$	13	$	17	$	130

Year Ended December 31, 2008

	Termination		Retention		Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives		Depreciation		Costs		Write-offs		Other		Total
Restructuring charges	$	34							$	10	$	34	$	78
Restructuring-related expenses:
Cost of products sold			$	9	$	4	$	4						17
Selling, general and administrative expenses				27		4								31
Research and development expenses				7										7
				43		8		4						55
	$	34	$	43	$	8	$	4	$	10	$	34	$	133

Restructuring and restructuring-related costs recorded in 2008 related entirely to our 2007 Restructuring plan.

Termination benefits represent amounts incurred pursuant to our on-going benefit arrangements and amounts for one-time involuntary termination benefits, and have been recorded in accordance with ASC Topic 712, Compensation – Non-retirement Postemployment Benefits (formerly FASB Statement No. 112, Employer’s Accounting for Postemployment Benefits) and ASC Topic 420, Exit or Disposal Cost Obligations (formerly FASB Statement 146, Accounting for Costs Associated with Exit or Disposal Activities). We expect to record additional termination benefits related to our Plant Network Optimization program and 2010 Restructuring plan in 2011 and 2012 when we identify with more specificity the job classifications, functions and locations of the remaining head count to be eliminated. Retention incentives represent cash incentives, which were recorded over the service period during which eligible employees remained employed with us in order to retain the payment. Other restructuring costs, which represent primarily consulting fees, are being recorded as incurred in accordance with Topic 420. Accelerated depreciation is being recorded over the adjusted remaining useful life of the related assets, and production line transfer costs are being recorded as incurred.

We have incurred cumulative restructuring charges of $433 million and restructuring-related costs of $183 million since we committed to each plan. The following presents these costs by major type and by plan:

	2010		Plant		2007
	Restructuring		Network		Restructuring
(in millions)	plan		Optimization		plan		Total
Termination benefits	$	66	$	26	$	204	$	296
Fixed asset write-offs		11				31		42
Other		28				67		95
Total restructuring charges		105		26		302		433
Retention incentives						66		66
Accelerated depreciation				13		16		29
Transfer costs				40		43		83
Other		5						5
Restructuring-related expenses		5		53		125		183
	$	110	$	79	$	427	$	616

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We made total cash payments associated with restructuring initiatives pursuant to these plans of $133 million during 2010 and have made total cash payments of $479 million since committing to each plan. Each of these payments was made using cash generated from operations, and are comprised of the following:

	2010		Plant		2007
	Restructuring		Network		Restructuring
(in millions)	plan		Optimization		plan		Total
Year Ended December 31, 2010
Termination benefits	$	45			$	16	$	61
Retention incentives						2		2
Transfer costs			$	28		13		41
Other		24				5		29
	$	69	$	28	$	36	$	133
Program to Date
Termination benefits	$	45			$	195	$	240
Retention incentives						66		66
Transfer costs			$	40		43		83
Other		24				66		90
	$	69	$	40	$	370	$	479

Litigation-related Net Charges

We record certain significant litigation-related activity as a separate line item in our consolidated statements of operations, and these charges are excluded by management for purposes of evaluating operating performance. During 2010, we reached a settlement with Medinol Ltd., resolving the dispute we had with them that had been subject of arbitration before the American Arbitration Association. Under the terms of the settlement, we received proceeds of $104 million from Medinol, which we recorded as a pre-tax gain in our 2010 consolidated financial statements included in Item 8 of this Annual Report.

In 2009, we recorded litigation-related net charges of $2.022 billion, associated primarily with an agreement to settle three patent disputes with Johnson & Johnson for $1.725 billion, plus interest. In addition, in 2009, we reached an agreement in principle with the U.S. Department of Justice, which was formally accepted by the District Court in 2011, under which we paid $296 million in January 2011 in order resolve the U.S. Government investigation of Guidant Corporation related to product advisories issued in 2005. We recorded a net charge of $294 million related to this matter in 2009, representing $296 million associated with the agreement, net of a $2 million reversal of a related accrual. Further, in 2009, we reduced previously recorded reserves associated with certain litigation-related matters following certain favorable court rulings, resulting in a credit of $60 million and recorded a pre-tax charge of $50 million associated with the settlement of all outstanding litigation with Bruce Saffran, M.D., Ph.D.

In 2008, we recorded litigation-related charges of $334 million as a result of a ruling by a federal judge in a patent infringement case brought against us by Johnson & Johnson. This charge was in addition to previous charges related to this matter. In 2009, we made the associated settlement payment of $716 million, including penalties and interest. See discussion of our material legal proceedings in Note L – Commitments and Contingencies to our 2010 consolidated financial statements included in Item 8 of this Annual Report.

Interest Expense

Our interest expense decreased to $393 million in 2010, as compared to $407 million in 2009. The decrease in our interest expense was a result of lower average debt levels, due to term loan prepayments throughout 2009, as well as the 2010 prepayment of our $900 million loan from Abbott Laboratories and a slight decrease in our average borrowing rate. Our average borrowing rate was 6.0 percent in 2010 and 6.1 percent in 2009. In addition, our 2010 interest expense included $15 million of write-offs of debt issuance costs and impacts of the early termination of interest rate contracts associated with term loan prepayments during the year, as compared to $34 million in 2009. These decreases were partially offset by the write-off of the related remaining $10 million discount attributable to

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the Abbott loan upon prepayment. Refer to the Liquidity and Capital Resources section and Note G – Borrowings and Credit Arrangements to our 2010 consolidated financial statements included in Item 8 of this Annual Report for information regarding our debt obligations.

Our interest expense decreased to $407 million in 2009, as compared to $468 million in 2008. The decrease in our interest expense was a result of lower average debt levels, due to term loan repayments during 2009. Partially offsetting these decreases were losses of $27 million associated with the early termination of interest rate contracts for which there was no longer an underlying exposure and the write-off of $7 million of debt issuance costs following prepayments of our term loan, as well as a slight increase in our average borrowing rate. Our average borrowing rate was 6.1 percent in 2009 and 6.0 percent in 2008.

Other, net

Our other, net reflected expense of $14 million in 2010, $7 million in 2009, and $58 million in 2008. The following are the components of other, net:

	Year Ended December 31,
(in millions)	2010			2009			2008
Interest income	$	13		$	7		$	47
Foreign currency (losses) gains		(9	)		(5	)		5
Net (losses) gains on investments and notes receivable		(12	)		3			(93	)
Other expense, net		(6	)		(12	)		(17	)
	$	(14	)	$	(7	)	$	(58	)

Our interest income increased in 2010, as compared to 2009, due primarily to the collection of interest on outstanding accounts receivable. Our interest income decreased in 2009, as compared to 2008, due primarily to lower average investment rates available in the market, as well as lower average cash balances. Other, net included net losses of $12 million in 2010, net gains of $3 million in 2009 and net losses of $93 million in 2008, associated with our investment portfolio. The $93 million of losses in 2008 relate primarily to the sale of our non-strategic investments, described in Note F – Investments and Notes Receivable to our 2010 consolidated financial statements included in Item 8 of this Annual Report.

Tax Rate

The following provides a summary of our reported tax rate:

										Percentage
										Point Increase (Decrease)
	Year Ended December 31,									2010			2009
	2010			2009			2008			vs. 2009			vs. 2008
Reported tax rate		0.2	%		(21.6	) %		0.2	%		21.8	%		(21.8	) %
Impact of certain receipts/ charges		18.0	%		39.1	%		18.9	%		(21.1	) %		20.2	%
		18.2	%		17.5	%		19.1	%		0.7	%		(1.6	) %

The change in our reported tax rate for 2010, as compared to 2009, and 2009, as compared to 2008, relates primarily to the impact of certain receipts and charges that are taxed at different rates than our effective tax rate. In 2010, these receipts and charges included goodwill and intangible asset impairment charges, a gain associated with the receipt of an acquisition-related milestone payment, a gain associated with a litigation-related settlement receipt, and restructuring-related charges. Our reported tax rate was also net favorably affected by discrete items, related primarily to the re-measurement of an uncertain tax position resulting from a favorable court ruling issued in a similar third-party case, a resolution of an uncertain tax position resulting from a favorable taxpayer motion issued in a similar third-party case as well as conclusion of the appeals process for the federal examination for certain years. In 2009, these receipts and charges included intangible asset impairment charges, purchased research and development charges, restructuring and litigation-related net charges, a favorable tax ruling on a divestiture-related gain recognized in a prior period, and discrete tax items associated primarily with resolutions of uncertain tax positions related to audit settlements and changes in estimates for tax benefits

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claimed related to prior periods. In 2008, these charges included gains and losses associated with the divestiture of certain non-strategic businesses and investments, goodwill and intangible asset impairment charges, litigation-related charges. Changes in the geographic mix of our sales also impacted our reported tax rate in 2010, as compared to 2009, and in 2009, as compared to 2008.

We are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. We have concluded all U.S. federal income tax matters through 2000 and substantially all material state, local, and foreign income tax matters through 2001. We resolved a number of foreign examinations during 2010. As a result of these activities, we decreased our reserve for uncertain tax positions by $9 million, inclusive of $3 million of interest and penalties. In addition, as a result of the expiration of statutes of limitations in various foreign and state jurisdictions, we decreased our reserve for uncertain tax positions by $20 million, inclusive of $7 million of interest and penalties. Further, during 2010, we concluded the appeals process for the federal tax examination for Boston Scientific (excluding Guidant) covering years 2002-2005 and decreased our reserve for uncertain tax positions by $72 million, inclusive of $21 million of interest and penalties, net of payments. We also re-measured an uncertain tax position due to a favorable court ruling issued in a similar third-party case and resolved another uncertain tax position resulting from a favorable taxpayer motion issued in a similar third-party case, which resulted in a decrease of $91 million, inclusive of $25 million of interest and penalties.

During 2009, we received favorable foreign court decisions and resolved certain foreign matters. As a result of these activities, we decreased our reserve for uncertain tax positions by $20 million, inclusive of $7 million of interest and penalties. In addition, statutes of limitations expired in various foreign and state jurisdictions, as a result, decreased our reserve for uncertain tax positions by $29 million, inclusive of interest and penalties. We also resolved certain litigation-related matters, described in our 2009 Annual Report filed on Form 10-K. Based on the outcome of the settlements, we reassessed the reserve for uncertain tax positions previously recorded on certain positions and decreased our reserve by $22 million, inclusive of $1 million of interest.

During 2008, we resolved certain matters in federal, state, and foreign jurisdictions for Guidant and Boston Scientific for the years 1998- 2005. We settled multiple federal issues at the Internal Revenue Service (IRS) examination and Appellate levels, including issues related to Guidant’s acquisition of Intermedics, Inc., and various litigation settlements, described in Note L – Commitments and Contingencies to our 2010 consolidated financial statements included in Item 8 of this Annual Report, or our 2009 Annual Report filed on Form 10-K. We also received favorable foreign court decisions and a favorable outcome related to our foreign research credit claims. As a result of these audit activities, we decreased our reserve for uncertain tax positions, excluding tax payments, by $156 million, inclusive of $37 million of interest and penalties.

On December 17, 2010, we received Notices of Deficiency from the IRS reflecting proposed audit adjustments for Guidant Corporation for the 2001-2003 tax years. The incremental tax liability asserted by the IRS is $525 million, plus interest. The primary issue in dispute is the transfer pricing used in connection with the technology license agreements between domestic and foreign subsidiaries of Guidant. We believe we have meritorious defenses for our tax filings and we intend to file a petition to the U.S. Tax Court in early 2011. No payments will be made on the issue until it is resolved, which may take several years. We believe that our income tax reserves associated with this matter are adequate and the final resolution will not have a material impact on our financial condition or results of operations. However, both the final resolution and potential impact of that resolution are uncertain and could have a material impact on our financial condition or results of operations.

The federal tax returns of Guidant Corporation for the 2004 through April 2006 tax years and of Boston Scientific Corporation for the 2006-2007 tax years are currently under examination by the IRS. The relevant statutes of limitations for these examinations expire during December 2011 and September 2011, respectively. We do not anticipate that at the conclusion of these examinations, we will be able to reach an agreement with the IRS regarding our federal tax liabilities for these years. We expect that final resolution of these tax liabilities will require that we avail ourselves of applicable IRS appellate and judicial procedures, as appropriate.

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Liquidity and Capital Resources

As of December 31, 2010, we had $213 million of cash and cash equivalents on hand, comprised of $105 million invested in prime money market and government funds, $16 million invested in short-term time deposits, and $92 million in interest bearing and non-interest bearing bank accounts. Our policy is to invest excess cash in short-term marketable securities earning a market rate of interest without assuming undue risk to principal, and we limit our direct exposure to securities in any one industry or issuer.

Subsequent to year-end, in January 2011, we closed the sale of our Neurovascular business to Stryker Corporation and received pre-tax proceeds of $1.450 billion at closing, including an upfront payment of $1.426 billion, and $24 million, which was placed into escrow to be released upon the completion of local closings in certain foreign jurisdictions, and will receive $50 million contingent upon the transfer or separation of certain manufacturing facilities, which we expect will be completed over a period of approximately 24 months. In January 2011, we paid at maturity $250 million of our senior notes, and a $296 million litigation-related settlement associated with the U.S. Department of Justice matter described previously, using cash on hand. We also have full access to our $2.0 billion revolving credit facility.

The following provides a summary and description of our cash inflows (outflows) for the years ended December 31, 2010, 2009, and 2008:

	Year Ended December 31,
(in millions)	2010			2009			2008
Cash provided by operating activities	$	325		$	835		$	1,216
Cash (used for) provided by investing activities		(480	)		(793	)		324
Cash used for financing activities		(496	)		(820	)		(1,350	)

Operating Activities

During 2010, cash provided by operating activities was $325 million, as compared to $835 million in 2009, a decrease of $510 million. This decrease was driven primarily by the payment of $1.725 billion to Johnson & Johnson related to a patent litigation settlement, as compared to approximately $837 million of legal settlements paid in 2009. This cash outflow was partially offset by the receipt of a $250 million milestone payment from Abbott and $104 million received in connection with a litigation settlement with Medinol, each described in Results of Operations.

During 2009, cash provided by operating activities was $835 million, as compared to $1.216 billion in 2008, a decrease of $381 million. This decrease was due primarily to litigation-related payments of $837 million, consisting primarily of payments to Johnson & Johnson associated with patent litigation settlements. These cash outflows were partially offset by lower net tax payments of $370 million and lower interest payments of $50 million, due to lower average debt balances, as well as improvements in working capital.

Investing Activities

During 2010, our investing activities were comprised primarily of capital expenditures of $272 million, as well as payments of approximately $200 million to acquire Asthmatx, Inc. and certain other strategic assets, described in Note B – Acquisitions to our 2010 consolidated financial statements included in Item 8 of this Annual Report. We expect to incur total capital expenditures of approximately $300 million to $350 million during 2011, which includes capital expenditures to further upgrade our information systems infrastructure, and to enhance our manufacturing capabilities to support continued growth in our business units.

During 2009, our investing activities included $523 million of payments related to prior period acquisitions, comprised primarily of a final fixed payment of approximately $500 million related to our prior period acquisition of Advanced Bionics Corporation, described in Note B – Acquisitions to our 2010 consolidated financial statements included in Item 8 of this Annual Report. Our investing activities in 2009 also included capital expenditures of $312 million, payments for investments in privately held companies, and acquisitions of

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businesses and certain technology rights of $54 million, which were offset by proceeds from the sale of investments in, and collection of notes receivable from, certain publicly traded and privately held companies, of $91 million.

During 2008, our investing activities included proceeds of approximately $1.3 billion associated with the divestiture of certain businesses, and $149 million of proceeds associated with the sale of investments and collections of notes receivable. These cash inflows were partially offset by $675 million in payments related to prior period acquisitions, associated primarily with Advanced Bionics; and $39 million of net cash payments for investments in privately held companies, and acquisitions of certain technology rights. In addition, we made capital expenditures of $362 million and paid $21 million, net of cash acquired, to acquire CryoCor, Inc. and $17 million, net of cash acquired, to acquire Labcoat, Ltd. Refer to Note F – Investments and Notes Receivable and Note B – Acquisitions to our 2010 consolidated financial statements included in Item 8 of this Annual Report for more information regarding these transactions.

Financing Activities

Our cash flows from financing activities reflect issuances and repayments of debt and proceeds from stock issuances related to our equity incentive programs.

Debt

We made payments on debt, net of proceeds from borrowings, of $527 million in 2010, $853 million in 2009, and $1.425 billion in 2008, and had total debt of $5.438 billion as of December 31, 2010 and $5.918 billion as of December 31, 2009. The debt maturity schedule for the significant components of our debt obligations as of December 31, 2010 is as follows:

(in millions)	2011		2012		2013		2014		2015		Thereafter		Total
Term loan	$	250	$	50	$	700							$	1,000
Senior notes		250					$	600	$	1,250	$	2,350		4,450
	$	500	$	50	$	700	$	600	$	1,250	$	2,350	$	5,450

Note: The table above does not include discounts associated with our senior notes, or amounts related to interest rate contracts used to hedge the fair value of certain of our senior notes.

There were no amounts borrowed under our credit facilities as of December 31, 2010 or December 31, 2009. As of December 31, 2010, we had outstanding letters of credit of $120 million, as compared to $123 million as of December 31, 2009, which consisted primarily of bank guarantees and collateral for workers’ compensation insurance arrangements. As of December 31, 2010 and 2009, none of the beneficiaries had drawn upon the letters of credit or guarantees; accordingly, we have not recognized a related liability for our outstanding letters of credit in our consolidated balance sheets as of December 31, 2010 or 2009. We believe we will generate sufficient cash from operations and intend to fund these payments without drawing on the letters of credit.

In January 2011, we paid at maturity $250 million of our senior notes; in addition, we borrowed $250 million under our credit and security facility secured by our U.S. trade receivables and used the proceeds to pre-pay all $100 million of our 2011 term loan maturities and $150 million of our 2012 term loan maturities. These prepayments are reflected as ‘current’ in the table above, as well as in our consolidated balance sheets included in Item 8 of this Annual Report. As a result, quarterly principal payments of $50 million will commence in the fourth quarter of 2012.

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Our revolving credit facility agreement requires that we maintain certain financial covenants, as follows:

		Actual as of
	Covenant	December 31,
	Requirement	2010
Maximum leverage ratio (1)	3.85 times	2.3 times
Minimum interest coverage ratio (2)	3.0 times	6.1 times

(1)	Ratio of total debt to consolidated EBITDA, as defined by the agreement, for the preceding four consecutive fiscal quarters. Requirement decreases to 3.5 times after March 31, 2011.
(2)	Ratio of consolidated EBITDA, as defined by the agreement, to interest expense for the preceding four consecutive fiscal quarters.

The credit agreement provides for an exclusion from the calculation of consolidated EBITDA, as defined by the agreement, through the credit agreement maturity, of up to $258 million in restructuring charges and restructuring-related expenses related to our previously-announced restructuring plans, plus an additional $300 million for any future restructuring initiatives. As of December 31, 2010, we had $470 million of the aggregate restructuring charge exclusion remaining. In addition, any litigation-related charges and credits are excluded from the calculation of consolidated EBITDA until such items are paid or received; as well as up to $1.5 billion of any future cash payments for future litigation settlements or damage awards (net of any litigation payments received); and litigation-related cash payments (net of cash receipts) of up to $1.310 billion related to amounts that were recorded in the financial statements as of March 31, 2010. As of December 31, 2010, we had $2.154 billion of the aggregate legal payment exclusion remaining.

As of and through December 31, 2010, we were in compliance with the required covenants. Our inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facilities or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would grant such waivers.

Equity

During 2010, we received $31 million in proceeds from stock issuances related to our stock option and employee stock purchase plans, as compared to $33 million in 2009 and $71 million in 2008. Proceeds from the exercise of employee stock options and employee stock purchases vary from period to period based upon, among other factors, fluctuations in the trading price of our common stock and in the exercise and stock purchase patterns of employees. Stock-based compensation expense related to our stock ownership plans was $150 million in 2010, $144 million in 2009, and $138 million in 2008.

Contractual Obligations and Commitments

The following table provides a summary of certain information concerning our obligations and commitments to make future payments, and is based on conditions in existence as of December 31, 2010.

	Payments Due by Period
(in millions)	2011		2012		2013		2014		2015		Thereafter		Total
Litigation settlements	$	296											$	296
Long-term debt obligations		500	$	50	$	700	$	600	$	1,250	$	2,350		5,450
Interest payments (1)		286		280		262		229		193		1,300		2,550
Operating lease obligations (1)		83		69		46		24		15		45		282
Purchase obligations (1)		205		51		8		4		1		2		271
Minimum royalty obligations (1)		13		1		1		1		1		3		20
Unrecognized tax benefits		8												8
	$	1,391	$	451	$	1,017	$	858	$	1,460	$	3,700	$	8,877

(1) In accordance with generally accepted accounting principles in the United States, these obligations relate to expenses associated with future periods and are not reflected in our consolidated balance sheets.

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The litigation settlement obligation noted above relates to our settlement with the U.S. Department of Justice for $296 million, discussed in Note L – Commitments and Contingencies to our 2010 consolidated financial statements included in Item 8 of this Annual Report, and was paid in January 2011. Refer to Note G – Borrowings and Credit Arrangements to our 2010 consolidated financial statements included in Item 8 of this Annual Report for further information regarding our debt obligations and associated interest obligations.

The amounts in the table above with respect to operating lease obligations represent amounts pursuant to contractual arrangements for the lease of property, plant and equipment used in the normal course of business. Purchase obligations relate primarily to non-cancellable inventory commitments and capital expenditures entered in the normal course of business. Royalty obligations reported above represent minimum contractual obligations under our current royalty agreements. The table above does not reflect unrecognized tax benefits of $1.242 billion, the timing of which is uncertain. Refer to Note K – Income Taxes to our 2010 consolidated financial statements included in Item 8 of this Annual Report for more information on these unrecognized tax benefits.

Certain of our acquisitions involve the potential payment of contingent consideration, including our 2010 acquisition of Asthmatx, Inc. The table above does not reflect any such obligations, as the timing and amounts are uncertain. See Note B – Acquisitions to our 2010 consolidated financial statements included in Item 8 of this Annual Report for the estimated maximum potential amount of future contingent consideration we could be required to pay associated with prior acquisitions.

Legal Matters

The medical device market in which we primarily participate is largely technology driven. Physician customers, particularly in interventional cardiology, have historically moved quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation is inherently complex and unpredictable. Furthermore, appellate courts can overturn lower court patent decisions.

In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only for individual cases, but also for a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies. Several third parties have asserted that certain of our current and former product offerings infringe patents owned or licensed by them. We have similarly asserted that other products sold by our competitors infringe patents owned or licensed by us. Adverse outcomes in one or more of the proceedings against us could limit our ability to sell certain products in certain jurisdictions, or reduce our operating margin on the sale of these products and could have a material adverse effect on our financial position, results of operations or liquidity.

In particular, although we have resolved multiple litigation matters with Johnson & Johnson, we continue to be involved in patent litigation with them, particularly relating to drug-eluting stent systems. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operation or liquidity.

In the normal course of business, product liability, securities and commercial claims are asserted against us. Similar claims may be asserted against us in the future related to events not known to management at the present time. We are substantially self-insured with respect to product liability claims and intellectual property infringement, and maintain an insurance policy providing limited coverage against securities claims. The absence

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of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, securities and commercial litigation, and other legal proceedings in the future, regardless of their outcome, could have a material adverse effect on our financial position, results of operations and liquidity. In addition, the medical device industry is the subject of numerous governmental investigations often involving regulatory, marketing and other business practices. These investigations could result in the commencement of civil and criminal proceedings, substantial fines, penalties and administrative remedies, divert the attention of our management and have an adverse effect on our financial position, results of operations and liquidity.

Our accrual for legal matters that are probable and estimable was $588 million as of December 31, 2010 and $2.316 billion as of December 31, 2009, and includes estimated costs of settlement, damages and defense. The decrease in our accrual is due primarily to the payment of $1.725 billion to Johnson & Johnson in connection with the patent litigation settlement discussed in Note L – Commitments and Contingencies to our 2010 consolidated financial statements included in Item 8 of this Annual Report. We continue to assess certain litigation and claims to determine the amounts, if any, that management believes will be paid as a result of such claims and litigation and, therefore, additional losses may be accrued and paid in the future, which could materially adversely impact our operating results, cash flows and our ability to comply with our debt covenants. See further discussion of our material legal proceedings in Note L.

Critical Accounting Estimates

Our financial results are affected by the selection and application of accounting policies. We have adopted accounting policies to prepare our consolidated financial statements in conformity with generally accepted accounting principles in the United States (U.S. GAAP). We describe these accounting polices in Note A–Significant Accounting Policies to our 2010 consolidated financial statements included in Item 8 of this Annual Report.

To prepare our consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities, the disclosure of contingent liabilities as of the date of our financial statements and the reported amounts of our revenues and expenses during the reporting period. Our actual results may differ from these estimates. We consider estimates to be critical if (i) we are required to make assumptions about material matters that are uncertain at the time of estimation or if (ii) materially different estimates could have been made or it is reasonably likely that the accounting estimate will change from period to period. The following are areas requiring management’s judgment that we consider critical:

Revenue Recognition

We generally allow our customers to return defective, damaged and, in certain cases, expired products for credit. We base our estimate for sales returns upon historical trends and record these amounts as a reduction of revenue when we sell the initial product. In addition, we may allow customers to return previously purchased products for next-generation product offerings. For these transactions, we defer recognition of revenue on the sale of the earlier generation product based upon an estimate of the amount to be returned when the next-generation products are shipped to the customer. Uncertain timing of next-generation product approvals, variability in product launch strategies, product recalls and variation in product utilization all affect our estimates related to sales returns and could cause actual returns to differ from these estimates.

Many of our CRM product offerings combine the sale of a device with our LATITUDE® Patient Management System, which represents a future service obligation. In accordance with accounting guidance regarding multiple-element arrangements applicable through December 31, 2010, we deferred revenue on the undelivered service element based on verifiable objective evidence of fair value, using the residual method of allocation, and recognized the associated revenue over the related service period. The use of an alternative method of allocation or estimate of fair value could result in a different amount of revenue deferral in any given period. On January 1, 2011, we adopted ASC Update No. 2009-13, Revenue Recognition (Topic 605)- Multiple-Deliverable Revenue Arrangements. The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly Emerging

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Issues Task Force (EITF) Issue No. 00-21, Multiple-Element Arrangements). Update No. 2009-13 provides principles and application guidance to determine whether multiple deliverables exist, how the individual deliverables should be separated and how to allocate the revenue in the arrangement among those separate deliverables, including requiring the use of the relative selling price method. The adoption of Update No. 2009-13 did not have a material impact on our results of operations or financial position.

Inventory Provisions

We base our provisions for excess, expired and obsolete inventory primarily on our estimates of forecasted net sales. A significant change in the timing or level of demand for our products as compared to forecasted amounts may result in recording additional provisions for excess, expired and obsolete inventory in the future. Further, the industry in which we participate is characterized by rapid product development and frequent new product introductions. Uncertain timing of next-generation product approvals, variability in product launch strategies, product recalls and variation in product utilization all affect our estimates related to excess, expired and obsolete inventory.

Valuation of Intangible Assets

We base the fair value of identifiable intangible assets acquired in a business combination, including purchased research and development, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. Further, for those arrangements that involve potential future contingent consideration, we record on the date of acquisition a liability equal to the discounted fair value of the estimated additional consideration we may be obligated to make in the future. We re-measure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of revenue estimates. The use of alternative valuation assumptions, including estimated revenue projections; growth rates; cash flows and discount rates and alternative estimated useful life assumptions, or probabilities surrounding the achievement of clinical, regulatory or revenue-based milestones could result in different purchase price allocations and amortization expense in current and future periods.

We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If an impairment indicator exists, we test the intangible asset for recoverability. If the carrying value of the intangible asset is not recoverable, as discussed in Note A, we will write the carrying value down to fair value in the period identified. In addition, we test our indefinite-lived intangible assets at least annually for impairment and reassess their classification as indefinite-lived assets. To test our indefinite-lived intangible assets for impairment, we calculate the fair value of these assets and compare the calculated fair values to the respective carrying values. If the carrying value exceeds the fair value of the indefinite-lived intangible asset, we write the carrying value down to the fair value.

We generally calculate fair value of our intangible assets as the present value of estimated future cash flows we expect to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). The use of alternative assumptions, including estimated cash flows, discount rates, and alternative estimated remaining useful lives could result in different calculations of impairment.

Goodwill Valuation

We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination to goodwill. We test our April 1 goodwill balances during the second quarter of each year for impairment, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. In performing the assessment, we utilize the two-step approach prescribed under ASC

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Topic 350, Intangibles-Goodwill and Other (formerly FASB Statement No. 142, Goodwill and Other Intangible Assets). The first step requires a comparison of the carrying value of the reporting units, as defined, to the fair value of these units. We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. We determine our reporting units by first identifying our operating segments, and then assess whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. We aggregate components within an operating segment that have similar economic characteristics. For our April 1, 2010 annual impairment assessment, we identified our reporting units to be our seven U.S. operating segments, which in aggregate make up the U.S. reportable segment, and our four international operating segments. When allocating goodwill from business combinations to our reporting units, we assign goodwill to the reporting units that we expect to benefit from the respective business combination at the time of acquisition. In addition, for purposes of performing our annual goodwill impairment test, assets and liabilities, including corporate assets, which relate to a reporting unit’s operations, and would be considered in determining its fair value, are allocated to the individual reporting units. We allocate assets and liabilities not directly related to a specific reporting unit, but from which the reporting unit benefits, based primarily on the respective revenue contribution of each reporting unit.

During 2010, 2009, and 2008, we used only the income approach, specifically the discounted cash flow (DCF) method, to derive the fair value of each of our reporting units in preparing our goodwill impairment assessment. This approach calculates fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting these after-tax cash flows to a present value using a risk-adjusted discount rate. We selected this method as being the most meaningful in preparing our goodwill assessments because we believe the income approach most appropriately measures our income producing assets. We have considered using the market approach and cost approach but concluded they are not appropriate in valuing our reporting units given the lack of relevant market comparisons available for application of the market approach and the inability to replicate the value of the specific technology-based assets within our reporting units for application of the cost approach. Therefore, we believe that the income approach represents the most appropriate valuation technique for which sufficient data is available to determine the fair value of our reporting units.

In applying the income approach to our accounting for goodwill, we make assumptions about the amount and timing of future expected cash flows, terminal value growth rates and appropriate discount rates. The amount and timing of future cash flows within our DCF analysis is based on our most recent operational budgets, long range strategic plans and other estimates. The terminal value growth rate is used to calculate the value of cash flows beyond the last projected period in our DCF analysis and reflects our best estimates for stable, perpetual growth of our reporting units. We use estimates of market-participant risk-adjusted weighted-average costs of capital (WACC) as a basis for determining the discount rates to apply to our reporting units’ future expected cash flows.

If the carrying value of a reporting unit exceeds its fair value, we then perform the second step of the goodwill impairment test to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the estimated fair value of a reporting unit’s goodwill to its carrying value. If we were unable to complete the second step of the test prior to the issuance of our financial statements and an impairment loss was probable and could be reasonably estimated, we would recognize our best estimate of the loss in our current period financial statements and disclose that the amount is an estimate. We would then recognize any adjustment to that estimate in subsequent reporting periods, once we have finalized the second step of the impairment test.

Although we use consistent methodologies in developing the assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates are uncertain by nature and can vary from actual results. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, cash flows and discount rates could result in different fair value estimates.

We have identified a total of four reporting units with a material amount of goodwill that are at higher risk of potential failure of the first step of the goodwill impairment test in future reporting periods. These reporting units include our U.S. CRM unit, which holds $1.5 billion of allocated goodwill, our U.S. Cardiovascular unit, which holds $2.2 billion of allocated goodwill, our U.S. Neuromodulation unit, which holds $1.2 billion of allocated

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goodwill, and our EMEA unit, which holds $3.9 billion of allocated goodwill. The level of excess fair value over carrying value for these reporting units identified as being at higher risk (with the exception of the U.S. CRM reporting unit, whose carrying value continues to exceed its fair value) ranged from approximately six percent to 23 percent. On a quarterly basis, we monitor the key drivers of fair value for these reporting units to detect changes that would warrant an interim impairment test. The key variables that drive the fair value of our reporting units are estimated revenue growth rates, levels of profitability and perpetual growth rate assumptions, as well as the WACC. These assumptions are subject to uncertainty, including our ability to grow revenue and improve profitability levels. For each of these reporting units, relatively small declines in the future performance and cash flows of the reporting unit or small changes in other key assumptions may result in the recognition of significant goodwill impairment charges. For example, keeping all other variables constant, a 50 basis point increase in the WACC applied would require that we perform the second step of the goodwill impairment test for our U.S. CRM, U.S. Neuromodulation, and EMEA reporting units failing the first step of the goodwill impairment test. In addition, keeping all other variables constant, a 100 basis point decrease in perpetual growth rates would require that we perform the second step of the goodwill impairment test for all four of the reporting units with higher risk of impairment. The estimates used for our future cash flows and discount rates are our best estimates and we believe they are reasonable, but future declines in the business performance of our reporting units may impair the recoverability of our goodwill. See Note D – Goodwill and Other Intangible Assets to our 2010 consolidated financial statements included in Item 8 of this Annual Report for further discussion of our 2010 and 2008 goodwill impairment charges, as well as a discussion of future events that could have a negative impact on the fair value of these reporting units.

Income Taxes

We provide for potential amounts due in various tax jurisdictions. In the ordinary course of conducting business in multiple countries and tax jurisdictions, there are many transactions and calculations where the ultimate tax outcome is uncertain. Judgment is required in determining our worldwide income tax provision. In our opinion, we have made adequate provisions for income taxes for all years subject to audit. Although we believe our estimates are reasonable, the final outcome of these matters may be different from that which we have reflected in our historical income tax provisions and accruals. Such differences could have a material impact on our income tax provision and operating results.

We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will not realize some portion or all of the deferred tax assets. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years.

New Accounting Pronouncements

Standards Implemented

ASC Update No. 2010-06

In January 2010, the FASB issued ASC Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements. Update No. 2010-06 requires additional disclosure within the rollforward of activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, Update No. 2010-06 requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Level 2 and Level 3. We adopted Update No. 2010-06 for our first quarter ended March 31, 2010, except for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements, for which disclosures will be required for our first quarter ending March 31, 2011. During 2010, we did not have any transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy. Refer to Note E – Fair Value Measurements to our 2010 consolidated financial statements included in Item 8 of this Annual Report for

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disclosures surrounding our fair value measurements, including information regarding the valuation techniques and inputs used in fair value measurements for assets and liabilities within Level 2 and Level 3 of the fair value hierarchy.

ASC Update No. 2009-17

In December 2009, the FASB issued ASC Update No. 2009-17, Consolidations (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which formally codifies FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). Update No. 2009-17 and Statement No. 167 amend Interpretation No. 46(R), Consolidation of Variable Interest Entities, to require that an enterprise perform an analysis to determine whether the enterprise’s variable interests give it a controlling financial interest in a variable interest entity (VIE). The analysis identifies the primary beneficiary of a VIE as the enterprise that has both 1) the power to direct activities of a VIE that most significantly impact the entity’s economic performance and 2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. Update No. 2009-17 eliminated the quantitative approach previously required for determining the primary beneficiary of a VIE and requires ongoing reassessments of whether an enterprise is the primary beneficiary. We adopted Update No. 2009-17 for our first quarter ended March 31, 2010. The adoption of Update No. 2009-17 did not have any impact on our results of operations or financial position.

ASC Update No. 2010-20

In July 2010, the FASB issued ASC Update No. 2010-20, Receivables (Topic 310) - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. Update No. 2010-20 requires expanded qualitative and quantitative disclosures about financing receivables, including trade accounts receivable, with respect to credit quality and credit losses, including a rollforward of the allowance for credit losses. The enhanced disclosure requirements are generally effective for interim and annual periods ending after December 15, 2010. We adopted Update No. 2010-20 for our year ended December 31, 2010, except for the rollforward of the allowance for credit losses, for which disclosure will be required for our first quarter ending March 31, 2011. Refer to Note A – Significant Account Policies to our 2010 consolidated financial statements included in Item 8 of this Annual Report for disclosures surrounding concentrations of credit risk and our policies with respect to the monitoring of the credit quality of customer accounts.

Standards to be Implemented

ASC Update No. 2009-13

In October 2009, the FASB issued ASC Update No. 2009-13, Revenue Recognition (Topic 605 )- Multiple-Deliverable Revenue Arrangements. The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements). Update No. 2009-13 provides principles and application guidance to determine whether multiple deliverables exist, how the individual deliverables should be separated and how to allocate the revenue in the arrangement among those separate deliverables. Update No. 2009-13 also expands the disclosure requirements for multiple-deliverable revenue arrangements. We adopted Update No. 2009-13 as of January 1, 2011. The adoption did not have a material impact on our results of operations or financial position.

ASC Update No. 2010-29

In December 2010, the FASB issued ASC Update No. 2010-29, Business Combinations (Topic 805) - Disclosure of Supplementary Pro Forma Information for Business Combinations. Update No. 2010-29 clarifies paragraph 805-10-50-2(h) to require public entities that enter into business combinations that are material on an individual or aggregate basis to disclose pro forma information for such business combinations that occurred in the current reporting period, including pro forma revenue and earnings of the combined entity as though the acquisition date had been as of the beginning of the comparable prior annual reporting period only. We are required to adopt Update No. 2010-29 for material business combinations for which the acquisition date is on or after January 1, 2011.

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Additional Information

Use of Non-GAAP Financial Measures

Use and Economic Substance of Non-GAAP Financial Measures Used by Boston Scientific

To supplement our consolidated financial statements presented on a GAAP basis, we disclose certain non-GAAP measures, including adjusted net income and adjusted net income per share that exclude certain amounts, and regional and divisional revenue growth rates that exclude the impact of foreign exchange. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States.

The GAAP measure most comparable to adjusted net income is GAAP net income (loss); the GAAP measure most comparable to adjusted net income per share is GAAP net income (loss) per share. To calculate regional and divisional revenue growth rates that exclude the impact of foreign exchange, we convert actual current-period net sales from local currency to U.S. dollars using constant foreign exchange rates. The GAAP measure most comparable to this non-GAAP measure is growth rate percentages based on GAAP revenue. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP measure are included elsewhere in this Annual Report.

Management uses these supplemental non-GAAP measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors, and to establish operational goals and forecasts that are used in allocating resources and determining compensation. In addition, management uses these non-GAAP measures to further its understanding of the performance of operating segments. The adjustments excluded from our non-GAAP measures are consistent with those excluded from our reportable segments’ measure of profit or loss. These adjustments are excluded from the segment measures that are reported to our Chief Operating Decision Maker and are used to make operating decisions and assess performance.

The following is an explanation of each of the adjustments that management excluded as part of its non-GAAP measures for the years ended December 31, 2010, 2009 and 2008, as well as reasons for excluding each of these individual items:

• Goodwill and other intangible asset impairment charges - These amounts represent non-cash write-downs of the goodwill balance attributable to our U.S. Cardiac Rhythm Management business, as well as certain intangible assets balances. Following our acquisition of Guidant Corporation in 2006, and the related increase in debt, we have heightened our focus on cash generation and debt pay down. We remove the impact of these charges from operating performance to assist in assessing cash generated from operations. We believe this is a critical metric in measuring our ability to generate cash and pay down debt. Therefore, these charges are excluded from management’s assessment of operating performance and are also excluded from the measures used to set employee compensation. Accordingly, management believes this may be useful information to users of its financial statements and therefore has excluded these charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of current operating performance, particularly in terms of liquidity.

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• Acquisition-related charges (credits) - These adjustments consist of (a) purchased research and development charges, (b) contingent consideration expense, (c) gains on acquisition-related milestone receipts, (d) due diligence and other fees, and (e) inventory step-up adjustments. Purchased research and development is a highly variable charge based on the extent and nature of external technology acquisitions during the period. Contingent consideration expense represents accounting adjustments to state our contingent consideration liabilities at their estimated fair value. These adjustments can be highly variable depending on the assessed likelihood of making future contingent consideration payments. In addition, contingent consideration expense was not recognized based on accounting principles in place previous to 2009, and, therefore, is not comparable to periods prior to 2009. Acquisition-related gains resulted from receipts related to Guidant Corporation’s sale of its vascular intervention and endovascular solutions businesses to Abbott Laboratories, and are not indicative of future operating results. Due diligence and other fees include legal, tax and other one time expenses associated with recent acquisitions that are not representative of on-going operations. Inventory step-up adjustments are non-cash charges related to acquired inventory directly attributable to acquisitions and is not indicative of the our on-going operations, or on-going cost of products sold. Management therefore removes the impact of these (credits) charges from our operating results to facilitate an evaluation of current operating performance and a comparison to past operating performance.

• Divestiture-related charges (credits) – These amounts represent fees associated with business divestitures and gains and related tax impacts that we recognized related to the sale of certain non-strategic investments. These gains and losses are not indicative of future operating performance and are not used by management to assess operating performance. Accordingly, management excludes these amounts for purposes of calculating these non-GAAP measures to facilitate an evaluation of current operating performance and a comparison to past operating performance.

• Restructuring and restructuring-related costs - These adjustments represent costs associated with our 2010 Restructuring plan, Plant Network Optimization program and 2007 Restructuring plan. These expenses are excluded by management in assessing operating performance, as well as from our operating segments’ measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excludes these charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of current operating performance and a comparison to past operating performance.

• Litigation-related net (credits) charges - These amounts are attributable to certain significant patent litigation and other legal matters, none of which reflect expected on-going operating expenses. Accordingly, management excluded these (credits) charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of current operating performance and for comparison to past operating performance.

• Discrete tax items - These items represent adjustments of certain tax positions, which were initially established in prior periods as a result of acquisition-, divestiture-, restructuring- or litigation-related charges (credits). These adjustments do not reflect expected on-going operating results. Accordingly, management excludes these amounts for purposes of calculating these non-GAAP measures to facilitate an evaluation of current operating performance and for comparison to past operating performance.

• Amortization expense - Amortization expense is a non-cash charge and does not impact our liquidity or compliance with the covenants included in our debt agreements. Management removes the impact of amortization from our operating performance to assist in assessing cash generated from operations. Management believes this is a critical metric in measuring our ability to generate cash and pay down debt. Therefore, amortization expense is excluded from management’s assessment of operating performance and is also excluded from the measures management uses to set employee compensation. Accordingly, management believes this may be useful information to users of its financial statements and therefore excludes amortization expense for purposes of calculating these non-GAAP measures to facilitate an evaluation of current operating performance, particularly in terms of liquidity.

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• Foreign exchange on net sales - The impact of foreign exchange is highly variable and difficult to predict. Accordingly, management excludes the impact of foreign exchange for purposes of reviewing regional and divisional revenue growth rates to facilitate an evaluation of current operating performance and comparison to past operating performance.

Material Limitations Associated with the Use of Non-GAAP Financial Measures

Adjusted net income, adjusted net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange may have limitations as analytical tools, and these non-GAAP measures should not be considered in isolation from or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are:

• Amortization expense and goodwill and other intangible asset impairment charges, though not directly affecting our cash flows, represent a net reduction in value of goodwill and other intangible assets. The net loss associated with this reduction in value is not included in our adjusted net income or adjusted net income per diluted share and therefore these measures do not reflect the full effect of the reduction in value of those assets.

• Acquisition- and divestiture-related charges (credits) reflect economic costs and benefits and are not reflected in adjusted net income and adjusted net income per diluted share.

• Items such as restructuring and restructuring-related costs, litigation-related net (credits) charges, and discrete tax items that are excluded from adjusted net income and adjusted net income per diluted share can have a material impact on cash flows and GAAP net income (loss) and net income (loss) per diluted share.

• Revenue growth rates stated on a constant currency basis, by their nature, exclude the impact of foreign exchange, which may have a material impact on GAAP net sales.

• Other companies may calculate adjusted net income, adjusted net income per diluted share, or regional and divisional revenue growth rates that exclude the impact of foreign exchange differently than us, limiting the usefulness of those measures for comparative purposes.

Compensation for Limitations Associated with Use of Non-GAAP Financial Measures

We compensate for the limitations on non-GAAP financial measures by relying upon GAAP results to gain a complete picture of performance. The non-GAAP measures focus instead upon the core business, which is only a subset, albeit a critical one, of overall performance. We provide detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure elsewhere in this Annual Report, and encourage investors to review these reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

We believe that presenting adjusted net income, adjusted net income per share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange, in addition to the related GAAP measures, provides investors greater transparency to the information used by management for its financial and operational decision-making and allows investors to see our results “through the eyes” of management. We further believe that providing this information better enables our investors to understand our operating performance and to evaluate the methodology used by management to evaluate and measure such performance.

Rule 10b5-1 Trading Plans

Periodically, certain of our executive officers adopt written stock trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 and our own Stock Trading Policy. A Rule 10b5-1 Trading Plan is a written document that pre-establishes the amounts, prices and dates (or formula(s) for determining the amounts, prices and dates) of future purchases or sales of our stock, including the exercise and sale of stock options, and is

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entered into at a time when the person is not in possession of material non-public information about the company.

On February 16, 2010, Kenneth J. Pucel, our Executive Vice President, Global Operations and Technology, entered into a Rule 10b5-1 Trading Plan. Mr. Pucel’s plan covered the sale of 5,000 shares of our stock to be acquired upon the exercise of 5,000 stock options and expired on July 25, 2010. Transactions under Mr. Pucel’s plan were based upon pre-established dates and stock price thresholds and were disclosed publicly through appropriate filings with the Securities and Exchange Commission (SEC).

On March 1, 2010, Joseph M. Fitzgerald, our Senior Vice President and President, Endovascular, entered into a Rule 10b5-1 Trading Plan. Mr. Fitzgerald’s plan covers the sale of up to 19,500 shares of our stock to be acquired upon the exercise of 4,000 stock options expiring on May 9, 2010; 4,000 stock options expiring on July 25, 2010; 4,000 stock options expiring on October 31, 2010; and 7,500 stock options expiring on February 27, 2011. Transactions under Mr. Fitzgerald’s plan are based upon pre-established dates and stock price thresholds and will expire once all of the shares have been sold or February 25, 2011, whichever is earlier. Any transaction under Mr. Fitzgerald’s plan will be disclosed publicly through appropriate filings with the SEC.

On March 1, 2010, Jean F. Lance, our Senior Vice President and Chief Compliance Officer, entered into a Rule 10b5-1 Trading Plan. Ms. Lance’s plan covers the sale of 80,868 shares of our stock to be acquired upon the exercise of 24,200 stock options expiring on May 9, 2010; 30,000 stock options expiring on July 25, 2010; and 26,668 stock options expiring on December 6, 2010. Transactions under Ms. Lance’s plan were based upon pre-established dates and stock price thresholds and expired on December 6, 2010. Any transaction under Ms. Lance’s plan were disclosed publicly through appropriate filings with the SEC.

On November 18, 2010, Michael P. Phalen, our Executive Vice President and President, International, entered into a Rule 10b5-1 Trading Plan. Mr. Phalen’s plan covers the sale of 25,000 shares of our stock to be acquired upon the exercise of 15,000 stock options expiring on February 27, 2011 and 10,000 stock options expiring on December 17, 2011. Transactions under Mr. Phalen’s plan are based upon pre-established dates and stock price thresholds and will expire once all of the shares have been sold or December 9, 2011, whichever is earlier. Any transaction under Mr. Phalen’s plan will be disclosed publicly through appropriate filings with the SEC.

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Management’s Report on Internal Control over Financial Reporting

As the management of Boston Scientific Corporation, we are responsible for establishing and maintaining adequate internal control over financial reporting. We designed our internal control process to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control–Integrated Framework. Based on our assessment, we believe that, as of December 31, 2010, our internal control over financial reporting is effective at a reasonable assurance level based on these criteria.

Ernst & Young LLP, an independent registered public accounting firm, has issued an audit report on the effectiveness of our internal control over financial reporting. This report in which they expressed an unqualified opinion is included below.

/s/ J. Raymond Elliott		/s/ Jeffrey D. Capello
	J. Raymond Elliott		Jeffrey D. Capello
	President and Chief Executive Officer		Executive Vice President and Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Boston Scientific Corporation

We have audited Boston Scientific 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 (the COSO criteria). Boston Scientific Corporation’s 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, Boston Scientific Corporation 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 Boston Scientific Corporation as of December 31, 2010 and 2009 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010 of Boston Scientific Corporation and our report dated February 17, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 17, 2011

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We develop, manufacture and sell medical devices globally and our earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments. We operate the program pursuant to documented corporate risk management policies. We do not enter derivative transactions for speculative purposes. Gains and losses on derivative financial instruments substantially offset losses and gains on underlying hedged exposures. Furthermore, we manage our exposure to counterparty risk on derivative instruments by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.

Our currency risk consists primarily of foreign currency denominated firm commitments, forecasted foreign currency denominated intercompany and third-party transactions and net investments in certain subsidiaries. We use both nonderivative (primarily European manufacturing operations) and derivative instruments to manage our earnings and cash flow exposure to changes in currency exchange rates. We had currency derivative instruments outstanding in the contract amount of $5.077 billion as of December 31, 2010 and $4.742 billion as of December 31, 2009. We recorded $82 million of other assets and $189 million of other liabilities to recognize the fair value of these derivative instruments as of December 31, 2010, as compared to $56 million of other assets and $110 million of other liabilities as of December 31, 2009. A ten percent appreciation in the U.S. dollar’s value relative to the hedged currencies would increase the derivative instruments’ fair value by $297 million as of December 31, 2010 and $271 million as of December 31, 2009. A ten percent depreciation in the U.S. dollar’s value relative to the hedged currencies would decrease the derivative instruments’ fair value by $363 million as of December 31, 2010 and by $331 million as of December 31, 2009. Any increase or decrease in the fair value of our currency exchange rate sensitive derivative instruments would be substantially offset by a corresponding decrease or increase in the fair value of the hedged underlying asset, liability or forecasted transaction, resulting in minimal impact on our consolidated statements of operations.

Our interest rate risk relates primarily to U.S. dollar borrowings, partially offset by U.S. dollar cash investments, or ‘net debt.’ As of December 31, 2010, $4.433 billion of our outstanding debt obligations, or approximately 85 percent of our net debt, was at fixed interest rates. We did not have any interest rate derivative instruments outstanding as of December 31, 2010 or 2009. In the first quarter of 2011, we entered interest rate derivative contracts having a notional amount of $850 million to convert fixed-rate debt into floating-rate debt.

See Note E – Fair Value Measurements to our 2010 consolidated financial statements included in Item 8 of this Annual Report for further information regarding our derivative financial instruments.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Boston Scientific Corporation

We have audited the accompanying consolidated balance sheets of Boston Scientific Corporation as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ 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)2. 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 Boston Scientific Corporation at December 31, 2010 and 2009, and the consolidated results of its operations and its 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Boston Scientific 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 17, 2011, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 17, 2011

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ITEM 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)	Year Ended December 31,
	2010			2009			2008
Net sales	$	7,806		$	8,188		$	8,050
Cost of products sold		2,599			2,576			2,469
Gross profit		5,207			5,612			5,581
Operating expenses:
Selling, general and administrative expenses		2,580			2,635			2,589
Research and development expenses		939			1,035			1,006
Royalty expense		185			191			203
Loss on program termination					16
Amortization expense		513			511			543
Goodwill impairment charges		1,817						2,613
Intangible asset impairment charges		65			12			177
Purchased research and development					21			43
Contingent consideration expense		2
Acquisition-related milestone		(250	)					(250	)
Gain on divestitures								(250	)
Restructuring charges		116			63			78
Litigation-related net (credits) charges		(104	)		2,022			334
		5,863			6,506			7,086
Operating loss		(656	)		(894	)		(1,505	)
Other income (expense):
Interest expense		(393	)		(407	)		(468	)
Other, net		(14	)		(7	)		(58	)
Loss before income taxes		(1,063	)		(1,308	)		(2,031	)
Income tax expense (benefit)		2			(283	)		5
Net loss	$	(1,065	)	$	(1,025	)	$	(2,036	)
Net loss per common share
Basic	$	(0.70	)	$	(0.68	)	$	(1.36	)
Assuming dilution	$	(0.70	)	$	(0.68	)	$	(1.36	)
Weighted-average shares outstanding:
Basic		1,517.8			1,507.9			1,498.5
Assuming dilution		1,517.8			1,507.9			1,498.5

(See notes to the consolidated financial statements)

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CONSOLIDATED BALANCE SHEETS

	As of December 31,
(in millions, except per share data)	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	213		$	864
Trade accounts receivable, net		1,320			1,375
Inventories		894			891
Deferred income taxes		429			572
Assets held for sale		576			578
Prepaid expenses and other current assets		183			319
Total current assets		3,615			4,599
Property, plant and equipment, net		1,697			1,722
Goodwill		10,186			11,936
Other intangible assets, net		6,343			6,667
Other long-term assets		287			253
TOTAL ASSETS	$	22,128		$	25,177
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current debt obligations	$	504		$	3
Accounts payable		184			212
Accrued expenses		1,626			2,609
Other current liabilities		295			198
Total current liabilities		2,609			3,022
Long-term debt		4,934			5,915
Deferred income taxes		1,644			1,875
Other long-term liabilities		1,645			2,064
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value - authorized 50,000,000 shares; none issued and outstanding
Common stock, $.01 par value - authorized 2,000,000,000 shares; issued 1,520,780,112 shares as of December 31, 2010 and 1,510,753,934 shares as of December 31, 2009		15			15
Additional paid-in capital		16,232			16,086
Accumulated deficit		(4,822	)		(3,757	)
Accumulated other comprehensive loss, net of tax:
Foreign currency translation adjustment		(50	)		8
Unrealized loss on derivative financial instruments		(65	)		(37	)
Unrealized costs associated with certain retirement plans		(14	)		(14	)
Total stockholders’ equity		11,296			12,301
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	22,128		$	25,177

(See notes to the consolidated financial statements)

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     CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share data)

																	Accumulated
					Additional												Other			Comprehensive
	Common Stock				Paid-In			Deferred Cost, ESOP						Accumulated			Comprehensive			Income
	Shares Issued		Par Value		Capital			Shares			Amount			Deficit			Income (Loss)			(Loss)
Balance as of January 1, 2008		1,491,234,911	$	15	$	15,788			951,566		$	(22	)	$	(693	)	$	9
Comprehensive income
Net loss															(2,036	)				$	(2,036	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment																		(67	)		(67	)
Net change in available-for-sale investments																		(16	)		(16	)
Net change in derivative financial instruments																		33			33
Net change in certain retirement amounts																		(12	)		(12	)
Impact of stock-based compensation plans, net of tax		10,400,768				166
401 (k) ESOP transactions						(10	)		(951,566	)		22
Other															(3	)
Balance as of December 31, 2008		1,501,635,679	$	15	$	15,944		$	-		$	-		$	(2,732	)	$	(53	)	$	(2,098	)
Comprehensive income
Net loss															(1,025	)					(1,025	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment																		21			21
Net change in derivative financial instruments																		(11	)		(11	)
Impact of stock-based compensation plans, net of tax		9,118,255				142
Balance as of December 31, 2009		1,510,753,934	$	15	$	16,086								$	(3,757	)	$	(43	)	$	(1,015	)
Comprehensive income
Net loss															(1,065	)					(1,065	)
Other comprehensive loss, net of tax
Foreign currency translation adjustment																		(58	)		(58	)
Net change in derivative financial instruments																		(28	)		(28	)
Impact of stock-based compensation plans, net of tax		10,026,178				146
Balance as of December 31, 2010		1,520,780,112	$	15	$	16,232								$	(4,822	)	$	(129	)	$	(1,151	)

     (See notes to the consolidated financial statements)

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CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
(in millions)	2010			2009			2008
Operating Activities
Net loss	$	(1,065	)	$	(1,025	)	$	(2,036	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		816			834			864
Deferred income taxes		(110	)		(64	)		(334	)
Stock-based compensation expense		150			144			138
Goodwill impairment charges		1,817						2,613
Intangible asset impairment charges		65			12			177
Net losses (gains) on investments and notes receivable		12			(9	)		78
Purchased research and development					21			43
Other non-cash acquisition- and divestiture-related charges (credits)		2						(250	)
Other, net		11			(3	)		(8	)
Increase (decrease) in cash flows from operating assets and liabilities, excluding the effect of acquisitions and divestitures:
Trade accounts receivable, net		52			1			96
Inventories		(5	)		(92	)		(120	)
Other assets		132			276			(21	)
Accounts payable and accrued expenses		(1,148	)		462			392
Other liabilities		(404	)		278			(416	)
Cash provided by operating activities		325			835			1,216
Investing Activities
Property, plant and equipment
Purchases		(272	)		(312	)		(362	)
Proceeds on disposals		5			5			2
Acquisitions
Payments for acquisitions of businesses, net of cash acquired		(199	)		(4	)		(21	)
Payments relating to prior period acquisitions		(12	)		(523	)		(675	)
Other investing activity
Proceeds from business divestitures								1,287
Payments for investments in and acquisitions of certain technologies		(6	)		(50	)		(56	)
Proceeds from sales of investments and collections of notes receivable		4			91			149
Cash (used for) provided by investing activities		(480	)		(793	)		324
Financing Activities
Debt
Proceeds from long-term borrowings, net of debt issuance costs		973			1,972
Payments on long-term borrowings		(1,500	)		(2,825	)		(1,175	)
Proceeds from borrowings on revolving credit facility		200
Payments on revolving credit facility borrowings		(200	)					(250	)
Equity
Proceeds from issuances of shares of common stock		31			33			71
Excess tax benefit relating to stock options								4
Cash used for financing activities		(496	)		(820	)		(1,350	)
Effect of foreign exchange rates on cash					1			(1	)
Net (decrease) increase in cash and cash equivalents		(651	)		(777	)		189
Cash and cash equivalents at beginning of year		864			1,641			1,452
Cash and cash equivalents at end of year	$	213		$	864		$	1,641
SUPPLEMENTAL INFORMATION:
Cash (received) paid for income taxes, net	$	(286	)	$	46		$	416
Cash paid for interest		328			364			414

(See notes to the consolidated financial statements)

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NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Our consolidated financial statements include the accounts of Boston Scientific Corporation and our wholly-owned subsidiaries. Through December 31, 2009, we assessed the terms of our investment interests to determine if any of our investees met the definition of a variable interest entity (VIE) in accordance with accounting standards effective through that date, and would have consolidated any VIEs in which we were the primary beneficiary. Our evaluation considered both qualitative and quantitative factors and various assumptions, including expected losses and residual returns. In December 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification™ (ASC) Update No. 2009-17, Consolidations (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which formally codifies FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). Update No. 2009-17 and Statement No. 167 amend Interpretation No. 46(R), Consolidation of Variable Interest Entities, to require that an enterprise perform an analysis to determine whether the enterprise’s variable interests give it a controlling financial interest in a VIE. The analysis identifies the primary beneficiary of a VIE as the enterprise that has both 1) the power to direct activities of a VIE that most significantly impact the entity’s economic performance and 2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. Update No. 2009-17 eliminated the quantitative approach previously required for determining the primary beneficiary of a VIE and requires ongoing reassessments of whether an enterprise is the primary beneficiary. We adopted Update No. 2009-17 for our first quarter ended March 31, 2010. Based on our assessments under the applicable guidance, we did not consolidate any VIEs during the years ended December 31, 2010, 2009, or 2008.

We account for investments in entities over which we have the ability to exercise significant influence under the equity method if we hold 50 percent or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary. We record these investments initially at cost, and adjust the carrying amount to reflect our share of the earnings or losses of the investee, including all adjustments similar to those made in preparing consolidated financial statements. We account for investments in entities in which we have less than a 20 percent ownership interest under the cost method of accounting if we do not have the ability to exercise significant influence over the investee.

In the first quarter of 2008, we completed the divestiture of certain non-strategic businesses. Our operating results for the year ended December 31, 2008 include the results of these businesses through the date of separation, as these divestitures did not meet the criteria for discontinued operations. On January 3, 2011, we closed the sale of our Neurovascular business to Stryker Corporation. We are providing transitional services to Stryker through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of up to 24 months, subject to extension. Due to our continuing involvement in the operations of the Neurovascular business, the divestiture does not meet the criteria for presentation as a discontinued operation and, therefore, the results of the Neurovascular business are included in our results of operations for all periods presented. Refer to Note C – Divestitures and Assets Held for Sale for a description of these business divestitures.

Basis of Presentation

The accompanying consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-K and Article 10 of Regulation S-X.

We have reclassified certain prior year amounts to conform to the current year’s presentation, including those to reclassify certain balances to ‘assets held for sale’ classification. See Note C – Divestitures and Assets Held for Sale, Note D – Goodwill and Other Intangible Assets, Note J – Supplemental Balance Sheet Information, and Note P – Segment Reporting for further details.

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Subsequent Events

We evaluate events occurring after the date of our accompanying consolidated balance sheets for potential recognition or disclosure in our financial statements. We did not identify any material subsequent events requiring adjustment to our accompanying consolidated financial statements (recognized subsequent events). Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note C – Divestitures and Assets Held for Sale, Note G – Borrowings and Credit Arrangements, Note L – Commitments and Contingencies, and Note R – Subsequent Events for more information.

Accounting Estimates

To prepare our consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities, the disclosure of contingent liabilities as of the date of our financial statements and the reported amounts of our revenues and expenses during the reporting period. Our actual results may differ from these estimates. Refer to Critical Accounting Estimates included in Item 7 of this Annual Report for further discussion.

Cash and Cash Equivalents

We record cash and cash equivalents in our consolidated balance sheets at cost, which approximates fair value. Our policy is to invest excess cash in short-term marketable securities earning a market rate of interest without assuming undue risk to principal, and we limit our direct exposure to securities in any one industry or issuer. We consider all highly liquid investments purchased with a remaining maturity of three months or less at the time of acquisition to be cash equivalents.

We record available-for-sale investments at fair value and exclude unrealized gains and temporary losses on available-for-sale securities from earnings, reporting such gains and losses, net of tax, as a separate component of stockholders’ equity, until realized. We compute realized gains and losses on sales of available-for-sale securities based on the average cost method, adjusted for any other-than-temporary declines in fair value. We record held-to-maturity securities at amortized cost and adjust for amortization of premiums and accretion of discounts through maturity. We classify investments in debt securities or equity securities that have a readily determinable fair value that we purchase and hold principally for selling them in the near term as trading securities. All of our cash investments as of December 31, 2010 and 2009 had maturity dates at date of purchase of less than three months and, accordingly, we have classified them as cash and cash equivalents in our accompanying consolidated balance sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, derivative financial instrument contracts and accounts and notes receivable. Our investment policy limits exposure to concentrations of credit risk and changes in market conditions. Counterparties to financial instruments expose us to credit-related losses in the event of nonperformance. We transact our financial instruments with a diversified group of major financial institutions and actively monitor outstanding positions to limit our credit exposure.

We provide credit, in the normal course of business, to hospitals, healthcare agencies, clinics, doctors’ offices and other private and governmental institutions and generally do not require collateral. We perform on-going credit evaluations of our customers and maintain allowances for potential credit losses, based on historical information and management’s best estimates. Amounts determined to be uncollectible are written off against this reserve. We recorded write-offs of uncollectible accounts receivable of $15 million in 2010, $14 million in 2009, and $11 million in 2008. We are not dependent on any single institution and no single customer accounted for more than ten percent of our net sales in 2010, 2009 or 2008. We closely monitor outstanding receivables for potential collection risks, including those that may arise from economic conditions, in both the U.S. and international economies. The credit and economic conditions within Greece, Italy, Spain, Portugal and Ireland, among other members of the European Union, have deteriorated throughout 2010. These conditions have resulted in, and may

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continue to result in, an increase in the average length of time that it takes to collect on our accounts receivable outstanding in these countries and, in some cases, write-offs of uncollectible amounts.

Revenue Recognition

We generate revenue primarily from the sale of single-use medical devices, and present revenue net of sales taxes in our consolidated statements of operations. We consider revenue to be realized or realizable and earned when all of the following criteria are met: persuasive evidence of a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectibility is reasonably assured. We generally meet these criteria at the time of shipment, unless a consignment arrangement exists or we are required to provide additional services. We recognize revenue from consignment arrangements based on product usage, or implant, which indicates that the sale is complete. For our other transactions, we recognize revenue when our products are delivered and risk of loss transfers to the customer, provided there are no substantive remaining performance obligations required of us or any matters requiring customer acceptance, and provided we can form an estimate for sales returns. Many of our Cardiac Rhythm Management (CRM) product offerings combine the sale of a device with our LATITUDE® Patient Management System, which represents a future service obligation. In accordance with accounting guidance regarding multiple-element arrangements applicable through December 31, 2010, we deferred revenue on the undelivered service element based on verifiable objective evidence of fair value, using the residual method of allocation, and recognized the associated revenue over the related service period. On January 1, 2011, we adopted ASC Update No. 2009-13, Revenue Recognition (Topic 605)- Multiple-Deliverable Revenue Arrangements. The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements). Update No. 2009-13 provides principles and application guidance to determine whether multiple deliverables exist, how the individual deliverables should be separated and how to allocate the revenue in the arrangement among those separate deliverables, including requiring the use of the relative selling price method. The adoption of Update No. 2009-13 did not have a material impact on our results of operations or financial position.

We generally allow our customers to return defective, damaged and, in certain cases, expired products for credit. We base our estimate for sales returns upon historical trends and record the amount as a reduction to revenue when we sell the initial product. In addition, we may allow customers to return previously purchased products for next-generation product offerings. For these transactions, we defer recognition of revenue on the sale of the earlier generation product based upon an estimate of the amount of product to be returned when the next-generation products are shipped to the customer.

We also offer sales rebates and discounts to certain customers. We treat sales rebates and discounts as a reduction of revenue and classify the corresponding liability as current. We estimate rebates for products where there is sufficient historical information available to predict the volume of expected future rebates. If we are unable to estimate the expected rebates reasonably, we record a liability for the maximum rebate percentage offered. We have entered certain agreements with group purchasing organizations to sell our products to participating hospitals at negotiated prices. We recognize revenue from these agreements following the same revenue recognition criteria discussed above.

Warranty Obligations

We offer warranties on certain of our product offerings. Approximately 85 percent of our warranty liability as of December 31, 2010 related to implantable devices offered by our CRM business, which include defibrillator and pacemaker systems. Our CRM products come with a standard limited warranty covering the replacement of these devices. We offer a full warranty for a portion of the period post-implant, and a partial warranty over the remainder of the useful life of the product. We estimate the costs that we may incur under our warranty programs based on the number of units sold, historical and anticipated rates of warranty claims and cost per claim, and record a liability equal to these estimated costs as cost of products sold at the time the product sale occurs. We assess the adequacy of our recorded warranty liabilities on a quarterly basis and adjust these amounts as necessary. Changes in our product warranty accrual during 2010, 2009 and 2008 consisted of the following (in millions):

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	Year Ended December 31,
	2010			2009			2008
Beginning balance	$	55		$	62		$	66
Provision		15			29			35
Settlements/ reversals		(27	)		(36	)		(39	)
Ending balance	$	43		$	55		$	62

Inventories

We state inventories at the lower of first-in, first-out cost or market. We base our provisions for excess, expired and obsolete inventory primarily on our estimates of forecasted net sales. A significant change in the timing or level of demand for our products as compared to forecasted amounts may result in recording additional provisions for excess, expired and obsolete inventory in the future. Further, the industry in which we participate is characterized by rapid product development and frequent new product introductions. Uncertain timing of next-generation product approvals, variability in product launch strategies, product recalls and variation in product utilization all affect our estimates related to excess, expired and obsolete inventory. Approximately 40 percent of our finished goods inventory as of December 31, 2010 and 2009 was at customer locations pursuant to consignment arrangements.

Property, Plant and Equipment

We state property, plant, equipment, and leasehold improvements at historical cost. We charge expenditures for maintenance and repairs to expense and capitalize additions and improvements that extend the life of the underlying asset. We generally provide for depreciation using the straight-line method at rates that approximate the estimated useful lives of the assets. We depreciate buildings and improvements over a 20 to 40 year life; equipment, furniture and fixtures over a three to ten year life; and leasehold improvements over the shorter of the useful life of the improvement or the term of the related lease. Depreciation expense was $303 million in 2010, $323 million in 2009, and $321 million in 2008.

Valuation of Business Combinations

We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their fair values at the dates of acquisition, including identifiable intangible assets and purchased research and development which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination, including purchased research and development, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired to goodwill. The use of alternative valuation assumptions, including estimated revenue projections; growth rates; cash flows and discount rates and alternative estimated useful life assumptions, or probabilities surrounding the achievement of clinical, regulatory or revenue-based milestones could result in different purchase price allocations and amortization expense in current and future periods. Transaction costs associated with these acquisitions are expensed as incurred through selling, general and administrative costs.

As of January 1, 2009, we adopted FASB Statement No. 141(R), Business Combinations (codified within ASC Topic 805, Business Combinations). Pursuant to the guidance in Statement No. 141(R) (Topic 805), in those circumstances where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the estimated discounted fair value of the contingent payments we expect to make as of the acquisition date. We re-measure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of revenue estimates. For acquisitions consummated prior to January 1, 2009, we will continue to record contingent consideration as an additional element of cost of the acquired entity when the contingency is resolved and consideration is issued or becomes issuable.

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Purchased Research and Development

Our purchased research and development represents intangible assets acquired in a business combination that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use. The primary basis for determining the technological feasibility of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region. Through December 31, 2008, we expensed the value attributable to these in-process projects at the time of the acquisition in accordance with accounting standards effective through that date. As discussed above, as of January 1, 2009, we adopted FASB Statement No. 141(R), Business Combinations (codified within ASC Topic 805, Business Combinations), a replacement for Statement No. 141. Statement No. 141(R) also superseded FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, which required research and development assets acquired in a business combination that had no alternative future use to be measured at their fair values and expensed at the acquisition date. Topic 805 requires that purchased research and development acquired in a business combination be recognized as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. For our 2010 business combinations, we have recognized purchased research and development as an intangible asset.

In addition, we expense certain costs associated with strategic alliances outside of business combinations as purchased research and development as of the acquisition date. Our adoption of Statement No. 141(R) (Topic 805) did not change this policy with respect to asset purchases.

We use the income approach to determine the fair values of our purchased research and development at the date of acquisition. This approach calculates fair value by estimating the after-tax cash flows attributable to an in-process project over its useful life and then discounting these after-tax cash flows back to a present value. We base our revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected levels of market share. In arriving at the value of the in-process projects, we consider, among other factors: the in-process projects’ stage of completion; the complexity of the work completed as of the acquisition date; the costs already incurred; the projected costs to complete; the contribution of core technologies and other acquired assets; the expected regulatory path and introduction dates by region; and the estimated useful life of the technology. We apply a market-participant risk-adjusted discount rate to arrive at a present value as of the date of acquisition. We believe that the estimated in-process research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the projects. However, if the projects are not successful or completed in a timely manner, we may not realize the financial benefits expected for these projects or for the acquisition as a whole.

We test our purchased research and development intangible assets acquired in a business combination for impairment at least annually, and more frequently if events or changes in circumstances indicate that the assets may be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with their carrying amount. If the carrying amount exceeds its fair value, we would record an impairment loss in an amount equal to the excess. Upon completion of the associated research and development efforts, we will determine the useful life of the technology and begin amortizing the assets to reflect their use over their remaining lives; upon permanent abandonment we would write-off the remaining carrying amount of the associated purchased research and development intangible asset.

Amortization and Impairment of Intangible Assets

We record intangible assets at historical cost and amortize them over their estimated useful lives. We use a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. The approximate useful lives for amortization of our intangible assets is as follows: patents and licenses, two to 20 years; definite-lived core and developed technology, five to 25 years; customer relationships, five to 25 years; other intangible assets, various.

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We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), we will write the carrying value down to the fair value in the period identified.

We generally calculate fair value of our intangible assets as the present value of estimated future cash flows we expect to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). The use of alternative assumptions, including estimated cash flows, discount rates, and alternative estimated remaining useful lives could result in different calculations of impairment. However, we believe our assumptions and estimates are accurate and represent our best estimates. See Note D - Goodwill and Other Intangible Assets for more information related to impairments of intangible assets during 2010, 2009, and 2008.

For patents developed internally, we capitalize costs incurred to obtain patents, including attorney fees, registration fees, consulting fees, and other expenditures directly related to securing the patent. Legal costs incurred in connection with the successful defense of both internally-developed patents and those obtained through our acquisitions are capitalized and amortized over the remaining amortizable life of the related patent.

Goodwill Valuation

We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination to goodwill. We test our April 1 goodwill balances during the second quarter of each year for impairment, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. In performing the assessment, we utilize the two-step approach prescribed under ASC Topic 350, Intangibles-Goodwill and Other (formerly FASB Statement No. 142, Goodwill and Other Intangible Assets). The first step requires a comparison of the carrying value of the reporting units, as defined, to the fair value of these units. We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. We determine our reporting units by first identifying our operating segments, and then assess whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. We aggregate components within an operating segment that have similar economic characteristics. For our April 1, 2010 annual impairment assessment, we identified our reporting units to be our seven U.S. operating segments, which in aggregate make up the U.S. reportable segment, and our four international operating segments. When allocating goodwill from business combinations to our reporting units, we assign goodwill to the reporting units that we expect to benefit from the respective business combination at the time of acquisition. In addition, for purposes of performing our annual goodwill impairment test, assets and liabilities, including corporate assets, which relate to a reporting unit’s operations, and would be considered in determining its fair value, are allocated to the individual reporting units. We allocate assets and liabilities not directly related to a specific reporting unit, but from which the reporting unit benefits, based primarily on the respective revenue contribution of each reporting unit.

During 2010, 2009, and 2008, we used only the income approach, specifically the discounted cash flow (DCF) method, to derive the fair value of each of our reporting units in preparing our goodwill impairment assessment. This approach calculates fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting these after-tax cash flows to a present value using a risk-adjusted discount rate. We selected this method as being the most meaningful in preparing our goodwill assessments because we believe the income approach most appropriately measures our income producing assets. We have considered using the market approach and cost approach but concluded they are not appropriate in valuing our reporting units given

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the lack of relevant market comparisons available for application of the market approach and the inability to replicate the value of the specific technology-based assets within our reporting units for application of the cost approach. Therefore, we believe that the income approach represents the most appropriate valuation technique for which sufficient data is available to determine the fair value of our reporting units.

In applying the income approach to our accounting for goodwill, we make assumptions about the amount and timing of future expected cash flows, terminal value growth rates and appropriate discount rates. The amount and timing of future cash flows within our DCF analysis is based on our most recent operational budgets, long range strategic plans and other estimates. The terminal value growth rate is used to calculate the value of cash flows beyond the last projected period in our DCF analysis and reflects our best estimates for stable, perpetual growth of our reporting units. We use estimates of market-participant risk-adjusted weighted-average costs of capital (WACC) as a basis for determining the discount rates to apply to our reporting units’ future expected cash flows.

If the carrying value of a reporting unit exceeds its fair value, we then perform the second step of the goodwill impairment test to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the estimated fair value of a reporting unit’s goodwill to its carrying value. If we were unable to complete the second step of the test prior to the issuance of our financial statements and an impairment loss was probable and could be reasonably estimated, we would recognize our best estimate of the loss in our current period financial statements and disclose that the amount is an estimate. We would then recognize any adjustment to that estimate in subsequent reporting periods, once we have finalized the second step of the impairment test.

Investments in Publicly Traded and Privately Held Entities

We account for our publicly traded investments as available-for-sale securities based on the quoted market price at the end of the reporting period. We compute realized gains and losses on sales of available-for-sale securities based on the average cost method, adjusted for any other-than-temporary declines in fair value. We account for our investments in privately held entities, for which fair value is not readily determinable, in accordance with ASC Topic 323, Investments – Equity Method and Joint Ventures.

We account for investments in entities over which we have the ability to exercise significant influence under the equity method if we hold 50 percent or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary. We record these investments initially at cost, and adjust the carrying amount to reflect our share of the earnings or losses of the investee, including all adjustments similar to those made in preparing consolidated financial statements. We account for investments in entities in which we have less than a 20 percent ownership interest under the cost method of accounting if we do not have the ability to exercise significant influence over the investee.

Each reporting period, we evaluate our investments to determine if there are any events or circumstances that are likely to have a significant adverse effect on the fair value of the investment. Examples of such impairment indicators include, but are not limited to: a significant deterioration in earnings performance; recent financing rounds at reduced valuations; a significant adverse change in the regulatory, economic or technological environment of an investee; or a significant doubt about an investee’s ability to continue as a going concern. If we identify an impairment indicator, we will estimate the fair value of the investment and compare it to its carrying value. Our estimation of fair value considers all available financial information related to the investee, including valuations based on recent third-party equity investments in the investee. If the fair value of the investment is less than its carrying value, the investment is impaired and we make a determination as to whether the impairment is other-than-temporary. We deem impairment to be other-than-temporary unless we have the ability and intent to hold an investment for a period sufficient for a market recovery up to the carrying value of the investment. Further, evidence must indicate that the carrying value of the investment is recoverable within a reasonable period. For other-than-temporary impairments, we recognize an impairment loss equal to the difference between an investment’s carrying value and its fair value. Impairment losses on our investments are included in other, net in our consolidated statements of operations.

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Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, we determine deferred tax assets and liabilities based on differences between the financial reporting and tax bases of our assets and liabilities. We measure deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will not realize some portion or all of the deferred tax assets. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years.

We do not provide income taxes on unremitted earnings of our foreign subsidiaries where we have indefinitely reinvested such earnings in our foreign operations. It is not practical to estimate the amount of income taxes payable on the earnings that are indefinitely reinvested in foreign operations. Unremitted earnings of our foreign subsidiaries that we have indefinitely reinvested in foreign operations are $9.193 billion as of December 31, 2010 and $9.355 billion as of December 31, 2009.

We provide for potential amounts due in various tax jurisdictions. In the ordinary course of conducting business in multiple countries and tax jurisdictions, there are many transactions and calculations where the ultimate tax outcome is uncertain. Judgment is required in determining our worldwide income tax provision. In our opinion, we have made adequate provisions for income taxes for all years subject to audit. Although we believe our estimates are reasonable, the final outcome of open tax matters may be different from that which we have reflected in our historical income tax provisions and accruals. Such differences could have a material impact on our income tax provision and operating results.

Legal, Product Liability Costs and Securities Claims

We are involved in various legal and regulatory proceedings, including intellectual property, breach of contract, securities litigation and product liability suits. In some cases, the claimants seek damages, as well as other relief, which, if granted, could require significant expenditures or impact our ability to sell our products. We are also the subject of certain governmental investigations, which could result in substantial fines, penalties, and administrative remedies. We are substantially self-insured with respect to product liability and intellectual property infringement claims. We maintain insurance policies providing limited coverage against securities claims. We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. In accordance with ASC Topic 450, Contingencies (formerly FASB Statement No. 5, Accounting for Contingencies), we accrue anticipated costs of settlement, damages, losses for general product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. We analyze litigation settlements to identify each element of the arrangement. We allocate arrangement consideration to patent licenses received based on estimates of fair value, and capitalize these amounts as assets if the license will provide an on-going future benefit. See Note L - Commitments and Contingencies for discussion of our individual material legal proceedings.

Costs Associated with Exit Activities

We record employee termination costs in accordance with ASC Topic 712, Compensation - Nonretirement and Postemployment Benefits (formerly FASB Statement No. 112, Employer’s Accounting for Postemployment Benefits), if we pay the benefits as part of an on-going benefit arrangement, which includes benefits provided as part of our domestic severance policy or that we provide in accordance with international statutory requirements. We accrue employee termination costs associated with an on-going benefit arrangement if the obligation is attributable to prior services rendered, the rights to the benefits have vested and the payment is probable and we can reasonably estimate the liability. We account for employee termination benefits that represent a one-time benefit in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (formerly FASB Statement No. 146, Accounting for

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Costs Associated with Exit or Disposal Activities). We record such costs into expense over the employee’s future service period, if any. In addition, in conjunction with an exit activity, we may offer voluntary termination benefits to employees. These benefits are recorded when the employee accepts the termination benefits and the amount can be reasonably estimated. Other costs associated with exit activities may include contract termination costs, including costs related to leased facilities to be abandoned or subleased, and impairments of long-lived assets.

Translation of Foreign Currency

We translate all assets and liabilities of foreign subsidiaries from local currency into U.S. dollars using the year-end exchange rate, and translate revenues and expenses at the average exchange rates in effect during the year. We show the net effect of these translation adjustments in our consolidated financial statements as a component of accumulated other comprehensive loss. For any significant foreign subsidiaries located in highly inflationary economies, we would re-measure their financial statements as if the functional currency were the U.S. dollar. We did not record any highly inflationary economy translation adjustments in 2010, 2009 or 2008.

Foreign currency transaction gains and losses are included in other, net in our consolidated statements of operations, net of losses and gains from any related derivative financial instruments. We recognized net foreign currency transaction losses of $9 million in 2010, $5 million in 2009, and gains of $5 million in 2008.

Financial Instruments

We recognize all derivative financial instruments in our consolidated financial statements at fair value in accordance with ASC Topic 815, Derivatives and Hedging (formerly FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities). In accordance with Topic 815, for those derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Our derivative instruments do not subject our earnings or cash flows to material risk, as gains and losses on these derivatives generally offset losses and gains on the item being hedged. We do not enter into derivative transactions for speculative purposes and we do not have any non-derivative instruments that are designated as hedging instruments pursuant to Topic 815. Refer to Note E – Fair Value Measurements for more information on our derivative instruments.

Shipping and Handling Costs

We generally do not bill customers for shipping and handling of our products. Shipping and handling costs of $88 million in 2010, $82 million in 2009, and $72 million in 2008 are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Research and Development

We expense research and development costs, including new product development programs, regulatory compliance and clinical research as incurred. Refer to Purchased Research and Development for our policy regarding in-process research and development acquired in connection with our business combinations and strategic alliances.

Employee Retirement Plans

In connection with our 2006 acquisition of Guidant Corporation, we now sponsor the Guidant Retirement Plan, a frozen noncontributory defined benefit plan covering a select group of current and former employees. The funding policy for the plan is consistent with U.S. employee benefit and tax-funding regulations. Plan assets, which are maintained in a trust, consist primarily of equity and fixed-income instruments.

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We maintain an Executive Retirement Plan, a defined benefit plan covering executive officers and division presidents. Participants may retire with unreduced benefits once retirement conditions have been satisfied. Further, we sponsor the Guidant Supplemental Retirement Plan, a frozen, nonqualified defined benefit plan for certain former officers and employees of Guidant. The Guidant Supplemental Retirement Plan was funded through a Rabbi Trust that contains segregated company assets used to pay the benefit obligations related to the plan. In addition, certain current and former U.S. and Puerto Rico employees of Guidant are eligible to receive a portion of their healthcare retirement benefits under a frozen defined benefit plan. We also maintain retirement plans covering certain international employees.

We use a December 31 measurement date for these plans and record the underfunded portion as a liability, recognizing changes in the funded status through other comprehensive income. The outstanding obligation as of December 31, 2010 and 2009 is as follows:

	As of December 31, 2010						As of December 31, 2009
	Projected						Projected
	Benefit				Underfunded		Benefit				Underfunded
	Obligation		Fair value of		PBO		Obligation		Fair value of		PBO
(in millions)	(PBO)		Plan Assets		Recognized		(PBO)		Plan Assets		Recognized
Executive Retirement Plan	$	11				11	$	14			$	14
Guidant Retirement Plan (frozen)		101	$	77		24		98	$	68		30
Guidant Supplemental Retirement Plan (frozen)		30				30		29				29
Guidant Healthcare Retirement Benefit Plan (frozen)		10				10		14				14
International Retirement Plans		72		36		36		59		28		31
	$	224	$	113	$	111	$	214	$	96	$	118

The value of the Rabbi Trust assets used to pay the Guidant Supplemental Retirement Plan benefits included in our accompanying consolidated financial statements was approximately $30 million as of December 31, 2010 and 2009.

The assumptions associated with our employee retirement plans as of December 31, 2010 are as follows:

					Long-Term
					Healthcare		Rate of
	Discount		Expected Return		Cost		Compensation
	Rate		on Plan Assets		Trend Rate		Increase
Executive Retirement Plan		5.00%						3.50%
Guidant Retirement Plan (frozen)		6.00%		7.75%
Guidant Supplemental Retirement Plan (frozen)		5.50%
Healthcare Retirement Benefit Plan (frozen)		4.75%				5.00%
International Retirement Plans		1.25% - 5.00%		2.50% - 4.10%				3.00%

We base our discount rate on the rates of return available on high-quality bonds with maturities approximating the expected period over which benefits will be paid. The rate of compensation increase is based on historical and expected rate increases. We review external data and historical trends in healthcare costs to determine healthcare cost trend rate assumptions. We base our rate of expected return on plan assets on historical experience, our investment guidelines and expectations for long-term rates of return. A rollforward of the changes in the fair value of plan assets for our funded retirement plans during 2010 and 2009 is as follows:

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	Year Ended December 31,
(in millions)	2010			2009
Beginning fair value	$	96		$	76
Actual return on plan assets		8			18
Employer contributions		19			6
Benefits paid		(14	)		(6)
Net transfers in (out)		1			3
Foreign currency exchange		3			(1)
Ending fair value	$	113		$	96

Our investment policy with respect to these plans is to maximize the ability to meet plan liabilities while minimizing the need to make future contributions to the plans. Plan assets are invested primarily in equity securities and debt securities.

We also sponsor a voluntary 401(k) Retirement Savings Plan for eligible employees. We match employee contributions equal to 200 percent for employee contributions up to two percent of employee compensation, and fifty percent for employee contributions greater than two percent, but not exceeding six percent, of pre-tax employee compensation. Total expense for our matching contributions to the plan was $64 million in 2010, $71 million in 2009, and $63 million in 2008.

In connection with our acquisition of Guidant, we previously sponsored the Guidant Employee Savings and Stock Ownership Plan, which allowed for employee contributions of a percentage of pre-tax earnings, up to established federal limits. Our matching contributions to the plan were in the form of shares of stock, allocated from the Employee Stock Ownership Plan (ESOP). Refer to Note N – Stock Ownership Plans for more information on the ESOP. Effective June 1, 2008, this plan was merged into our 401(k) Retirement Savings Plan, described above. Prior to this merger, expense for our matching contributions to the plan was $12 million in 2008.

Net Income (Loss) per Common Share

We base net income (loss) per common share upon the weighted-average number of common shares and common stock equivalents outstanding during each year. Potential common stock equivalents are determined using the treasury stock method. We exclude stock options whose effect would be anti-dilutive from the calculation.

NOTE B – ACQUISITIONS

During 2010, we paid approximately $200 million in cash to acquire Asthmatx, Inc. and certain other strategic assets. We did not consummate any material acquisitions during 2009. During 2008, we paid approximately $40 million in cash to acquire CryoCor, Inc. and Labcoat, Ltd. Each of these acquisitions is described in further detail below. The purchase price allocations presented for our 2010 acquisitions are preliminary, pending finalization of the valuation surrounding deferred tax assets and liabilities, and will be finalized in 2011.

Our consolidated financial statements include the operating results for each acquired entity from its respective date of acquisition. We do not present pro forma information for these acquisitions given the immateriality of their results to our consolidated financial statements.

2010 Acquisitions

Asthmatx, Inc.

On October 26, 2010, we completed the acquisition of 100 percent of the fully diluted equity of Asthmatx, Inc. Asthmatx designs, manufactures and markets a less-invasive, catheter-based bronchial thermoplasty procedure for the treatment of severe persistent asthma. The acquisition was intended to broaden and diversify our product portfolio by expanding into the area of endoscopic pulmonary intervention. We are integrating the operations of

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the Asthmatx business into our Endoscopy division. We paid approximately $194 million at the closing of the transaction using cash on hand, and may be required to pay future consideration up to $250 million that is contingent upon the achievement of certain revenue-based milestones.

As of the acquisition date, we recorded a contingent liability of $54 million, representing the estimated fair value of the contingent consideration we currently expect to pay to the former shareholders of Asthmatx upon the achievement of certain revenue-based milestones. The acquisition agreement provides for payments on product sales using technology acquired from Asthmatx of up to $200 million through December 2016 and, in addition, we may be obligated to pay a one-time revenue-based milestone payment of $50 million, no later than 2019, for a total of $250 million in maximum future consideration.

The fair value of the contingent consideration liability associated with the $200 million of potential payments was estimated by discounting, to present value, the contingent payments expected to be made based on our estimates of the revenues expected to result from the acquisition. We used a risk-adjusted discount rate of 20 percent to reflect the market risks of commercializing this technology, which we believe is appropriate and representative of market participant assumptions. For the $50 million milestone payment, we used a probability-weighted scenario approach to determine the fair value of this obligation using internal revenue projections and external market factors. We applied a rate of probability to each scenario, as well as a risk-adjusted discount factor, to derive the estimated fair value of the contingent consideration as of the acquisition date. This fair value measurement is based on significant unobservable inputs, including management estimates and assumptions and, accordingly, is classified as Level 3 within the fair value hierarchy prescribed by ASC Topic 820, Fair Value Measurements and Disclosures (formerly FASB Statement No. 157, Fair Value Measurements). In accordance with ASC Topic 805, Business Combinations (formerly FASB Statement No. 141(R), Business Combinations), we will re-measure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of revenue estimates. During the fourth quarter of 2010, we recorded expense of $2 million in the accompanying statements of operations representing the increase in fair value of this obligation between the acquisition date and December 31, 2010.

The components of the preliminary purchase price as of the acquisition date for our 2010 acquisitions are as follows:

			All
(in millions)	Asthmatx		Other		Total
Cash	$	194	$	5	$	199
Fair value of contingent consideration		54		15		69
	$	248	$	20	$	268

We accounted for these acquisitions as business combinations and, in accordance with Topic 805, we have recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following summarizes the preliminary purchase price allocations:

				All
(in millions)	Asthmatx			Other		Total
Goodwill	$	68		$	5	$	73
Amortizable intangible assets		176			3		179
Indefinite-lived intangible assets		45			12		57
Other net assets		2					2
Deferred income taxes		(43	)				(43)
	$	248		$	20	$	268

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Transaction costs associated with these acquisitions were expensed as incurred through selling, general and administrative costs in the statement of operations and were not material in 2010.

We allocated the preliminary purchase price to specific intangible asset categories as follows:

							Weighted		Range of Risk-
							Average		Adjusted Discount
							Amortization		Rates used in
	Amount Assigned						Period		Purchase Price
	(in millions)						(in years)		Allocation
	Asthmatx		All Other		Total
Amortizable intangible assets
Technology - core	$	168			$	168		12.0		28.0	%
Technology - developed		8	$	3		11		5.5		27.0% - 35.5	%
		176		3		179		11.6
Indefinite-lived intangible assets
Purchased research and development		45		12		57				29.0% - 36.0	%
	$	221	$	15	$	236

Core technology consists of technical processes, intellectual property, and institutional understanding with respect to products and processes that we will leverage in future products or processes and will carry forward from one product generation to the next. Developed technology represents the value associated with marketed products that have received regulatory approval, primarily the Alair^® Bronchial Thermoplasty System acquired from Asthmatx, which is approved for distribution in CE Mark countries and received FDA approval in April 2010. The amortizable intangible assets are being amortized on a straight-line basis over their assigned useful lives.

Purchased research and development represents the estimated fair value of acquired in-process research and development projects, including the second generation of the Alair^® product, which have not yet reached technological feasibility. The indefinite-lived intangible assets will be tested for impairment on an annual basis, or more frequently if impairment indicators are present, in accordance with our accounting policies described in Note A- Significant Accounting Policies, and amortization of the purchased research and development will begin upon completion of the project. As of the acquisition date, we estimate that the total cost to complete the in-process research and development programs acquired from Asthmatx is between $10 million and $15 million. We currently expect to launch the second generation of the Alair^® product in the U.S. in 2014, in our Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries in 2016, and Japan in 2017, subject to regulatory approvals. We expect material net cash inflows from such products to commence in 2014, following the launch of this technology in the U.S.

We believe that the estimated intangible asset values so determined represent the fair value at the date of each acquisition and do not exceed the amount a third party would pay for the assets. We used the income approach, specifically the discounted cash flow method, to derive the fair value of the amortizable intangible assets and purchased research and development. These fair value measurements are based on significant unobservable inputs, including management estimates and assumptions and, accordingly, are classified as Level 3 within the fair value hierarchy prescribed by Topic 820.

We recorded the excess of the purchase price over the estimated fair values of the identifiable assets as goodwill, which is non-deductible for tax purposes. Goodwill was established due primarily to revenue and cash flow projections associated with future technology, as well as synergies expected to be gained from the integration of these businesses into our existing operations, and has been allocated to our reportable segments as follows based on the relative expected benefit from the business combinations, as follows:

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(in millions)	Asthmatx		All Other		Total
U.S.	$	17	$	5	$	22
EMEA		44				44
Inter-Continental		4				4
Japan		3				3
	$	68	$	5	$	73

2009 Acquisitions

Our policy is to expense certain costs associated with strategic investments outside of business combinations as purchased research and development as of the acquisition date. Our adoption of Statement No. 141(R) (Topic 805) did not change this policy with respect to asset purchases. In accordance with this policy, we recorded purchased research and development charges of $21 million in 2009, associated with entering certain licensing and development arrangements. Since the technology purchases did not involve the transfer of processes or outputs as defined by Statement No. 141(R) (Topic 805), the transactions did not qualify as business combinations.

2008 Acquisitions

Labcoat, Ltd.

In December 2008, we completed the acquisition of the assets of Labcoat, Ltd., a development-stage drug-coating company, for a purchase price of $17 million, net of cash acquired.

CryoCor, Inc.

In May 2008, we completed our acquisition of 100 percent of the fully diluted equity of CryoCor, Inc., and paid a cash purchase price of $21 million, net of cash acquired. CryoCor was developing products using cryogenic technology for use in treating atrial fibrillation.

In 2008, in accordance with accounting guidance applicable at the time, we consummated the acquisitions of Labcoat and CryoCor and recorded $43 million of purchased research and development charges, including $17 million associated with Labcoat and $8 million attributable to CryoCor, as well as $18 million associated with entering certain licensing and development arrangements. During 2010, we suspended the Labcoat and CryoCor in-process research and development projects.

Payments Related to Prior Period Acquisitions

Certain of our acquisitions involve contingent consideration arrangements. Payment of additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels, achieving product development targets or obtaining regulatory approvals. In August 2007, we entered an agreement to amend our 2004 merger agreement with the principal former shareholders of Advanced Bionics Corporation. Previously, we were obligated to pay future consideration contingent primarily on the achievement of future performance milestones. The amended agreement provided a new schedule of consolidated, fixed payments, consisting of $650 million that was paid in 2008, and a final $500 million payment, paid in 2009. We received cash proceeds of $150 million in 2008 related to our sale of a controlling interest in the Auditory business acquired with Advanced Bionics, and received additional proceeds of $40 million in 2009 related to the sale of our remaining interest in this business. Refer to Note C – Divestitures and Assets Held for Sale for a discussion of this transaction. During 2010, we made total payments of $12 million related to prior period acquisitions. During 2009, including the $500 million payment to the former shareholders of Advanced Bionics, we made total payments of $523 million related to prior period acquisitions. During 2008, we paid $675 million related to prior period acquisitions, consisting primarily of the $650 million payment made to the principal former shareholders of Advanced Bionics.

As of December 31, 2010, the estimated maximum potential amount of future contingent consideration (undiscounted) that we could be required to make associated with acquisitions consummated prior to 2010 is

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approximately $260 million. In accordance with accounting guidance applicable at the time we consummated these acquisitions, we do not recognize a liability until the contingency is resolved and consideration is issued or becomes issuable. Topic 805 now requires the recognition of a liability equal to the expected fair value of future contingent payments at the acquisition date for all acquisitions consummated after January 1, 2009. In connection with our 2010 business combinations, we recorded liabilities of $69 million representing the estimated fair value of contingent payments expected to be made, including $54 million associated with Asthmatx and $15 million attributable to other acquisitions. The maximum amount of future contingent consideration (undiscounted) that we could be required to make associated with our 2010 acquisitions is approximately $275 million. Included in the accompanying consolidated balance sheets is accrued contingent consideration of $71 million as of December 31, 2010 and $6 million as of December 31, 2009.

NOTE C – DIVESTITURES AND ASSETS HELD FOR SALE

Neurovascular Divestiture

On January 3, 2011, we closed the sale of our Neurovascular business to Stryker Corporation for a purchase price of $1.5 billion, payable in cash. We received $1.450 billion at closing, including an upfront payment of $1.426 billion, and $24 million which was placed into escrow to be released upon the completion of local closings in certain foreign jurisdictions, and will receive $50 million contingent upon the transfer or separation of certain manufacturing facilities, which we expect will be completed over a period of approximately 24 months. We are providing transitional services to Stryker through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of up to 24 months, subject to extension. Due to our continuing involvement in the operations of the Neurovascular business, the divestiture does not meet the criteria for presentation as a discontinued operation. We acquired the Neurovascular business in 1997 with our acquisition of Target Therapeutics. The 2010 revenues generated by the Neurovascular business were $340 million, or approximately four percent of our consolidated net sales.

In accordance with ASC Topic 360-10-45, Impairment or Disposal of Long-lived Assets, we reclassified as of the October 28, 2010 announcement date, and have presented separately, the assets of the Neurovascular business as ‘assets held for sale’ in the accompanying consolidated balance sheets. As of the announcement date, we ceased amortization and depreciation of the assets to be transferred. Pursuant to the divestiture agreement, Stryker did not assume any liabilities recorded as of the closing date associated with the Neurovascular business. The assets held for sale included in the accompanying consolidated balance sheets attributable to the divestiture consist of the following:

	As of December 31,
(in millions)	2010		2009
Inventories	$	30	$	29
Property, plant and equipment, net		4		4
Goodwill		478		468
Other intangible assets, net		59		64
	$	571	$	565

We also reclassified to ‘assets held for sale’ certain property, plant and equipment that we intend to sell within the next twelve months having a net book value of $5 million as of December 31, 2010 and $13 million as of December 31, 2009. The assets classified as ‘held for sale’ in our accompanying consolidated balance sheets, excluding goodwill and intangible assets, which we do not allocate to our reportable segments, are primarily located in the U.S. and Ireland, and were previously included in our U.S. and EMEA reportable segments.

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Other Divestitures

In 2008, we completed the sale of certain non-strategic businesses for gross proceeds of approximately $1.3 billion. We sold a controlling interest in our Auditory business and drug pump development program, acquired with Advanced Bionics Corporation in 2004, to entities affiliated with the principal former shareholders of Advanced Bionics for an aggregate purchase price of $150 million in cash. Under the terms of the agreement, we retained an equity interest in the limited liability company formed for purposes of operating the Auditory business and, in 2009, received proceeds of $40 million from the subsequent sale of this investment. In addition, we sold our Cardiac Surgery and Vascular Surgery businesses to the Getinge Group for net cash proceeds of approximately $700 million. We acquired the Cardiac Surgery business in April 2006 with our acquisition of Guidant Corporation and acquired the Vascular Surgery business in 1995. Further, we sold our Fluid Management and Venous Access businesses to Navilyst Medical (affiliated with Avista Capital Partners) for net cash proceeds of approximately $400 million, and recorded a gain of $234 million during 2008 associated with the transaction. We acquired the Fluid Management business as part of our acquisition of Schneider Worldwide in 1998. Further, we sold our Endovascular Aortic Repair program obtained in connection with our 2005 acquisition of TriVascular, Inc. for $30 million in cash, and recorded a gain of $16 million during 2008 associated with the transaction.

NOTE D – GOODWILL AND OTHER INTANGIBLE ASSETS

The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated write-offs of goodwill as of December 31, 2010 and 2009 is as follows:

	As of December 31, 2010					As of December 31, 2009
			Accumulated					Accumulated
	Gross Carrying		Amortization/			Gross Carrying		Amortization/
(in millions)	Amount		Write-offs			Amount		Write-offs
Amortizable intangible assets
Technology - core	$	6,658	$	(1,424	)	$	6,490	$	(1,107	)
Technology - developed		1,026		(966	)		1,013		(798	)
Patents		527		(309	)		543		(304	)
Other intangible assets		808		(325	)		805		(266	)
		9,019		(3,024	)		8,851		(2,475	)
Unamortizable intangible assets
Goodwill		14,616		(4,430	)		14,549		(2,613	)
Technology - core		291					291
In-process research and development		57
	$	14,964	$	(4,430	)	$	14,840	$	(2,613	)

2010 Goodwill Impairment Charge

We test our April 1 goodwill balances during the second quarter of each year for impairment, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The ship hold and product removal actions associated with our U.S. implantable cardioverter defibrillator (ICD) and cardiac resynchronization therapy defibrillator (CRT-D) products, which we announced on March 15, 2010, described in Item 7 of this Annual Report, and the expected corresponding financial impact on our operations created an indication of potential impairment of the goodwill balance attributable to our U.S. Cardiac Rhythm Management (CRM) reporting unit. Therefore, we performed an interim impairment test in accordance with our accounting policies described in Note A – Significant Accounting Policies, and recorded a $1.848 billion, on both a pre-tax and after-tax basis, goodwill impairment charge associated with our U.S. CRM reporting unit. Due to the timing of the product actions and the procedures required to complete the two step goodwill impairment test, the goodwill impairment charge was an estimate, which we finalized in the second quarter of 2010. During the second quarter of 2010, we recorded a $31 million reduction of the charge, resulting in a final goodwill impairment charge of $1.817 billion. This charge does not impact our compliance with our debt covenants or our cash flows.

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At the time we performed our interim goodwill impairment test, we estimated that our U.S. defibrillator market share would decrease approximately 400 basis points exiting 2010 as a result of the ship hold and product removal actions, as compared to our market share exiting 2009, and that these actions would negatively impact our 2010 U.S. CRM revenues by approximately $300 million. In addition, we expected that our on-going U.S. CRM net sales and profitability would likely continue to be adversely impacted as a result of the ship hold and product removal actions. Therefore, as a result of these product actions, as well as lower expectations of market growth in new areas and increased competitive and other pricing pressures, we lowered our estimated average U.S. CRM net sales growth rates within our 15-year discounted cash flow (DCF) model, as well as our terminal value growth rate, by approximately a couple of hundred basis points to derive the fair value of the U.S. CRM reporting unit. The reduction in our forecasted 2010 U.S. CRM net sales, the change in our expected sales growth rates thereafter and the reduction in profitability as a result of the recently enacted excise tax on medical device manufacturers, discussed in Item 7 of this Annual Report, were several key factors contributing to the impairment charge. Partially offsetting these factors was a 50 basis point reduction in our estimated market-participant risk-adjusted weighted-average cost of capital (WACC) used in determining our discount rate.

In the second quarter of 2010, we performed our annual goodwill impairment test for all of our reporting units. We updated our U.S. CRM assumptions to reflect our market share position at that time, our most recent operational budgets and long range strategic plans. In conjunction with our annual test, the fair value of each reporting unit exceeded its carrying value, with the exception of our U.S. CRM reporting unit. Based on the remaining book value of our U.S. CRM reporting unit following the goodwill impairment charge, the carrying value of our U.S. CRM reporting unit continues to exceed its fair value, due primarily to the book value of amortizable intangible assets allocated to this reporting unit. The remaining book value of our amortizable intangible assets which have been allocated to our U.S. CRM reporting unit is approximately $3.5 billion as of December 31, 2010. We tested these amortizable intangible assets for impairment on an undiscounted cash flow basis as of March 31, 2010, and determined that these assets were not impaired, and there have been no impairment indicators related to these assets subsequent to the performance of that test. The assumptions used in our annual goodwill impairment test related to our U.S. CRM reporting unit were substantially consistent with those used in our first quarter interim impairment test.

In the fourth quarter of 2010, we performed an interim impairment test on our international reporting units as a result of the announced divestiture of our Neurovascular business, discussed in Note C – Divestitures and Assets Held for Sale. As part of the divestment, we allocated a portion of our goodwill from our international reporting units to the Neurovascular business being sold. We then tested each of our international reporting units for impairment in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Our testing did not identify any reporting units whose carrying values exceeded the calculated fair values. However, the level of excess fair value over carrying value for our EMEA region is approximately six percent, a decrease from 14 percent in the second quarter.

Goodwill Impairment Monitoring

We have identified a total of four reporting units with a material amount of goodwill that are at higher risk of potential failure of the first step of the impairment test in future reporting periods. These reporting units include our U.S. CRM unit, which holds $1.5 billion of allocated goodwill, our U.S. Cardiovascular unit, which holds $2.2 billion of allocated goodwill, our U.S. Neuromodulation unit, which holds $1.2 billion of allocated goodwill, and our EMEA region, which holds $3.9 billion of allocated goodwill. The level of excess fair value over carrying value for these reporting units identified as being at higher risk (with the exception of the U.S. CRM reporting unit, whose carrying value continues to exceed its fair value) ranged from approximately six percent to 23 percent. On a quarterly basis, we monitor the key drivers of fair value for these reporting units to detect events or other changes that would warrant an interim impairment test. The key variables that drive the cash flows of our reporting units are estimated revenue growth rates, levels of profitability and perpetual growth rate assumptions, as well as the WACC. These assumptions are subject to uncertainty, including our ability to grow revenue and improve profitability levels. For each of these reporting units, relatively small declines in the future performance and cash flows of the reporting unit or small changes in other key assumptions may result in the recognition of significant goodwill impairment charges. For example, keeping all other variables constant, a 50 basis point increase in the WACC applied would require that we perform the second step of the goodwill impairment test for

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our U.S. CRM, U.S. Neuromodulation, and EMEA reporting units. In addition, keeping all other variables constant, a 100 basis point decrease in perpetual growth rates would require that we perform the second step of the goodwill impairment test for all four of the reporting units with higher risk of impairment. The estimates used for our future cash flows and discount rates are our best estimates and we believe they are reasonable, but future declines in the business performance of our reporting units may impair the recoverability of our goodwill. Future events that could have a negative impact on the fair value of the reporting units include, but are not limited to:

• decreases in estimated market sizes or market growth rates due to greater-than-expected pricing pressures, product actions, product sales mix, disruptive technology developments, government cost containment initiatives and healthcare reforms, and/or other economic conditions;

• declines in our market share and penetration assumptions due to increased competition, an inability to develop or launch new products, and market and/or regulatory conditions that may cause significant launch delays or product recalls;

• declines in revenue as a result of loss of key members of our sales force and other key personnel;

• negative developments in intellectual property litigation that may impact our ability to market certain products or increase our costs to sell certain products;

• adverse legal decisions resulting in significant cash outflows;

• increases in the research and development costs necessary to obtain regulatory approvals and launch new products, and the level of success of on-going and future research and development efforts;

• decreases in our profitability due to an inability to successfully implement and achieve timely and sustainable cost improvement measures consistent with our expectations, increases in our market-participant tax rate, and/or changes in tax laws;

• increases in our market-participant risk-adjusted WACC; and

• changes in the structure of our business as a result of future reorganizations or divestitures of assets or businesses.

Negative changes in one or more of these factors could result in additional impairment charges.

2008 Goodwill Impairment Charge

During the fourth quarter of 2008, the decline in our stock price and our market capitalization created an indication of potential impairment of our goodwill balance. Therefore, we performed an interim impairment test and recorded a $2.613 billion goodwill impairment charge associated with our U.S. CRM reporting unit. As a result of economic conditions and the related increase in volatility in the equity and credit markets, which became more pronounced starting in the fourth quarter of 2008, our estimated risk-adjusted WACC increased 150 basis points from 9.5 percent during our 2008 second quarter annual goodwill impairment assessment to 11.0 percent during our 2008 fourth quarter interim impairment assessment. This change, along with reductions in market demand for products in our U.S. CRM reporting unit relative to our assumptions at the time of the Guidant acquisition, were the key factors contributing to the impairment charge. At the time we acquired the CRM business from Guidant Corporation in 2006, we expected average U.S. CRM net sales growth rates in the mid-teens; however, due to changes in end market demand, we reduced our estimates of average U.S. CRM sales growth rates to the mid-to-high single digits. Our estimated risk-adjusted market-participant WACC decreased 50 basis points from 11.0 percent during our 2008 fourth quarter interim impairment assessment to 10.5 percent

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during our 2009 second quarter annual goodwill impairment assessment, and our other significant assumptions remained largely consistent. Our 2009 goodwill impairment test did not identify any reporting units whose carrying values exceeded estimated fair values. See Note A – Significant Accounting Policies for further discussion of our policies and methodologies related to goodwill impairment testing.

Other Intangible Asset Impairment Charges

During 2010, due to lower than anticipated net sales of one of our Peripheral Interventions technology offerings, as well as changes in our expectations of future market acceptance of this technology, we lowered our sales forecasts associated with the product. In addition, as part of our initiatives to reprioritize and diversify our product portfolio, we discontinued one of our internal research and development programs to focus on those with a higher likelihood of success. As a result of these factors, and in accordance with our accounting policies described in Note A, we tested the related intangible assets for impairment and recorded intangible asset impairment charges of $65 million to write down the balance of these intangible assets to their fair values. We have recorded these amounts in the intangible asset impairment charges caption in our accompanying consolidated statements of operations.

During 2009, we recorded $12 million of intangible asset impairment charges to write down the value of certain intangible assets to their fair value, due primarily to lower than anticipated market penetration of one of our Urology technology offerings.

During 2008, we reduced our future revenue and cash flow forecasts associated with certain of our Peripheral Interventions-related intangible assets, primarily as a result of a recall of one of our products. Therefore, we tested these intangible assets for impairment, and determined that these assets were impaired, resulting in a $131 million charge to write down these intangible assets to their fair value. Further, as a result of significantly lower than forecasted sales of certain of our Urology products, due to lower than anticipated market penetration, we determined that certain of our Urology-related intangible assets were impaired, resulting in a $46 million impairment charge to write down these intangible assets to their fair value.

The intangible asset category and associated write downs recorded in 2010, 2009 and 2008 were as:

	Year Ended December 31,
(in millions)	2010		2009		2008
Technology - developed	$	18
Technology - core		47	$	10	$	126
Other intangible assets				2		51
	$	65	$	12	$	177

Estimated amortization expense for each of the five succeeding fiscal years based upon our intangible asset portfolio as of December 31, 2010 is as follows:

	Estimated
	Amortization
	Expense
Fiscal Year	(in millions)
2011	$	430
2012		385
2013		371
2014		367
2015		366

Our core technology that is not subject to amortization represents technical processes, intellectual property and/or institutional understanding acquired through business combinations that is fundamental to the on-going operations of our business and has no limit to its useful life. Our core technology that is not subject to

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amortization is comprised primarily of certain purchased stent and balloon technology, which is foundational to our continuing operations within the Cardiovascular market and other markets within interventional medicine. We test our indefinite-lived intangible assets at least annually for impairment and reassess their classification as indefinite-lived assets. Our 2009 impairment test did not identify any indefinite-lived intangible assets whose carrying value exceeded its estimated fair value. We amortize all other core technology over its estimated useful life.

Goodwill as of December 31, 2010 as allocated to our U.S., EMEA, Japan, and Inter-Continental reportable segments for purposes of our goodwill impairment testing is presented below. Our U.S. goodwill is further allocated to our U.S. reporting units for our goodwill testing in accordance with Topic 350. The following is a rollforward of our goodwill balance by reportable segment:

										Inter-
(in millions)	United States			EMEA			Japan			Continental			Total
Balance as of January 1, 2009	$	7,160		$	4,073		$	597		$	591		$	12,421
Purchase price adjustments		(21	)		(6	)								(27	)
Goodwill acquired		2			1						1			4
Contingent consideration		6												6
Goodwill reclassified to assets held for sale*		(164	)		(193	)		(48	)		(63	)		(468	)
Balance as of December 31, 2009	$	6,983		$	3,875		$	549		$	529		$	11,936
Purchase price adjustments		1			(2	)		(1	)		(1	)		(3	)
Goodwill acquired		22			44			3			4			73
Contingent consideration		7												7
Goodwill written off		(1,817	)											(1,817	)
Adjustments to goodwill classified as held for sale		(7	)		(2	)					(1	)		(10	)
Balance as of December 31, 2010	$	5,189		$	3,915		$	551		$	531		$	10,186

* As of December 31, 2010, in conjunction with the January 2011 sale of our Neurovascular business, we present separately the assets of the disposal group, including the related goodwill, as ‘assets held for sale’ within our accompanying consolidated balance sheets. The 2009 reclassification and balances as of December 31, 2009 are presented are for comparative purposes and were not classified as held for sale at that date. Refer to Note C – Divestitures and Assets Held for Sale for more information regarding this transaction, and for the major classes of assets, including goodwill, classified as held for sale.

The 2009 and 2010 purchase price adjustments related primarily to adjustments in taxes payable and deferred income taxes, including changes in the liability for unrecognized tax benefits.

The following is a rollforward of accumulated goodwill write-offs by reportable segment:

						Inter-
(in millions)	United States			EMEA	Japan	Continental	Total
Accumulated write-offs as of January 1, 2009	$	(2,613	)				$	(2,613	)
Goodwill written off								–
Accumulated write-offs as of December 31, 2009		(2,613	)					(2,613	)
Goodwill written off		(1,817	)					(1,817	)
Accumulated write-offs as of December 31, 2010	$	(4,430	)				$	(4,430	)

NOTE E – FAIR VALUE MEASUREMENTS

Derivative Instruments and Hedging Activities

We develop, manufacture and sell medical devices globally and our earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments, and operate the program pursuant to documented corporate risk management policies. We recognize all derivative financial instruments in

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our consolidated financial statements at fair value in accordance with FASB ASC Topic 815, Derivatives and Hedging (formerly FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities). In accordance with Topic 815, for those derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Our derivative instruments do not subject our earnings or cash flows to material risk, as gains and losses on these derivatives generally offset losses and gains on the item being hedged. We do not enter into derivative transactions for speculative purposes and we do not have any non-derivative instruments that are designated as hedging instruments pursuant to Topic 815.

Currency Hedging

We are exposed to currency risk consisting primarily of foreign currency denominated monetary assets and liabilities, forecasted foreign currency denominated intercompany and third-party transactions and net investments in certain subsidiaries. We manage our exposure to changes in foreign currency on a consolidated basis to take advantage of offsetting transactions. We use both derivative instruments (currency forward and option contracts), and non-derivative transactions (primarily European manufacturing and distribution operations) to reduce the risk that our earnings and cash flows associated with these foreign currency denominated balances and transactions will be adversely affected by currency exchange rate changes.

Designated Foreign Currency Hedges

All of our designated currency hedge contracts outstanding as of December 31, 2010 and December 31, 2009 were cash flow hedges under Topic 815 intended to protect the U.S. dollar value of our forecasted foreign currency denominated transactions. We record the effective portion of any change in the fair value of foreign currency cash flow hedges in other comprehensive income (OCI) until the related third-party transaction occurs. Once the related third-party transaction occurs, we reclassify the effective portion of any related gain or loss on the foreign currency cash flow hedge to earnings. In the event the hedged forecasted transaction does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. We had currency derivative instruments designated as cash flow hedges outstanding in the contract amount of $2.679 billion as of December 31, 2010 and $2.760 billion as of December 31, 2009.

We recognized net losses of $30 million in earnings on our cash flow hedges during 2010, as compared to net gains of $4 million during 2009 and net losses of $67 million during 2008. All currency cash flow hedges outstanding as of December 31, 2010 mature within 36 months. As of December 31, 2010, $71 million of net losses, net of tax, were recorded in accumulated other comprehensive income (AOCI) to recognize the effective portion of the fair value of any currency derivative instruments that are, or previously were, designated as foreign currency cash flow hedges, as compared to net losses of $44 million as of December 31, 2009. As of December 31, 2010, $47 million of net losses, net of tax, may be reclassified to earnings within the next twelve months.

The success of our hedging program depends, in part, on forecasts of transaction activity in various currencies (primarily Japanese yen, Euro, British pound sterling, Australian dollar and Canadian dollar). We may experience unanticipated currency exchange gains or losses to the extent that there are differences between forecasted and actual activity during periods of currency volatility. In addition, changes in currency exchange rates related to any unhedged transactions may impact our earnings and cash flows.

During 2009, we directed our EMEA sales offices to converge differing operating structures to a consistent limited risk distribution sales structure beginning in the third quarter of 2010. This change impacted our EMEA transaction flow and effectively moved our foreign exchange risk from third-party sales to intercompany sales. While the convergence has not had a significant impact on the magnitude of foreign currency exposure, we de-designated certain cash flow hedges of third-party sales. We reclassified net losses of $5 million from AOCI to current earnings during 2009 related to these de-designated cash flow hedges.

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Non-designated Foreign Currency Contracts

We use currency forward contracts as a part of our strategy to manage exposure related to foreign currency denominated monetary assets and liabilities. These currency forward contracts are not designated as cash flow, fair value or net investment hedges under Topic 815; are marked-to-market with changes in fair value recorded to earnings; and are entered into for periods consistent with currency transaction exposures, generally one to six months. We had currency derivative instruments not designated as hedges under Topic 815 outstanding in the contract amount of $2.398 billion as of December 31, 2010 and $1.982 billion as of December 31, 2009.

Interest Rate Hedging

Our interest rate risk relates primarily to U.S. dollar borrowings, partially offset by U.S. dollar cash investments. We use interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates by converting floating-rate debt into fixed-rate debt or fixed-rate debt into floating-rate debt.

We designate these derivative instruments either as fair value or cash flow hedges under Topic 815. We record changes in the value of fair value hedges in interest expense, which is generally offset by changes in the fair value of the hedged debt obligation. Interest payments made or received related to our interest rate derivative instruments are included in interest expense. We record the effective portion of any change in the fair value of derivative instruments designated as cash flow hedges as unrealized gains or losses in OCI, net of tax, until the hedged cash flow occurs, at which point the effective portion of any gain or loss is reclassified to earnings. We record the ineffective portion of our cash flow hedges in interest expense. In the event the hedged cash flow does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time. During 2009, our interest rate derivative instruments either matured as scheduled or were terminated in connection with the prepayment of our bank term loan, discussed further in Note G – Borrowings and Credit Arrangements. We recognized $27 million of losses within interest expense during 2009 due to the early termination of these interest rate contracts. We had no interest rate derivative instruments outstanding as of December 31, 2010 or December 31, 2009. In the first quarter of 2011, we entered interest rate derivative contracts having a notional amount of $850 million to convert fixed-rate debt into floating-rate debt, which we have designated as fair value hedges.

In prior years we terminated certain interest rate derivative instruments, including fixed-to-floating interest rate contracts, designated as fair value hedges, and floating-to-fixed treasury locks, designated as cash flow hedges. In accordance with Topic 815, we are amortizing the gains and losses of these derivative instruments upon termination into earnings over the term of the hedged debt. The carrying amount of certain of our senior notes included unamortized gains of $2 million as of December 31, 2010 and $3 million as of December 31, 2009, and unamortized losses of $5 million as of December 31, 2010 and $8 million as of December 31, 2009, related to the fixed-to-floating interest rate contracts. We recognized approximately $2 million of interest expense during 2010 and 2009 related to these derivative instruments. In addition, we had pre-tax net gains within AOCI related to terminated floating-to-fixed treasury locks of $8 million as of December 31, 2010 and $11 million as of December 31, 2009. We recognized approximately $3 million as a reduction of interest expense during 2010 and $2 million as a reduction in interest expense related to these derivative instruments during 2009. As of December 31, 2010, $5 million of net gains, net of tax, are recorded in AOCI to recognize the effective portion of these instruments, as compared to $7 million of net gains as of December 31, 2009. As of December 31, 2010, an immaterial amount of net gains, net of tax, may be reclassified to earnings within the next twelve months from amortization of our previously terminated interest rate derivative instruments.

During 2010, we recognized in earnings an immaterial amount of net gains related to our previously terminated interest rate derivative contracts. During 2009, we recognized in earnings $70 million of net losses, inclusive of the $27 million of interest rate contract termination losses described above, related to our interest rate derivative instruments, including previously terminated interest rate derivative contracts. During 2008, we recognized in earnings $20 million of net losses related to our interest rate contracts.

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Counterparty Credit Risk

We do not have significant concentrations of credit risk arising from our derivative financial instruments, whether from an individual counterparty or a related group of counterparties. We manage our concentration of counterparty credit risk on our derivative instruments by limiting acceptable counterparties to a diversified group of major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to each counterparty, and by actively monitoring their credit ratings and outstanding fair values on an on-going basis. Furthermore, none of our derivative transactions are subject to collateral or other security arrangements and none contain provisions that are dependent on our credit ratings from any credit rating agency.

We also employ master netting arrangements that reduce our counterparty payment settlement risk on any given maturity date to the net amount of any receipts or payments due between us and the counterparty financial institution. Thus, the maximum loss due to credit risk by counterparty is limited to the unrealized gains in such contracts net of any unrealized losses should any of these counterparties fail to perform as contracted. Although these protections do not eliminate concentrations of credit, as a result of the above considerations, we do not consider the risk of counterparty default to be significant.

Fair Value of Derivative Instruments

The following presents the effect of our derivative instruments designated as cash flow hedges under Topic 815 on our accompanying consolidated statements of operations during 2010 and 2009:

				Amount of Pre-
	Amount of Pre-			tax Gain (Loss)				Amount of Pre-tax Gain
	tax Gain (Loss)			Reclassified from				(Loss) Recognized in
	Recognized in			AOCI into				Earnings on Ineffective
	OCI			Earnings				Portion and Amount
	(Effective			(Effective			Location in Statement of	Excluded from			Location in Statement of
(in millions)	Portion)			Portion)			Operations	Effectiveness Testing*			Operations
Year Ended December 31, 2010
Interest rate contracts				$	3		Interest expense
Currency hedge contracts	$	(74	)		(30	)	Cost of products sold
	$	(74	)	$	(27	)
Year Ended December 31, 2009
Interest rate contracts	$	(24	)	$	(41	)	Interest expense	$	(27	)	Interest expense	**
Currency hedge contracts		(57	)		9		Cost of products sold		(5	)	Cost of products sold	***
	$	(81	)	$	(32	)		$	(32	)

* Other than described in **, the amount of gain (loss) recognized in earnings related to the ineffective portion of hedging relationships was de minimis in 2010 and 2009.

** We prepaid $2.825 billion of our term loan debt in 2009 and recognized ineffectiveness of $27 million on interest rate swaps for which there was no longer an underlying exposure.

*** Represents amount reclassified from AOCI to earnings in 2009 related to de-designated cash flow hedges.

		Amount of Gain (Loss) Recognized
	Location	in Earnings (in millions)
Derivatives Not Designated as	in Statement of	Year Ended December 31,
Hedging Instruments	Operations	2010			2009
Currency hedge contracts	Other, net	$	(77	)
Currency hedge contracts	Cost of products sold				$	(1	)
		$	(77	)	$	(1	)

Losses and gains on currency hedge contracts not designated as hedged instruments were substantially offset by net gains from foreign currency transaction exposures of $68 million during 2010, and $5 million during 2009. As a result, we recorded net foreign currency losses of $9 million during 2010 and $5 million during 2009, within other, net in our accompanying consolidated financial statements.

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Topic 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative instruments using the framework prescribed by ASC Topic 820, Fair Value Measurements and Disclosures (formerly FASB Statement No. 157, Fair Value Measurements), by considering the estimated amount we would receive to sell or transfer these instruments at the reporting date and by taking into account current interest rates, currency exchange rates, the creditworthiness of the counterparty for assets, and our creditworthiness for liabilities. In certain instances, we may utilize financial models to measure fair value. Generally, we use inputs that include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; other observable inputs for the asset or liability; and inputs derived principally from, or corroborated by, observable market data by correlation or other means. As of December 31, 2010, we have classified all of our derivative assets and liabilities within Level 2 of the fair value hierarchy prescribed by Topic 820, as discussed below, because these observable inputs are available for substantially the full term of our derivative instruments.

The following are the balances of our derivative assets and liabilities as of December 31, 2010 and December 31, 2009:

		As of December 31,
(in millions)	Location in Balance Sheet (1)	2010		2009
Derivative Assets:
Designated Hedging Instruments
Currency hedge contracts	Prepaid expenses and other current assets	$	32	$	20
Currency hedge contracts	Other long-term assets		27		12
			59		32
Non-Designated Hedging Instruments
Currency hedge contracts	Prepaid expenses and other current assets		23		24
Total Derivative Assets		$	82	$	56
Derivative Liabilities:
Designated Hedging Instruments
Currency hedge contracts	Other current liabilities	$	87	$	64
Currency hedge contracts	Other long-term liabilities		71		29
			158		93
Non-Designated Hedging Instruments
Currency hedge contracts	Other current liabilities		31		17
Total Derivative Liabilities		$	189	$	110

(1) We classify derivative assets and liabilities as current when the remaining term of the derivative contract is one year or less.

Other Fair Value Measurements

Recurring Fair Value Measurements

On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices, where available. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:

• Level 1 – Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.

• Level 2 – Inputs to the valuation methodology are other observable inputs, including quoted market

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	prices for similar assets or liabilities and market-corroborated inputs.
•	Level 3 – Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk.

Our investments in money market funds are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Our money market funds are classified as cash and cash equivalents within our accompanying consolidated balance sheets, in accordance with our accounting policies.

Assets and liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2010 and 2009:

	As of December 31, 2010								As of December 31, 2009
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3	Total
Assets
Money market funds	$	105					$	105	$	405				$	405
Currency hedge contracts			$	82				82				56			56
	$	105	$	82			$	187	$	405	$	56		$	461
Liabilities
Currency hedge contracts			$	189			$	189			$	110		$	110
Accrued contingent consideration					$	71		71
			$	189	$	71	$	260			$	110		$	110

In addition to $105 million invested in money market and government funds as of December 31, 2010, we had $16 million of cash invested in short-term time deposits, and $92 million in interest bearing and non-interest bearing bank accounts. In addition to $405 million invested in money market and government funds as of December 31, 2009, we had $346 million of cash invested in short-term time deposits, and $113 million in interest bearing and non-interest bearing bank accounts.

Changes in the fair value of recurring fair value measurements using significant unobservable inputs (Level 3) during the year ended December 31, 2010 were as follows (in millions):

Balance as of December 31, 2009
Contingent consideration liability recorded	$	(69	)
Fair value adjustment		(2	)
Balance as of December 31, 2010	$	(71	)

Non-Recurring Fair Value Measurements

We hold certain assets and liabilities that are measured at fair value on a non-recurring basis in periods subsequent to initial recognition. The fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. The aggregate carrying amount of our cost method investments was $43 million as of December 31, 2010 and $58 million as of December 31, 2009.

During 2010, we recorded $1.882 billion of impairment charges to adjust our goodwill and certain intangible assets to their fair values, and $16 million of losses to write down certain cost method investments to their fair values, because we deemed the decline in the values of the investments to be other-than-temporary. We wrote down goodwill attributable to our U.S. CRM reporting unit, discussed in Note D – Goodwill and Other Intangible Assets, with a carrying amount of $3.296 billion to its estimated fair value of $1.479 billion, resulting in a write-down of $1.817 billion. In addition, we recorded a loss of $60 million to write down certain of our Peripheral Interventions intangible assets, discussed in Note D, to their estimated fair values of $14 million; and a loss of $5 million, discussed in Note D, to write off the remaining value associated with certain other intangible assets. These adjustments fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs

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to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our most recent operational budgets, long range strategic plans and other estimates.

The fair value of our outstanding debt obligations was $5.654 billion as of December 31, 2010 and $6.111 billion as of December 31, 2009, which was determined by using primarily quoted market prices for our publicly registered senior notes, classified as Level 1 within the fair value hierarchy. Refer to Note G – Borrowings and Credit Arrangements for a discussion of our debt obligations.

NOTE F – INVESTMENTS AND NOTES RECEIVABLE

We have historically entered a significant number of alliances with publicly traded and privately held entities in order to broaden our product technology portfolio and to strengthen and expand our reach into existing and new markets. During 2007, we announced our intent to sell the majority of our investment portfolio in order to monetize those investments determined to be non-strategic. In June 2008, we signed definitive agreements with Saints Capital and Paul Capital Partners to sell the majority of our investments in, and notes receivable from, certain publicly traded and privately held entities for gross proceeds of approximately $140 million. In connection with these agreements, we received proceeds of $95 million in 2008, and an additional $45 million in 2009. In addition, we received proceeds of $46 million in 2009 and $54 million in 2008 from other transactions to monetize certain other non-strategic investments.

In 2010, we recorded gains of $4 million and other-than-temporary impairments of $16 million associated with our investment portfolio. Gains and losses associated with our investments and notes receivable are recorded in other, net within our consolidated statements of operations. As of December 31, 2010, we held investments with a book value of $7 million that we accounted for under the equity method of accounting. The aggregate carrying amount of our cost method investments was $43 million as of December 31, 2010.

In 2009, we recorded gains of $23 million and other-than-temporary impairments of $14 million associated with our investment portfolio. In addition, we recorded losses of $6 million associated with our equity method investments. As of December 31, 2009, we held investments with a book value of $8 million that we accounted for under the equity method of accounting. The aggregate carrying amount of our cost method investments was $58 million as of December 31, 2009.

In 2008, we recorded other-than-temporary impairments of $130 million associated with our investment portfolio, and gains of $52 million related to the sale of non-strategic investments. The other-than-temporary impairments included $127 million related to non-strategic investments and notes receivable which we had sold or intended to sell, and $3 million related to our strategic equity investments. We also recognized other costs of $5 million associated with the Saints and Paul agreements. We recorded losses of $10 million, reported in other, net, in our accompanying consolidated statements of operations associated with our equity method investments.

We had notes receivable from certain portfolio companies of approximately $40 million as of December 31, 2010 and 2009.

NOTE G – BORROWINGS AND CREDIT ARRANGEMENTS

We had total debt of $5.438 billion as of December 31, 2010 and $5.918 billion as of December 31, 2009. During the second quarter of 2010, we refinanced the majority of our 2011 debt obligations, including the establishment of a new $1.0 billion three-year, senior unsecured term loan facility, and used $900 million of the proceeds to prepay in full our loan due to Abbott Laboratories without any premium or penalty. During 2010, we also prepaid all $600 million of our senior notes due June 2011. The following are the components of our debt obligations as of December 31, 2010 and 2009:

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	As of December 31,
(in millions)	2010			2009
Term loan	$	250
Senior notes		250
Other		4		$	3
Current debt obligations		504			3
Term loan		750
Abbott loan					900
Senior notes		4,200			5,050
Fair value adjustment (1)					(5	)
Discounts		(17	)		(32	)
Other		1			2
Long-term debt obligations		4,934			5,915
	$	5,438		$	5,918

(1) Represents net unamortized losses related to interest rate contracts to hedge the fair value of certain of our senior notes. See
Note E - Fair Value Measurements for further discussion regarding the accounting treatment for these contracts.

The debt maturity schedule for the significant components of our debt obligations as of December 31, 2010 is as follows:

(in millions)	2011		2012		2013		2014		2015		Thereafter		Total
Term loan	$	250	$	50	$	700							$	1,000
Senior notes		250					$	600	$	1,250	$	2,350		4,450
	$	500	$	50	$	700	$	600	$	1,250	$	2,350	$	5,450

Note: The table above does not include discounts associated with our senior notes, or amounts related to interest rate contracts used to hedge the fair value of certain of our senior notes.

Term Loan and Revolving Credit Facility

Our term loan facility requires quarterly principal payments of $50 million commencing in the third quarter of 2011, with the remaining principal amount due at the credit facility maturity date, currently June 2013, with up to two one-year extension options subject to certain conditions. However, in January 2011, we prepaid $250 million of these obligations using borrowings from our credit and security facility discussed below, and, accordingly, have presented the full prepayment within 2011 above, as well as within ‘current debt obligations’ in our accompanying consolidated balance sheets. As a result, quarterly principal payments of $50 million will commence in the fourth quarter of 2012. Term loan borrowings bear interest at LIBOR plus an interest margin of between 1.75 percent and 3.25 percent, based on our corporate credit ratings (currently 2.75 percent).

In the second quarter of 2010, we syndicated a new $2.0 billion revolving credit facility, maturing in June 2013, with up to two one-year extension options subject to certain conditions, to replace our existing $1.75 billion revolving credit facility maturing in April 2011. Any revolving credit facility borrowings bear interest at LIBOR plus an interest margin of between 1.55 percent and 2.625 percent, based on our corporate credit ratings (currently 2.25 percent). In addition, we are required to pay a facility fee based on our credit ratings and the total amount of revolving credit commitments, regardless of usage, under the agreement (currently 0.50 percent per year). Any borrowings under the revolving credit facility are unrestricted and unsecured. There were no amounts borrowed under our revolving credit facilities as of December 31, 2010 or December 31, 2009.

In connection with our 2009 patent litigation settlement with Johnson & Johnson discussed in Note L – Commitments and Contingencies, we borrowed $200 million against our revolving credit facility during the first quarter of 2010 to

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fund a portion of the settlement, and subsequently repaid these borrowings during the quarter without any premium or penalty. Further, in February 2010, we posted a $745 million letter of credit under our credit facility as collateral for the remaining Johnson & Johnson obligation. In August 2010, we prepaid the remaining Johnson & Johnson obligation of $725 million, plus interest, using cash on hand and cancelled the related letter of credit. We now have full access to our $2.0 billion revolving credit facility to support operational needs. As of December 31, 2010, we had outstanding letters of credit of $120 million, as compared to $123 million as of December 31, 2009, which consisted primarily of bank guarantees and collateral for workers’ compensation insurance arrangements. As of December 31, 2010 and 2009, none of the beneficiaries had drawn upon the letters of credit or guarantees; accordingly, we have not recognized a related liability for our outstanding letters of credit in our consolidated balance sheets as of December 31, 2010 or 2009. We believe we will generate sufficient cash from operations to fund these payments and intend to fund these payments without drawing on the letters of credit.

Our revolving credit facility agreement requires that we maintain certain financial covenants, as follows:

		Actual as of
	Covenant	December 31,
	Requirement	2010
Maximum leverage ratio (1)	3.85 times	2.3 times
Minimum interest coverage ratio (2)	3.0 times	6.1 times

(1)	Ratio of total debt to consolidated EBITDA, as defined by the agreement, for the preceding four consecutive fiscal quarters. Requirement decreases to 3.5 times after March 31, 2011.
(2)	Ratio of consolidated EBITDA, as defined by the agreement, to interest expense for the preceding four consecutive fiscal quarters.

The credit agreement provides for an exclusion from the calculation of consolidated EBITDA, as defined by the agreement, through the credit agreement maturity, of up to $258 million in restructuring charges and restructuring-related expenses related to our previously-announced restructuring plans, plus an additional $300 million for any future restructuring initiatives. As of December 31, 2010, we had $470 million of the restructuring charge exclusion remaining. In addition, any litigation-related charges and credits are excluded from the calculation of consolidated EBITDA until such items are paid or received; as well as up to $1.5 billion of any future cash payments for future litigation settlements or damage awards (net of any litigation payments received); and litigation-related cash payments (net of cash receipts) of up to $1.310 billion related to amounts that were recorded in the financial statements as of March 31, 2010. As of December 31, 2010, we had $2.154 billion of the legal payment exclusion remaining.

As of and through December 31, 2010, we were in compliance with the required covenants. Our inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facilities or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would grant such waivers.

Abbott Loan

In April 2006, we borrowed $900 million from Abbott Laboratories. During 2010, we prepaid this loan in full with no penalty or premium. The loan from Abbott bore interest at a fixed 4.0 percent rate, payable semi-annually. We determined that an appropriate fair market interest rate on the loan from Abbott was 5.25 percent per annum. We recorded the loan at a discount of approximately $50 million at the inception of the loan and recorded interest at an imputed rate of 5.25 percent over the term of the loan. Upon repayment of the loan, we accelerated the recognition of the remaining unamortized discount of $10 million through interest expense. There was no remaining unamortized discount as of December 31, 2010, and $14 million as of December 31, 2009.

Senior Notes

We had senior notes outstanding of $4.450 billion as of December 31, 2010 and $5.050 billion as of December 31, 2009. These notes are publicly registered securities, are redeemable prior to maturity and are not subject to any sinking fund requirements. Our senior notes are unsecured, unsubordinated obligations and rank on a parity

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with each other. These notes are effectively junior to borrowings under our credit and security facility and liabilities of our subsidiaries. In December 2010, we prepaid $600 million of senior notes maturing in June 2011 and, at maturity in January 2011, paid $250 million of our senior notes. Our senior notes consist of the following as of December 31, 2010:

	Amount		Issuance		Semi-annual
	(in millions)		Date	Maturity Date	Coupon Rate
January 2011 Notes	$	250	November 2004	January 2011		4.250	%
June 2014 Notes		600	June 2004	June 2014		5.450	%
January 2015 Notes		850	December 2009	January 2015		4.500	%
November 2015 Notes		400	November 2005	November 2015		5.500	%
June 2016 Notes		600	June 2006	June 2016		6.400	%
January 2017 Notes		250	November 2004	January 2017		5.125	%
January 2020 Notes		850	December 2009	January 2020		6.000	%
November 2035 Notes		350	November 2005	November 2035		6.250	%
January 2040 Notes		300	December 2009	January 2040		7.375	%
	$	4,450

Rating changes throughout 2010, 2009 and 2008 had no impact on the interest rates associated with our senior notes. Our $2.0 billion of senior notes issued in 2009 contain a change-in-control provision, which provides that each holder of the senior notes may require us to repurchase all or a portion of the notes at a price equal to 101 percent of the aggregate repurchased principal, plus accrued and unpaid interest, if a rating event, as defined in the indenture, occurs as a result of a change-in-control, as defined in the indenture. Any other credit rating changes may impact our borrowing cost, but do not require us to repay any borrowings. Subsequent rating improvements may result in a decrease in the adjusted interest rate to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2015 and November 2035 Notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher.

Other Arrangements

We also maintain a $350 million credit and security facility secured by our U.S. trade receivables, maturing in August 2011, subject to extension. Use of any borrowed funds is unrestricted. Borrowing availability under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. Certain significant changes in the quality of our receivables may require us to repay borrowings immediately under the facility. The credit agreement required us to create a wholly-owned entity, which we consolidate. This entity purchases our U.S. trade accounts receivable and then borrows from two third-party financial institutions using these receivables as collateral. The receivables and related borrowings remain on our consolidated balance sheets because we have the right to prepay any borrowings and effectively retain control over the receivables. Accordingly, pledged receivables are included as trade accounts receivable, net, while the corresponding borrowings are included as debt on our consolidated balance sheets. There were no amounts borrowed under this facility as of December 31, 2010 or 2009. In January 2011, we borrowed $250 million under this facility and used the proceeds to prepay $100 million of term loan borrowings maturing in 2011 and $150 million of term loan borrowings maturing in 2012.

In addition, we have accounts receivable factoring programs in certain European countries that we account for as sales under ASC Topic 860, Transfers and Servicing. These agreements provide for the sale of accounts receivable to third parties, without recourse, of up to approximately 300 million Euro (translated to approximately $400 million as of December 31, 2010). We have no retained interests in the transferred receivables, other than collection and administrative responsibilities and, once sold, the accounts are no longer available to satisfy creditors in the event of bankruptcy. We de-recognized $363 million of receivables as of December 31, 2010 at an average interest rate of 2.0 percent, and $318 million as of December 31, 2009 at an average interest rate of 2.0 percent. Further, we have uncommitted credit facilities with two commercial Japanese banks that provide for borrowings and promissory notes discounting of up to 18.5 billion Japanese yen (translated to approximately $226 million as of December 31,

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2010). We discounted $197 million of notes receivable as of December 31, 2010 at an average interest rate of 1.7 percent, and $194 million of notes receivable as of December 31, 2009 at an average interest rate of 1.6 percent. Discounted and de-recognized accounts and notes receivable are excluded from trade accounts receivable in the accompanying consolidated balance sheets. The purpose of each of these programs is to provide us with additional liquidity.

NOTE H – LEASES

Rent expense amounted to $92 million in 2010, $102 million in 2009, and $92 million in 2008.

Our obligations under noncancelable capital leases were not material as of December 31, 2010 and 2009. Future minimum rental commitments as of December 31, 2010 under other noncancelable lease agreements are as follows (in millions):

2011	$	83
2012		69
2013		46
2014		24
2015		15
Thereafter		45
	$	282

NOTE I – RESTRUCTURING-RELATED ACTIVITIES

On an on-going basis, we monitor the dynamics of the economy, the healthcare industry, and the markets in which we compete; and we continue to assess opportunities for improved operational effectiveness and efficiency, and better alignment of expenses with revenues, while preserving our ability to make the investments in research and development projects, capital and our people that are essential to our long-term success. As a result of these assessments, we have undertaken various restructuring initiatives in order to enhance our growth potential and position us for long-term success. These initiatives are described below.

In October 2007, our Board of Directors approved, and we committed to, an expense and head count reduction plan (the 2007 Restructuring plan). The plan was intended to bring expenses in line with revenues as part of our initiatives to enhance short- and long-term shareholder value. Key activities under the plan included the restructuring of several businesses, corporate functions and product franchises in order to better utilize resources, strengthen competitive positions, and create a more simplified and efficient business model; the elimination, suspension or reduction of spending on certain research and development projects; and the transfer of certain production lines among facilities. We initiated these activities in the fourth quarter of 2007. The transfer of certain production lines contemplated under the 2007 Restructuring plan was completed as of December 31, 2010; all other major activities under the plan, with the exception of final production line transfers, were completed as of December 31, 2009.

The execution of this plan resulted in total pre-tax expenses of $427 million and required cash outlays of $380 million, of which we have paid $370 million to date. We recorded a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of total costs associated with the plan by major type of cost:

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Type of cost	Total amount incurred
Restructuring charges:
Termination benefits	$204 million
Fixed asset write-offs	$31 million
Other (1)	$67 million
Restructuring-related expenses:
Retention incentives	$66 million
Accelerated depreciation	$16 million
Transfer costs (2)	$43 million
	$427 million

(1)	Consists primarily of consulting fees, contractual cancellations, relocation costs and other costs.
(2)	Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight and product line validations.

In addition, in January 2009, our Board of Directors approved, and we committed to, a Plant Network Optimization program, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The program is a complement to our 2007 Restructuring plan, and is intended to improve overall gross profit margins. Activities under the Plant Network Optimization program were initiated in the first quarter of 2009 and are expected to be substantially complete by the end of 2012.

We expect that the execution of the Plant Network Optimization program will result in total pre-tax charges of approximately $135 million to $150 million, and that approximately $115 million to $125 million of these charges will result in cash outlays, of which we have made payments of $40 million to date. We have recorded related costs of $79 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of our estimates of costs associated with the Plant Network Optimization program by major type of cost:

	Total estimated amount expected to
Type of cost	be incurred
Restructuring charges:
Termination benefits	$30 million to $35 million
Restructuring-related expenses:
Accelerated depreciation	$20 million to $25 million
Transfer costs (1)	$85 million to $90 million
	$135 million to $150 million

(1) Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight, idle facility and product line validations.

Further, on February 6, 2010, our Board of Directors approved, and we committed to, a series of management changes and restructuring initiatives (the 2010 Restructuring plan) designed to focus our business, drive innovation, accelerate profitable growth and increase both accountability and shareholder value. Key activities under the plan include the integration of our Cardiovascular and CRM businesses, as well as the restructuring of certain other businesses and corporate functions; the centralization of our research and development organization; the re-alignment of our international structure to reduce our administrative costs and invest in expansion opportunities including significant investments in emerging markets; and the reprioritization and diversification of our product portfolio. Activities under the 2010 Restructuring plan were initiated in the first quarter of 2010 and are expected to be substantially complete by the end of 2012.

We estimate that the 2010 Restructuring plan will result in total pre-tax charges of approximately $180 million to $200 million, and that approximately $165 million to $175 million of these charges will result in cash outlays, of which we have made payments of $69 million to date. We have recorded related costs of $110 million since

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inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. We expect the execution of the plan will result in the elimination of approximately 1,000 to 1,300 positions by the end of 2012. The following provides a summary of our expected total costs associated with the plan by major type of cost:

	Total estimated amount expected to
Type of cost	be incurred
Restructuring charges:
Termination benefits	$95 million to $100 million
Fixed asset write-offs	$10 million to $15 million
Other (1)	$55 million to $60 million
Restructuring-related expenses:
Other (2)	$20 million to $25 million
	$180 million to $200 million

(1)	Includes primarily consulting fees and costs associated with contractual cancellations.
(2)	Comprised of other costs directly related to restructuring plan, including accelerated depreciation and infrastructure-related costs.

We recorded restructuring charges pursuant to our restructuring plans of $116 million during 2010, $63 million during 2009, and $78 million during 2008. In addition, we recorded expenses within other lines of our accompanying consolidated statements of operations related to our restructuring initiatives of $53 million during 2010, $67 million during 2009, and $55 million during 2008. The following presents these costs by major type and line item within our accompanying consolidated statements of operations, as well as by program:

Year Ended December 31, 2010

	Termination		Retention	Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives	Depreciation		Costs		Write-offs		Other		Total
Restructuring charges	$	70						$	11	$	35	$	116
Restructuring-related expenses:
Cost of products sold				$	7	$	41						48
Selling, general and administrative expenses											5		5
Research and development expenses
					7		41				5		53
	$	70		$	7	$	41	$	11	$	40	$	169

	Termination		Retention	Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives	Depreciation		Costs		Write-offs		Other		Total
2010 Restructuring plan	$	66						$	11	$	33	$	110
Plant Network Optimization program		4		$	7	$	28						39
2007 Restructuring plan							13				7		20
	$	70		$	7	$	41	$	11	$	40	$	169

Year Ended December 31, 2009

	Termination		Retention		Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives		Depreciation		Costs		Write-offs		Other		Total
Restructuring charges	$	34							$	13	$	16	$	63
Restructuring-related expenses:
Cost of products sold			$	5	$	8	$	37						50
Selling, general and administrative expenses				10		3						1		14
Research and development expenses				3										3
				18		11		37				1		67
	$	34	$	18	$	11	$	37	$	13	$	17	$	130

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	Termination		Retention		Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives		Depreciation		Costs		Write-offs		Other		Total
Plant Network Optimization program	$	22			$	6	$	12					$	40
2007 Restructuring plan		12		18		5		25	$	13	$	17		90
	$	34	$	18	$	11	$	37	$	13	$	17	$	130

Year Ended December 31, 2008

	Termination		Retention		Accelerated		Transfer		Fixed Asset
(in millions)	Benefits		Incentives		Depreciation		Costs		Write-offs		Other		Total
Restructuring charges	$	34							$	10	$	34	$	78
Restructuring-related expenses:
Cost of products sold			$	9	$	4	$	4						17
Selling, general and administrative expenses				27		4								31
Research and development expenses				7										7
				43		8		4						55
	$	34	$	43	$	8	$	4	$	10	$	34	$	133

Restructuring and restructuring-related costs recorded in 2008 related entirely to our 2007 Restructuring plan.

Termination benefits represent amounts incurred pursuant to our on-going benefit arrangements and amounts for one-time involuntary termination benefits, and have been recorded in accordance with ASC Topic 712, Compensation – Non-retirement Postemployment Benefits (formerly FASB Statement No. 112, Employer’s Accounting for Postemployment Benefits) and ASC Topic 420, Exit or Disposal Cost Obligations (formerly FASB Statement 146, Accounting for Costs Associated with Exit or Disposal Activities). We expect to record additional termination benefits related to our Plant Network Optimization program and 2010 Restructuring plan in 2011 and 2012 when we identify with more specificity the job classifications, functions and locations of the remaining head count to be eliminated. Retention incentives represent cash incentives, which were recorded over the service period during which eligible employees remained employed with us in order to retain the payment. Other restructuring costs, which represent primarily consulting fees, are being recorded as incurred in accordance with Topic 420. Accelerated depreciation is being recorded over the adjusted remaining useful life of the related assets, and production line transfer costs are being recorded as incurred.

We have incurred cumulative restructuring charges of $433 million and restructuring-related costs of $183 million since we committed to each plan. The following presents these costs by major type and by plan:

	2010		Plant		2007
	Restructuring		Network		Restructuring
(in millions)	plan		Optimization		plan		Total
Termination benefits	$	66	$	26	$	204	$	296
Fixed asset write-offs		11				31		42
Other		28				67		95
Restructuring charges		105		26		302		433
Retention incentives						66		66
Accelerated depreciation				13		16		29
Transfer costs				40		43		83
Other		5						5
Restructuring-related expenses		5		53		125		183
	$	110	$	79	$	427	$	616

The following is a rollforward of the restructuring liability associated with each of these initiatives, since the inception of the respective plan, which is reported as a component of accrued expenses included in our accompanying consolidated balance sheets:

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										Plant
										Network
	2010 Restructuring plan									Optimization		2007 Restructuring plan
	Termination									Termination		Termination
(in millions)	Benefits			Other			Subtotal			Benefits		Benefits			Other			Subtotal			Total
Charges												$	158		$	10		$	168		$	168
Cash payments													(23	)		(8	)		(31	)		(31	)
Accrued as of December 31, 2007													135			2			137			137
Charges													34			34			68			68
Cash payments													(128	)		(35	)		(163	)		(163	)
Accrued as of December 31, 2008													41			1			42			42
Charges										$	22		12			17			29			51
Cash payments													(28	)		(18	)		(46	)		(46	)
Accrued as of December 31, 2009											22		25			-			25			47
Charges	$	66		$	28		$	94			4		3			6			9			107
Other adjustments to accruals													(3	)					(3	)		(3	)
Cash payments		(45	)		(20	)		(65	)				(16	)		(5	)		(21	)		(86	)
Accrued as of December 31, 2010	$	21		$	8		$	29		$	26	$	9		$	1		$	10		$	65

We made total cash payments associated with restructuring initiatives pursuant to these plans of $133 million during 2010 and have made total cash payments of $479 million since committing to each plan. Each of these payments was made using cash generated from operations, and are comprised of the following:

	2010		Plant		2007
	Restructuring		Network		Restructuring
(in millions)	plan		Optimization		plan		Total
Year Ended December 31, 2010
Termination benefits	$	45			$	16	$	61
Retention incentives						2		2
Transfer costs			$	28		13		41
Other		24				5		29
	$	69	$	28	$	36	$	133
Program to Date
Termination benefits	$	45			$	195	$	240
Retention incentives						66		66
Transfer costs			$	40		43		83
Other		24				66		90
	$	69	$	40	$	370	$	479

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NOTE J – SUPPLEMENTAL BALANCE SHEET INFORMATION

Components of selected captions in our accompanying consolidated balance sheets are as follows:

	As of December 31,
(in millions)	2010			2009
Trade accounts receivable, net
Accounts receivable	$	1,445		$	1,485
Less: allowances		(125	)		(110	)
	$	1,320		$	1,375

Inventories
Finished goods	$	622	$	642
Work-in-process		95		69
Raw materials		177		180
	$	894	$	891

Property, plant and equipment, net
Land	$	119	$	118
Buildings and improvements		919		923
Equipment, furniture and fixtures		1,889		1,934
Capital in progress		241		271
		3,168		3,246
Less: accumulated depreciation		1,471		1,524
	$	1,697	$	1,722

	As of December 31,
(in millions)		2010		2009
Accrued expenses
Legal reserves	$	441	$	1,453
Payroll and related liabilities		436		472
Accrued contingent consideration		9		6
Other		740		678
	$	1,626	$	2,609

Other long-term liabilities
Legal reserves	$	147	$	863
Accrued income taxes		1,062		857
Accrued contingent consideration		62
Other long-term liabilities		374		344
	$	1,645	$	2,064

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NOTE K – INCOME TAXES

Our (loss) income before income taxes consisted of the following:

	Year Ended December 31,
(in millions)	2010			2009			2008
Domestic	$	(1,910	)	$	(1,102	)	$	(3,018	)
Foreign		847			(206	)		987
	$	(1,063	)	$	(1,308	)	$	(2,031	)

The related provision (benefit) for income taxes consisted of the following:

	Year Ended December 31,
(in millions)	2010		2009		2008
Current
Federal	$	(83)	$	(173)	$	110
State		9		(18)		27
Foreign		125		(2)		189
		51		(193)		326
Deferred
Federal		(25)		(115)		(279)
State		(4)		(15)		(20)
Foreign		(20)		40		(22)
		(49)		(90)		(321)
	$	2	$	(283)	$	5

The reconciliation of income taxes at the federal statutory rate to the actual provision (benefit)  for income taxes is as follows:

	Year Ended December 31,
	2010			2009			2008
U.S. federal statutory income tax rate		(35.0)	%		(35.0)	%		(35.0)	%
State income taxes, net of federal benefit		0.3	%					0.4	%
State law changes on deferred tax					(2.4)	%
Effect of foreign taxes		(20.4)	%		(20.0)	%		(5.9)	%
Non-deductible acquisition expenses					0.5	%		0.5	%
Research credit		(6.0)	%		(1.3)	%		(0.5)	%
Valuation allowance		2.5	%		5.1	%		2.9	%
Divestitures					(4.8)	%		(9.9)	%
Goodwill impairment charges		59.8	%					45.0	%
Intangible asset impairment charges								1.5	%
Legal settlement					33.3	%
Other, net		(1.0)	%		3.0	%		1.2	%
		0.2	%		(21.6)	%		0.2	%

We had net deferred tax liabilities of $1.198 billion as of December 31, 2010 and $1.281 billion as of December 31, 2009. Gross deferred tax liabilities of $2.281 billion as of December 31, 2010 and $2.382 billion as of December 31, 2009 relate primarily to intangible assets acquired in connection with our prior acquisitions. Gross deferred tax assets of $1.083 billion as of December 31, 2010 and $1.101 billion as of December 31, 2009 relate primarily to the establishment of inventory and product-related reserves, litigation and product liability reserves, purchased research and development, investment write-downs, net operating loss carryforwards and tax credit carryforwards. In light of our historical financial performance and the extent of our deferred tax liabilities, we believe we will recover substantially all of these assets.

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We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will not realize some portion or all of the deferred tax assets. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Significant components of our deferred tax assets and liabilities are as follows:

	As of December 31,
(in millions)	2010			2009
Deferred Tax Assets:
Inventory costs, intercompany profit and related reserves	$	207		$	176
Tax benefit of net operating loss and credits		593			385
Reserves and accruals		253			260
Restructuring-related charges and purchased research and development		17			1
Litigation and product liability reserves		66			323
Unrealized gains and losses on derivative financial instruments		39			25
Investment write-down		32			33
Stock-based compensation		90			92
Federal benefit of uncertain tax positions		132			129
Other		11			6
		1,440			1,430
Less valuation allowance		(357	)		(329	)
		1,083			1,101
Deferred Tax Liabilities:
Property, plant and equipment		47			57
Intangible assets		2,227			2,298
Litigation settlement					24
Other		7			3
		2,281			2,382
Net Deferred Tax Liabilities	$	1,198		$	1,281

Our deferred tax assets and liabilities are included in the following locations within our accompanying consolidated balance sheets (in millions):

	Location in	As of December 31,
Component	Balance Sheet	2010		2009
Current deferred tax asset	Deferred income taxes	$	429	$	572
Non-current deferred tax asset	Other long-term assets		19		24
Deferred Tax Assets			448		596
Current deferred tax liability	Other current liabilities		2		2
Non-current deferred tax liability	Deferred income taxes		1,644		1,875
Deferred Tax Liabilities			1,646		1,877
Net Deferred Tax Liabilities		$	1,198	$	1,281

As of December 31, 2010, we have U.S. tax net operating loss, capital loss and tax credits, the tax effect of which was $252 million, as compared to $261 million as of December 31, 2009. In addition, we have foreign tax net operating loss carryforwards and tax credits, the tax effect of which was $341 million as of December 31, 2010, as compared to $334 million as of December 31, 2009. These tax attributes will expire periodically beginning in 2011. After consideration of all positive and negative evidence, we believe that it is more likely than not that a portion of the deferred tax assets will not be realized. As a result, we established a valuation allowance of $357 million as of December 31, 2010 and $329 million as of December 31, 2009. The increase in the valuation allowance as of

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December 31, 2010, as compared to December 31, 2009, is attributable primarily to foreign net operating losses generated during the year. The income tax impact of the unrealized gain or loss component of other comprehensive income was a benefit of $16 million in 2010, a benefit of $4 million in 2009, and a provision of $1 million in 2008.

We do not provide income taxes on unremitted earnings of our foreign subsidiaries where we have indefinitely reinvested such earnings in our foreign operations. We do not believe it is practical to estimate the amount of income taxes payable on the earnings that are indefinitely reinvested in foreign operations. Unremitted earnings of our foreign subsidiaries that we have indefinitely reinvested in foreign operations are $9.193 billion as of December 31, 2010 and $9.355 billion as of December 31, 2009.

As of December 31, 2010, we had $965 million of gross unrecognized tax benefits, of which net $859 million, if recognized, would affect our effective tax rate. As of December 31, 2009, we had $1.038 billion of gross unrecognized tax benefits, of which net $908 million, exclusive of interest and penalties, if recognized, would affect our effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):

	Year Ended December 31,
	2010			2009			2008
Beginning Balance	$	1,038		$	1,107		$	1,180
Additions based on positions related to the current year		55			31			128
Additions based on positions related to the prior year		44			17			48
Reductions for tax positions of prior years		(124	)		(32	)		(161	)
Settlements with taxing authorities		(35	)		(65	)		(82	)
Statute of limitation expirations		(13	)		(20	)		(6	)
Ending Balance	$	965		$	1,038		$	1,107

We are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. We have concluded all U.S. federal income tax matters through 2000 and substantially all material state, local, and foreign income tax matters through 2001. We resolved a number of foreign examinations during 2010. As a result of these activities, we decreased our reserve for uncertain tax positions by $9 million, inclusive of $3 million of interest and penalties. In addition, as a result of the expiration of statutes of limitations in various foreign and state jurisdictions, we decreased our reserve for uncertain tax positions by $20 million, inclusive of $7 million of interest and penalties. Further, during 2010, we concluded the appeals process for the federal tax examination for Boston Scientific (excluding Guidant) covering years 2002-2005 and decreased our reserve for uncertain tax positions by $72 million, inclusive of $21 million of interest and penalties, net of payments. We also re-measured an uncertain tax position due to a favorable court ruling issued in a similar third-party case and resolved another uncertain tax position resulting from a favorable taxpayer motion issued in a similar third-party case, which resulted in a decrease of $91 million inclusive of $25 million of interest and penalties.

During 2009, we received favorable foreign court decisions and resolved certain foreign matters. As a result of these activities, we decreased our reserve for uncertain tax positions by $20 million, inclusive of $7 million of interest and penalties. In addition, statutes of limitations expired in various foreign and state jurisdictions, as a result, decreased our reserve for uncertain tax positions by $29 million, inclusive of interest and penalties. We also resolved certain litigation-related matters, described our 2009 Annual Report filed on Form 10-K. Based on the outcome of the settlements, we reassessed the reserve for uncertain tax positions previously recorded on certain positions and decreased our reserve by $22 million, inclusive of $1 million of interest.

During 2008, we resolved certain matters in federal, state, and foreign jurisdictions for Guidant and Boston Scientific for the years 1998- 2005. We settled multiple federal issues at the Internal Revenue Service (IRS) examination and Appellate levels, including issues related to Guidant’s acquisition of Intermedics, Inc., and various litigation settlements. We also received favorable foreign court decisions and a favorable outcome related to our foreign research credit claims. As a result of these audit activities, we decreased our reserve for uncertain tax positions, excluding tax payments, by $156 million, inclusive of $37 million of interest and penalties during 2008.

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On December 17, 2010, we received Notices of Deficiency from the IRS reflecting proposed audit adjustments for Guidant Corporation for the 2001-2003 tax years. The incremental tax liability asserted by the IRS is $525 million plus interest. The primary issue in dispute is the transfer pricing in connection with the technology license agreements between domestic and foreign subsidiaries of Guidant. We believe we have meritorious defenses for our tax filing and we intend to file a petition to the U.S. Tax Court in early 2011. No payments will be made on the issue until it is resolved, which may take several years. We believe that our income tax reserves associated with this matter are adequate and the final resolution will not have a material impact on our financial condition or results of operations. However, final resolution is uncertain and could have a material impact on our financial condition or results of operation.

We recognize interest and penalties related to income taxes as a component of income tax expense. We had $285 million accrued for gross interest and penalties as of December 31, 2010 and $299 million as of December 31, 2009. The decrease in gross interest and penalties was the result of a $72 million reduction, due primarily to the conclusion of the appeals process for the federal tax examination covering years 2002-2005, payments related to audit settlements, re-measurement and resolution of uncertain tax positions due to favorable court rulings and favorable taxpayer motion issued in similar third-party cases, and statute expirations, offset by $58 million recognized in our consolidated statements of operations. We released $14 million of total interest and penalties related to income taxes in 2010, and recognized $31 million in 2009 and $4 million in 2008.

It is reasonably possible that within the next 12 months we will resolve multiple issues including transfer pricing, research and development credit and transactional related issues, with foreign, federal and state taxing authorities, in which case we could record a reduction in our balance of unrecognized tax benefits of up to approximately $14 million.

NOTE L – COMMITMENTS AND CONTINGENCIES

The medical device market in which we primarily participate is largely technology driven. Physician customers, particularly in interventional cardiology, have historically moved quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation is inherently complex and unpredictable. Furthermore, appellate courts can overturn lower court patent decisions.

In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only for individual cases, but also for a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies. Several third parties have asserted that certain of our current and former product offerings infringe patents owned or licensed by them. We have similarly asserted that other products sold by our competitors infringe patents owned or licensed by us. Adverse outcomes in one or more of the proceedings against us could limit our ability to sell certain products in certain jurisdictions, or reduce our operating margin on the sale of these products and could have a material adverse effect on our financial position, results of operations or liquidity.

In particular, although we have resolved multiple litigation matters with Johnson & Johnson, described herein, we continue to be involved in patent litigation with them, particularly relating to drug-eluting stent systems. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operation or liquidity.

In the normal course of business, product liability, securities and commercial claims are asserted against us. Similar claims may be asserted against us in the future related to events not known to management at the present time. We are substantially self-insured with respect to product liability claims and intellectual property

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infringement, and maintain an insurance policy providing limited coverage against securities claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, securities and commercial litigation, and other legal proceedings in the future, regardless of their outcome, could have a material adverse effect on our financial position, results of operations and liquidity. In addition, the medical device industry is the subject of numerous governmental investigations often involving regulatory, marketing and other business practices. These investigations could result in the commencement of civil and criminal proceedings, substantial fines, penalties and administrative remedies, divert the attention of our management and have an adverse effect on our financial position, results of operations and liquidity.

We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. In accordance with ASC Topic 450, Contingencies (formerly FASB Statement No. 5, Accounting for Contingencies), we accrue anticipated costs of settlement, damages, losses for general product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range.

Our accrual for legal matters that are probable and estimable was $588 million as of December 31, 2010 and $2.316 billion as of December 31, 2009, and includes estimated costs of settlement, damages and defense. The decrease in our accrual is due primarily to the payment of $1.725 billion to Johnson & Johnson in connection with the patent litigation settlement discussed below. We continue to assess certain litigation and claims to determine the amounts, if any, that management believes will be paid as a result of such claims and litigation and, therefore, additional losses may be accrued and paid in the future, which could materially adversely impact our operating results, cash flows and our ability to comply with our debt covenants.

In management’s opinion, we are not currently involved in any legal proceedings other than those specifically identified below, which, individually or in the aggregate, could have a material effect on our financial condition, operations and/or cash flows. Unless included in our legal accrual or otherwise indicated below, a range of loss associated with any individual material legal proceeding cannot be estimated.

Patent Litigation

Litigation with Johnson & Johnson (including its subsidiary, Cordis Corporation)

On April 13, 1998, Cordis Corporation filed suit against Boston Scientific Scimed, Inc. and us in the U.S. District Court for the District of Delaware, alleging that our former NIR^® stent infringed three claims of two patents (the Fischell patents) owned by Cordis and seeking damages and injunctive relief. On May 2, 2005, the District Court entered judgment that none of the three asserted claims was infringed, although two of the claims were not invalid. The District Court also found the two patents unenforceable for inequitable conduct. Cordis appealed the non-infringement finding of one claim in one patent and the unenforceability of that patent. We cross appealed the finding that one of the two claims was not invalid. Cordis did not appeal as to the second patent. On June 29, 2006, the Court of Appeals upheld the finding that the claim was not invalid, remanded the case to the District Court for additional factual findings related to inequitable conduct, and did not address the finding that the claim was not infringed. On August 10, 2009, the District Court reversed its finding that the two patents were unenforceable for inequitable conduct. On August 24, 2009, we asked the District Court to reconsider and on March 31, 2010, the District Court denied our request for reconsideration. On April 2, 2010, Cordis filed an appeal and on April 9, 2010, we filed a cross appeal.

On each of May 25, June 1, June 22 and November 27, 2007, Boston Scientific Scimed, Inc. and we filed a declaratory judgment action against Johnson & Johnson and Cordis Corporation in the U.S. District Court for the District of Delaware seeking a declaratory judgment of invalidity of four U.S. patents (the Wright and Falotico patents) owned by them and of non-infringement of the patents by the PROMUS® coronary stent system, supplied to us by Abbott Laboratories. On February 21, 2008, Johnson & Johnson and Cordis filed counterclaims for infringement seeking an injunction and a declaratory judgment of validity. On June 25, 2009, we amended our

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complaints to allege that the four patents owned by Johnson & Johnson and Cordis are unenforceable. On January 20, 2010, the District Court found the four patents owned by Johnson & Johnson and Cordis invalid. On February 17, 2010, Johnson & Johnson and Cordis appealed the District Court’s decision. The oral argument on appeal occurred on January 11, 2011.

On February 1, 2008, Wyeth Corporation and Cordis Corporation filed an amended complaint against Abbott Laboratories, adding us and Boston Scientific Scimed, Inc. as additional defendants to the complaint. The suit alleges that the PROMUS® coronary stent system, supplied to us by Abbott, infringes three U.S. patents (the Morris patents) owned by Wyeth and licensed to Cordis. The suit was filed in the U.S. District Court for the District of New Jersey seeking monetary and injunctive relief. A Markman hearing was held on July 15, 2010. On November 3, 2010, the District Court granted a motion to bifurcate damages from liability in the case. A liability trial is scheduled to begin September 12, 2011. On January 7, 2011, Wyeth and Cordis withdrew their infringement claim as to one of the patents.

On September 22, 2009, Cordis Corporation, Cordis LLC and Wyeth Corporation filed a complaint for patent infringement against Abbott Laboratories, Abbott Cardiovascular Systems, Inc., Boston Scientific Scimed, Inc. and us alleging that the PROMUS® coronary stent system, supplied to us by Abbott, infringes a patent (the Llanos patent) owned by Cordis and Wyeth that issued on September 22, 2009. The suit was filed in the U.S. District Court for the District of New Jersey seeking monetary and injunctive relief. On September 22, 2009, we filed a declaratory judgment action in the U.S. District Court for the District of Minnesota against Cordis and Wyeth seeking a declaration that the patent is invalid and not infringed by the PROMUS® coronary stent system, supplied to us by Abbott. On January 19, 2010, the Minnesota District Court transferred our suit to the U.S. District Court for the District of New Jersey and on February 17, 2010, the Minnesota case was dismissed. On July 13, 2010, Cordis filed a motion to amend the complaint to add an additional patent, which the New Jersey District Court granted on August 2, 2010. Cordis filed an amended complaint on August 9, 2010. On September 3, 2010 we filed an answer to the amended complaint along with counterclaims of invalidity and non-infringement.

On December 4, 2009, Boston Scientific Corporation and Boston Scientific Scimed, Inc. filed a complaint for patent infringement against Cordis Corporation alleging that its Cypher Mini™ stent product infringes a U.S. patent (the Jang patent) owned by us. The suit was filed in the U.S. District Court for the District of Minnesota seeking monetary and injunctive relief. On January 19, 2010, Cordis filed its answer as well as a motion to transfer the suit to the U.S. District Court for the District of Delaware. On April 16, 2010, the Minnesota District Court granted Cordis’ motion to transfer the case to Delaware. A trial has been scheduled to begin on May 5, 2011.

On January 15, 2010, Cordis Corporation filed a complaint against us and Boston Scientific Scimed, Inc. alleging that the PROMUS® coronary stent system, supplied to us by Abbott, infringes three patents (the Fischell patents) owned by Cordis. The suit was filed in the U.S. District Court for the District of Delaware and seeks monetary and injunctive relief. A trial is scheduled to begin on April 9, 2012.

Litigation with Medtronic, Inc.

On December 17, 2007, Medtronic, Inc. filed a declaratory judgment action in the U.S. District Court for the District of Delaware against us, Guidant Corporation, and Mirowski Family Ventures L.L.C., challenging its obligation to pay royalties to Mirowski on certain cardiac resynchronization therapy devices by alleging non-infringement and invalidity of certain claims of two patents owned by Mirowski and exclusively licensed to Guidant and sublicensed to Medtronic. On November 21, 2008, Medtronic filed an amended complaint adding unenforceability of the patents. A trial was held in January 2010 and a decision has not yet been rendered.

Other Stent System Patent Litigation

On May 19, 2005, G. David Jang, M.D. filed suit against us alleging breach of contract relating to certain patent rights covering stent technology. The suit was filed in the U.S. District Court for the Central District of California seeking monetary damages and rescission of the contract. After a Markman ruling relating to the Jang patent rights, Dr. Jang stipulated to the dismissal of certain claims alleged in the complaint with a right to appeal. In February 2007, the parties agreed to settle the other claims of the case. On May 23, 2007, Jang filed an appeal with

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respect to the remaining patent claims. On July 11, 2008, the Court of Appeals vacated the District Court’s consent judgment and remanded the case back to the District Court for further clarification. On June 11, 2009, the District Court ordered a stay of the action pursuant to the parties’ joint stipulation.

On October 5, 2009, Dr. Jang served a lien notice on us seeking a portion of any recovery from Johnson & Johnson for infringement of the Jang patent, and on May 25, 2010, Dr. Jang filed a formal suit in the U.S. District Court for the Central District of California. On June 5, 2010, we answered denying the allegations and on July 2, 2010, we filed a motion to transfer the action to the U.S. District Court for the District of Delaware. On August 9, 2010, the Central California District Court ordered the case transferred to Delaware.

On March 16, 2009, OrbusNeich Medical, Inc. filed suit against us in the U.S. District Court for the Eastern District of Virginia alleging that our VeriFLEX™ (Liberté®) bare-metal coronary stent system infringes two U.S. patents (the Addonizio and Pazienza patents) owned by it. The complaint also alleges breach of contract and misappropriation of trade secrets and seeks monetary and injunctive relief. On April 13, 2009, we answered denying the allegations and filed a motion to transfer the case to the U.S. District Court for the District of Minnesota as well as a motion to dismiss the state law claims. On June 8, 2009, the case was transferred to the U.S. District Court for the District of Massachusetts. On September 11, 2009, OrbusNeich filed an amended complaint against us. On October 2, 2009, we filed a motion to dismiss the non-patent claims and, on October 20, 2009, we filed an answer to the amended complaint. On March 18, 2010, the Massachusetts District Court dismissed OrbusNeich’s unjust enrichment and fraud claims, but denied our motion to dismiss the remaining state law claims. On April 14, 2010, OrbusNeich filed a motion to amend its complaint to add another patent (another Addonizio patent). On January 21, 2011, OrbusNeich moved for leave to amend its complaint to drop its misappropriation of trade secret, violation of Massachusetts Business Practices Act and unfair competition claims from the case.

On November 17, 2009, Boston Scientific Scimed, Inc. filed suit against OrbusNeich Medical, Inc. and certain of its subsidiaries in the Hague District Court in the Netherlands alleging that OrbusNeich’s sale of the Genous stents infringes a patent owned by us (the Keith patent) and seeking monetary damages and injunctive relief. A hearing was held on June 18, 2010. In December 2010, the case was stayed pending the outcome of an earlier case on the same patent.

On September 27, 2010, Boston Scientific Scimed, Inc., Boston Scientific Ltd., Endovascular Technologies, Inc. and we filed suit against Taewoong Medical, Co., Ltd., Standard Sci-Tech, Inc., EndoChoice, Inc. and Sewoon Medical Co., Ltd for infringement of three patents on stents for use in the GI system (the Pulnev and Hankh patents) and against Cook Medical Inc. (and related entities) for infringement of the same three patents and an additional patent (the Thompson patent). The suit was filed in the U.S. District Court for the District of Massachusetts seeking monetary damages and injunctive relief. On December 2, 2010, we amended our complaint to add infringement of six additional Pulnev patents, bringing the total number of asserted patents to ten. In January 2011, the defendants answered the complaint, denying infringement and counterclaiming for invalidity and unenforceability of the asserted patents.

Other Patent Litigation

On August 24, 2010, EVM Systems, LLC filed suit against us, Cordis Corporation, Abbott Laboratories Inc. and Abbott Vascular, Inc. in the U.S. District Court for the Eastern District of Texas alleging that our vena cava filters, including the Escape Nitinol Stone Retrieval Device, infringe two patents (the Sachdeva patents) and seeking monetary damages.

On May 17, 2010, Dr. Luigi Tellini filed suit against us and certain of our subsidiaries, Guidant Italia S.r.l. and Boston Scientific S.p.A., in the Civil Tribunal in Milan, Italy alleging certain of our Cardiac Rhythm Management (CRM) products infringe an Italian patent (the Tellini patent) owned by Dr. Tellini and seeking monetary damages. We filed our response on October 26, 2010. During a hearing on November 16, 2010, Dr. Tellini’s claims were dismissed with a right to refile amended claims. Dr. Tellini refiled amended claims on January 10, 2011.

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Product Liability Related Litigation

Cardiac Rhythm Management

Two product liability class action lawsuits and more than 37 individual lawsuits involving approximately 37 individual plaintiffs remain pending in various state and federal jurisdictions against Guidant alleging personal injuries associated with defibrillators or pacemakers involved in certain 2005 and 2006 product communications. The majority of the cases in the United States are pending in federal court but approximately seven cases are currently pending in state courts. On November 7, 2005, the Judicial Panel on Multi-District Litigation established MDL-1708 (MDL) in the U.S. District Court for the District of Minnesota and appointed a single judge to preside over all the cases in the MDL. In April 2006, the personal injury plaintiffs and certain third-party payors served a Master Complaint in the MDL asserting claims for class action certification, alleging claims of strict liability, negligence, fraud, breach of warranty and other common law and/or statutory claims and seeking punitive damages. The majority of claimants do not allege physical injury, but sue for medical monitoring and anxiety. On July 12, 2007, we reached an agreement to settle certain claims, including those associated with the 2005 and 2006 product communications, which was amended on November 19, 2007. Under the terms of the amended agreement, subject to certain conditions, we would pay a total of up to $240 million covering up to 8,550 patient claims, including almost all of the claims that have been consolidated in the MDL as well as other filed and unfiled claims throughout the United States. On June 13, 2006, the Minnesota Supreme Court appointed a single judge to preside over all Minnesota state court lawsuits involving cases arising from the product communications. At the conclusion of the MDL settlement in 2010, 8,180 claims had been approved for participation. As a result, we made all required settlement payments of approximately $234 million, and no other payments are due under the MDL settlement agreement. On April 6, 2009, September 24, 2009, April 16, 2010 and August 30, 2010, the MDL Court issued orders dismissing with prejudice the claims of most plaintiffs participating in the settlement; the claims of settling plaintiffs whose cases were pending in state courts have been or will be dismissed by those courts. On April 22, 2010, the MDL Court certified an order from the Judicial Panel on Multidistrict Litigation remanding the remaining cases to their trial courts of origin.

We are aware of more than 33 Guidant product liability lawsuits pending internationally associated with defibrillators or pacemakers, including devices involved in the 2005 and 2006 product communications, generally seeking monetary damages. Six of those suits pending in Canada are putative class actions, four of which are stayed pending the outcome of two lead class actions. On April 10, 2008, the Justice of Ontario Court certified a class of persons in whom defibrillators were implanted in Canada and a class of family members with derivative claims. On May 8, 2009, the Court certified a class of persons in whom pacemakers were implanted in Canada and a class of family members with derivative claims.

Guidant or its affiliates have been defendants in five separate actions brought by private third-party providers of health benefits or health insurance (TPPs). In these cases, plaintiffs allege various theories of recovery, including derivative tort claims, subrogation, violation of consumer protection statutes and unjust enrichment, for the cost of healthcare benefits they allegedly paid in connection with the devices that have been the subject of Guidant’s product communications. Two of the TPP actions were previously dismissed without prejudice, but have now been revived as a result of the MDL Court’s January 15, 2010 order, and are pending in the U.S. District Court for the District of Minnesota, although they are proceeding separately from the MDL. A third action was recently remanded by the MDL Court to the U.S. District Court for the Southern District of Florida. Two other TPP actions were pending in state court in Minnesota, but were settled and dismissed with prejudice by court order dated June 3, 2010. The settled cases were brought by Blue Cross & Blue Shield plans and United Healthcare and its affiliates.

ANCURE Endograft System

As of June 2003, Guidant had outstanding 14 suits alleging product liability-related causes of action relating to the ANCURE Endograft System for the treatment of abdominal aortic aneurysms. Subsequently, Guidant was notified of additional claims and served with additional complaints relating to the ANCURE System. From time to time, Guidant has settled certain of the individual claims and suits for amounts that were not material to us. As of January 17, 2011, there were three pending suits alleging product liability-related causes of action

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relating to the ANCURE Endograft System, one is pending in the U.S. District Court for the District of Minnesota and the other two are pending in state court in California. In 2009, the California state court dismissed four suits on summary judgment. On February 9, 2010, the California Court of Appeals upheld the dismissal of two of these cases, and on June 9, 2010, the California Supreme Court declined to review the dismissals of those two cases. On December 12, 2010, the U.S. Supreme Court also declined to review the dismissals in those two cases. On November 18, 2010, the California Court of Appeals upheld the dismissal of the other two cases. It is not yet known whether the plaintiffs in those two cases will pursue further appeals.

Additionally, as of January 17, 2011 Guidant had been notified of over 130 potential unfiled claims alleging product liability relating to the ANCURE System. The claimants generally allege that they or their relatives suffered injuries, and in certain cases died, as a result of purported defects in the device or the accompanying warnings and labeling. It is uncertain how many of these claims will ultimately be pursued against Guidant.

Securities Related Litigation

On September 23, 2005, Srinivasan Shankar, individually and on behalf of all others similarly situated, filed a purported securities class action suit in the U.S. District Court for the District of Massachusetts on behalf of those who purchased or otherwise acquired our securities during the period March 31, 2003 through August 23, 2005, alleging that we and certain of our officers violated certain sections of the Securities Exchange Act of 1934. Four other plaintiffs, individually and on behalf of all others similarly situated, each filed additional purported securities class action suits in the same court on behalf of the same purported class. On February 15, 2006, the District Court ordered that the five class actions be consolidated and appointed the Mississippi Public Employee Retirement System Group as lead plaintiff. A consolidated amended complaint was filed on April 17, 2006. The consolidated amended complaint alleges that we made material misstatements and omissions by failing to disclose the supposed merit of the Medinol litigation and U.S. Department of Justice (DOJ) investigation relating to the 1998 NIR ON® Ranger with Sox stent recall, problems with the TAXUS® drug-eluting coronary stent systems that led to product recalls, and our ability to satisfy U.S. Food and Drug Administration (FDA) regulations concerning medical device quality. The consolidated amended complaint seeks unspecified damages, interest, and attorneys’ fees. The defendants filed a motion to dismiss the consolidated amended complaint on June 8, 2006, which was granted by the District Court on March 30, 2007. On April 16, 2008, the U.S. Court of Appeals for the First Circuit reversed the dismissal of only plaintiff’s TAXUS® stent recall-related claims and remanded the matter for further proceedings. On February 25, 2009, the District Court certified a class of investors who acquired our securities during the period November 30, 2003 through July 15, 2004. The defendants filed a motion for summary judgment and a hearing on the motion was held on April 21, 2010. On April 27, 2010, the District Court granted defendants’ motion and on April 28, 2010, the District Court entered judgment in defendants’ favor and dismissed the case. The plaintiffs filed a notice of appeal on May 27, 2010. The oral argument in the First Circuit Court of Appeals was held February 10, 2011.

On April 9, 2010, the City of Roseville Employees’ Retirement System individually and on behalf of purchasers of our securities during the period from April 20, 2009 to March 12, 2010, filed a purported securities class action suit in the U.S. District Court for the District of Massachusetts. The suit alleges that we and certain of our current and former officers violated certain sections of the Securities Exchange Act of 1934 and seeks unspecified monetary damages. The suit claims that our stock price was artificially inflated because we failed to disclose certain matters with respect to our CRM business. An order was issued on July 12, 2010 appointing KBC Asset Management NV and Steelworkers Pension Trust as co-lead plaintiffs and the selection of lead class counsel. The plaintiffs filed an amended class action complaint on September 14, 2010. In the amended complaint, the plaintiffs narrowed the alleged class period from October 20, 2009 to February 10, 2010.

On April 14, 2010, we received a letter from the United Union of Roofers, Waterproofers and Allied Workers Local Union No. 8 (Local 8) demanding that our Board of Directors seek to remedy any legal violations committed by current and former officers and directors during the period beginning April 20, 2009 and continuing through March 12, 2010. The letter alleges that our officers and directors caused us to issue false and misleading statements and failed to disclose material adverse information regarding serious issues with our CRM business. The matter was referred to a special committee of the Board to investigate and then make a recommendation to the full Board.

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On June 21, 2010, we received a shareholder derivative complaint filed by Rick Barrington individually and on behalf of all others similarly situated against all of our current directors, certain former directors and certain current and former officers seeking to remedy their alleged breaches of fiduciary duties that allegedly caused losses to us during the purported relevant period of April 20, 2009 to March 12, 2010. The allegations in this matter are largely the same as those asserted in the City of Roseville case. The case was filed in the U.S. District Court for the District of Massachusetts on behalf of purchasers of our securities during the period from April 20, 2009 through March 12, 2010. On October 7, 2010, Mr. Barrington filed an amended complaint.

On August 19, 2010, the Iron Workers District Council Southern Ohio and Vicinity Pension Trust filed a putative shareholder derivative class action lawsuit against us and our Board of Directors in the U.S. District Court for the District of Delaware. The allegations and remedies sought in the complaint are largely the same as those in the original complaint filed by the City of Roseville Employees’ Retirement System on April 9, 2010.

On October 22, 2010, Sanjay Israni filed a shareholder derivative complaint against us and against certain directors and officers purportedly seeking to remedy alleged breaches of fiduciary duties that allegedly caused losses to us. The relevant period defined in the complaint is from April 20, 2009 to March 30, 2010. The allegations in the complaint are largely the same as those contained in the shareholder derivative action filed by Rick Barrington.

Governmental Proceedings

Boston Scientific Corporation

In December 2007, we were informed by the U.S. Attorney’s Office for the Northern District of Texas that it was conducting an investigation of allegations related to improper promotion of biliary stents for off-label uses. The allegations were set forth in a qui tam whistle-blower complaint, which named us and certain of our competitors. The complaint remained under confidential seal until January 11, 2010 when, following the federal government’s decision not to intervene in the case, the U.S. District Court for the Northern District of Texas unsealed the complaint. We filed a motion to dismiss on July 16, 2010.

On June 26, 2008, the U.S. Attorney’s Office for the District of Massachusetts issued a separate subpoena to us under the Health Insurance Portability & Accountability Act of 1996 (HIPAA) pursuant to which the U.S. Department of Justice requested the production of certain documents and information related to our biliary stent business. We continue to cooperate with the subpoena request and related investigation.

On June 27, 2008, the Republic of Iraq filed a complaint against our wholly-owned subsidiary, BSSA France, and 92 other defendants in the U.S. District Court of the Southern District of New York. The complaint alleges that the defendants acted improperly in connection with the sale of products under the United Nations Oil for Food Program. The complaint alleges Racketeer Influenced and Corrupt Organizations Act (RICO) violations, conspiracy to commit fraud and the making of false statements and improper payments, and seeks monetary and punitive damages. On July 31, 2009, the plaintiff filed an amended complaint, which has been opposed by the defendants. On August 10, 2010, defendants filed additional procedural motions regarding its notice of supplemental authority, initially filed by the defendants on July 6, 2010.

On July 14, 2008, we received a subpoena from the Attorney General for the State of New Hampshire requesting information in connection with our refusal to sell medical devices or equipment intended to be used in the administration of spinal cord stimulation trials to practitioners other than practicing medical doctors. We have responded to the New Hampshire Attorney General’s request.

Guidant / Cardiac Rhythm Management

On November 2, 2005, the Attorney General of the State of New York filed a civil complaint against Guidant pursuant to the consumer protection provisions of New York’s Executive Law, alleging that Guidant concealed from physicians and patients a design flaw in its VENTAK PRIZM® 2 1861 defibrillator from approximately

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February 2002 until May 23 2005 and by Guidant’s concealment of this information, it engaged in repeated and persistent fraudulent conduct in violation of the law. The New York Attorney General sought permanent injunctive relief, restitution for patients in whom a VENTAK PRIZM® 2 1861 defibrillator manufactured before April 2002 was implanted, disgorgement of profits, and all other proper relief. The case was removed from New York State Court in 2005 and transferred to the MDL Court in the U.S. District Court for the District of Minnesota in 2006. On April 26, 2010, the MDL Court certified an order remanding the remaining cases to the trial courts. On or about May 7, 2010, the New York Attorney General’s lawsuit was remanded to the U.S. District Court for the Southern District of New York. In December 2010, Guidant and the New York Attorney General reached an agreement in principle to resolve this matter. Under the terms of the settlement Guidant agreed to pay less than $1 million and to continue in effect certain patient safety, product communication and other administrative procedure terms of the multistate settlement reached with other state Attorneys General in 2007. On January 6, 2011, the District Court entered a consent order and judgment concluding the matter.

In October 2005, Guidant received an administrative subpoena from the U.S. Department of Justice (DOJ), acting through the U.S. Attorney’s office in Minneapolis, issued under the Health Insurance Portability & Accountability Act of 1996 (HIPAA). The subpoena requested documents relating to alleged violations of the Food, Drug, and Cosmetic Act occurring prior to our acquisition of Guidant involving Guidant’s VENTAK PRIZM® 2, CONTAK RENEWAL® and CONTAK RENEWAL 2 devices. Guidant cooperated with the request. On November 3, 2009, Guidant and the DOJ reached an agreement in principle to resolve the matters raised in the Minneapolis subpoena. Under the terms of the agreement, Guidant would plead to two misdemeanor charges related to failure to include information in reports to the FDA and we will pay approximately $296 million in fines and forfeitures on behalf of Guidant. We recorded a charge of $294 million in the third quarter of 2009 as a result of the agreement in principle, which represents the $296 million charge associated with the agreement, net of a $2 million reversal of a related accrual. On February 24, 2010, Guidant entered into a plea agreement and sentencing stipulations with the Minnesota U.S. Attorney and the Office of Consumer Litigation of the DOJ documenting the agreement in principle. On April 5, 2010, Guidant formally pled guilty to the two misdemeanor charges. On April 27, 2010, the District Court declined to accept the plea agreement between Guidant and the DOJ. On January 12, 2011, following a review of the case by the U.S. Probation office for the District of Minnesota, the District Court accepted Guidant’s plea agreement with the DOJ resolving this matter. The Court placed Guidant on probation for three years, with annual reviews to determine if early discharge from probation will be ordered. During the probationary period, Guidant will provide the probation office with certain reports on its operations. In addition, Boston Scientific voluntarily committed to contribute a total of $15 million to its Close the Gap and Science, Technology, Engineering and Math (STEM) education programs over the next three years.

Shortly after reaching the plea agreement with the Criminal division of the U.S. Department of Justice (DOJ) in November 2009 described above, the Civil division of the DOJ notified us that it has opened an investigation into whether there were civil violations under the False Claims Act related to these products. On January 27, 2011, the Civil division of the DOJ filed a civil False Claims Act complaint against us and Guidant (and other related entities) in the Allen qui tam case described herein.

In January 2006, Guidant was served with a civil False Claims Act qui tam lawsuit filed in the U.S. District Court for the Middle District of Tennessee in September 2003 by Robert Fry, a former employee alleged to have worked for Guidant from 1981 to 1997. The lawsuit claims that Guidant violated federal law and the laws of the States of Tennessee, Florida and California by allegedly concealing limited warranty and other credits for upgraded or replacement medical devices, thereby allegedly causing hospitals to file reimbursement claims with federal and state healthcare programs for amounts that did not reflect the providers’ true costs for the devices. On December 20, 2010 the District Court granted the parties’ motion to suspend further proceedings following the parties advising the Court that they had reached a settlement in principle. The parties are scheduled to report to the District Court on the status of a final settlement agreement no later than February 28, 2011.

On July 1, 2008, Guidant Sales Corporation received a subpoena from the Maryland office of the U.S. Department of Health and Human Services, Office of Inspector General seeking information concerning payments to physicians, primarily related to the training of sales representatives. We are cooperating with this request.

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On October 17, 2008, we received a subpoena from the U.S. Department of Health and Human Services, Office of the Inspector General requesting information related to the alleged use of a skin adhesive in certain of our CRM products. In early 2010, we learned that this subpoena was related to the James Allen qui tam action. After the U.S. Department of Justice (DOJ) declined to intervene in the original complaint in the Allen qui tam action, Mr. Allen filed an amended complaint in the U.S. District Court for the District of Buffalo New York alleging that Guidant violated the False Claims Act by selling certain PRIZM 2 devices and seeking monetary damages. On July 23, 2010, we were served with the amended and recently unsealed qui tam complaint filed by James Allen, an alleged device recipient. In September 2010, we filed a motion to dismiss the complaint. On December 14, 2010, the federal government filed unopposed motions to intervene and to transfer the litigation to the U.S. District Court for the District of Minnesota. Both motions were granted. The case has been assigned to Judge Donovan Frank, as a related case to In re: Guidant Corp. Implantable Defibrillators Products Liability Litigation, MDL No. 05-1708 (DWF/AJB). As described herein on January 27, 2011, the Civil division of the DOJ filed a civil False Claims Act complaint against us and Guidant (and other related entities) in the Allen qui tam action.

On October 24, 2008, we received a letter from the Department of Justice informing us of an investigation relating to alleged off-label promotion of surgical cardiac ablation system devices to treat atrial fibrillation. We divested the surgical cardiac ablation business, and the devices at issue are no longer sold by us. On July 13, 2009, we became aware that a judge in Texas partially unsealed a qui tam whistleblower complaint which is the basis for the Department of Justice investigation. In August 2009, the federal government, which has the right to intervene and take over the conduct of the qui tam case, filed a notice indicating that it has elected not to intervene in this matter at this time.

Following the unsealing of the whistleblower complaint, in August 2009 we received shareholder letters demanding that our Board of Directors take action against certain directors and executive officers as a result of the alleged off-label promotion of surgical cardiac ablation system devices to treat atrial fibrillation. On March 19, 2010, the same shareholders filed purported derivative lawsuits in the Massachusetts Superior Court of Middlesex County against the same directors and executive officers named in the demand letters, alleging breach of fiduciary duty in connection with the alleged off-label promotion of surgical cardiac ablation system devices and seeking unspecified damages, costs, and equitable relief. The parties have agreed to defer action on these suits until after the Board of Director’s determination whether to pursue the matter. On July 26, 2010, the Board determined to reject the shareholders’ demand. In October 2010, we and those of our present officers and directors who were named as defendants in these actions moved to dismiss the lawsuits. On December 16, 2010 the Massachusetts Superior Court granted the motion to dismiss and issued a final judgment dismissing all three cases with prejudice.

On September 25, 2009, we received a subpoena from the U.S. Department of Health and Human Services, Office of Inspector General, requesting certain information relating to contributions made by us to charities with ties to physicians or their families. We are currently working with the government to understand the scope of the subpoena.

On March 12, 2010, we received a Civil Investigative Demand (CID) from the Civil Division of the U.S. Department of Justice requesting documents and information relating to reimbursement advice offered by us relating to certain CRM devices. We are cooperating with the request.

On March 22, 2010, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking documents relating to our March 15, 2010 announcement regarding the ship hold and product removal actions associated with our ICD and cardiac resynchronization therapy defibrillator (CRT-D) systems, and relating to earlier recalls of our ICD and CRT-D devices. We are cooperating with the request.

On March 22, 2010, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking documents relating to the former Market Development Sales Organization that operated within our CRM business. We are cooperating with the request.

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Other Proceedings

On September 25, 2006, Johnson & Johnson filed a lawsuit against us, Guidant and Abbott Laboratories in the U.S. District Court for the Southern District of New York. The complaint alleges that Guidant breached certain provisions of the amended merger agreement between Johnson & Johnson and Guidant (Merger Agreement) as well as the implied duty of good faith and fair dealing. The complaint further alleges that Abbott and we tortiously interfered with the Merger Agreement by inducing Guidant’s breach. The complaint seeks certain factual findings, damages in an amount no less than $5.5 billion and attorneys’ fees and costs. On August 29, 2007, the judge dismissed the tortious interference claims against us and Abbott and the implied duty of good faith and fair dealing claim against Guidant. On February 20, 2009, Johnson & Johnson filed a motion to amend its complaint to reinstate its tortious interference claims against us and Abbott and to add additional breach allegations against Guidant. On February 17, 2010, Johnson & Johnson’s motion to amend the complaint was denied. A trial date has not yet been scheduled.

On July 28, 2000, Dr. Tassilo Bonzel filed a complaint naming certain of our Schneider Worldwide subsidiaries and Pfizer Inc. and certain of its affiliates as defendants, alleging that Pfizer failed to pay Dr. Bonzel amounts owed under a license agreement involving Dr. Bonzel’s patented Monorail® balloon catheter technology. This and similar suits were dismissed in state and federal courts in Minnesota. On April 24, 2007, we received a letter from Dr. Bonzel’s counsel alleging that the 1995 license agreement with Dr. Bonzel may have been invalid under German law. On October 5, 2007, Dr. Bonzel filed a complaint against us and Pfizer in the District Court in Kassel, Germany alleging that the 1995 license agreement is invalid under German law and seeking monetary damages. On June 12, 2009, the District Court dismissed all but one of Dr. Bonzel’s claims. On October 16, 2009, Dr. Bonzel made an additional filing in support of his remaining claim and added new claims. On December 23, 2009, we filed our response opposing the addition of the new claims. A hearing was held September 24, 2010. On November 5, 2010, the Court ordered Bonzel to select which claims he would pursue in the case.

On December 16, 2010, Kilts Resources LLC filed a qui tam suit against us in the U.S. District Court for the Eastern District of Texas alleging that we marked and distributed our Glidewire product with an expired patent in violation of the false marking statute and seeking monetary damages.

On December 17, 2010, we received Notices of Deficiency from the Internal Revenue Service assessing additional taxes for Guidant Corporation for the 2001 — 2003 tax years. We intend to file a petition to the U.S. Tax Court in early 2011 contesting the assessments. Refer to Note K — Income Taxes for more information.

Matters Concluded Since January 1, 2010

On January 13, 2003, Cordis Corporation filed suit for patent infringement against Boston Scientific Scimed, Inc. and us alleging that our Express 2^® coronary stent infringes a U.S. patent (the Palmaz patent) owned by Cordis. The suit was filed in the U.S. District Court for the District of Delaware seeking monetary and injunctive relief. We filed a counterclaim alleging that certain Cordis products infringe a patent owned by us (the Jang patent). On August 4, 2004, the Court granted a Cordis motion to add our VeriFLEX™ (Liberté^®) bare-metal coronary stent system and two additional patents to the complaint (the Gray patents). On June 21, 2005, a jury found that our TAXUS^® Express 2^®, Express 2^®, Express^® Biliary, and VeriFLEX™ (Liberté^®) stents infringe the Palmaz patent and that the VeriFLEX™ (Liberté^®) stent infringes a Gray patent. With respect to our counterclaim, on July 1, 2005 a jury found that Johnson & Johnson’s Cypher^®, Bx Velocity^®, Bx Sonic^® and Genesis™ stents infringe our Jang patent. On March 31, 2009, the Court of Appeals upheld the District Court’s decision that Johnson & Johnson’s Cypher^®, Bx Velocity^®, Bx Sonic^® and Genesis™ stent systems infringe our Jang patent and that the patent is valid. The Court of Appeals also instructed the District Court to dismiss with prejudice any infringement claims against our TAXUS Liberté^® stent. The Court of Appeals affirmed the District Court’s ruling that our TAXUS^® Express 2^®, Express 2^®, Express^® Biliary, and VeriFLEX™ (Liberté^®) stents infringe the Palmaz patent and that the patent is valid. The Court of Appeals also affirmed that our VeriFLEX™ (Liberté^®) stent infringes a Gray patent and that the patent is valid. Both parties filed a request for a rehearing and a rehearing en banc with the Court of Appeals, and on June 26, 2009, the Court of Appeals denied both petitions. On September 24, 2009, both parties filed Petitions for Writ of Certiorari before the U.S. Supreme Court which were denied on November 30, 2009. On January 29, 2010, the parties entered into a settlement agreement which resolved these matters. As a result of the settlement, we agreed to pay Johnson & Johnson $1.725 billion,

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plus interest. We paid $1.0 billion of this obligation during the first quarter of 2010 and paid the remaining $725 million obligation in August 2010.

On October 17, 2008, Cordis Corporation filed a complaint for patent infringement against us alleging that our TAXUS^® Liberté^® stent product, when launched in the United States, infringed a U.S. patent (the Gray patent) owned by it. The suit was filed in the U.S. District Court for the District of Delaware seeking monetary and injunctive relief. On November 10, 2008, Cordis filed a motion for summary judgment and on May 1, 2009, we filed a motion to dismiss the case. On May 26, 2009, Cordis dismissed its request for injunctive relief. On July 21, 2009, the District Court denied both parties’ motions. This matter was resolved as part of the January 29, 2010 settlement agreement described in the prior paragraph.

Guidant Sales Corp., Cardiac Pacemakers, Inc. and Mirowski Family Ventures L.L.C. (Mirowski) were plaintiffs in a suit originally filed against St. Jude Medical, Inc. and its affiliates in November 1996 in the U.S. District Court for the Southern District of Indiana alleging that certain ICD systems marketed by St. Jude infringe a patent (the Mirowski patent) licensed to us. On March 1, 2006, the District Court granted St. Jude’s motion to limit damages to a subset of the accused products but denied their motion to limit damages to only U.S. sales. On March 26, 2007, the District Court found the patent infringed but invalid. On December 18, 2008, the Court of Appeals upheld the District Court’s ruling of infringement and overturned the invalidity ruling. On January 21, 2009, St. Jude and we filed requests for rehearing and rehearing en banc with the Court of Appeals. On March 6, 2009, the Court of Appeals granted St. Jude’s request for a rehearing en banc on a damages issue and denied our requests. On August 19, 2009, the en banc Court of Appeals held that damages were limited to U.S. sales only. On November 16, 2009, Mirowski and we filed a Petition for Writ of Certiorari to the U.S Supreme Court and on January 11, 2010 the Supreme Court denied the petition. The case was remanded back to the District Court for a trial on damages. On April 13, 2010, Mirowski and St. Jude reached a settlement in principle. On May 6, 2010, Mirowski and St. Jude reached a final settlement and the District Court dismissed the case with prejudice.

On November 3, 2005, a securities class action complaint was filed on behalf of purchasers of Guidant stock between December 1, 2004 and October 18, 2005 in the U.S. District Court for the Southern District of Indiana, against Guidant and several of its officers and directors. The complaint alleges that the defendants concealed adverse information about Guidant’s defibrillators and pacemakers and sold stock in violation of federal securities laws. The complaint seeks a declaration that the lawsuit can be maintained as a class action, monetary damages, and injunctive relief. Several additional, related securities class actions were filed in November 2005 and January 2006. The Court issued an order consolidating the complaints and appointed the Iron Workers of Western Pennsylvania Pension Plan and David Fannon as lead plaintiffs. In August 2006, the defendants moved to dismiss the complaint. On February 27, 2008, the District Court granted the motion to dismiss and entered final judgment in favor of all defendants. On March 13, 2008, the plaintiffs filed a motion seeking to amend the final judgment to permit the filing of a further amended complaint. On May 21, 2008, the District Court denied plaintiffs motion to amend the judgment. On June 6, 2008, plaintiffs appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit. On October 21, 2009, the Court of Appeals affirmed the decision of the District Court granting our motion to dismiss the case with prejudice. Plaintiffs filed a motion to reconsider, and on November 20, 2009, the Court of Appeals denied the motion. The plaintiffs did not seek review by the U.S. Supreme Court within the time allotted.

In January 2006, we received a corporate warning letter from the Food and Drug Administration (FDA) notifying us of serious regulatory problems at three of our facilities and advising us that our corporate-wide corrective action plan relating to three site-specific warning letters issued to us in 2005 was inadequate. We identified solutions to the quality system issues cited by the FDA and implemented those solutions throughout our organization. During 2008, the FDA reinspected a number of our facilities and, in October 2008, informed us that our quality system was in substantial compliance with its Quality System Regulations. In November 2009 and January 2010, the FDA reinspected two of our sites to follow up on observations from the 2008 FDA inspections. Both of these FDA inspections confirmed that all issues at the sites have been resolved and all restrictions related to the corporate warning letter were removed. On August 11, 2010, we were notified by the FDA that the corporate warning letter had been lifted.

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On December 11, 2007, Wall Cardiovascular Technologies LLC filed suit against us and Cordis Corporation alleging that our TAXUS® Express® coronary stent system, and other products and services related to coronary, carotid and peripheral stents, infringe a patent owned by it (the Wall patent) and that Cordis’ drug-eluting stent system infringes the patent. The suit was filed in the U.S. District Court for the Eastern District of Texas and sought monetary and injunctive relief. Wall Cardiovascular Technologies later amended its complaint to add Medtronic, Inc. and Abbott Laboratories to the suit with respect to their drug-eluting stent systems. The parties entered into a settlement agreement resolving the matter for an amount not material to us and the District Court granted a motion to dismiss with prejudice on September 9, 2010.

In July 2005, a purported class action complaint was filed on behalf of participants in Guidant’s employee pension benefit plans in the U.S. District Court for the Southern District of Indiana against Guidant and its directors. The complaint alleged breaches of fiduciary duty under the Employee Retirement Income Security Act of 1974, as amended (ERISA), specifically that Guidant fiduciaries concealed adverse information about Guidant’s defibrillators and imprudently made contributions to Guidant’s 401(k) plan and employee stock ownership plan in the form of Guidant stock. The complaint sought class certification, declaratory and injunctive relief, monetary damages, the imposition of a constructive trust, and costs and attorneys’ fees. In September 2007, we filed a motion to dismiss the complaint for failure to state a claim. In June 2008, the District Court dismissed the complaint in part, but ruled that certain of the plaintiffs’ claims may go forward to discovery. On October 29, 2008, the Magistrate Judge ruled that discovery should be limited, in the first instance, to alleged damages-related issues. On October 8, 2009, we reached a resolution with the plaintiffs in this matter for an amount not material to us. On May 19, 2010, the District Court granted preliminary approval of the proposed settlement. On September 9, 2010, the District Court held a settlement fairness hearing and on September 10, 2010, the District Court entered the final order and judgment approving the settlement.

On January 19, 2006, George Larson filed a purported class action complaint in the U.S. District Court for the District of Massachusetts on behalf of participants and beneficiaries of our 401(k) Retirement Savings Plan (401(k) plan) and Global Employee Stock Ownership Plan (GESOP) alleging that we and certain of our officers and employees violated certain provisions under the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Department of Labor regulations. Other similar actions were filed in early 2006. On April 3, 2006, the District Court issued an order consolidating the actions. On August 23, 2006, plaintiffs filed a consolidated purported class action complaint on behalf of all participants and beneficiaries of our 401(k) plan during the period May 7, 2004 through January 26, 2006 alleging that we, our 401(k) Administrative and Investment Committee (the Committee), members of the Committee, and certain directors violated certain provisions of ERISA (the Consolidated ERISA Complaint). The Consolidated ERISA Complaint alleged, among other things, that the defendants breached their fiduciary duties to the 401(k) plan’s participants because they knew or should have known that the value of our common stock was artificially inflated and was not a prudent investment for the 401(k) plan (the First ERISA Action). The Consolidated ERISA Complaint sought equitable and monetary relief. On June 30, 2008, Robert Hochstadt (who previously had withdrawn as an interim lead plaintiff) filed a motion to intervene to serve as a proposed class representative. On November 3, 2008, the District Court denied the plaintiffs’ motion to certify a class, denied Hochstadt’s motion to intervene, and dismissed the action. On December 2, 2008, the plaintiffs filed a notice of appeal. Following the settlement of the Second ERISA Action described in the paragraph below, the First Circuit Court of Appeals entered judgment dismissing the appeal in the First ERISA Action on October 12, 2010.

On December 24, 2008, Robert Hochstadt and Edward Hazelrig, Jr. filed a purported class action complaint in the U.S. District Court for the District of Massachusetts on behalf of all participants and beneficiaries of our 401(k) Retirement Savings Plan during the period May 7, 2004 through January 26, 2006 (the Second ERISA Action). The new complaint repeated the allegations of the August 23, 2006, Consolidated ERISA Complaint. On September 30, 2009, we and certain of the proposed class representatives in the First and Second ERISA Actions entered into a memorandum of understanding reflecting an agreement in principle to settle the First and Second ERISA Actions in their entirety for an amount not material to us. The proposed settlement received preliminary approval from the District Court. On August 5, 2010, the District Court held a settlement fairness hearing and on August 11, 2010, the District Court entered an Order and Final Judgment approving the settlement of the Second ERISA Action and dismissing that action.

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On November 7, 2008, Guidant/Boston Scientific received a request from the U.S. Department of Defense, Defense Criminal Investigative Service and the Department of the Army, Criminal Investigation Command seeking information concerning sales and marketing interactions with physicians at Madigan Army Medical Center in Tacoma, Washington. We resolved this matter in November 2010 for an amount not material to us.

In March 2005, we acquired Advanced Stent Technologies, Inc. (AST), a stent development company. On November 25, 2008, representatives of the former stockholders of AST filed two arbitration demands against us with the American Arbitration Association. AST claimed that we failed to exercise commercially reasonable efforts to develop products using AST’s technology in violation of the acquisition agreement. The demands sought monetary and equitable relief. We answered denying any liability. The parties selected arbitrators and preliminary matters were presented to the panel. On May 13, 2010, the panel ruled that AST was not entitled to monetary relief at that time. Arbitration was scheduled for November 2010. The parties settled the case on December 3, 2010 for an amount not material to us.

On December 12, 2008, we submitted a request for arbitration against Medinol Ltd. with the American Arbitration Association in New York seeking enforcement of a contract between Medinol and us which would require Medinol to contribute to any final damage award owed by us to Johnson & Johnson for damages related to the sales of the NIR® stent supplied to us by Medinol. A panel of three arbitrators was constituted to hear the arbitration. On February 9, 2010, the arbitration panel found the contract enforceable against Medinol. On February 17, 2010, Medinol filed a motion for reconsideration, and on April 28, 2010, the Arbitration panel reaffirmed its February 9, 2010 ruling. A hearing on the merits was held in September 2010. On December 27, 2010, the parties reached a settlement resolving this matter. Under the terms of the settlement, Medinol paid us approximately $104 million on December 30, 2010, and the parties canceled and terminated certain provisions of their September 21, 2005 Settlement Agreement and mutually released each other of all claims in the arbitration.

Litigation-related Net Charges

We record certain significant litigation-related activity as a separate line item in our consolidated statements of operations. In 2010, we reached a settlement agreement with Medinol, Ltd. under which we received approximately $104 million in proceeds, and recorded a pre-tax gain of $104 million in the accompanying consolidated statements of operations. In 2009, we recorded litigation-related charges of $2.022 billion, associated primarily with an agreement to settle three patent disputes with Johnson & Johnson for $1.725 billion, plus interest. In addition, in November 2009, we reached an agreement in principle with the U.S. Department of Justice to pay $296 million in order resolve the U.S. Government investigation of Guidant Corporation related to product advisories issued in 2005. Further, during 2009, we recorded charges of $50 million associated with the settlement of all outstanding litigation with Bruce Saffran, and reduced previously recorded reserves associated with certain litigation-related matters following certain favorable court rulings, resulting in a credit of $60 million. In 2008, we recorded litigation-related charges of $334 million as a result of a ruling by a federal judge in a patent infringement case brought against us by Johnson & Johnson.

NOTE M – STOCKHOLDERS’ EQUITY

Preferred Stock

We are authorized to issue 50 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by our stockholders. As of December 31, 2010 and 2009, we had no shares of preferred stock issued or outstanding.

Common Stock

We are authorized to issue 2.0 billion shares of common stock, $.01 par value per share. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when

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declared by the Board of Directors, and to share ratably in our assets legally available for distribution to our stockholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption, or conversion rights. The holders of common stock do not have cumulative voting rights. The holders of a majority of the shares of common stock can elect all of the directors and can control our management and affairs.

We did not repurchase any shares of our common stock during 2010, 2009 or 2008. There are approximately 37 million shares remaining under previous share repurchase authorizations, which do not expire. Repurchased shares are available for reissuance under our equity incentive plans and for general corporate purposes, including acquisitions and alliances. There were no shares in treasury as of December 31, 2010 or 2009.

NOTE N – STOCK OWNERSHIP PLANS

Employee and Director Stock Incentive Plans

Shares reserved for future issuance under our current and former stock incentive plans totaled approximately 167 million as of December 31, 2010. Together, these plans cover officers, directors, employees and consultants and provide for the grant of various incentives, including qualified and nonqualified stock options, deferred stock units, stock grants, share appreciation rights, performance-based awards and market-based awards. The Executive Compensation and Human Resources Committee of the Board of Directors, consisting of independent, non-employee directors, may authorize the issuance of common stock and authorize cash awards under the plans in recognition of the achievement of long-term performance objectives established by the Committee.

Nonqualified options issued to employees are generally granted with an exercise price equal to the market price of our stock on the grant date, vest over a four-year service period, and have a ten-year contractual life. In the case of qualified options, if the recipient owns more than ten percent of the voting power of all classes of stock, the option granted will be at an exercise price of 110 percent of the fair market value of our common stock on the date of grant and will expire over a period not to exceed five years. Non-vested stock awards (including restricted stock awards and deferred stock units (DSUs)) issued to employees are generally granted with an exercise price of zero and typically vest in four to five equal annual installments. These awards represent our commitment to issue shares to recipients after the vesting period. Upon each vesting date, such awards are no longer subject to risk of forfeiture and we issue shares of our common stock to the recipient.

The following presents the impact of stock-based compensation on our consolidated statements of operations for the years ended December 31, 2010, 2009 and 2008:

	Year Ended December 31,
(in millions)	2010			2009			2008
Cost of products sold	$	25		$	22		$	21
Selling, general and administrative expenses		93			89			88
Research and development expenses		32			33			29
		150			144			138
Less: income tax benefit		(55	)		(45	)		(41	)
	$	95		$	99		$	97
Net loss per common share - basic	$	0.06		$	0.07		$	0.06
Net loss per common share - assuming dilution	$	0.06		$	0.07		$	0.06

Stock Options

We generally use the Black-Scholes option-pricing model to calculate the grant-date fair value of stock options granted to employees under our stock incentive plans. We calculated the fair value for options granted during 2010, 2009 and 2008 using the following estimated weighted-average assumptions:

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	Year Ended December 31,
	2010		2009		2008
Options granted (in thousands)		11,008		14,153		4,905
Weighted-average exercise price	$	7.26	$	8.61	$	12.53
Weighted-average grant-date fair value	$	3.11	$	3.92	$	4.44
Black-Scholes Assumptions
Expected volatility		42%		45%		35%
Expected term (in years, weighted)		6.0		6.0		5.0
Risk-free interest rate		1.52% - 2.93%		1.80% - 3.04%		2.77% - 3.77%

Expected Volatility

We use our historical volatility and implied volatility as a basis to estimate expected volatility in our valuation of stock options.

Expected Term

We estimate the expected term of options using historical exercise and forfeiture data. We believe that this historical data is the best estimate of the expected term of new option grants.

Risk-Free Interest Rate

We use yield rates on U.S. Treasury securities for a period approximating the expected term of the award to estimate the risk-free interest rate in our grant-date fair value assessment.

Expected Dividend Yield

We have not historically paid dividends to our shareholders. We currently do not intend to pay dividends, and intend to retain all of our earnings to repay indebtedness and invest in the continued growth of our business. Therefore, we have assumed an expected dividend yield of zero in our grant-date fair value assessment.

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Information related to stock options for 2010, 2009 and 2008 under stock incentive plans is as follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Stock Options			Exercise		Contractual		Value
	(in thousands)			Price		Life (in years)		(in millions)
Outstanding as of January 1, 2008		68,741		$	17
Granted		4,905			13
Exercised		(4,546	)		8
Cancelled/forfeited		(8,034	)		19
Outstanding as of December 31, 2008		61,066		$	17
Granted		14,153			9
Exercised		(411	)		7
Cancelled/forfeited		(10,096	)		17
Outstanding as of December 31, 2009		64,712		$	15
Granted		11,008			7
Exercised		(719	)		7
Cancelled/forfeited		(14,627	)		13
Outstanding as of December 31, 2010		60,374		$	14		5.3	$	4
Exercisable as of December 31, 2010		40,975		$	17		3.8
Expected to vest as of December 31, 2010		18,208			9		8.6		3
Total vested and expected to vest as of December 31, 2010		59,183		$	14		5.3	$	3

The total intrinsic value of stock options exercised was less than $1 million in 2010, $1 million in 2009 and $19 million in 2008.

Non-Vested Stock

We value restricted stock awards and DSUs based on the closing trading value of our shares on the date of grant. Information related to non-vested stock awards during 2010, 2009, and 2008 is as follows:

				Weighted
	Non-Vested			Average
	Stock Award			Grant-
	Units			Date Fair
	(in thousands)			Value
Balance as of January 1, 2008		18,136		$	20
Granted		13,557			12
Vested (1)		(3,856	)		21
Forfeited		(3,183	)		18
Balance as of December 31, 2008		24,654		$	16
Granted		12,703			8
Vested (1)		(5,895	)		16
Forfeited		(3,572	)		20
Balance as of December 31, 2009		27,890		$	12
Granted		17,619			7
Vested (1)		(8,431	)		14
Forfeited		(3,794	)		10
Balance as of December 31, 2010		33,284		$	9

(1) The number of restricted stock units vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements.

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The total vesting date fair value of stock award units that vested was approximately $62 million in 2010, $51 million in 2009 and $47 million in 2008.

Market-based Awards

During the first quarter of 2010, we granted market-based awards to certain members of our senior management team. The attainment of these stock units is based on our total shareholder return (TSR) as compared to the TSR of the companies in the S&P 500 Health Care Index and is measured in three annual performance cycles. In addition, award recipients must remain employed by us throughout the three-year measurement period to attain the full award.

We determined the fair value of the 2010 market-based awards to be approximately $7 million, based on a Monte Carlo simulation, utilizing the following assumptions:

Stock price on date of grant	$	7.41
Measurement period (in years)		3.0
Risk-free rate		1.29	%

We will recognize the expense in our consolidated statements of operations on a straight-line basis over the three-year measurement period.

2009 CEO Award

During 2009, we granted a market-based award of up to 1.25 million deferred stock units to our newly appointed chief executive officer. The attainment of this award is based on the individual’s continued employment and our stock reaching certain specified prices prior to December 31, 2012. We determined the fair value of the award to be approximately $5 million, based on a Monte Carlo simulation using the following assumptions:

Stock price on date of grant	$	9.51
Expected volatility		45	%
Contractual term (in years)		3.5
Risk-free rate		1.99	%

We will continue to recognize the expense in our consolidated statements of operations using an accelerated attribution method.

Expense Attribution

Except as discussed above, we recognize compensation expense for our stock using a straight-line method over the substantive vesting period. Most of our stock awards provide for immediate vesting upon death or disability of the participant. Prior to mid-2010, we expensed stock-based awards, other than market-based awards, over the period between grant date and retirement eligibility or immediately if the employee is retirement eligible at the date of grant. For awards granted after mid-2010, other than market-based awards, retirement-eligible employees must provide one year of service after the date of grant in order to accelerate the vesting and retain the award, should they retire. Therefore, for awards granted after mid-2010, we expense stock-based awards over the greater of the period between grant date and retirement-eligibility date or one year. The market-based awards discussed above do not contain provisions that would accelerate the full vesting of the awards upon retirement-eligibility.

We recognize stock-based compensation expense for the value of the portion of awards that are ultimately expected to vest. FASB ASC Topic 718, Compensation – Stock Compensation (formerly FASB Statement No. 123(R), Share-Based Payments) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. We have applied, based on an analysis of our historical forfeitures, a weighted-average annual forfeiture rate of eight

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percent to all unvested stock awards as of December 31, 2010, which represents the portion that we expect will be forfeited each year over the vesting period. We re-evaluate this analysis annually, or more frequently if there are significant changes in circumstances, and adjust the forfeiture rate as necessary. Ultimately, we will only recognize expense for those shares that vest.

Unrecognized Compensation Cost

We expect to recognize the following future expense for awards outstanding as of December 31, 2010:

			Weighted
			Average
	Unrecognized		Remaining
	Compensation		Vesting
	Cost		Period
	(in millions)(1)		(in years)
Stock options	$	39
Non-vested stock awards		170
	$	209		1.9

      (1) Amounts presented represent compensation cost, net of estimated forfeitures.

Employee Stock Purchase Plans

In 2006, our stockholders approved and adopted a new global employee stock purchase plan, which provides for the granting of options to purchase up to 20 million shares of our common stock to all eligible employees. Under the employee stock purchase plan, we grant each eligible employee, at the beginning of each six-month offering period, an option to purchase shares of our common stock equal to not more than ten percent of the employee’s eligible compensation or the statutory limit under the U.S. Internal Revenue Code. Such options may be exercised generally only to the extent of accumulated payroll deductions at the end of the offering period, at a purchase price equal to 90 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. As of December 31, 2010, there were approximately 5 million shares available for future issuance under the employee stock purchase plan.

Information related to shares issued or to be issued in connection with the employee stock purchase plan based on employee contributions and the range of purchase prices is as follows:

(shares in thousands)	2010		2009		2008
Shares issued or to be issued		4,358		4,056		3,505
Range of purchase prices		$5.22 - $5.31		$7.09 - $8.10		$6.97 - $10.37

We use the Black-Scholes option-pricing model to calculate the grant-date fair value of shares issued under the employee stock purchase plan. We recognize expense related to shares purchased through the employee stock purchase plan ratably over the offering period. We recognized $9 million in expense associated with our employee stock purchase plan in 2010, $9 million in 2009 and $7 million in 2008.

In connection with our 2006 acquisition of Guidant Corporation, we assumed Guidant’s employee stock ownership plan (ESOP), which matched employee 401(k) contributions in the form of stock. As part of the Guidant purchase accounting, we recognized deferred costs of $86 million for the fair value of the shares that were unallocated on the date of acquisition. Common stock held by the ESOP was allocated among participants’ accounts on a periodic basis until these shares were exhausted and were treated as outstanding in the computation of earnings per share. As of December 31, 2010 and 2009, all of the common stock held by the ESOP had been allocated to employee accounts. Allocated shares of the ESOP were charged to expense based on the fair value of the common stock on the date of transfer. We recognized compensation expense of $12 million in 2008 related to the plan. Effective June 1, 2008, this plan was merged into our 401(k) Retirement Savings Plan.

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NOTE O – EARNINGS PER SHARE

We generated net losses in 2010, 2009 and 2008. Our weighted-average shares outstanding for earnings per share calculations excludes common stock equivalents of 10.0 million for 2010, 8.0 million for 2009, and 5.8 million for 2008 due to our net loss position in these years.

Weighted-average shares outstanding, assuming dilution, also excludes the impact of 61 million stock options for 2010, 48 million stock options for 2009, and 51 million for 2008, due to the exercise prices of these stock options being greater than the average fair market value of our common stock during the year.

NOTE P – SEGMENT REPORTING

Each of our reportable segments generates revenues from the sale of medical devices. As of December 31, 2010, we had four reportable segments based on geographic regions: the United States; EMEA, consisting of Europe, the Middle East and Africa; Japan; and Inter-Continental, consisting of our Asia Pacific and the Americas operating segments. The reportable segments represent an aggregate of all operating divisions within each segment. We measure and evaluate our reportable segments based on segment net sales and operating income. We exclude from segment operating income certain corporate and manufacturing-related expenses, as our corporate and manufacturing functions do not meet the definition of a segment, as defined by ASC Topic 280, Segment Reporting (formerly FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information). In addition, certain transactions or adjustments that our Chief Operating Decision Maker considers to be non-recurring and/or non-operational, such as amounts related to goodwill and intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related charges and credits; as well as amortization expense, are excluded from segment operating income. Although we exclude these amounts from segment operating income, they are included in reported consolidated operating income (loss) and are included in the reconciliation below.

We manage our international operating segments on a constant currency basis. Sales generated from reportable segments and divested businesses, as well as operating results of reportable segments and expenses from manufacturing operations, are based on internally-derived standard currency exchange rates, which may differ from year to year, and do not include intersegment profits. We have restated the segment information for 2009 and 2008 net sales and operating results based on our standard currency exchange rates used for 2010 in order to remove the impact of currency fluctuations. Because of the interdependence of the reportable segments, the operating profit as presented may not be representative of the geographic distribution that would occur if the segments were not interdependent. A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying consolidated statements of operations is as follows:

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	Year Ended December 31,
(in millions)	2010			2009			2008
				(restated)			(restated)
Net sales
United States	$	4,335		$	4,675		$	4,487
EMEA		1,879			1,900			1,889
Japan		942			1,023			986
Inter-Continental		727			722			670
Net sales allocated to reportable segments		7,883			8,320			8,032
Sales generated from 2008 business divestitures		4			11			69
Impact of foreign currency fluctuations		(81	)		(143	)		(51	)
	$	7,806		$	8,188		$	8,050

Depreciation expense
United States	$	73	$	81	$	88
EMEA		20		20		20
Japan		10		10		10
Inter-Continental		8		8		8
Depreciation expense allocated to reportable segments		111		119		126
Manufacturing operations		135		155		143
Corporate expenses and currency exchange		57		49		52
	$	303	$	323	$	321

Loss before income taxes
United States	$	767		$	1,019		$	1,000
EMEA		836			896			910
Japan		442			603			564
Inter-Continental		282			330			313
Operating income allocated to reportable segments		2,327			2,848			2,787
Manufacturing operations		(301	)		(387	)		(417	)
Corporate expenses and currency exchange		(465	)		(659	)		(532	)
Goodwill and intangible asset impairment charges and acquisition-, divestiture-, litigation-, and restructuring-related net charges		(1,704	)		(2,185	)		(2,800	)
Amortization expense		(513	)		(511	)		(543	)
Operating loss		(656	)		(894	)		(1,505	)
Other expense, net		(407	)		(414	)		(526	)
	$	(1,063	)	$	(1,308	)	$	(2,031	)

(in millions)	As of December 31,
Total assets	2010		2009
United States	$	1,936	$	2,025
EMEA		936		1,290
Japan		256		257
Inter-Continental		429		415
Total assets allocated to reportable segments		3,557		3,987
Assets held for sale		576		578
Goodwill		10,186		11,936
Other intangible assets		6,343		6,667
All other corporate and manufacturing operations assets		1,466		2,009
	$	22,128	$	25,177

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Enterprise-Wide Information (based on actual currency exchange rates)

Net sales

	Year Ended December 31,
(in millions)	2010		2009		2008
Cardiac Rhythm Management	$	2,180	$	2,413	$	2,286
Cardiovascular		3,271		3,520		3,563
Electrophysiology		147		149		153
Neurovascular		340		348		360
Endoscopy		1,079		1,006		943
Urology/Women’s Health		481		456		431
Neuromodulation		304		285		245
		7,802		8,177		7,981
Sales generated from 2008 business divestitures		4		11		69
	$	7,806	$	8,188	$	8,050
United States	$	4,335	$	4,675	$	4,487
Japan		968		988		861
Other foreign countries		2,499		2,514		2,633
		7,802		8,177		7,981
Sales generated from 2008 business divestitures		4		11		69
	$	7,806	$	8,188	$	8,050

Long-lived assets

	As of December 31,
(in millions)	2010		2009		2008
United States	$	1,188	$	1,206	$	1,159
Ireland		219		249		246
Other foreign countries		290		267		323
Property, plant and equipment, net		1,697		1,722		1,728
Goodwill		10,186		11,936		12,421
Other intangible assets		6,343		6,667		7,244
	$	18,226	$	20,325	$	21,393

NOTE Q – NEW ACCOUNTING PRONOUNCEMENTS

Standards Implemented

ASC Update No. 2010-06

In January 2010, the FASB issued ASC Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements. Update No. 2010-06 requires additional disclosure within the rollforward of activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, Update No. 2010-06 requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Level 2 and Level 3. We adopted Update No. 2010-06 for our first quarter ended March 31, 2010, except for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements, for which disclosures will be required for our first quarter ending March 31, 2011. During 2010, we did not have any transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy. Refer to Note E – Fair Value Measurements for disclosures surrounding our fair value measurements, including information regarding

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the valuation techniques and inputs used in fair value measurements for assets and liabilities within Level 2 and Level 3 of the fair value hierarchy.

ASC Update No. 2009-17

In December 2009, the FASB issued ASC Update No. 2009-17, Consolidations (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which formally codifies FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). Update No. 2009-17 and Statement No. 167 amend Interpretation No. 46(R), Consolidation of Variable Interest Entities, to require that an enterprise perform an analysis to determine whether the enterprise’s variable interests give it a controlling financial interest in a variable interest entity (VIE). The analysis identifies the primary beneficiary of a VIE as the enterprise that has both 1) the power to direct activities of a VIE that most significantly impact the entity’s economic performance and 2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. Update No. 2009-17 eliminated the quantitative approach previously required for determining the primary beneficiary of a VIE and requires ongoing reassessments of whether an enterprise is the primary beneficiary. We adopted Update No. 2009-17 for our first quarter ended March 31, 2010. The adoption of Update No. 2009-17 did not have any impact on our results of operations or financial position.

ASC Update No. 2010-20

In July 2010, the FASB issued ASC Update No. 2010-20, Receivables (Topic 310) - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. Update No. 2010-20 requires expanded qualitative and quantitative disclosures about financing receivables, including trade accounts receivable, with respect to credit quality and credit losses, including a rollforward of the allowance for credit losses. The enhanced disclosure requirements are generally effective for interim and annual periods ending after December 15, 2010. We adopted Update No. 2010-20 for our year ended December 31, 2010, except for the rollforward of the allowance for credit losses, for which disclosure will be required for our first quarter ending March 31, 2011. Refer to Note A – Significant Account Policies for disclosures surrounding concentrations of credit risk and our policies with respect to the monitoring of the credit quality of customer accounts.

Standards to be Implemented

ASC Update No. 2009-13

In October 2009, the FASB issued ASC Update No. 2009-13, Revenue Recognition (Topic 605)- Multiple-Deliverable Revenue Arrangements. The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, Multiple-Element Arrangements). Update No. 2009-13 provides principles and application guidance to determine whether multiple deliverables exist, how the individual deliverables should be separated and how to allocate the revenue in the arrangement among those separate deliverables. Update No. 2009-13 also expands the disclosure requirements for multiple-deliverable revenue arrangements. We adopted Update No. 2009-13 as of January 1, 2011. The adoption did not have a material impact on our results of operations or financial position.

ASC Update No. 2010-29

In December 2010, the FASB issued ASC Update No. 2010-29, Business Combinations (Topic 805) - Disclosure of Supplementary Pro Forma Information for Business Combinations. Update No. 2010-29 clarifies paragraph 805-10-50-2(h) to require public entities that enter into business combinations that are material on an individual or aggregate basis to disclose pro forma information for such business combinations that occurred in the current reporting period, including pro forma revenue and earnings of the combined entity as though the acquisition date had been as of the beginning of the comparable prior annual reporting period only. We are required to adopt Update No. 2010-29 for material business combinations for which the acquisition date is on or after January 1, 2011.

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NOTE R – SUBSEQUENT EVENTS

On January 3, 2011, we closed the sale of our Neurovascular business to Stryker Corporation for a purchase price of $1.5 billion, payable in cash. We received $1.450 billion at closing, including an upfront payment of $1.426 billion, and $24 million which was placed into escrow to be released upon the completion of local closings in certain foreign jurisdictions, and will receive $50 million contingent upon the transfer or separation of certain manufacturing facilities, which we expect will be completed over a period of approximately 24 months. We are providing transitional services to Stryker through a transition services agreement, and will also supply products to Stryker. These transition services and supply agreements are expected to be effective for a period of up to 24 months, subject to extension.

In addition, in early 2011 we announced and/or completed several acquisitions as part of our priority growth initiatives, targeting the areas of structural heart therapy, deep-brain stimulation, and atrial fibrillation. The final purchase prices and estimates and assumptions used in the allocation of the purchase prices associated with these acquisitions, each described below, will be finalized in 2011.

Sadra Medical, Inc.

On January 4, 2011, we completed the acquisition of the remaining fully diluted equity of Sadra Medical, Inc. Prior to the acquisition, we held a 14 percent equity ownership in Sadra. Sadra is developing a fully repositionable and retrievable device for percutaneous aortic valve replacement (PAVR) to treat patients with severe aortic stenosis. The acquisition was intended to broaden and diversify our product portfolio by expanding into the structural heart market. We will integrate the operations of the Sadra business into our Interventional Cardiology division. We paid approximately $193 million at the closing of the transaction using cash on hand to acquire the remaining 86 percent of Sadra, and may be required to pay future consideration up to $193 million that is contingent upon the achievement of certain regulatory and revenue-based milestones.

Intelect Medical, Inc.

On January 5, 2011, we completed the acquisition of the remaining fully diluted equity of Intelect Medical, Inc. Prior to the acquisition, we held a 15 percent equity ownership in Intelect. Intelect is developing advanced visualization and programming for the Vercise™ deep-brain stimulation system. We will integrate the operations of the Intelect business into our Neuromodulation division. The acquisition was intended to leverage the core architecture of our Vercise™ platform and advance the field of deep-brain stimulation. We paid approximately $60 million at the closing of the transaction using cash on hand, to acquire the remaining 85 percent of Intelect. There is no contingent consideration related to the Intelect acquisition.

Atritech, Inc.

On January 19, 2011, we announced the signing of a definitive merger agreement under which we will acquire Atritech, Inc., subject to customary closing conditions. Atritech has developed a device designed to close the left atrial appendage. The Atritech WATCHMAN^® Left Atrial Appendage Closure Technology, developed by Atritech, is the first device proven to offer an alternative to anticoagulant drugs for patients with atrial fibrillation and at high risk for stroke. The acquisition is intended to broaden our portfolio of less-invasive devices for cardiovascular care by expanding into the areas of atrial fibrillation and structural heart therapy. We will integrate the operations of the Atritech business into our Electrophysiology division and will leverage expertise from both our Electrophysiology and Interventional Cardiology sales forces. We will pay $100 million at the closing of the transaction and may be required to pay future consideration up to $275 million that is contingent upon achievement of certain regulatory and revenue-based milestones.

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QUARTERLY RESULTS OF OPERATIONS

(in millions, except per share data)
(unaudited)

	Three Months Ended
	March 31,			June 30,		Sept 30,			Dec 31,
2010
Net sales	$	1,960		$	1,928	$	1,916		$	2,002
Gross profit		1,297			1,274		1,293			1,342
Operating (loss) income		(1,486	)		231		251			349
Net (loss) income		(1,589	)		98		190			236
Net (loss) income per common share - basic	$	(1.05	)	$	0.06	$	0.13		$	0.16
Net (loss) income per common share - assuming dilution	$	(1.05	)	$	0.06	$	0.12		$	0.15
2009
Net sales	$	2,010		$	2,074	$	2,025		$	2,079
Gross profit		1,403			1,444		1,396			1,369
Operating income (loss)		11			275		51			(1,231	)
Net (loss) income		(13	)		158		(94	)		(1,075	)
Net (loss) income per common share - basic	$	(0.01	)	$	0.10	$	(0.06	)	$	(0.71	)
Net (loss) income per common share - assuming dilution	$	(0.01	)	$	0.10	$	(0.06	)	$	(0.71	)

Our reported results for 2010 included goodwill and intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items and amortization expense (after tax) of: $1.840 billion in the first quarter, $92 million in the second quarter, $106 million in the third quarter and $77 million in the fourth quarter. These charges consisted primarily of: a goodwill impairment charge attributable to the ship hold and product removal actions associated with our U.S. Cardiac Rhythm Management (CRM) reporting unit; a gain on the receipt of an acquisition-related milestone payment; a gain associated with the settlement of a litigation-related matter with Medinol Ltd; restructuring and restructuring-related costs attributable to our 2010 Restructuring plan, Plant Network Optimization program and 2007 Restructuring plan; and discrete tax benefits related to certain tax positions taken in a prior period.

Our reported results for 2009 included intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items and amortization expense (after tax) of: $302 million in the first quarter, $139 million in the second quarter, $385 million in the third quarter and $1.379 billion in the fourth quarter. These charges consisted primarily of: intangible asset impairment charges associated primarily with certain Urology-related intangible assets; purchased research and development charges related to the acquisition of certain technology rights; gains on the sale of non-strategic investments and other credits related to prior period business divestitures; litigation-related net charges associated primarily with the settlement of patent litigation matters with Johnson & Johnson and an agreement in principle with the U.S. Department of Justice related to a U.S. Government investigation of Guidant Corporation; restructuring and restructuring-related costs attributable to our Plant Network Optimization program and 2007 Restructuring plan; and discrete tax benefits related to certain tax positions taken in a prior period.

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

None.

ITEM 9A.   CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer (CEO), and Executive Vice President and Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2010 pursuant to Rule 13a-15(b) of the Securities Exchange Act. Disclosure controls and procedures are designed to ensure that material information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and ensure that such material information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, our CEO and CFO concluded that as of December 31, 2010, our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Management’s report on our internal control over financial reporting is contained in Item 7 of this Annual Report.

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

The report of Ernst & Young LLP on our internal control over financial reporting is contained in Item 7 of this Annual Report.

Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2010, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION.

None.

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PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is set forth in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010, and is incorporated into this Annual Report on Form 10-K by reference.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item is set forth in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010, and is incorporated into this Annual Report on Form 10-K by reference.

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

The information required by this Item is set forth in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010, and is incorporated into this Annual Report on Form 10-K by reference.

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

The information required by this Item is set forth in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010, and is incorporated into this Annual Report on Form 10-K by reference.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is set forth in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2010, and is incorporated into this Annual Report on Form 10-K by reference.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)    Financial Statements.

The response to this portion of Item 15 is set forth under Item 8.

(a)(2)    Financial Schedules.

The response to this portion of Item 15 (Schedule II) follows the signature page to this report. All other financial statement schedules are not required under the related instructions or are inapplicable and therefore have been omitted.

(a)(3)    Exhibits (* documents filed with this report, # compensatory plans or arrangements)

EXHIBIT NO.	TITLE
3.1	Restated By-laws of the Company (Exhibit 3.1(ii), Current Report on Form 8-K dated May 11, 2007, File No. 1-11083).
3.2	Third Restated Certificate of Incorporation (Exhibit 3.2, Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-11083).
4.1	Specimen Certificate for shares of the Company’s Common Stock (Exhibit 4.1, Registration No. 33-46980).
4.2	Description of Capital Stock contained in Exhibits 3.1 and 3.2.
4.3	Indenture dated as of June 25, 2004 between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank) (Exhibit 4.1, Current Report on Form 8-K dated June 25, 2004, File No. 1-11083).
4.4	Indenture dated as of November 18, 2004 between the Company and J.P. Morgan Trust Company, National Association, as Trustee (Exhibit 4.1, Current Report on Form 8-K dated November 18, 2004, File No. 1-11083).
4.5	Form of First Supplemental Indenture dated as of April 21, 2006 (Exhibit 99.4, Current Report on Form 8-K dated April 21, 2006, File No. 1-11083).
4.6	Form of Second Supplemental Indenture dated as of April 21, 2006 (Exhibit 99.6, Current Report on Form 8-K dated April 21, 2006, File No. 1-11083).
4.7	5.45% Note due June 15, 2014 in the aggregate principal amount of $500,000,000 (Exhibit 4.2, Current Report on Form 8-K dated June 25, 2004, File No. 1-11083).
4.8	5.45% Note due June 15, 2014 in the aggregate principal amount of $100,000,000 (Exhibit 4.3, Current Report on Form 8-K dated June 25, 2004, File No. 1-11083).
4.9	Form of Global Security for the 5.125% Notes due 2017 in the aggregate principal amount of $250,000,000 (Exhibit 4.3, Current Report on Form 8-K dated November 18, 2004, File No. 1-11083).

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4.10	Form of Global Security for the 4.250% Notes due 2011 in the aggregate principal amount of $250,000,000 (Exhibit 4.2, Current Report on Form 8-K dated November 18, 2004, File No. 1-11083).
4.11	Form of Global Security for the 5.50% Notes due 2015 in the aggregate principal amount of $400,000,000, and form of Notice to the holders thereof (Exhibit 4.1, Current Report on Form 8-K dated November 17, 2005 and Exhibit 99.5, Current Report on Form 8-K dated April 21, 2006, File No. 1-11083).
4.12	Form of Global Security for the 6.25% Notes due 2035 in the aggregate principal amount of $350,000,000, and form of Notice to holders thereof (Exhibit 4.2, Current Report on Form 8-K dated November 17, 2005 and Exhibit 99.7, Current Report on Form 8-K dated April 21, 2006, File No. 1-11083).
4.13	Indenture dated as of June 1, 2006 between the Company and JPMorgan Chase Bank, N.A., as Trustee (Exhibit 4.1, Current Report on Form 8-K dated June 9, 2006, File No. 1-11083).
4.14	Form of Global Security for the 6.00% Notes due 2011 in the aggregate principal amount of $600,000,000 (Exhibit 4.2, Current Report on Form 8-K dated June 9, 2006, File No. 1-11083).
4.15	Form of Global Security for the 6.40% Notes due 2016 in the aggregate principal amount of $600,000,000 (Exhibit 4.3, Current Report on Form 8-K dated June 9, 2006, File No. 1-11083).
4.16	4.500% Senior Note due January 15, 2015 in the aggregate principal amount of $850,000,000 (Exhibit 4.2, Current Report on Form 8-K dated December 10, 2009, File No. 1-11083).
4.17	6.000% Senior Note due January 15, 2020 in the aggregate principal amount of $850,000,000 (Exhibit 4.3, Current Report on Form 8-K dated December 10, 2009, File No. 1-11083).
4.18	7.375% Senior Note due January 15, 2040 in the aggregate principal amount of $300,000,000 (Exhibit 4.4, Current Report on Form 8-K dated December 10, 2009, File No. 1-11083).
10.1	Form of Amended and Restated Credit and Security Agreement dated as of November 7, 2007 by and among Boston Scientific Funding Corporation, the Company, Old Line Funding, LLC, Victory Receivables Corporation, The Bank of Tokyo-Mitsubishi Ltd., New York Branch and Royal Bank of Canada (Exhibit 10.1, Current Report on Form 8-K dated November 7, 2007, File No. 1-11083).
10.2	Form of Amendment No. 1 to Amended and Restated Credit and Security Agreement and Restatement of Amended Fee Letters dated as of August 6, 2008 by and among Boston Scientific Funding LLC, the Company, Old Line Funding, LLC, Victory Receivables Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Royal Bank of Canada (Exhibit 10.1, Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 1-11083).
10.3	Form of Amendment No. 2 to Amended and Restated Credit and Security Agreement and Restatement of Amended Fee Letters dated as of August 5, 2009 by and among Boston Scientific Corporation, Boston Scientific Funding LLC, Old Line Funding, LLC, Victory Receivables Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Royal Bank of Canada (Exhibit 10.2, Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, File No. 1-11083).
10.4	Form of Amendment No. 3 to Amended and Restated Credit and Security Agreement and Restatement of Amended Fee Letters dated as of August 4, 2010 by and among Boston Scientific Corporation, Boston Scientific Funding LLC, Old Line Funding, LLC, Victory Receivables Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Royal Bank of

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	Canada. (Exhibit 10.4, Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, File No. 1-11083).
10.5	Form of Amendment No. 4 to Amended and Restated Credit and Security Agreement and Restatement of Amended Fee Letters dated as of October 29, 2010 by and among Boston Scientific Corporation, Boston Scientific Funding LLC, Old Line Funding, LLC, Victory Receivables Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Royal Bank of Canada (Exhibit 10.7, Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, File No. 1-11083).
10.6	Form of Omnibus Amendment dated as of December 21, 2006 among the Company, Boston Scientific Funding Corporation, Variable Funding Capital Company LLC, Victory Receivables Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch (Amendment No. 1 to Receivables Sale Agreement and Amendment No. 9 to Credit and Security Agreement) (Exhibit 10.2, Annual Report on 10-K for the year ended December 31, 2006, File No. 1-11083).
10.7	Form of Amended and Restated Receivables Sale Agreement dated as of November 7, 2007 between the Company and each of its Direct or Indirect Wholly-Owned Subsidiaries that Hereafter Becomes a Seller Hereunder, as the Sellers, and Boston Scientific Funding LLC, as the Buyer (Exhibit 10.2, Current Report on Form 8-K dated November 7, 2007, File No. 1-11083).
10.8	Credit Agreement dated as of June 23, 2010 by and among Boston Scientific Corporation, BSC International Holding Limited, the several Lenders parties thereto, and JPMorgan Chase Bank, N.A., as Syndication Agent, and Bank of America, N.A., as Administrative Agent (Exhibit 10.1, Current Report on Form 8-K dated June 23, 2010, File No. 1-11083).
10.9	License Agreement among Angiotech Pharmaceuticals, Inc., Cook Incorporated and the Company dated July 9, 1997, and related Agreement dated December 13, 1999 (Exhibit 10.6, Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-11083).
10.10	Amendment between Angiotech Pharmaceuticals, Inc. and the Company dated November 23, 2004 modifying July 9, 1997 License Agreement among Angiotech Pharmaceuticals, Inc., Cook Incorporated and the Company (Exhibit 10.1, Current Report on Form 8-K dated November 23, 2004, File No. 1-11083).
10.11*	Sale and Purchase Agreement dated October 28, 2010 between Boston Scientific Corporation and Stryker Corporation.
10.12	Transaction Agreement, dated as of January 8, 2006, as amended, between Boston Scientific Corporation and Abbott Laboratories (Exhibit 10.47, Exhibit 10.48, Exhibit 10.49 and Exhibit 10.50, Annual Report on Form 10-K for year ended December 31, 2005 and Exhibit 10.1, Current Report on Form 8-K dated April 7, 2006, File No. 1-11083).
10.13	Form of Settlement Agreement and Non-Exclusive Patent Cross-License dated January 29, 2010 by and between Boston Scientific Corporation and Boston Scientific Scimed, Inc., and Johnson & Johnson (Exhibit 10.1, Current Report of Form 8-K dated January 29, 2010, File No.1-11083).
10.14	Form of Plea Agreement and Sentencing Stipulations executed as of February 24, 2010 (Exhibit 10.66, Annual Report on Form 10-K for year ended December 31, 2009, File No. 1-11083).
10.15	Form of Corporate Integrity Agreement between the Office of Inspector General of the Department of Health and Human Services and Boston Scientific Corporation (Exhibit 10.67, Annual Report on Form 10-K for year ended December 31, 2009, File No. 1-11083).
10.16	Decision and Order of the Federal Trade Commission in the matter of Boston Scientific

151   

	Corporation and Guidant Corporation finalized August 3, 2006 (Exhibit 10.5, Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, File No. 1-11083).
10.17	Embolic Protection Incorporated 1999 Stock Plan, as amended (Exhibit 10.1, Registration Statement on Form S-8, Registration No. 333-61060 and Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004, File No. 1-11083).#
10.18	Quanam Medical Corporation 1996 Stock Plan, as amended (Exhibit 10.3, Registration Statement on Form S-8, Registration No. 333-61060 and Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004, File No. 1-11083).#
10.19	RadioTherapeutics Corporation 1994 Incentive Stock Plan, as amended (Exhibit 4.2, Registration Statement on Form S-8, Registration No. 333-76380 and Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004, File No. 1-11083).#
10.20	Guidant Corporation 1994 Stock Plan, as amended (Exhibit 10.46, Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-11083).#
10.21	Guidant Corporation 1996 Nonemployee Directors Stock Plan, as amended (Exhibit 10.47, Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-11083).#
10.22	Guidant Corporation 1998 Stock Plan, as amended (Exhibit 10.48, Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-11083).#
10.23	Form of Guidant Corporation Option Grant (Exhibit 10.49, Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-11083).#
10.24	Boston Scientific Corporation 2006 Global Employee Stock Ownership Plan, as amended (Exhibit 10.23, Annual Report on Form 10-K for the year ended December 31, 2006, Exhibit 10.24, Annual Report on Form 10-K for the year ended December 31, 2006 and Exhibit 10.6, Current Report on Form 8-K dated December 15, 2009, File No. 1-11083).#
10.25	Boston Scientific Corporation 1992 Non-Employee Directors’ Stock Option Plan, as amended (Exhibit 10.2, Annual Report on Form 10-K for the year ended December 31, 1996, Exhibit 10.3, Annual Report on Form 10-K for the year ended December 31, 2000 and Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004, File No. 1-11083).#
10.26	Boston Scientific Corporation Non—Employee Director Deferred Compensation Plan, as amended and restated, effective January 1, 2009 (Exhibit 10.1, Current Report on Form 8-K dated October 28, 2008, File No. 1-11083).#
10.27	Form of Non-Qualified Stock Option Agreement (Non-Employee Directors) (Exhibit 10.5, Current Report on Form 8-K dated December 10, 2004, File No. 1-11083).#
10.28	Form of Restricted Stock Award Agreement (Non-Employee Directors) (Exhibit 10.6, Current Report on Form 8-K dated December 10, 2004, File No. 1-11083).#
10.29	Form of Boston Scientific Corporation Excess Benefit Plan, as amended (Exhibit 10.1, Current Report on Form 8-K dated June 29, 2005 and Exhibit 10.4, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).#
10.30	Form of Trust Under the Boston Scientific Corporation Excess Benefit Plan (Exhibit 10.2, Current Report on Form 8-K dated June 29, 2005, File No. 1-11083).#
10.31	Boston Scientific Corporation Deferred Bonus Plan (Exhibit 10.1, Current Report on Form 8-K

152   

	dated May 11, 2010, File No. 1-11083).#
10.32	Boston Scientific Corporation Executive Allowance Plan, as amended (Exhibit 10.53, Annual Report on Form 10-K for year ended December 31, 2005, Exhibit 10.1, Current Report on Form 8-K dated October 30, 2007, and Exhibit 10.2, Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 1-11083).#
10.33	Boston Scientific Corporation Executive Retirement Plan, as amended (Exhibit 10.54, Annual Report on Form 10-K for year ended December 31, 2005 and Exhibit 10.5, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).#
10.34	Form of 2010 Performance Incentive Plan (Exhibit 10.1, Current Report on Form 8-K dated December 15, 2009, File No. 1-11083).#
10.35	Form of 2010 Performance Share Plan (Exhibit 10.2, Current Report on Form 8-K dated December 15, 2009, File No. 1-11083).#
10.36	Form of 2011 Performance Share Program (Exhibit 10.1, Current Report on Form 8-K dated December 14, 2010, File No. 1-11083).#
10.37	Form of 2011 Performance Incentive Plan (Exhibit 10.1, Current Report on Form 8-K dated October 26, 2010, File No. 1-11083).#
10.38	Form of 2011 Performance Incentive Plan, as amended (Exhibit 10.1, Current Report on Form 8-K dated January 7, 2011, File No. 1-11083).#
10.39*	Boston Scientific Corporation 401(k) Retirement Savings Plan, Amended and Restated, effective as of January 1, 2011.#
10.40	Boston Scientific Corporation 1992 Long-Term Incentive Plan, as amended (Exhibit 10.1, Annual Report on Form 10-K for the year ended December 31, 1996, Exhibit 10.2, Annual Report on Form 10-K for the year ended December 31, 2001, Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004 and Exhibit 10.3, Current Report on Form 8-K dated May 9, 2005, File No. 1-11083).#
10.41	Boston Scientific Corporation 1995 Long-Term Incentive Plan, as amended (Exhibit 10.3, Annual Report on Form 10-K for the year ended December 31, 1996, Exhibit 10.5, Annual Report on Form 10-K for the year ended December 31, 2001, Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004 and Exhibit 10.3, Current Report on Form 8-K dated May 9, 2005, File No. 1-11083).#
10.42	Boston Scientific Corporation 2000 Long-Term Incentive Plan, as amended (Exhibit 10.20, Annual Report on Form 10-K for the year ended December 31, 1999, Exhibit 10.18, Annual Report on Form 10-K for the year ended December 31, 2001, Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004 and Exhibit 10.3, Current Report on Form 8-K dated May 9, 2005, and Exhibit 10.3, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).#
10.43	Boston Scientific Corporation 2003 Long-Term Incentive Plan, as Amended and Restated, Effective June 1, 2008 (Exhibit 10.1, Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, File No. 1-11083).#
10.44	Form of Non-Qualified Stock Option Agreement (vesting over three years) (Exhibit 10.1, Current Report on Form 8-K dated December 10, 2004, File No. 1-11083).#
10.45	Form of Non-Qualified Stock Option Agreement (vesting over four years) (Exhibit 10.2, Current

153   

	Report on Form 8-K dated December 10, 2004, File No. 1-11083).#
10.46	Form of Non-Qualified Stock Option Agreement (vesting over two years) (Exhibit 10.20, Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-11083).#
10.47	Form of Non-Qualified Stock Option Agreement (Executive) (Exhibit 10.1, Current Report on Form 8-K dated May 12, 2006, File No. 1-11083).#
10.48	Form of Deferred Stock Unit Award Agreement (Executive) (Exhibit 10.2, Current Report on Form 8-K dated May 12, 2006, File No. 1-11083).#
10.49	Form of Non-Qualified Stock Option Agreement (Special) (Exhibit 10.3, Current Report on Form 8-K dated May 12, 2006, File No. 1-11083).#
10.50	Form of Non-Qualified Stock Option Agreement dated July 1, 2005 (Exhibit 10.1, Current Report on Form 8-K dated July 1, 2005, File No. 1-11083).#
10.51	Form of Stock Option Agreement (with one year service requirement for vesting upon Retirement) (Exhibit 10.6, Quarterly Report on Form 10-K dated September 30, 2010, File No. 1-11083).#
10.52	Form of Restricted Stock Award Agreement (Exhibit 10.3, Current Report on Form 8-K dated December 10, 2004, File No. 1-11083).#
10.53	Form of Deferred Stock Unit Award Agreement (Special) (Exhibit 10.4, Current Report on Form 8-K dated May 12, 2006, File No. 1-11083).#
10.54	Form of Deferred Stock Unit Award Agreement (Exhibit 10.4, Current Report on Form 8-K dated December 10, 2004, File No. 1-11083).#
10.55	Form of Deferred Stock Unit Award Agreement (vesting over five years) (Exhibit 10.16, Annual Report on 10-K for the year ended December 31, 2006, File No. 1-11083).#
10.56	Form of Deferred Stock Unit Award Agreement (vesting over two years) (Exhibit 10.24, Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-11083).#
10.57	Form of Deferred Stock Unit Award Agreement (Non-Employee Directors) (Exhibit 10.7, Current Report on Form 8-K dated December 10, 2004, File No. 1-11083).#
10.58	Form of Deferred Stock Unit Award Agreement dated July 1, 2005 (Exhibit 10.2, Current Report on Form 8-K dated July 1, 2005, File No. 1-11083).#
10.59	Form of Deferred Stock Unit Award Agreement (with one year service requirement for vesting upon Retirement) (Exhibit 10.5, Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010, File No. 1-11083).#
10.60	Form of Performance Share Unit Award Agreement (Exhibit 10.41, Annual Report on Form 10-K for year ended December 31, 2009, File No 1-11083).#
10.61*	Form of Indemnification Agreement between the Company and certain Directors and Officers (Exhibit 10.16, Registration No. 33-46980).#
10.62	Form of Retention Agreement between Boston Scientific Corporation and certain Executive Officers, as amended (Exhibit 10.1, Current Report on Form 8-K dated February 20, 2007 and Exhibit 10.6, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).#

154   

10.63	Form of Change in Control Agreement between Boston Scientific Corporation and certain Executive Officers (Exhibit 10.3, Current Report on Form 8-K dated December 15, 2009, File No. 1-11083).#
10.64	Form of Severance Pay and Layoff Notification Plan as Amended and Restated effective as of November 1, 2007 (Exhibit 10.1, Current Report on Form 8-K dated November 1, 2007, File No. 1-11083).#
10.65	Form of Deferred Stock Unit Award Agreement between James R. Tobin and the Company dated February 28, 2006, as amended (2000 Long-Term Incentive Plan) (Exhibit 10.56, Annual Report on Form 10-K for year ended December 31, 2005 and Exhibit 10.7, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).#
10.66	Form of Deferred Stock Unit Agreement between James R. Tobin and the Company dated February 28, 2006, as amended (2003 Long-Term Incentive Plan) (Exhibit 10.57, Annual Report on Form 10-K for year ended December 31, 2005 and Exhibit 10.8, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).#
10.67	Form of Non-Qualified Stock Option Agreement dated February 24, 2009 between Boston Scientific Corporation and James R. Tobin (Exhibit 10.66, Annual Report on Form 10-K for year ended December 31, 2008, File No. 1-11083).#
10.68	Form of Transition and Retirement Agreement dated June 25, 2009 between Boston Scientific Corporation and James R. Tobin (Exhibit 10.1, Current Report on Form 8-K dated June 22, 2009, File No. 1-11083).#
10.69	Form of Offer Letter between Boston Scientific Corporation and Sam R. Leno dated April 11, 2007 (Exhibit 10.1, Current Report on Form 8-K dated May 7, 2007, File No. 1-11083).#
10.70	Form of Deferred Stock Unit Award dated June 5, 2007 between Boston Scientific Corporation and Sam R. Leno (Exhibit 10.1, Quarterly Report on Form 10-Q for quarter ended June 30, 2007, File No. 1-11083).#
10.71	Form of Non-Qualified Stock Option Agreement dated June 5, 2007 between Boston Scientific Corporation and Sam R. Leno (Exhibit 10.2, Quarterly Report on Form 10-Q dated June 30, 2007, File No. 1-11083).#
10.72	Form of Offer Letter between Boston Scientific Corporation and Jeffrey D. Capello dated May 16, 2008 (Exhibit 10.65, Annual Report on Form 10-K for year ended December 31, 2008, File No. 1-11083).#
10.73	Form of Offer Letter between Boston Scientific Corporation and J. Raymond Elliott dated June 22, 2009 (Exhibit 10.2, Current Report on Form 8-K dated June 22, 2009, File No. 1-11083).#
10.74	Form of Performance Deferred Stock Unit Award Agreement between Boston Scientific Corporation and J. Raymond Elliott dated June 23, 2009 (Exhibit 10.68, Annual Report on Form 10-K for year ended December 31, 2009, File No. 1-11083).#

155   

10.75	Form of Retention Agreement between Boston Scientific Corporation and J. Raymond Elliott, effective as of July 13, 2009 (Exhibit 10.1, Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, File No. 1-11083).#
10.76	Form of Restricted Deferred Stock Unit Award Agreement between Boston Scientific Corporation and J. Raymond Elliott dated June 23, 2009 (Exhibit 10.69, Annual Report on Form 10-K for year ended December 31, 2009, File No. 1-11083).#
10.77	Form of Offer Letter between Boston Scientific Corporation and Timothy A. Pratt dated April 9, 2008 (Exhibit 10.1, Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010, File No. 1-11083).#
10.78	Form of Agreement and General Release of All Claims between Fredericus A. Colen and Boston Scientific Corporation dated April 23, 2010 (Exhibit 10.1, Current Report on Form 8-K dated April 23, 2010, File No. 1-11083).#
11*	Statement regarding computation of per share earnings (included in Note O - Earnings per Share to the Company’s 2010 consolidated financial statements for the year ended December 31, 2010 included in Item 8).
12*	Statement regarding computation of ratios of earnings to fixed charges.
21*	List of the Company’s subsidiaries as of February 10, 2011.
23*	Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP.
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008; (ii) the Consolidated Statements of Financial Position as of December 31, 2010 and 2009; (iii) the Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008; (v) the notes to the Consolidated Financial Statements; and (vi) Schedule II - Valuation and Qualifying Accounts.

156   

SIGNATURES

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

Dated: February 17, 2011	By:	/s/ Jeffrey D. Capello
		Jeffrey D. Capello
		Executive 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 Boston Scientific Corporation and in the capacities and on the dates indicated.

Dated: February 17, 2011	By:	/s/ John E. Abele
		John E. Abele
		Director, Founder
Dated: February 17, 2011	By:	/s/ Katharine T. Bartlett
		Katharine T. Bartlett
		Director
Dated: February 17, 2011	By:	/s/ Bruce L. Byrnes
		Bruce L. Byrnes
		Director
Dated: February 17, 2011	By:	/s/ Nelda J. Connors
		Nelda J. Connors
		Director
Dated: February 17, 2011	By:	/s/ J. Raymond Elliott
		J. Raymond Elliott
		Director, President and Chief Executive Officer
Dated: February 17, 2011	By:	/s/ Marye Anne Fox, Ph.D.
		Marye Anne Fox, Ph.D.
		Director
Dated: February 17, 2011	By:	/s/ Ray J. Groves
		Ray J. Groves
		Director

Dated: February 17, 2011	By:	/s/ Kristina M. Johnson, Ph.D.
		Kristina M. Johnson, Ph.D.
		Director
Dated: February 17, 2011	By:	/s/ Ernest Mario, Ph.D.
		Ernest Mario, Ph.D.
		Director
Dated: February 17, 2011	By:	/s/ N.J. Nicholas, Jr.
		N.J. Nicholas, Jr.
		Director
Dated: February 17, 2011	By:	/s/ Pete M. Nicholas
		Pete M. Nicholas
		Director, Founder, Chairman of the Board
Dated: February 17, 2011	By:	/s/ Uwe E. Reinhardt, Ph.D.
		Uwe E. Reinhardt, Ph.D.
		Director
Dated: February 17, 2011	By:	/s/ John E. Sununu
		John E. Sununu
		Director

Schedule II

VALUATION AND QUALIFYING ACCOUNTS (in millions)

					Deductions to			Charges to
	Balance at		Charges to		Allowances for			(Deductions from)
	Beginning of		Costs and		Uncollectible			Other Accounts			Balance at
Description	Year		Expenses (a)		Accounts (b)			(c)			End of Year
Year Ended December 31, 2010:
Allowances for uncollectible accounts and sales returns and allowances	$	110		27		(15	)		3		$	125
Year Ended December 31, 2009:
Allowances for uncollectible accounts and sales returns and allowances	$	131		27		(14	)		(34	)	$	110
Year Ended December 31, 2008:
Allowances for uncollectible accounts and sales returns and allowances	$	137		8		(11	)		(3	)	$	131

(a) Represents allowances for uncollectible accounts established through selling, general and administrative expenses.

(b) Represents actual write-offs of uncollectible accounts.

(c) Represents net change in allowances for sales returns, recorded as contra-revenue.

EX-10.11

EXHIBIT 10.11

CONFIDENTIAL EXECUTION VERSION

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	24
Section 2.03	Purchase Price; Allocation of Purchase Price	27
Section 2.04	Milestone Payments	28
Section 2.05	Closing	29
Section 2.06	Closing Deliveries by BSC	29
Section 2.07	Closing Deliveries by the Purchaser	30
Section 2.08	Deferred Closings	30
Section 2.09	Other Transfers	32
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BSC
Section 3.01	Organization, Authority and Qualification of BSC and the Sellers	32
Section 3.02	No Conflict	33
Section 3.03	Governmental Consents and Approvals	33
Section 3.04	Financial Information	33
Section 3.05	Absence of Undisclosed Material Liabilities	34
Section 3.06	Conduct in the Ordinary Course	34
Section 3.07	Litigation	34
Section 3.08	Compliance with Laws; Permits	34
Section 3.09	Environmental Matters	35
Section 3.10	Intellectual Property	35
Section 3.11	Real Property	37
Section 3.12	Title to Purchased Assets; Sufficiency	37
Section 3.13	Labor Matters	38
Section 3.14	Employee Benefit Matters	39
Section 3.15	Taxes	41
Section 3.16	Material Contracts	41
Section 3.17	FDA Regulatory Compliance	43

i

Section 3.18	Healthcare Regulatory Compliance	44
Section 3.19	Product Liability	45
Section 3.20	Customers and Suppliers	45
Section 3.21	Certain Business Practices	46
Section 3.22	Brokers	46
Section 3.23	Disclaimer of BSC	46
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 4.01	Organization and Authority of the Purchaser and its Affiliates	46
Section 4.02	No Conflict	47
Section 4.03	Governmental Consents and Approvals	47
Section 4.04	Financing	48
Section 4.05	Litigation	48
Section 4.06	Brokers	48
Section 4.07	BSC’s Representations	48
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01	Conduct of Business Prior to the Closing	48
Section 5.02	Access to Information	51
Section 5.03	Confidentiality	52
Section 5.04	Regulatory and Other Authorizations	52
Section 5.05	Consents	54
Section 5.06	Retained Names and Marks	54
Section 5.07	Notifications	55
Section 5.08	Bulk Transfer Laws	56
Section 5.09	Audited Special Purpose Financial Statements	56
Section 5.10	Non-Solicitation	56
Section 5.11	Non-Competition	57
Section 5.12	Collection of Accounts Receivables; Inventory	58
Section 5.13	Further Action	58
Section 5.14	Tax Cooperation and Exchange of Information	59
Section 5.15	Conveyance Taxes	59
Section 5.16	VAT and Recoverable Taxes	59
Section 5.17	Proration of Taxes	60
Section 5.18	BSC Compensation Tax Items	61
Section 5.19	Tax Treatment of Deferred Transfers	62
Section 5.20	Successor Employer	62
Section 5.21	Risk of Loss	62
Section 5.22	Intercompany Arrangements	62
Section 5.23	Mixed Contracts	62

ii

Section 5.24	Schedules and Exhibits to Certain Ancillary Agreements; OUS Transfer Agreements	63
Section 5.25	IP Docket; Assignment Documents	63
Section 5.26	Additional Patents	64
ARTICLE VI
EMPLOYEE MATTERS
Section 6.01	Offers of Employment and Automatic Transfers	65
Section 6.02	Employee Benefits	67
Section 6.03	Existing Agreements	69
Section 6.04	WARN	69
Section 6.05	COBRA	69
Section 6.06	401(k) Plans	70
Section 6.07	Accrued Vacation	70
Section 6.08	No Guarantee of Continued Employment; No Third-Party Rights	70
Section 6.09	Compliance with Law	71
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.01	Conditions to Obligations of BSC	71
Section 7.02	Conditions to Obligations of the Purchaser	72
ARTICLE VIII
INDEMNIFICATION
Section 8.01	Survival of Representations and Warranties	73
Section 8.02	Indemnification by BSC	73
Section 8.03	Indemnification by the Purchaser	73
Section 8.04	Limits on Indemnification	74
Section 8.05	Notice of Loss; Third Party Claims; Mixed Actions	75
Section 8.06	Tax Treatment	77
Section 8.07	Remedies	77
Section 8.08	Set-Off Rights	77
Section 8.09	Information; Waiver	79
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.01	Termination	79
Section 9.02	Effect of Termination	80

iii

ARTICLE X
GENERAL PROVISIONS
Section 10.01	Expenses	80
Section 10.02	Notices	80
Section 10.03	Public Announcements	81
Section 10.04	Severability	81
Section 10.05	Entire Agreement	82
Section 10.06	Assignment	82
Section 10.07	Amendment	82
Section 10.08	Waiver	82
Section 10.09	No Third Party Beneficiaries	82
Section 10.10	Currency and Exchange Rates	82
Section 10.11	Specific Performance	83
Section 10.12	Governing Law	83
Section 10.13	Waiver of Jury Trial	83
Section 10.14	Counterparts	84

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

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          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.

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          “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

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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.

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          “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).

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          “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.

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          “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.

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          “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”;

(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;

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(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;

(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

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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 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;

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(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 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;

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(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);

(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

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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;

(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;

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(iii) all Liabilities for customs duties arising from the conduct of the Business on or prior to the Closing Date;

(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;

(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;

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(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 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

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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;

(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.

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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 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).

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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;

(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.

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(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 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

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“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 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

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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 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

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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 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

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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 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.

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(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.

(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 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

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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 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

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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, 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

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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.

(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

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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 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;

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(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;

(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

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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 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.

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(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.

(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.

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(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.

(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

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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.

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

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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 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

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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 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:

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(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.

(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;

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(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;

(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

(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.

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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 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).

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(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 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

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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 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

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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 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

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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, 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

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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.

(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

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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 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

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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 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.

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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 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

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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 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

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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 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

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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.

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

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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 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.

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(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 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.

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(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 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

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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 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

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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 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

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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.

(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

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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 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

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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 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

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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.

          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

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(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.

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.

Section 8.03  Indemnification by the Purchaser. BSC and its Affiliates, officers, directors, employees, agents, successors and assigns (each, a “Seller

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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 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

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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 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

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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 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

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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.

(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

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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 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

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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.

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;

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(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 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

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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.

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.

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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 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

82

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 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

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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-10.39

Exhibit 10.39

BOSTON SCIENTIFIC CORPORATION
401(k) RETIREMENT SAVINGS PLAN

(Amended and Restated, Effective January 1, 2011)

Table of Contents

	Page
ARTICLE 1. INTRODUCTION		1
1.1. Qualification and Purpose		1
1.2. Rights under Plans		1
1.3. Defined Terms		1
ARTICLE 2. DEFINITIONS		2
2.1. “Accounts”		2
2.2. “Affiliated Employer”		2
2.3. “Beneficiary”		2
2.4. “Board of Directors”		2
2.5. “Code”		2
2.6. “Committee”		2
2.7. “Company Stock”		2
2.8. “Compensation”		2
2.9. “Disability”		3
2.10. “Discretionary Contribution”		3
2.11. “Discretionary Contribution Account”		3
2.12. “Elective Contribution”		3
2.13. “Elective Contribution Account”		3
2.14. “Eligible Employee”		4
2.15. “Employee”		4
2.16. “Employee Contribution”		4
2.17. “Entry Date”		4
2.18. “ERISA”		4
2.19. “Highly Compensated Employee”		4
2.20. “Hour of Service”		4
2.21. “Leased Employee”		6
2.22. “Matching Contribution Account”		6
2.23. “Normal Retirement Age”		6
2.24. “Participant”		6
2.25. “Participating Employer”		6
2.26. “Plan”		6
2.27. “Plan Sponsor”		6

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	Page
2.28. “Plan Year”		6
2.29. “Predecessor Employer”		6
2.30. “Qualified Domestic Relations Order”		7
2.31. “Qualified Nonelective Contribution”		7
2.32. “QNEC Account”		7
2.33. “Regulation”		7
2.34. “Required Beginning Date”		7
2.35. “Rollover Contribution”		7
2.36. “Section”		7
2.37. “Trust”		7
2.38. “Trustee”		7
2.39. “Valuation Date”		7
2.40. “Year of Service for Vesting”		7
ARTICLE 3. PARTICIPATION		9
3.1. Date of Participation		9
3.2. Duration of Participation		10
ARTICLE 4. CONTRIBUTIONS		11
4.1. Elective Contributions		11
4.2. Form and Manner of Affirmative and Automatic Elections		11
4.3. Matching Contributions		13
4.4. Discretionary Contributions		13
4.5. Qualified Nonelective Contributions		14
4.6. Rollover Contributions		14
4.7. Employee Contributions		14
4.8. Crediting of Contributions		14
4.9. Time for Making Contributions		14
4.10. Certain Limits Apply		14
4.11. Return of Contributions		14
4.12. Establishment of Trust		15
ARTICLE 5. ROTH ELECTIVE DEFERRALS		16
5.1. General Application		16
5.2. Separate Accounting		16
5.3. Direct Rollovers		16
5.4. Correction of Excess Contributions		17
5.5. Definition		17

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	Page
ARTICLE 6. SAFE HARBOR MATCHING CONTRIBUTIONS		18
6.1. Rules of Application		18
6.2. Definitions		18
6.3. Safe Harbor Matching Contributions		18
6.4. Notice and Elections		19
6.5. Vesting of Safe Harbor Matching Contributions		19
ARTICLE 7. PARTICIPANT ACCOUNTS		20
7.1. Accounts		20
7.2. Adjustment of Accounts		20
7.3. Investment of Accounts		20
7.4. Appointment of Investment Manager or Named Fiduciary		21
7.5. Section 404(c) Compliance		21
7.6. Transfers From Other Plans		22
ARTICLE 8. VESTING OF ACCOUNTS		23
8.1. Immediate Vesting of Certain Accounts		23
8.2. Deferred Vesting of Discretionary Contribution Accounts		23
8.3. Special Vesting Rules		23
8.4. Changes in Vesting Schedule		24
8.5. Forfeitures		24
8.6. Vesting of Accounts Transferred From Other Plans		25
ARTICLE 9. WITHDRAWALS PRIOR TO SEVERANCE FROM EMPLOYMENT		26
9.1. Hardship Withdrawals		26
9.2. Withdrawals After Age 591/2		27
9.3. Withdrawal from Rollover Account		27
9.4. Withdrawal on Account of Disability		27
9.5. Withdrawal of Employee Contributions		27
9.6. Restrictions on Certain Distributions		28
9.7. Limitation of Withdrawal Amount		28
9.8. Distributions Required by a Qualified Domestic Relations Order		28
9.9. Withdrawals by Certain Former Participants in Other Plans		28
ARTICLE 10. LOANS TO PARTICIPANTS		30
10.1. In General		30
10.2. Rules and Procedures		30
10.3. Maximum Amount of Loan		30
10.4. Note; Security; Interest		30

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	Page
10.5. Note as Trust Asset		30
10.6. Rollover of Loans Upon Sale of Participating Employer		31
10.7. Nondiscrimination		31
10.8. Spousal Consent to Loans to Certain Former Participants in Other Plans		31
ARTICLE 11. BENEFITS UPON DEATH OR SEVERANCE FROM EMPLOYMENT		32
11.1. Severance From Employment for Reasons Other Than Death		32
11.2. Time of Distributions		32
11.3. Amount of Distribution		33
11.4. Distributions After a Participant’s Death		33
11.5. Designation of Beneficiary		34
11.6. Direct Rollovers of Eligible Distributions		35
11.7. Protected Forms of Benefit		36
11.8. Distribution Restrictions for Elective Contributions		36
11.9. Minimum Distribution Requirements		37
11.10. Non-Spousal Rollovers		41
11.11. Special Distribution Rules for 2009		41
ARTICLE 12. ADMINISTRATION		42
12.1. Committee		42
12.2. Powers of Committee		42
12.3. Effect of Interpretation or Determination		42
12.4. Reliance on Tables, etc.		43
12.5. Claims and Review Procedures		43
12.6. Indemnification of Committee and Assistants		43
12.7. Annual Report		43
12.8. Expenses of Plan		43
ARTICLE 13. AMENDMENT AND TERMINATION		44
13.1. Amendment		44
13.2. Termination		44
13.3. Distributions upon Termination of the Plan		44
13.4. Merger or Consolidation of Plan; Transfer of Plan Assets		44
ARTICLE 14. LIMITS ON CONTRIBUTIONS		46
14.1. Code Section 404 Limits		46
14.2. Code Section 415 Limits		46
14.3. Code Section 402(g) Limits		47
14.4. Code Section 401(k)(3) Limits		49

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	Page
14.5. Code Section 401(m) Limits		52
14.6. Code Section 401(k)(3) and 401(m) Limits after 2010		55
ARTICLE 15. SPECIAL TOP-HEAVY PROVISIONS		56
15.1. Provisions to Apply		56
15.2. Minimum Contribution		56
15.3. Adjustment to Limitation on Benefits		57
15.4. Definitions		57
ARTICLE 16. MISCELLANEOUS		60
16.1. Exclusive Benefit Rule		60
16.2. Limitation of Rights		60
16.3. Nonalienability of Benefits		60
16.4. Adequacy of Delivery		60
16.5. Reclassification of Employment Status		60
16.6. Veterans’ Reemployment and Benefits Rights		61
16.7. Governing law		61
16.8. Authority to Correct Operational Defects		61
16.9. Electronic Forms		61

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ARTICLE 1. INTRODUCTION.

     1.1. Qualification and Purpose. This document amends and restates the provisions of the Boston Scientific Corporation 401(k) Retirement Savings Plan, effective as of January 1, 2011 unless otherwise stated herein. Mergers and account transfers of certain other plans into the Plan shall have such effective dates as are provided in Schedule B. The original effective date of the Plan was January 1, 1987. The Plan and its related Trust are intended to qualify as a profit-sharing plan and trust under Code sections 401(a) and 501(a), the cash or deferred arrangement forming part of the Plan is intended to qualify under Code section 401(k). The Plan is intended to constitute a plan described in section 404(c) of ERISA. The provisions of the Plan and Trust shall be construed and applied accordingly. The purpose of the Plan is to provide benefits to Participants in a manner consistent and in compliance with such Code sections and Title I of ERISA. Notwithstanding the general effective date specified above, any provision of this restatement that is intended to comply with changes in law made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) and the Pension Protection Act of 2006 (“PPA”), Internal Revenue Service regulations or other guidance thereunder, or Department of Labor guidance shall be effective as of the effective dates specified for such changes in the applicable statute, regulation, or guidance. In addition, this restatement contains provisions intended to comply with the requirements of the Heroes Earnings Assistance and Relief Tax Act of 2008 (the “HEART Act” and the Worker, Retiree and Employer Recovery Act of 2008 (“WRERA”). Those provisions should be construed in accordance with each Act, and any subsequent guidance issued thereunder, and will supersede any provision of the Plan to the extent that it is inconsistent with either Act.

     1.2. Rights under Plans. The rights of Participants in this Plan or any other plan which has been merged into this Plan, and the rights of their beneficiaries, shall be determined in accordance with the terms of the applicable plan at the time they ceased to be employed.

     1.3. Defined Terms. All capitalized terms used in the following provisions of the Plan have the meanings given them under Article 2.

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ARTICLE 2. DEFINITIONS.

     Wherever used in the Plan, the following terms have the following meanings:

     2.1. “Accounts” mean, for any Participant, the accounts established under the Plan to which contributions made for the Participant’s benefit, and any allocable income, expense, gain and loss, are allocated.

     2.2. “Affiliated Employer” means (a) the Plan Sponsor, (b) any corporation that is a member of a controlled group of corporations (as defined in Code section 414(b)) of which the Plan Sponsor is also a member, (c) any trade or business, whether or not incorporated, that is under common control (as defined in Code section 414(c)) with the Plan Sponsor, (d) any trade or business that is a member of an affiliated service group (as defined in Code section 414(m)) of which the Plan Sponsor is also a member, or (e) to the extent required by Regulations issued under Code section 414(o), any other organization; provided, that the term “Affiliated Employer” shall not include any corporation or unincorporated trade or business prior to the date on which such corporation, trade or business satisfies the affiliation or control tests of, (b), (c), (d) or (e) above. In identifying any “Affiliated Employers” for purposes of the Code section 415 limits, the definitions in Code sections 414(b) and (c) shall be modified as provided in Code section 415(h).

     2.3. “Beneficiary” means any person entitled to receive benefits under the Plan upon the death of a Participant.

     2.4. “Board of Directors” means the members of the Board of Directors of Boston Scientific Corporation.

     2.5. “Code” means the Internal Revenue Code of 1986, as amended from time to time. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection, and also includes reference to any Regulation issued pursuant to or with respect to such section or subsection.

     2.6. “Committee” means the entity or persons appointed by the Board of Directors, or its designee, to administer the Plan pursuant to its provisions.

     2.7. “Company Stock” means any stock of the Plan Sponsor or an Affiliated Employer constituting a “qualifying employer security” within the meaning of section 407(d)(5) of ERISA.

     2.8. “Compensation” means:

     (a) for purposes of determining the Code section 415 limits, the amount of any minimum contribution under the special top-heavy provisions, and determining the status of an individual as a “highly compensated employee” or a “key employee,” the Participant’s wages as defined in Code section 3401(a) for purposes of income tax

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withholding at the source, but (i) determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed, and (ii) increased by any such amounts that would have been received by the individual from the Employer but for an election under Code section 125, 132(f)(4), 401(k), or 402(h);

     (b) for purposes of the limits under Sections 14.4 and 14.5, if applicable, “compensation” as defined under Code section 414(s) and the Treasury regulations thereunder; and

     (c) for all other purposes under the Plan, the same as in (a) above, reduced by all of the following items (even if includable in gross income): cost-of-living adjustments, reimbursements or other expense allowances, pay in lieu of vacation upon termination of employment, bonuses, deferred compensation, payments under a severance plan, amounts received upon the exercise of options to purchase Company Stock, and moving expenses.

     (d) Compensation shall include only that compensation which is actually paid to the Participant during the applicable Plan Year and prior to the Participant’s severance from employment, except as provided in Regulation section 1.415(c)-(2)(e)(3). For all purposes under the Plan, Compensation for any individual will be limited for any Plan Year as provided under Code section 401(a)(17). If the period for determining Compensation used in calculating a Participant’s allocation for a determination period is shorter than 12 months, the annual Compensation limit shall be an amount equal to the otherwise applicable limit multiplied by a fraction, the numerator of which is the number of months in the period, and the denominator of which is 12. For a Participant’s initial year of participation in the Plan, Compensation will be recognized for the entire Plan Year.

     2.9. “Disability” means an injury or sickness which makes a Participant unable to perform each of the “essential functions” (as defined in the Boston Scientific Long Term Disability Plan) of any “gainful occupation” (as defined in the Boston Scientific Long Term Disability Plan) for which the Participant is reasonably fitted by training, education or experience.

     2.10. “Discretionary Contribution” means a contribution made for the benefit of a Participant by a Participating Employer in the discretion of the Board of Directors.

     2.11. “Discretionary Contribution Account” means an Account to which Discretionary Contributions are allocated.

     2.12. “Elective Contribution” means a contribution made to the Plan for the benefit of a Participant pursuant to a Compensation Reduction Authorization. For any Plan Year after December 31, 2010, Elective Contributions shall include an elective deferral contribution described in Article 6, which is intended to satisfy the ADP safe harbor requirements.

     2.13. “Elective Contribution Account” means an Account to which Elective Contributions (but not Roth Elective Deferrals) are allocated.

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     2.14. “Eligible Employee” means, subject to Section 16.5:

     (a) any Employee who is employed by a Participating Employer, and who, in the opinion of his or her Participating Employer, may reasonably be expected to complete 1,000 or more Hours of Service with a Participating Employer in a Plan Year; or

     (b) any Employee not already an Eligible Employee under (a) above who is employed by a Participating Employer, and who has completed 1,000 or more Hours of Service in a computation period or has previously been an Eligible Employee described in (a) above.

The initial computation period shall be the 12-consecutive month period beginning on the date the Employee first performs an Hour of Service (the “employment commencement date”). The succeeding computation periods commence with the first Plan Year commencing after the Employee’s employment commencement date.

     Notwithstanding the foregoing, in no event will an individual become an Eligible Employee while he or she is characterized by an Affiliated Employer as a Leased Employee, nor will a foreign national or nonresident alien who is not paid from a Participating Employer’s U.S. payroll become an Eligible Employee.

     2.15. “Employee” means any individual employed by an Affiliated Employer, including any Leased Employee and any other individual required to be treated as an employee pursuant to Code sections 414(n) and 414(o).

     2.16. “Employee Contribution” means the voluntary after-tax contribution made by a Participant under the Plan for a Plan Year prior to January 1, 2011.

     2.17. “Entry Date” means the first day of each pay period during the Plan Year.

     2.18. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute or statutes of similar import.

     2.19. “Highly Compensated Employee” means each individual employed by an Affiliated Employer who (i) during such Plan Year or preceding Plan Year, is a “5% owner” within the meaning of Code section 414(q), or (ii) during the preceding Plan Year received Compensation in excess of $110,000 (as adjusted under that Code section) and was in the “top paid group” as defined therein for such Plan Year.

     2.20. “Hour of Service” means, with respect to any Employee:

     (a) Each hour for which the Employee is paid or entitled to payment for the performance of duties for an Affiliated Employer, each such hour to be credited to the Employee for the computation period in which the duties were performed;

     (b) Each hour for which the Employee is directly or indirectly paid or entitled to payment by any Affiliated Employer (including payments made or due from a trust fund or insurer to which the Affiliated Employer contributes or pays premiums) on

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account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity, disability, layoff, jury duty, military duty, or leave of absence, each such hour to be credited to the Employee for the computation period in which such period of time occurs, subject to the following rules;

     (i) No more than 501 Hours of Service shall be credited under this paragraph (b) to the Employee on account of any single continuous period during which the Employee performs no duties;

     (ii) Hours of Service shall not be credited under this paragraph (b) to an Employee for a payment which solely reimburses the Employee for medically related expenses incurred by the Employee, or which is made or due under a plan maintained solely for the purpose of complying with applicable workers’ compensation, unemployment compensation or disability insurance laws; and

     (iii) If the period during which the Employee performs no duties falls within two or more computation periods, and if the payment made on account of such period is not calculated on the basis of units of time, the number of Hours of Service credited with respect to such period shall be allocated between not more than the first two such periods based on the amount of the payment divided by the Employee’s most recent hourly rate of Compensation before the period during which no duties were performed;

     (c) Each hour not counted under paragraph (a) or (b) for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to be paid by any Affiliated Employer, each such hour to be credited to the Employee for the computation period to which the award or agreement for back pay pertains, provided that crediting of Hours of Service under this paragraph (c) with respect to periods described in paragraph (b) above shall be subject to the limitations and special rules set forth in clauses (i), (ii) and (iii) of paragraph (b);

     (d) Each noncompensated hour while an Employee during a period of absence from any Affiliated Employer in the armed forces of the United States if the Employee returns to work for any Affiliated Employer at a time when he or she has reemployment rights under federal law, and each noncompensated hour while an Employee on an unpaid leave of absence granted by the Employer; and

     (e) Solely for purposes of Section 8.5, each hour not counted under paragraph (a) or (b) for which the Employee is absent from work for maternity or paternity reasons, provided that no more than 501 Hours of Service shall be credited under this paragraph (e) to the Employee. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of the birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement.

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Hours of Service to be credited to an Employee under (a), (b) and (c) above will be calculated and credited pursuant to paragraphs (b) and (c) of section 2530.200b-2 of the Department of Labor Regulations, which are incorporated herein by reference. Hours of Service to be credited to an Employee during a period described in (d) and (e) above will be determined by the Committee with reference to the individual’s most recent normal work schedule, or at the rate of eight hours per day in the event the Committee is unable to establish such schedule. Notwithstanding the foregoing, where records of actual hours worked by an Employee are not maintained, an Employee will be credited with 190 Hours of Service for each month for which the Employee would be required to be credited with at least one Hour of Service.

     2.21. “Leased Employee” means any person who is not an employee of a Participating Employer (including, for purposes of this paragraph, Affiliated Employers) and who provides services to the Participating Employer, provided that (i) the services are provided pursuant to an agreement between the Participating Employer and any other person (“leasing organization”); (ii) the person has performed the services for the Company on a substantially full-time basis for a period of at least 1 year; and (iii) the services are performed under the primary direction and control of the Participating Employer; provided that, an individual shall not be considered a Leased Employee of the Participating Employer if (i) the employee is covered by a money purchase plan maintained by the leasing organization providing: (1) a nonintegrated employer contribution rate of at least 10 percent of “compensation,” as that term is defined in Section 2.8(a), (2) immediate participation, and (3) full and immediate vesting; and (ii) leased employees do not constitute more than 20 percent of the Participating Employer’s nonhighly compensated workforce.

     2.22. “Matching Contribution Account” means an Account to which Matching Contributions are allocated. For Plan Years after December 31, 2010, the Safe Harbor Matching Contributions shall be maintained in the separate recordkeeping account as described in Article 6.

     2.23. “Normal Retirement Age” means age 62.

     2.24. “Participant” means each Eligible Employee who participates in the Plan pursuant to its provisions.

     2.25. “Participating Employer” means the Plan Sponsor and each Affiliated Employer listed on Schedule A.

     2.26. “Plan” means the Boston Scientific Corporation 401(k) Retirement Savings Plan set forth herein, and all subsequent amendments thereto.

     2.27. “Plan Sponsor” means Boston Scientific Corporation, a Delaware Corporation.

     2.28. “Plan Year” means the calendar year.

     2.29. “Predecessor Employer” means any trade or business acquired by a Participating Employer, or any entity from which a Participating Employer has acquired substantially all of its assets.

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     2.30. “Qualified Domestic Relations Order” means any judgment, decree or order (including approval of a property settlement agreement) which constitutes a “qualified domestic relations order” within the meaning of Code section 414(p). A judgment, decree or order may still be considered to be a Qualified Domestic Relations Order if it requires a distribution to an alternate payee (or the segregation of accounts pending distribution to an alternate payee) before the Participant is otherwise entitled to a distribution under the Plan.

     2.31. “Qualified Nonelective Contribution” means a contribution made in the discretion of the Plan Sponsor which is designated by the Plan Sponsor as a Qualified Nonelective Contribution and which falls within the definition of a “qualified nonelective contribution” under Regulation section 1.401(k)-6.

     2.32. “QNEC Account” means an Account to which Qualified Nonelective Contributions are allocated.

     2.33. “Regulation” means a regulation issued by the Department of Treasury, including any final regulation, proposed regulation, temporary regulation, as well as any modification of any such regulation contained in any notice, revenue procedure, or similar pronouncement issued by the Internal Revenue Service.

     2.34. “Required Beginning Date” for a Participant shall be determined as follows:

     (a) For a Participant who is a 5 percent owner (as defined in Code section 416), the Required Beginning Date is April 1 following the calendar year in which the Participant attains age 70¹/2.

     (b) For a Participant who is not a 5 percent owner, the Required Beginning Date is April 1 following the later of (A) the calendar year in which the Participant attains age 70¹/2 or (B) the calendar year in which the Participant incurs a severance from employment from the Participating Employer.

     2.35. “Rollover Contribution” means a contribution made by a Participant which satisfies the requirements for rollover contributions as set forth in the Plan.

     2.36. “Section” means a section of the Plan.

     2.37. “Trust” means the trust established under Section 4.12.

     2.38. “Trustee” means the person or persons who are at any time acting as trustee under the Trust.

     2.39. “Valuation Date” means each day on which the New York Stock Exchange is open for trading.

     2.40. “Year of Service for Vesting” means a Plan Year during which the Employee completes at least 1,000 Hours of Service. The following special rules shall apply:

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     (a) Unless otherwise provided in Schedule B, in the event the Plan Sponsor acquires a business of another employer, through an acquisition either of assets or stock of such other employer, an Employee who was employed by such other employer immediately prior to such acquisition shall have his or her prior service with such other employer taken into account, as if it were service with an Affiliated Employer.

     (b) A Leased Employee shall accrue Years of Service for vesting purposes and shall be credited with such Years of Service for Vesting upon hire by a Participating Employer as a common law employee.

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ARTICLE 3. PARTICIPATION.

     3.1. Date of Participation.

     (a) Any individual who was a Participant on December 31, 2010 and is an Eligible Employee on January 1, 2011 will, subject to Section 3.2, continue to be a Participant.

     (b) Any other individual will become a Participant on the Entry Date coinciding with or next following the latest of:

(i)	January 1, 2011;
(ii)	the date on which he or she becomes an Eligible Employee;
(iii)	the date on which he or she attains age 18; and
(iv)	the 30th day after the date he or she completes an Hour of Service;

provided that (1) he or she is an Eligible Employee on such Entry Date and (2) he or she has in effect on such Entry Date a Compensation Reduction Authorization described in Section 4.2 which was submitted in the manner prescribed by the Committee. Unless otherwise provided by the Committee, an Employee who has satisfied the requirements of (i), (ii), (iii) and (iv) above, but who has failed to satisfy the requirements of (1) or (2) above, will become a Participant on the first Entry Date coinciding with or next following the date on which the requirements of both (1) and (2) are satisfied. Notwithstanding the foregoing, an Employee who has satisfied the requirements of (ii), (iii) and (iv) above, but has not satisfied the other requirements of this subsection (b), will become a Participant as of the date a Discretionary Contribution is made to the Plan, if he or she is otherwise eligible to receive an allocation pursuant to Section 4.4.

     (c) Unless otherwise provided in Schedule B, in the event the Plan Sponsor acquires a business of another employer, through an acquisition of either assets or stock, an Employee who was employed by such other employer immediately prior to such acquisition shall have his or her prior service with such other employer taken into account, as if it were service with an Affiliated Employer, for purposes of (b)(iv) above and Section 2.14(b).

     (d) An Employee who, immediately before becoming an Eligible Employee, has a contribution agreement in effect with an Affiliated Employer under a separate plan described in section 401(k) of the Code shall become a Participant on the payroll date coinciding with or next following the date he or she becomes an Eligible Employee, provided that he or she has a Compensation Reduction Authorization in effect on such payroll date.

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     (e) Notwithstanding the foregoing, an Eligible Employee who first completes an Hour of Service or, in the case of a rehired Employee, resumes employment with a Participating Employer on or after January 1, 2007 and who would become a Participant in accordance with subsection (b) but for the failure to enter into a Compensation Reduction Authorization will become a Participant on the first Entry Date on which an automatic Compensation Reduction Authorization is in effect with respect to such Eligible Employee pursuant to Section 4.2(b).

     3.2. Duration of Participation. An individual who has become a Participant under the Plan will remain a Participant for as long as an Account is maintained under the Plan for his or her benefit, or until his or her death, if earlier. Notwithstanding the preceding sentence and unless otherwise expressly provided for under the Plan, no contributions shall be made with respect to a Participant who is not an Eligible Employee. In the event a Participant remains an Employee but ceases to be an Eligible Employee and becomes ineligible for contributions, such Employee will again become eligible for contributions immediately upon returning to the class of Eligible Employees. In the event an Employee who is not an Eligible Employee becomes an Eligible Employee, such Employee will become a Participant on the first Entry Date on or after becoming an Eligible Employee, if he or she has satisfied the requirements of Section 3.1. A Participant or former Participant who is reemployed as an Eligible Employee shall again become eligible for contributions on the first Entry Date on or after reemployment.

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ARTICLE 4. CONTRIBUTIONS.

     4.1. Elective Contributions. On behalf of each Participant for whom there is in effect, for any pay period, a Compensation Reduction Authorization described in Section 4.2 and who is receiving Compensation from a Participating Employer during such pay period, such Participating Employer will contribute to the Trust, as an Elective Contribution, an amount equal to the amount by which such Compensation was reduced pursuant to the Compensation Reduction Authorization. Elective Contributions for any pay period in a Plan Year may not be less than 1 percent of the Participant’s Compensation for such pay period and the maximum amount of Elective Contributions for any pay period shall be the least of:

     (a) 25 percent of the Participant’s Compensation for such pay period;

     (b) the maximum amount permitted under Article 14, if applicable; and

     (c) any further limit placed on Highly Compensated Employees by the Committee in its discretion in anticipation of satisfying the actual deferral percentage or actual contribution percentage limits described in Article 14 to the extent those limits are applicable for the contributions made during the Plan Year.

     In addition, Participants who have attained age 50 before the close of a Plan Year shall be eligible to have catch-up Elective Contributions made on their behalf for the Plan Year in accordance with, and subject to, the limitations of Code section 414(v). Such catch-up Elective Contributions shall not be taken into account for purposes of compliance by the Plan with the required limitations of Code sections 402(g) and 415. Except to the extent described in Article 6 to calculate the Safe Harbor Matching Contributions described therein for Plan Years after December 31, 2010, the Participating Employers will not make Matching Contributions on account of catch-up Elective Contributions. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up Elective Contributions.

     4.2. Form and Manner of Affirmative and Automatic Elections.

     (a) A “Compensation Reduction Authorization” is an authorization from an Eligible Employee to a Participating Employer which satisfies the requirements of this Section. A Compensation Reduction Authorization may be either an “affirmative” or an “automatic” Compensation Reduction Authorization. Each affirmative Compensation Reduction Authorization shall be in a form prescribed or approved by the Committee, and may be entered into as of any Entry Date upon such prior notice as the Committee may prescribe. A Compensation Reduction Authorization may be changed by the Participant, with such prior notice as the Committee may prescribe, as of the first day of any payroll period. A Compensation Reduction Authorization shall be effective with respect to Compensation payable on and after the applicable Entry Date. A Compensation Reduction Authorization may be revoked by the Participant at any time upon such prior

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notice as the Committee may prescribe. A Participant who revokes a Compensation Reduction Authorization may enter into a new affirmative Compensation Reduction Authorization only as of a subsequent Entry Date.

     (b) An Eligible Employee who first completes an Hour of Service or, in the case of a rehired Employee, resumes employment with a Participating Employer on or after January 1, 2007 will be deemed to enter into an automatic Compensation Reduction Authorization pursuant to which his or her Compensation will be automatically reduced by the amount described in (c) below, beginning on the Entry Date determined by the Committee, and the amount of such reduction will be contributed to the Trust as a pre-tax Elective Contribution under Section 4.1, subject to the following terms and conditions:

     (i) An Eligible Employee whose Compensation has been automatically reduced under this Section 4.2(b) may elect at any time either to (1) cancel such automatic Compensation Reduction Authorization, thereby ceasing Elective Contributions to the Plan on his or her behalf, or (2) replace such automatic Compensation Reduction Authorization with an affirmative Compensation Reduction Authorization, thereby changing the amount of Elective Contributions to the Plan on his or her behalf or switching such Elective Contributions to Roth Elective Deferrals made pursuant to Article 5. Any election under this Section 4.2(b)(i) shall be in a form or manner prescribed or approved by the Committee and shall be effective with respect to Compensation payable on and after the date of such election, subject to such notice as the Committee may prescribe or require.

     (ii) Prior to the Entry Date on which an automatic Compensation Reduction Authorization takes effect with respect to an Eligible Employee, the Eligible Employee will receive a notice explaining his or her right to elect to terminate or change the amount of his or her Elective Contributions to the Plan and how such Elective Contributions will be invested in the absence of any investment election by the Eligible Employee. An Eligible Employee will have a reasonable period of time after receipt of such notice to cancel the automatic Compensation Reduction Authorization or replace it with an affirmative Compensation Reduction Authorization, and to make an affirmative investment election, before the automatic Compensation Reduction Authorization takes effect. Such notice or a similar notice will be provided to such Eligible Employee within a reasonable period of time before each Plan Year thereafter for so long as an automatic Compensation Reduction Authorization remains in effect with respect to such Eligible Employee under this Section 4.2(b).

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     (c) The amount of the reduction in an Eligible Employee’s Compensation under an automatic Compensation Reduction Authorization pursuant to Section 4.2(b) shall be as follows:

First Plan Year in which the automatic Compensation Reduction Authorization is in effect:	2% of Compensation
Second Plan Year in which the automatic Compensation Reduction Authorization is in effect:	3% of Compensation
Third Plan Year in which the automatic Compensation Reduction Authorization is in effect:	4% of Compensation
Fourth Plan Year in which the automatic Compensation Reduction Authorization is in effect:	5% of Compensation
Fifth Plan Year and future Plan Years in which the automatic Compensation Reduction Authorization is in effect:	6% of Compensation

In the event that a Participant who has terminated employment with a Participating Employer and subsequently resumes employment as an Eligible Employee with a Participating Employer, for purposes of this Section 4.2(c), the amount of that Employee’s automatic Compensation Reduction Authorization shall be determined according to the above amount for the First Plan Year, and each subsequent Plan Year after his or her rehire, without regard to his or her previous employment with an Affiliated Employer and without regard to his or her previous participation in the Plan.

     4.3. Matching Contributions. For Plan Years after December 31, 2010, the Matching Contributions shall consist of the Safe Harbor Matching Contributions described in Article 6.

     4.4. Discretionary Contributions. For each Plan Year, the Participating Employers shall contribute to the Plan such other amounts, if any, as the Board of Directors, in its sole discretion, may determine. Any such Discretionary Contribution for a Plan Year shall be made in cash or, if the Board of Directors so directs, in Company Stock, and shall be allocated among and credited to the Accounts of each individual who:

     (a) is a Participant who was an Eligible Employee on the last day of that Plan Year and completed at least 1000 Hours of Service during that Plan Year; or

     (b) is a Participant who has ceased to be an Eligible Employee during that Plan Year by reason of death or severance from employment after attaining age 62 or on account of Disability,

in proportion to the relative amount of his or her Compensation for such Plan Year to the total Compensation of all the Participants who are eligible to receive an allocation of the Discretionary Contribution.

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     4.5. Qualified Nonelective Contributions. To the extent necessary to satisfy the Code section 401(k)(3) limits with respect to Elective Contributions or the Code section 401(m) limits with respect to Matching Contributions, the Plan Sponsor, in its discretion, may determine whether a Qualified Nonelective Contribution shall be made to the Trust for a Plan Year and, if so, the amount to be contributed by such Participating Employer. If the Plan Sponsor determines that a Qualified Nonelective Contribution shall be made, each Participating Employer shall contribute its designated portion. Qualified Nonelective Contributions shall be fully vested and subject to the same distribution rules as Elective Contributions as of the time such Qualified Nonelective Contributions are made to the Plan.

     4.6. Rollover Contributions. An Eligible Employee (whether or not a Participant) may make a Rollover Contribution to the Plan upon demonstration to the Committee that the contribution is eligible for transfer to the Plan pursuant to the rollover provisions of the Code.

     4.7. Employee Contributions. For Plan Years prior to January 1, 2011, a Participant could elect to make after-tax Employee Contributions under the Plan in the form and manner prescribed or approved by the Committee. Employee Contributions for any pay period in such a Plan Year could be no less than 1 percent nor greater than 10 percent of the Participant’s Compensation for such period.

     4.8. Crediting of Contributions. Each type of contribution for a Plan Year shall be allocated among and credited to the respective Accounts of Participants eligible to share in the contributions as of the Valuation Date next following the date the contributions are received by the Trustee.

     4.9. Time for Making Contributions. Elective Contributions will be paid in cash to the Trust as soon as such contributions can reasonably be segregated from the general assets of the Participating Employer, but in any event no later than the time set forth in Department of Labor Regulations section 2510.3-102.

     4.10. Certain Limits Apply. All contributions to the Plan are subject to the applicable limits set forth under Code sections 401(k), 402(g), 401(m), 404, and 415, as further described elsewhere in the Plan. In addition, certain minimum allocations may be required under Code section 416, as also further described elsewhere in the Plan.

     4.11. Return of Contributions. If any contribution by a Participating Employer to the Trust is (a) made by reason of a mistake of fact, or (b) believed by the Participating Employer in good faith to be deductible under Code section 404, but the deduction is disallowed, the Trustee shall, upon request by the Participating Employer, return to the Participating Employer the excess of the amount contributed over the amount, if any, that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Such excess shall be reduced by the losses of the Trust attributable thereto, if and to the extent such losses exceed the gains and income attributable thereto. In no event shall the return of a contribution hereunder cause any Participant’s Accounts to be reduced to less than they would have been had the mistaken or nondeductible amount not been contributed. No return of a contribution hereunder shall be made more than one year after the mistaken payment of the contribution, or disallowance of the deduction, as the case may be.

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     4.12. Establishment of Trust. The Plan Sponsor established and maintains a Trust to accept and hold contributions made under the Plan. The Trust is governed by an agreement between the Plan Sponsor and the Trustee, the terms of which shall be consistent with the Plan’s provisions and intended qualification under Code sections 401(a) and 501(a).

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ARTICLE 5. ROTH ELECTIVE DEFERRALS.

5.1. General Application.

     (a) As of January 1, 2007, the Plan will accept Roth Elective Deferrals made on behalf of Participants. A Participant’s Roth Elective Deferrals will be allocated to a separate account maintained for such deferrals as described in Section 5.2.

     (b) Unless specifically stated otherwise, Roth Elective Deferrals will be treated as Elective Contributions for all purposes under the Plan.

5.2. Separate Accounting.

     (a) Contributions and withdrawals of Roth Elective Deferrals will be credited and debited to the Roth Elective Deferral Account maintained for each Participant.

     (b) The Plan will maintain a record of the amount of Roth Elective Deferrals in each Participant’s Account.

     (c) Gains, losses, and other credits or charges must be separately allocated on a reasonable and consistent basis to each Participant’s Roth Elective Deferral Account and the Participant’s other Accounts under the Plan.

     (d) No contributions other than Roth Elective Deferrals and properly attributable earnings will be credited to each Participant’s Roth Elective Deferral Account.

5.3. Direct Rollovers.

     (a) Notwithstanding Section 11.6, a direct rollover of a distribution from a Roth Elective Deferral Account under the Plan will only be made to another Roth elective deferral account under an applicable retirement plan described in section 402A(e)(1) of the Code or to a Roth IRA described in section 408A of the Code, and only to the extent the rollover is permitted under the rules of section 402(c) of the Code.

     (b) Notwithstanding Section 4.6, the Plan will accept a Rollover Contribution to a Roth Elective Deferral Account only if it is a direct rollover from another Roth elective deferral account under an applicable retirement plan described in section 402A(e)(1) of the Code and only to the extent the rollover is permitted under the rules of section 402(c) of the Code.

     (c) Eligible rollover distributions from a Participant’s Roth elective deferral account under another an applicable retirement plan will not be taken into account in determining whether the total amount of the Participant’s account balances under the Plan exceeds $1,000 for purposes of mandatory distributions from the Plan described in Section 11.2.

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     5.4. Correction of Excess Contributions. In the case of a distribution of excess contributions under Section 14.4, a Highly Compensated Employee may not designate the extent to which the excess amount is composed of pre-tax elective deferrals and Roth Elective Deferrals.

5.5. Definition.

     (a) Roth Elective Deferrals. A “Roth Elective Deferral” is an Elective Contribution that is:

     (i) Designated irrevocably by the Participant at the time of the affirmative Compensation Reduction Authorization as a Roth Elective Deferral that is being made in lieu of all or a portion of the pre-tax Elective Contributions the Participant is otherwise eligible to make under the Plan; and

     (ii) Treated by the Participating Employer as includable in the Participant’s taxable income at the time the Participant would have received that amount in cash if the Participant had not entered into a Compensation Reduction Authorization.

     (b) Roth Elective Deferral Account. A “Roth Elective Deferral Account” means an Account to which a Participant’s Roth Elective Deferrals are allocated.

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ARTICLE 6. SAFE HARBOR MATCHING CONTRIBUTIONS.

6.1. Rules of Application.

     (a) This Article shall apply for Plan Years after December 31, 2010. For each Plan Year thereafter, the ADP and ACP testing provisions in Sections 14.4 and 14.5 shall not apply, except to the extent described in any subsequent Plan amendment.

     (b) To the extent that any provision of the Plan is inconsistent with the provisions of this Article, the provisions of this Article shall apply.

6.2. Definitions.

     (a) “Compensation” is defined according to the provisions of Section 2.8 for the purpose of determining the amount of a Participant’s Safe Harbor Matching Contribution under this Article. For purposes of this Article, no dollar limit, other than that imposed by Code section 401(a)(17), shall limit the Compensation of a Nonhighly Compensated Employee.

     (b) “Elective Contribution,” for a Plan year after December 31, 2010, is an Elective Contribution, as described in Section 4.1, intended to satisfy the ADP testing requirements described in Code section 401(k)(12) and which shall satisfy the requirements of the ADP testing safe harbor without regard to permitted disparity under Code section 401(l).

     (c) “Eligible Employee,” for purposes of this Article, means an Employee eligible to make Elective Contributions under the Plan for any part of the Plan Year or who would be eligible to make Elective Contributions notwithstanding any suspension due to the Participant’s receipt of a hardship distribution described in Section 9.1 of the Plan or any applicable statutory limitations, such as Code sections 402(g) and 415.

     (d) “Safe Harbor Matching Contribution” means the matching contribution described in Section 6.3 that is intended to satisfy the ACP testing requirements described in Code section 401(m)(11).

     (e) “Safe Harbor Matching Contribution Account” means the Account to which Safe Harbor Matching Contributions will be allocated.

6.3. Safe Harbor Matching Contributions. On a bi-weekly, payroll period basis, each Participating Employer will make a Safe Harbor Matching Contribution to the Trust for the benefit of each Participant on whose behalf it made Elective Contributions for the period.

     (b) The Participating Employer will make a Safe Harbor Matching Contribution for that period to the Participant’s Matching Contribution Account, based upon the enhanced matching contribution formula, which shall be equal to (i) 200% of the Elective Contributions made on behalf of the Participant for the period which do not

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exceed 2% of the Participant’s Compensation for the period, plus (ii) 50% of the Elective Contributions made on behalf of the Participant for the period which exceed 2% but do not exceed 6% of the Participant’s Compensation for the period.

     (c) For purposes of this Section, the catch-up Elective Contributions described in Section 4.1 shall be taken into account to determine the amount of each Participant’s Safe Harbor Matching Contributions.

6.4. Notice and Elections.

     (a) Between 30 and 90 days prior to each Plan Year in which Participants will receive Safe Harbor Matching Contributions, a Participating Employer will provide each Eligible Employee a notice describing his or her rights and obligations under the Plan (the “Safe Harbor Notice”).

     (b) If an Employee first becomes eligible to participate in the Plan and his or her automatic Compensation Reduction Authorization will become effective after the beginning of the Plan Year, the Participating Employer will provide a Safe Harbor Notice to that Eligible Employee within a reasonable period of time before his or her Entry Date, but no earlier than 90 days prior to that date.

     (c) As provided in Section 4.2, a Participant may modify the amount of his or her Elective Contributions as of the first day of any payroll period, including those within the 30-day period following his or her receipt of the safe harbor notice.

     6.5. Vesting of Safe Harbor Matching Contributions. The Participant’s accrued benefit derived from the Safe Harbor Matching Contributions described in this Article is nonforfeitable and may not be distributed earlier than upon his or her severance of employment, death, disability, attainment of age 59 ¹/2 or the termination of the Plan according to Code section 401(k)(10).

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ARTICLE 7. PARTICIPANT ACCOUNTS.

     7.1. Accounts. The Committee will establish and maintain (or cause the Trustee to establish and maintain) for each Participant, such Accounts as are necessary to carry out the purposes of this Plan.

     7.2. Adjustment of Accounts. As of each Valuation Date, each Account will be adjusted to reflect the fair market value of the assets allocated to the Account. In so doing:

     (a) each Account balance will be increased by the amount of contributions, income and gain allocable to such Account since the prior Valuation Date; and

     (b) each Account balance will be decreased by the amount of distributions from the Account and expenses and losses allocable to the Account since the prior Valuation Date.

Income, expense, gain or loss which is generated by a particular investment within the Trust shall be allocated among the Accounts invested in that investment in proportion to the balances of such Accounts as of the immediately preceding Valuation Date. Any expenses relating to a specific Account or Accounts, including without limitation commissions or sales charges with respect to an investment in which the Account participates, but excluding costs relating to the processing of Qualified Domestic Relations Orders, may be charged solely to the particular Account or Accounts.

     7.3. Investment of Accounts.

     (a) A Participant’s Accounts shall be invested by the Trustee as the Participant directs from among such investment options as the Plan Sponsor may make available from time to time in accordance with the investment policy established by the Committee. The Committee shall prescribe the manner in which such directions may be made or changed, the dates as of which they shall be effective, and the allocation of Accounts with respect to which no directions are submitted. Any other assets of the Trust not specified above in this Section shall be invested by the Trustee in the sole discretion of the Trustee and in accordance with its fiduciary duties under ERISA; provided, that if an investment manager or other named fiduciary has been appointed with respect to all or a portion of such assets, the Trustee shall invest such portion as the investment manager or other named fiduciary directs. Notwithstanding the foregoing, all investments under the Plan are subject to the rules and limitations contained in the prospectus or other documents that describe the investment.

     (b) The Plan shall include a Company Stock investment option. To the extent such Company Stock has voting rights, or in the event of any tender or exchange offer by any person for such Company Stock, Participants invested in such Company Stock fund may direct the Trustee as to the voting and tender of such Company Stock in accordance with procedures established by the Committee. The Committee may also provide for the temporary suspension of the right of Participants subject to Section 16 of the Securities Exchange Act of 1934 to invest further amounts in, or to redirect the investment of any

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amounts out of, the Company Stock fund. The Committee may also establish from time to time a maximum percentage of any Participant’s Accounts which may be invested in the Company Stock fund. Any restrictions or conditions with respect to the investment of employer securities under the Plan shall be imposed and administered in a manner consistent with section 401(a)(35)(D)(ii)(II) of the Code, IRS Notice 2006-107, and other guidance thereunder.

     (c) In connection with the acquisition of Schneider (USA) Inc. and Corvita Corporation, the Company established an investment fund to hold shares of Pfizer Inc. common stock transferred from the Pfizer Savings and Investment Plan. No contributions under this Plan may be invested in the Pfizer stock fund, and dividends and interest payable on the assets of the Pfizer stock fund allocated to the Accounts of a Participant will be invested according to such Participant’s current investment election for contributions under the Plan. A Participant may direct that amounts held in the Pfizer stock fund on his or her behalf be transferred to one or more other investment funds made available by the Committee from time to time, and any amounts so transferred shall not be reallocated to the Pfizer stock fund.

     7.4. Appointment of Investment Manager or Named Fiduciary. The Plan Sponsor may appoint in writing one or more investment managers or other “named fiduciaries” (within the meaning of ERISA section 402(a)(2)) to manage the investment of all or designated portions of the assets held in the Trust. The appointment shall be effective upon acknowledgment in writing by the investment manager or other named fiduciary that it is a fiduciary with respect to the Plan. An investment manager must be (a) registered as an investment adviser under the Investment Advisers Act of 1940, (b) a bank as defined in that Act, or (c) an insurance company qualified under the laws of more than one state to manage, acquire or dispose of any assets of the Plan.

     7.5. Section 404(c) Compliance. The Plan is intended to be an “ERISA section 404(c) plan” as described in section 404(c) of ERISA and title 29 of the Code of Federal Regulations section 2550.404c-1, and shall be administered and interpreted in a manner consistent with that intent. The investment direction requirements of Department of Labor regulation section 2550.404c-1(b)(2)(i)(B)(1)(iv) and (b)(2)(i)(A) and the requirements relating to the investment alternatives under the Plan are intended to be satisfied by Section 7.3 above, in each case taking into account related communications to Participants and beneficiaries under the summary plan description for the Plan and other communications. For purposes of ERISA section 404(c), the “identified plan fiduciary” obligated to comply with Participant and Beneficiary investment instructions (except as provided in such section and regulations thereunder), the identified plan fiduciary obligated to provide Participants and Beneficiaries with the materials set forth in Department of Labor regulations section 2550.404c-1(b)(2)(i)(B) and the identified plan fiduciary obligated to comply with the confidentiality requirements and procedures under Department of Labor regulations section 2550.404c-1(d)(2)(ii)(E)(4)(viii) relating to employer securities shall be the Committee. The Committee may decline to implement Participant and Beneficiary investment instructions which would result in a prohibited transaction described in ERISA section 406 or section 4975 of the Code or which would generate income that would be taxable to the Plan.

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     7.6. Transfers From Other Plans.

     (a) Unless otherwise provided herein, in the event that another plan is merged into the Plan, or accounts are otherwise transferred to the Plan from another plan, the assets transferred to the Plan shall be allocated as follows:

     (i) Assets attributable to an individual’s elective contributions and qualified nonelective contributions (if any) shall be allocated to an Elective Contribution Account for his or her benefit under the Plan;

     (ii) Assets attributable to matching employer contributions (if any), shall be allocated to a Matching Contribution Account for his or her benefit under the Plan;

     (iii) Assets attributable to other employer contributions (if any), shall be allocated to a Discretionary Contribution Account for his or her benefit under the Plan; and

     (iv) Assets attributable to an individual’s after-tax contributions (if any) shall be allocated to an after-tax contribution account for his or her benefit under the Plan.

     The assets transferred may be separately accounted for in sub-accounts under the Plan as determined to be necessary by the Committee in order to administer the provisions of Articles 8, 9, 10 and 11. Unless otherwise provided in Schedule B or in an acquisition agreement between a Participating Employer and the employer maintaining such transferor plan, all assets transferred under this Section shall be invested in accordance with investment directions by the Participant under Section 7.3 above or, absent such directions, in a fund designated by the Committee.

     (b) Any individual for whom accounts have been transferred under this Section and who has not become a Participant under Section 3.1, or pursuant to such other special eligibility rules provided in Schedule B, shall be treated as a Participant for purposes of Articles 7, 8, 11, 12, 13 and 16 and, so long as he or she is an Employee, Articles 9 and 10. Such an individual shall become a Participant for all purposes of the Plan to the extent such individual satisfies the requirements of Section 3.1 or any other special eligibility rules provided in Schedule B which apply to such individual.

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ARTICLE 8. VESTING OF ACCOUNTS.

     8.1. Immediate Vesting of Certain Accounts. A Participant shall at all times have a vested interest in 100% of the following accounts, as applicable: Elective Contribution Account, Employee Contribution Account, QNEC Account, Matching Contribution Account, his or her Rollover Account, and other accounts that the Committee may establish, unless explicitly provided otherwise herein.

     8.2. Deferred Vesting of Discretionary Contribution Accounts.

     (a) A Participant who on December 31, 1992 had at least three Years of Service for purposes of calculating vesting, shall have a vested interest in 100% of his or her Discretionary Contribution Account, if any.

     (b) A Participant not described in (a) above, shall have a vested interest in a percentage of his or her Discretionary Contribution Account, if any, determined in accordance with the following schedule and based on his or her Years of Service for Vesting:

Years of Service	Applicable
for Vesting	Nonforfeitable Percentage
less than 1		0	%
1 but less than 2		20	%
2 but less than 3		40	%
3 but less than 4		60	%
4 but less than 5		80	%
5 or more		100	%

     8.3. Special Vesting Rules. Notwithstanding any provision of the Plan to the contrary, a Participant will have a vested interest in 100% of the Accounts maintained for his or her benefit upon the happening of any one of the following events:

     (a) the Participant’s attainment of age 62 while an Employee;

     (b) the Participant’s severance from employment on account of Disability;

     (c) the Participant’s death while an Employee and, effective January 1, 2007 for this purpose, a Participant who dies while performing “qualified military service” (as defined in Code section 414(u)) will be treated as having resumed his employment with the Participating Employer immediately prior to the date of his death;

     (d) the termination of the Plan or the complete discontinuance of Contributions under the Plan; or

     (e) the partial termination of the Plan with respect to the Participant.

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     8.4. Changes in Vesting Schedule. If the Plan’s vesting schedule is amended, or the Plan is amended in any way that directly or indirectly affects the computation of a Participant’s vested percentage (or if the Plan changes to or from a top-heavy vesting schedule), each Participant who has completed 3 years of Vesting Service may elect, within the period described below, to have his or her vested percentage determined without regard to such amendment or change. The period referred to in the preceding sentence will begin on the date the amendment of the vesting schedule is adopted and will end 60 days after the latest of the following dates:

     (a) the date on which such amendment is adopted;

     (b) the date on which such amendment becomes effective; and

     (c) the date on which the Participant is issued written notice of such amendment by the Committee.

     8.5. Forfeitures.

     (a) In general. Any portion of a Participant’s Account in which he or she is not vested upon severance from employment for any reason will be forfeited as of the earlier of:

     (i) the expiration of 5 consecutive Plan Years during each of which the Participant does not complete 501 Hours of Service, or

     (ii) the distribution of the vested portion of the Account if such distribution is made as a result of the Participant’s severance from employment.

Any Participant who separates from the service of the Affiliated Employers prior to earning a vested interest in any of his or her Accounts shall be deemed to have received a complete distribution of his or her vested interest on the day he or she separates from service.

     (b) Certain Restorations. Notwithstanding the preceding paragraph, if a Participant forfeits any portion of an Account as a result of the complete distribution of the vested portion of the Account but thereafter returns to the employ of an Affiliated Employer, the amount forfeited will be recredited to the Participant’s Account if he or she repays to the Plan the entire amount distributed, without interest, prior to the earlier of (i) the close of the fifth consecutive Plan Year in each of which the Participant does not complete at least 501 Hours of Service or (ii) the fifth anniversary of the date on which the Participant is reemployed. In the case of a Participant who had earlier separated from service prior to earning a vested interest in any of his or her Accounts and was deemed to have received a distribution of such vested interest, the amount forfeited will be restored upon the Participant’s reemployment prior to the close of the fifth consecutive Plan Year in each of which the Participant does not complete at least 501 Hours of Service. A Participant’s vested percentage in the amount recredited under this paragraph will thereafter be determined under the terms of the Plan as if no forfeiture had occurred. The money required to effect the restoration of a Participant’s Account shall come from other Accounts forfeited during the Plan Year of restoration, and to the extent

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such funds are inadequate, from a special contribution by the Participant’s Participating Employer.

     (c) If a Participant forfeits any part of his or her Accounts under paragraph (a) above, the amount of the forfeiture will be applied, first, toward the restoration of any amount previously forfeited, as required under paragraph (a) above, and then, toward either (i) the payment of reasonable expenses of administering the Plan, or (ii) any Matching Contributions under Section 4.3 or any Safe Harbor Matching Contributions under Section 6.3, which are required to be made to the Plan, as determined by the Committee.

     8.6. Vesting of Accounts Transferred From Other Plans. In the event that another plan is merged into the Plan, or accounts are otherwise transferred to the Plan from another plan, the portion of each Account under this Plan that is attributable to a vested and nonforfeitable account, or portion of an account, under the transferor plan shall remain vested and nonforfeitable under this Plan. The remaining portion of each Account under this Plan that is attributable to a transferor plan account shall vest in accordance with Section 8.2, unless otherwise provided in Schedule B.

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ARTICLE 9. WITHDRAWALS PRIOR TO SEVERANCE FROM EMPLOYMENT.

     9.1. Hardship Withdrawals.

     (a) Immediate and heavy financial need. A Participant may make a withdrawal from his or her Elective Contribution Account (but not any portion of the Participant’s qualified nonelective contributions) in the event of an immediate and heavy financial need arising from:

     (i) expenses for (or necessary to obtain) medical care that would be deductible under Code section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income);

     (ii) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments);

     (iii) payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education for the Participant, or the Participant’s spouse, children, or dependents (as defined in Code section 152, but without regard to Code section 152(b)(1), (b)(2) and (d)(1)(B));

     (iv) payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education for the Participant, or the Participant’s spouse, children, or dependents (as defined in Code section 152, but without regard to Code section 152(b)(1), (b)(2) and (d)(1)(B));

     (v) payments for burial or funeral expenses for the Participant’s deceased parent, spouse, children or dependents (as defined in Code section 152, but without regard to Code section 152(d)(1)(B));

     (vi) expenses for the repair of damage to the Participant’s principal residence that would qualify for the casualty deduction under Code section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); or

     (vii) any other need identified by the Commissioner of Revenue as a “financial hardship” for purposes of section 401(k) plans through the publication of revenue rulings, notices and other guidance of general applicability.

The Committee’s determination of whether there is an immediate and heavy financial need, as defined above, shall be made solely on the basis of written evidence furnished by the Participant. Such evidence must also indicate the amount of such need. A Participant may request no more than one withdrawal under this Section in any single Plan Year.

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     (b) Distribution of amount necessary to meet need. As soon as practicable after the Committee’s determination that an immediate and heavy financial need exists with respect to the Participant, that the Participant has obtained all other distributions (other than hardship distributions) and all nontaxable loans currently available under the Plan and all other plans maintained by the Affiliated Employers, and that no other resources are reasonably available to the Participant to satisfy the need, the Committee will direct the Trustee to pay to the Participant the amount necessary to meet the need created by the hardship (but not in excess of the value of the Participant’s Elective Contribution Account, determined as of the Valuation Date that authorized distribution directions are received by the Trustee). The amount necessary to meet the need may include any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution. Distribution will be made solely from the Participant’s Elective Contribution Account, and shall not include any portion of the Account that is attributable to income earned after December 31, 1988.

     (c) Effect of hardship distribution. If a Participant receives a hardship distribution pursuant to this Section, then any Elective Contribution election or any other cash-or-deferred or employee contribution election in effect with respect to the Participant under the Plan or any other plan maintained by an Affiliated Employer shall be suspended for the 6-month period beginning with the date the Participant receives the distribution.

     9.2. Withdrawals After Age 59¹/2. A Participant who is an Employee and has attained age 59¹/2 may make a withdrawal from any one or more of his or her Accounts for any reason, upon such prior notice as the Committee may prescribe. Any such withdrawal shall be in the amount specified by the Participant, up to the vested value of the particular Account determined as of the Valuation Date that the Participant’s authorized distribution directions are received by the Trustee. Payment to the Participant shall be made as soon as practicable after such Valuation Date.

     9.3. Withdrawal from Rollover Account. A Participant who is an Employee may make a withdrawal from his or her Rollover Account for any reason, upon such prior notice as the Committee may prescribe. Any such withdrawal shall be in the amount specified by the Participant, up to the value of the Rollover Account determined as of the Valuation Date that authorized distribution directions are received by the Trustee. Payment to the Participant shall be made as soon as practicable after such Valuation Date.

     9.4. Withdrawal on Account of Disability. A Participant who is an Employee and who has a Disability, may make a withdrawal from his or her Accounts upon such prior notice as the Committee may prescribe. Any such withdrawal shall be in the amount specified by the Participant, up to the vested value of his or her Accounts, determined as of the Valuation Date that the Participant’s authorized distribution directions are received by the Trustee. Payment to the Participant shall be made as soon as practicable after such Valuation Date.

     9.5. Withdrawal of Employee Contributions. A Participant who is an Employee may make a withdrawal from his or her Employee Contribution Account for any reason upon such prior notice and in accordance with such procedures as the Committee may prescribe. Any

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such withdrawal shall be in the amount specified by the Participant in accordance with procedures prescribed by the Committee, up to the value of the Participant’s Employee Contribution Account, determined as of the Valuation Date that authorized distribution directions are received by the Trustee. Payment to the Participant shall be made as soon as practicable after such Valuation Date.

     9.6. Restrictions on Certain Distributions. In the case of a Participant who has not yet reached Normal Retirement Age and whose vested portion of his or her Accounts is valued in excess of $1,000, no distribution may be made to the Participant under this Article unless:

     (a) between the 30th and 180th day prior to the date distribution is to be made, the Committee notifies the Participant in writing that he or she may defer distribution until the Normal Retirement Age and provides the Participant with a written description of the consequences of failing to defer such receipt and of the material features and (if applicable) the relative values of the forms of distribution available under the Plan; and

     (b) the Participant consents to the distribution in writing after the information described above has been provided to him or her.

Notwithstanding the foregoing, such distribution may commence less than 30 days after the required notification described above is given, provided that (i) the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider whether or not to elect a distribution; and (ii) the Participant, after receiving the notice, elects a distribution.

For purposes of this Section, a Participant’s vested portion of his or her Accounts will be considered to be valued in excess of $1,000 if the value of the vested portion of his or her Accounts exceeds such amount at the time of the distribution in question. For the avoidance of doubt, nothing in this Section confers a substantive distribution right to any Participant; therefore, a Participant must be eligible to receive a distribution pursuant to the other provisions of this Article in order for this Section to apply.

     9.7. Limitation of Withdrawal Amount. In the event that there is allocated to a Participant’s Account a promissory note with respect to a loan made from the Plan, the maximum amount of cash that may be withdrawn from the Account prior to the Participant’s severance from employment shall be determined without regard to the value of such note.

     9.8. Distributions Required by a Qualified Domestic Relations Order. To the extent required by a Qualified Domestic Relations Order, the Committee shall make distributions from a Participant’s Accounts to alternate payees named in such order in a manner consistent with the distribution options otherwise available under the Plan, regardless of whether the Participant is otherwise entitled to a distribution at such time under the Plan.

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     9.9. Withdrawals by Certain Former Participants in Other Plans.

          (a) In addition to the rights to take withdrawals prior to severance from employment as described above, in the case of a Participant for whom amounts have been transferred under Section 7.6, the Participant shall be entitled to take withdrawals hereunder in the circumstances in which withdrawals prior to severance from employment would have been permitted under the transferor plan, as set forth in Schedule B.

          (b) In the case of a married Participant for whom amounts have been transferred under Section 7.6 from another plan and who has at any time elected an annuity form of payment under Section 11.7, no withdrawal may be made under this Article unless (i) his or her spouse consents in writing to such withdrawal, such consent acknowledges the effect of the withdrawal and is witnessed by a Plan representative or a notary public, and such consent specifies the form of the withdrawal (i.e., a lump sum cash payment), or (ii) it is established to the satisfaction of the Committee that the foregoing consent may not be obtained because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe.

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ARTICLE 10. LOANS TO PARTICIPANTS.

     10.1. In General. Upon the written request of a Participant on a form acceptable to the Committee, and subject to the conditions of this Article, the Committee shall direct the Trustee to make a loan from the Trust to the Participant. For purposes of this Article, “Participant” includes any Participant who is an Employee of a Participating Employer, and any other Participant (or Beneficiary of a deceased Participant) who is a “party in interest” within the meaning of ERISA section 3(14).

     10.2. Rules and Procedures. The Committee shall promulgate such rules and procedures, not inconsistent with the express provisions of this Article, as it deems necessary to carry out the purposes of this Article including, but not limited to, rules for charging loan fees directly to a Participant’s Accounts. All such rules and procedures shall be deemed a part of the Plan for purposes of the Department of Labor regulation section 2550.408b-1(d). Loans shall not be made available to Participants who are Highly Compensated Employees in an amount (determined under Department of Labor regulation section 2550.408b-1(b)) greater than the amount made available to other Participants.

     10.3. Maximum Amount of Loan. The following limitations shall apply in determining the amount of any loan to a Participant hereunder:

     (a) The amount of the loan, together with any other outstanding indebtedness of the Participant under the Plan or any other qualified retirement plans of the Affiliated Employers, shall not exceed $50,000 reduced by the excess of (i) the highest outstanding loan balance of the Participant from such plans during the one-year period ending on the day prior to the date on which the loan is made, over (ii) the Participant’s outstanding loan balance from such plans immediately prior to the loan.

     (b) The amount of the loan shall not exceed 50% of the Participant’s vested interest in his or her Accounts, determined as of the Valuation Date immediately preceding the date of the loan.

     10.4. Note; Security; Interest. Each loan shall be evidenced by a written note signed by the Participant and shall be secured by the Participant’s vested interest in his or her Accounts, including in such security the note evidencing the loan. The loan shall bear interest at a reasonable annual percentage interest rate to be determined by the Committee. The documents evidencing a loan shall provide that payments shall be made not less frequently than quarterly and over a specified term as determined by the Committee (but not to exceed five years; ten years if the loan is being applied toward the purchase of a principal residence for the Participant); such documents shall also require that the loan be amortized with level payments of principal and interest.

     10.5. Note as Trust Asset. The note evidencing a loan to a Participant under this Article shall be an asset of the Trust which is allocated to the Account of such Participant, and

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shall for purposes of the Plan be deemed to have a value at any given time equal to the unpaid principal balance of the note plus the amount of any accrued but unpaid interest.

     10.6. Rollover of Loans Upon Sale of Participating Employer. Notwithstanding anything in the Plan to the contrary, the Committee shall have sole and complete discretion, in the event of the disaffiliation with the Plan Sponsor of an Affiliated Employer, or the sale or divestiture of a Participating Employer of a division, business unit or business location of such Participating Employer, to permit in accordance with Regulation section 1.401(a)(31)-1, Q&A-16, the direct rollover of a note evidencing a Participant loan to a qualified trust described in Code section 401(a) or a qualified annuity plan described in Code section 403(a) that will accept such a direct rollover of a loan note; provided, however, that any such direct rollover of a note evidencing a Participant loan shall be subject to such rules, procedures and time limitations as the Committee may establish.

     10.7. Nondiscrimination. Loans shall be made available under this Article to all Participants on a reasonably equivalent basis, except that the Committee may make reasonable distinctions based on creditworthiness.

     10.8. Spousal Consent to Loans to Certain Former Participants in Other Plans. In the case of a married Participant for whom amounts have been transferred under Section 7.6 from a transferor plan and who has at any time elected an annuity form of payment under Section 11.7 or under the transferor plan, no loan shall be made unless (a) the Participant’s spouse consents in writing to such loan and to the use of the Participant’s Accounts as security for the loan, and such consent acknowledges the effect of the loan and the use of the Accounts as security, is witnessed by a Plan representative or a notary public, and is provided no more than 180 days before the date on which the loan is to be secured by the Accounts, or (b) it is established to the satisfaction of the Committee that the foregoing consent may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe.

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ARTICLE 11. BENEFITS UPON DEATH OR SEVERANCE FROM EMPLOYMENT

     11.1. Severance From Employment for Reasons Other Than Death. Following a Participant’s severance from employment of an Affiliated Employer for any reason other than death, the Participant will receive the vested portion of his or her Accounts in cash (or, if any portion of the Participant’s vested Accounts is invested in the Company Stock fund, in shares of Company Stock, based upon the Participant’s election of shares rather than cash).

     11.2. Time of Distributions. Distribution with respect to a Participant’s severance from employment for any reason other than death will be made in accordance with this Section.

     (a) If the Participant has attained Normal Retirement Age or the vested portion of the Participant’s Accounts is valued at $1,000 or less, distribution of such vested portion will be made in cash (or, if any portion of the Participant’s vested Accounts is invested in the Company Stock fund, in shares of Company Stock, based upon the Participant’s election of shares rather than cash) as soon as practicable after severance from employment.

     (b) If the Participant has not yet attained Normal Retirement Age and the vested portion of the Participant’s Accounts is valued in excess of $1,000 but less than or equal to $5,000, the Participant may elect to receive distribution of the vested portion of his or her Accounts in cash (or, if any portion of the Participant’s vested Accounts is invested in the , based upon the Participant’s election of shares rather than cash) or to have such amount distributed directly to an eligible retirement plan in accordance with Section 11.6. In the event that the Participant fails to make such an election pursuant to the procedures provided by the Committee, the Committee will distribute the vested portion of the Participant’s Accounts in a direct rollover to an individual retirement plan designated by the Committee.

     (c) If the Participant has not yet attained Normal Retirement Age and the vested portion of the Participant’s Accounts is valued in excess of $5,000, distribution of such vested portion may not be made under this paragraph unless

     (i) between the 30th and 180th day prior to the date distribution is to be made, the Committee notifies the Participant in writing that he or she may defer distribution until the Normal Retirement Age and provides the Participant with a written description of the consequences of failing to defer such receipt; and

     (ii) the Participant consents to the distribution in writing after the information described above has been provided to him or her, and files such consent with the Committee.

Notwithstanding the foregoing, such distribution may commence less than 30 days after the required notification described above is given, provided that (i) the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the

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notice to consider whether or not to elect a distribution; and (ii) the Participant, after receiving the notice, elects a distribution.

For purposes of this Section, the vested portion of a Participant’s Accounts will be considered to be valued in excess of $1,000, if the value of the vested portion of such Accounts (excluding Rollover Contributions and any earnings thereon) exceeds such amount at the time of the distribution in question. Distribution under this Section in all events will be made no later than the 60th day after the close of the Plan Year in which occurs the later of the Participant’s severance from employment or the Participant’s attainment of the Normal Retirement Age. Notwithstanding the foregoing, the Committee will periodically distribute the vested portion of terminated Participants’ Accounts that no longer have a value in excess of $1,000, and will cause the direct rollover to individual retirement plans of the vested portion of terminated Participants’ Accounts that are valued in excess of $1,000 but less than or equal to $5,000.

     11.3. Amount of Distribution.

     (a) Single Sums. In the case of a distribution to be made in a single sum, the amount of the distribution shall be determined as of the Valuation Date on which authorized distribution directions are received by the Trustee.

     (b) Installments. To the extent allowed in Section 11.7, in the case of distributions to be made in monthly, quarterly, semi-annual, or annual installments, the aggregate installment amount for a particular calendar year (the “installment year”) shall be determined by dividing

     (i) the value of the vested portion of the Participant’s Accounts as of the last Valuation Date preceding the distribution date by

     (ii) the lesser of (A) the number of remaining installment years in the installment period elected by the Participant as of the beginning of the installment year and (B) the number of years in the applicable remaining life expectancy for the installment year determined pursuant to regulations under Code section 401(a)(9).

     11.4. Distributions After a Participant’s Death.

     (a) Death Prior to Severance From Employment. If a Participant dies prior to his or her severance from the service of the Participating Employers, the Participant’s Beneficiary will receive the Participant’s Accounts in either of the following forms, as elected by the Beneficiary on a form approved by the Committee:

     (i) in cash (or, if any portion of the Participant’s vested Accounts is invested in the Company Stock fund, in shares of Company Stock, based upon the Participant’s election of shares rather than cash) as soon as practicable following the Participant’s death (but in no event later than December 31 of the calendar year following the year of the Participant’s death); or

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     (ii) to the extent allowed in Section 11.7, in monthly, quarterly, semi-annual, or annual installments over a period certain not to exceed the life expectancy of the Beneficiary, such installments to begin no later than December 31 of the calendar year following the year of the Participant’s death and to be made in amounts determined in the same manner as under Section 11.3(b) above.

     (b) Death After Severance From Employment. If a Participant dies after severance from employment but before the complete distribution of his or her Accounts has been made, the Participant’s Beneficiary will receive the vested portion of the Participant’s Accounts. Distribution will be made in cash (or, if any portion of the Participant’s vested Accounts is invested in the Company Stock fund, in shares of Company Stock, based upon the Participant’s election of shares rather than cash) as soon as practicable following the Participant’s death (but no later than December 31 of the calendar year following the year of the Participant’s death) provided, however, that if distribution to the Participant had begun following his or her severance from employment in a form elected by the Participant, distribution will continue to be made to the Beneficiary at least as rapidly in such form unless the Beneficiary elects to receive the distribution in cash (or, if any portion of the Participant’s vested Accounts is invested in the Company Stock fund, in shares of Company Stock, based upon the Participant’s election of shares rather than cash) as soon as practicable following the Participant’s death. Any such election must be made on a form approved by the Committee and must be received by the Committee within such period following the Participant’s death as the Committee may prescribe.

Any distribution to a Beneficiary under this Section shall be determined as of the Valuation Date that authorized distribution directions are received by the Trustee.

     11.5. Designation of Beneficiary. Subject to the provisions of this Section, a Participant’s Beneficiary shall be the person or persons and entity or entities, if any, designated by the Participant from time to time on a form or in the manner approved by the Committee. In the absence of an effective beneficiary designation, the full amount payable upon the death of the Participant shall be paid to his or her surviving spouse or, if none, to his or her estate. If any Beneficiary survives the Participant but dies prior to receipt of his or her interest in the Participant’s Account, such Beneficiary’s remaining interest shall be paid to the Beneficiary’s estate (unless the Participant had effectively designated a successor or contingent Beneficiary for the Beneficiary’s remaining interest). A nonspouse beneficiary designation by a Participant who is married at the time of his or her death shall not be effective unless:

     (a) prior to the Participant’s death, the Participant’s surviving spouse consented to and acknowledged the effect of the Participant’s designation of the specific non-spouse Beneficiary (including any class of Beneficiaries or any contingent Beneficiaries) on a written form approved by the Committee and witnessed by a notary public or a duly authorized Plan representative; or

     (b) it is established to the satisfaction of the Committee that spousal consent may not be obtained because there is no spouse, because the spouse has died (evidenced by a certificate of death), because the spouse cannot be located (based on information

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supplied by a government agency or independent investigator), or because of such other circumstances as the Secretary of the Treasury may prescribe; or

     (c) the spouse had earlier executed a general consent form permitting the Participant (i) to select from among certain specified beneficiaries without any requirement of further consent by the spouse (and the Participant designates a Beneficiary from the specified list), or (ii) to change his or her Beneficiary without any requirement of further consent by the spouse. Any such general consent shall be on a form or in the manner approved by the Committee that was witnessed by a notary public or a duly authorized Plan representative and must acknowledge that the spouse has the right to limit consent to a specific beneficiary and that the spouse voluntarily elects to relinquish such right.

In the event a spouse is legally incompetent to give consent, the spouse’s legal guardian, even if the guardian is the Participant, may give consent on behalf of the spouse. Any consent and acknowledgment by (or on behalf of) a spouse, or the establishment that the consent and acknowledgment cannot be obtained, shall be effective only with respect to such spouse, but shall be irrevocable once made. A Participant’s spouse will be determined for all purposes under the Plan in accordance with federal law.

     11.6. Direct Rollovers of Eligible Distributions. Notwithstanding any provision of the Plan to the contrary that may otherwise limit a distributee’s election under this Section, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. If an eligible rollover distribution is made to a Roth IRA (as such term is defined in section 408A(b) of the Code), the distributee shall recognize ordinary income in the amount of the eligible rollover distribution to the extent provided in section 408A(d)(3)(A) of the Code. For purposes of this Section, the following terms have the following meanings:

     (a) an “eligible rollover distribution” is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives of the distributee and the distributee’s Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code section 401(a)(9); any distribution that is made on account of hardship; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). Notwithstanding the foregoing, with respect to distributions made after December 31, 2001, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax Employee Contributions which are not includable in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or in a direct trustee-to-trustee transfer to a qualified trust described in section 401(a) or 403(a) of the Code or an annuity contract described in section 403(b) of the Code and such trust or contract agrees to account separately for amounts so

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transferred (and earnings thereon), including separately accounting for the portion of such distribution which is includable in gross income and the portion of such distribution which is not so includable.

     (b) with respect to a distributee, an “eligible retirement plan” is an individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a qualified trust described in Code section 401(a). With respect to distributions made after December 31, 2001, an “eligible retirement plan” shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to account separately for amounts transferred into such plan from this Plan. With respect to distributions made after December 31, 2007, an “eligible retirement plan” shall also mean a Roth IRA described in, and subject to the applicable requirements of, section 408A of the Code.

     (c) a “distributee” includes an employee or former employee. In addition, the employee’s or former employee’s surviving spouse and the employee’s or former employee’s spouse or former spouse, who is an alternate payee under a Qualified Domestic Relations Order, are distributees with regard to the interest of the spouse or former spouse.

     (d) a “direct rollover” is a payment by the Plan to the eligible retirement plan specified by the distributee.

     11.7. Protected Forms of Benefit. Notwithstanding any provision of this Plan to the contrary, in the event that the Plan Sponsor directs the Trustee to accept Plan assets for the benefit of Participants from another qualified retirement plan in connection with a merger or acquisition, or the adoption of the Plan by a Participating Employer, the Account balance attributable to such benefit shall be payable in the benefit form or forms so provided under the predecessor plan to the extent required by Code section 411(d)(6) and Regulations promulgated thereunder, or any successor Code provision (which forms of benefits shall be set forth on Schedule B to this Plan and identified with the appropriate Participating Employer); provided that, with respect to a Participant whose annuity starting date is on or after the date the Trustee accepts such assets from such predecessor plan, a particular optional form of benefit shall not be retained if the form or forms of payment available to the Participant under this Plan includes payment in a single-sum distribution form that is otherwise identical (within the meaning of Regulation section 1.411(d)-4, Q&A-2(e)(2)) to the optional form of benefit that was available to the Participant under the predecessor plan.

     11.8. Distribution Restrictions for Elective Contributions. Notwithstanding anything in the Plan to the contrary, a Participant’s Elective Contribution Account shall be distributable only in accordance with Code section 401(k).

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     11.9. Minimum Distribution Requirements. This Section will apply for purposes of determining required minimum distributions for calendar years beginning on or after January 1, 2003, and takes precedence over any other provisions of the Plan to the contrary.

     (a) Time and Manner of Distribution.

     (i) Required Beginning Date. The payment of benefits to the Participant will commence no later than the Participant’s Required Beginning Date.

     (ii) Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

     (A) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 1/2, if later.

     (B) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, then distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

     (C) If there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

     (D) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 11.9(a)(ii), other than Section 11.9(a)(ii)(A), will apply as if the surviving spouse were the Participant.

For purposes of this Section 11.9(a)(ii) and Section 11.9(c), unless Section 11.9(a)(ii)(D) applies, distributions are considered to begin on the Participant’s Required Beginning Date. If Section 11.9(a)(ii)(D) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 11.9(a)(ii)(A). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 11.9(a)(ii)(A)), the date distributions are considered to begin is the date distributions actually commence.

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     (iii) Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first distribution calendar year distributions will be made in accordance with Sections 11.9(b) and (c). If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of section 401(a)(9) of the Code and the Regulations.

     (b) Required Minimum Distributions During a Participant’s Lifetime.

     (i) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

     (A) the quotient obtained by dividing the Participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

     (B) if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

     (ii) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this Section 11.9(b) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

     (c) Required Minimum Distributions After Participant’s Death.

     (i) Death On or After Date Distributions Begin.

     (A) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated Beneficiary, determined as follows:

     1. The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

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     2. If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

     3. If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

     (B) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

     (ii) Death Before Date Distributions Begin.

     (A) Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the remaining life expectancy of the Participant’s designated Beneficiary, determined as provided in Section 11.9(c)(i).

     (B) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

     (C) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies

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before distributions are required to begin to the surviving spouse under Section 11.9(a)(ii)(A), this Section 11.9(c)(ii) will apply as if the surviving spouse were the Participant.

     (D) Requirements of Treasury Regulations Incorporated. All distributions required under this Section 11.9 will be determined and made in accordance with the Regulations under section 401(a)(9) of the Code.

     (E) Definitions: For purposes of this Section 11.9, the following definitions shall apply:

     1. Designated Beneficiary. The individual who is designated as the Beneficiary under Section 2.3 of the Plan and is the designated Beneficiary under section 401(a)(9) of the Code and section 1.401(a)(9)-4 of the Regulations.

     2. Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 11.9(a)(ii). The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that distribution calendar year.

     3. Life Expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Regulations.

     4. Participant’s account balance. The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

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     5. Required Beginning Date. The date specified in Section 2.34 of the Plan.

     11.10. Non-Spousal Rollovers. Notwithstanding anything in the Plan to the contrary, an eligible rollover distribution (as defined in Section 11.6) to a Beneficiary who is not the surviving spouse of a Participant may be directed in a direct trustee-to-trustee transfer to an individual retirement account described in Code section 408(a) or an individual retirement annuity described in Code section 408(b), in accordance with section 402(c)(11) of the Code.

     11.11. Special Distribution Rules for 2009. Notwithstanding Section 11.9 of the Plan, a Participant or Beneficiary who would have been required to receive required minimum distributions for 2009 (“2009 RMDs”), if not for the enactment of Code section 401(a)(9)(H), and who would have satisfied that requirement by receiving distributions that are: (1) equal to the 2009 RMDs or (2) one or more payments in a series of substantially equal distributions (that include the 2009 RMDs) made at least annually and expected to last for the life (or life expectancy) of the Participant and the Participant’s designated Beneficiary, or for a period of at least 10 years (“Extended 2009 RMDs), will receive those distributions for 2009. However, Participants and Beneficiaries described in the preceding sentence will be given the opportunity to elect not to receive the distributions described in the preceding sentence. In addition, notwithstanding Section 11.6 of the Plan, and solely for purposes of applying the direct rollover provisions of the Plan, 2009 RMDs and Extended 2009 RMDs will be treated as eligible rollover distributions, notwithstanding any other provision of the Plan to the contrary.

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ARTICLE 12. ADMINISTRATION.

     12.1. Committee. The Plan will be administered by a committee of individuals selected by the Board of Directors or its designee, to serve at its pleasure. The Committee will be a “named fiduciary” for purposes of section 402(a)(1) of ERISA with authority to control and manage the operation and administration of the Plan, and will be responsible for complying with all of the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA. The Committee will not, however, have any authority over the investment of assets of the Trust in its capacity as Committee.

     12.2. Powers of Committee. The Committee will have full discretionary power to administer the Plan in all of its details, subject, however, to the requirements of ERISA. For this purpose the Committee’s discretionary power will include, but will not be limited to, the following authority:

     (a) to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan or required to comply with applicable law;

     (b) to interpret the Plan;

     (c) to decide all questions concerning the Plan and the eligibility of any person to participate in the Plan;

     (d) to compute the amounts to be distributed under the Plan, and to determine the person or persons to whom such amounts will be distributed;

     (e) to authorize the payment of distributions;

     (f) to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under the Code and applicable Regulations, or under other federal, state or local law and regulations;

     (g) to allocate and delegate its ministerial duties and responsibilities and to appoint such agents, counsel, accountants and consultants as may be required or desired to assist in administering the Plan; and

     (h) to allocate and delegate its fiduciary responsibilities in accordance with ERISA section 405.

     12.3. Effect of Interpretation or Determination. Any interpretation of the Plan or other determination with respect to the Plan by the Committee shall be final and conclusive on all persons in the absence of clear and convincing evidence that the Committee acted arbitrarily and capriciously.

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     12.4. Reliance on Tables, etc.In administering the Plan, the Committee will be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by any accountant, trustee, counsel or other expert who is employed or engaged by the Committee or by the Plan Sponsor on the Committee’s behalf.

     12.5. Claims and Review Procedures. The Committee shall adopt procedures for the filing and review of claims in accordance with ERISA section 503.

     12.6. Indemnification of Committee and Assistants. Each Participating Employer agrees, jointly and severally, to indemnify and defend to the fullest extent of the law any Employee or former Employee (a) who serves or has served as a Committee member, (b) who has been appointed to assist the Committee in administering the Plan, or (c) to whom the Committee has delegated any of its duties or responsibilities against any liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Plan Sponsor) occasioned by any act or omission to act in connection with the Plan, if such act or omission to act is in good faith and without gross negligence.

     12.7. Annual Report. The Committee shall submit annually to the Plan Sponsor a report showing in reasonable summary form, the financial position of the Trust and giving a brief account of the operations of the Plan for the past year, and such further information as the Plan Sponsor may reasonably require.

     12.8. Expenses of Plan. The Committee may direct the Trustee to pay from the Trust any or all expenses of administering the Plan, to the extent such expenses are reasonable. The Committee will determine what constitutes a reasonable expense of administering the Plan, and whether such expenses shall be paid from the Trust. Any such expenses not paid out of the Trust shall be paid by the Company; provided, however, that to the extent permitted by ERISA, the Committee may direct the Trustee to reimburse the Company out of the Trust for a reasonable expense of administering the Plan which is paid by the Company prior to a determination with respect to such expense.

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ARTICLE 13. AMENDMENT AND TERMINATION.

     13.1. Amendment. The Plan Sponsor reserves the power at any time or times to amend the provisions of the Plan and Trust to any extent and in any manner that it may deem advisable. Upon delivery to the Trustee and each Participating Employer of an amendment adopted by the Board of Directors, the Plan shall be amended at the time and in the manner set forth therein, and all Participants and all persons claiming an interest hereunder shall be bound thereby. Notwithstanding the foregoing, no action by the Board of Directors shall be required to amend the Plan to revise Schedule A, regarding the addition or removal of Participating Employers, Schedule B, regarding a merger of, or transfer of accounts from, another plan into the Plan or Schedule C, regarding previous special employer contributions. Moreover, the Plan Sponsor may amend or modify any plan provisions which relate to ERISA section 404(c) compliance, including changes which would eliminate the Plan’s status as an ERISA section 404(c) plan. However, the Plan Sponsor will not have the power:

     (a) to amend the Plan or Trust in such manner as would cause or permit any part of the assets of the Trust to be diverted to purposes other than for the exclusive benefit of each Participant and his or her Beneficiary (except as permitted by the Plan with respect to Qualified Domestic Relations Orders or the return of contributions upon nondeductibility or mistake of fact), unless such amendment is required or permitted by law, governmental regulation or ruling; or

     (b) to amend the Plan or Trust retroactively in such a manner as would reduce the accrued benefit of any Participant, except as otherwise permitted or required by law. For purposes of this paragraph, an amendment which has the effect of decreasing a Participant’s Account balance or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment, shall be treated as reducing an accrued benefit.

     13.2. Termination. The Plan Sponsor has established the Plan and authorized the establishment of the Trust with the bona fide intention and expectation that contributions will be continued indefinitely, but may discontinue contributions under the Plan or terminate the Plan at any time by written notice delivered to the Trustee without liability whatsoever for any such discontinuance or termination. In addition, the Participating Employers will have no obligation or liability whatsoever to maintain the Plan for any given length of time and may cease to be Participating Employers in a manner acceptable to the Plan Sponsor.

     13.3. Distributions upon Termination of the Plan. Upon termination of the Plan by the Plan Sponsor, the Trustee will distribute to each Participant (or other person entitled to distribution) the value of the Participant’s Accounts in a single sum as soon as practicable following such termination. The amount of such distribution shall be determined as of the Valuation Date that authorized distribution directions are received by the Trustee.

     13.4. Merger or Consolidation of Plan; Transfer of Plan Assets. In case of any merger or consolidation of the Plan with, or transfer of assets and liabilities of the Plan to, any

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other plan, provision must be made so that each Participant would, if the Plan then terminated, receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan had then terminated.

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ARTICLE 14. LIMITS ON CONTRIBUTIONS.

     14.1. Code Section 404 Limits. The sum of the contributions made by each Participating Employer under the Plan for any Plan Year shall not exceed the maximum amount deductible under the applicable provisions of the Code. All contributions under the Plan made by a Participating Employer are expressly conditioned on their deductibility under Code section 404 for the taxable year when paid (or treated as paid under Code section 404(a)(6)).

     14.2. Code Section 415 Limits.

     (a) Incorporation by reference. Code section 415 is hereby incorporated by reference into the Plan.

     (b) Annual addition. The Committee shall determine an “annual addition” for each Participant for each limitation year, which shall consist of the following amounts:

     (i) Elective Contributions allocated to the Participant’s Accounts for the year;

     (ii) Matching Contributions or Safe Harbor Matching Contributions allocated to the Participant’s Accounts for the year;

     (iii) Qualified Nonelective Contributions allocated to the Participant’s Accounts for the year;

     (iv) Employee Contributions allocated to the Participant’s Accounts for the year;

     (v) forfeitures;

     (vi) amounts allocated to an individual medical amount (as defined in Code section 415(l)(2)) which is part of a pension or annuity plan maintained by an Affiliated Employer; and

     (vii) amounts derived from contributions paid or accrued which are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code section 419A(d)(3)) under a welfare benefit fund (as defined in Code section 419(e)) maintained by an Affiliated Employer.

     (c) Except as permitted by Code section 414(v), the annual additions made on behalf of the Participant for any limitation year, when added to the annual additions, if any, to his or her account for such year under all other plans maintained by the Affiliated Employers (as determined under Regulation section 1.415(f)-1), shall not exceed the lesser of (i) the dollar limit under Code section 415(c)(1)(A), as adjusted for increases in the cost of living under Code section 415(d), or (ii) 100 percent of the Participant’s

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Compensation for such limitation year from the Affiliated Employers. The compensation limit referred to in (ii) above shall not apply to an individual medical benefit account (as defined in Code section 415(l)) or a post-retirement medical benefits account for a key employee (as defined in Code section 419A(d)(1)).

     (d) Limitation Year. For purposes of determining the Code section 415 limits under the Plan, the “limitation year” shall be the Plan Year.

     (e) Order of reductions. To the extent necessary to satisfy the limitations of Code section 415 for any Participant, the annual addition which would otherwise be made on behalf of the Participant under the Plan shall be reduced before the Participant’s benefit is reduced under any and all defined benefit plans, and before the Participant’s annual addition is reduced under any other defined contribution plan.

     (f) Return of excess contributions. If, as a result of a reasonable error in estimating a Participant’s Compensation for a Plan Year or limitation year, a reasonable error in determining the amount of elective deferrals (within the meaning of Code section 402(g)(3)) that may be made with respect to any individual under the limits of Code section 415, or under such other facts and circumstances as may be permitted under regulation or by the Internal Revenue Service, the annual addition under the Plan for a Participant would cause the Code section 415 limitations for a limitation year to be exceeded, the excess amounts shall be corrected as determined by the Committee in a manner permitted under the correction programs under Revenue Procedure 2008-50 or subsequent Internal Revenue Service correction programs.

     14.3. Code Section 402(g) Limits.

     (a) In general. The maximum amount of Elective Contributions made on behalf of any Participant for any calendar year, when added to the amount of elective deferrals under all other plans, contracts and arrangements of an employer with respect to the Participant for the calendar year, shall in no event exceed the maximum applicable limit in effect for the calendar year under Code section 402(g)(1), provided, however, that catch-up Elective Contributions described in Section 4.1 shall not be taken into account for purposes of compliance with Code section 402(g)(1). For purposes of the Plan, an individual’s elective deferrals for a taxable year are the sum of the following:

     (i) Any elective contribution under a qualified cash or deferred arrangement (as defined in Code section 401(k)): (1) to the extent the contribution is not includable in the individual’s gross income for the taxable year on account of Code section 402(a)(8) (before applying the limits of Code section 402(g) or this Section); or (2) to the extent the contribution is includable in the individual’s gross income for the taxable year on account of Code section 402A as a Roth contribution;

     (ii) Any employer contribution to a simplified employee pension (as defined in code section 408(k) to the extent not includable in the individual’s

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gross income for the taxable year on account of Code section 402(h)(1)(B) (before applying the limits of Code section 402(g)); and

     (iii) Any employer contribution to a custodial account or annuity contract under section 403(b) under a salary reduction agreement (within the meaning of Code section 3121(a)(5)(D)), to the extent not includable in the individual’s gross income for the taxable year on account of Code section 403(b) before applying the limits of Code section 402(g).

A Participant will be considered to have made “excess deferrals” for a taxable year to the extent that the Participant’s elective deferrals for the taxable year exceed the applicable limit described above for the year.

     (b) Distribution of excess deferrals. In the event that an amount is included in a Participant’s gross income for a taxable year as a result of an excess deferral under Code section 402(g), and the Participant notifies the Committee on or before the March 1 following the taxable year that all or a specified part of an Elective Contribution made for his or her benefit represents an excess deferral, the Committee shall make every reasonable effort to cause such excess deferral, adjusted for allocable income, to be distributed to the Participant no later than the April 15 following the calendar year in which such excess deferral was made. The income allocable to excess deferrals is equal to the allocable gain or loss for the taxable year of the individual, plus, in the case of a distribution in a taxable year beginning on or after January 1, 2007, but before January 1, 2008, the allocable gain or loss for the period between the end of the taxable year and the date of distribution (the “gap period”). For distributions in taxable years beginning prior to January 1, 2007, income allocable to excess deferrals for the taxable year shall be determined by multiplying the gain or loss attributable to the Participant’s Elective Contribution Account for the taxable year by a fraction, the numerator of which is the Participant’s excess deferrals for the taxable year, and the denominator of which is the sum of the Participant’s Elective Contribution Account balance as of the beginning of the taxable year plus the Participant’s Elective Contributions for the taxable year. For distributions in taxable years beginning on or after January 1, 2007 and before January 1, 2008, income allocable to excess deferrals for the aggregate of the taxable year and the gap period shall be determined in accordance with the alternative method set forth in proposed Regulation section 1.402(g)-1(e)(5)(iii). A distribution of excess deferrals for a taxable year beginning after December 31, 2007, shall not include any income allocable to the gap period. No distribution of an excess deferral shall be made during the taxable year of a Participant in which the excess deferral was made unless the correcting distribution is made after the date on which the Plan received the excess deferral and both the Participant and the Plan designate the distribution as a distribution of an excess deferral. The amount of any excess deferrals that may be distributed to a Participant for a taxable year shall be reduced by the amount of Elective Contributions that were excess contributions and were previously distributed to the Participant for the Plan Year beginning with or within such taxable year.

     (c) Treatment of excess deferrals. For other purposes of the Code, including Code sections 401(a)(4), 401(k)(3), 404, 409, 411, 412, and 416, excess deferrals must be

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treated as employer contributions even if they are distributed in accordance with paragraph (b) above. However, excess deferrals of a non-Highly Compensated Employee are not to be taken into account for purposes of Code section 401(k)(3) (the actual deferral percentage test) to the extent the excess deferrals are prohibited under Code section 401(a)(30). Excess deferrals are also to be treated as employer contributions for purposes of Code section 415 unless distributed under paragraph (b) above.

     14.4. Code Section 401(k)(3) Limits.

     (a) In general. Elective Contributions made under the Plan, other than the safe harbor contributions described in Article 6 for a Plan Year after December 31, 2010, are subject to the limits of Code section 401(k)(3), as more fully described below. The Plan provisions relating to the 401(k)(3) limits are to be interpreted and applied in accordance with Code sections 401(k)(3) and 401(a)(4), which are hereby incorporated by reference, and in such manner as to satisfy such other requirements relating to Code section 401(k) as may be prescribed by the Secretary of the Treasury from time to time.

     (b) Actual deferral ratios. For each Plan Year, the Committee will determine the “actual deferral ratio” for each Participant who is eligible for Elective Contributions. The actual deferral ratio shall be the ratio, calculated to the nearest one-hundredth of one percent, of the Elective Contributions (plus any Qualified Nonelective Contributions treated as Elective Contributions) made on behalf of the Participant for the Plan Year to the Participant’s Compensation for the Plan Year. For purposes of determining a Participant’s actual deferral ratio:

     (i) Elective Contributions will be taken into account only if each of the following requirements are satisfied:

     (A) the Elective Contribution is allocated to the Participant’s Elective Contribution Account as of a date within the Plan Year is not contingent upon participation in the Plan or performance of services on any date subsequent to that date, and is actually paid to the Trust no later than the end of the 12-month period immediately following the Plan Year to which the contribution relates; and

     (B) the Elective Contribution relates to Compensation that either would have been received by the Participant in the Plan Year but for the Participant’s election to defer under the Plan, or is attributable to services performed in the Plan Year and, but for the Participant’s election to defer, would have been received by the Participant within 2¹/2 months after the close of the Plan Year.

To the extent Elective Contributions which meet the requirements of (A) and (B) above constitute excess deferrals, they will be taken into account for each Highly Compensated Employee, but will not be taken into account for any non-Highly Compensated Employee;

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     (ii) In the case of a Participant who is a Highly Compensated Employee for the Plan Year and is eligible to have elective deferrals (and qualified nonelective contributions, to the extent treated as elective deferrals) allocated to his or her accounts under two or more cash or deferred arrangements described in Code section 401(k) maintained by an Affiliated Employer, the Participant’s actual deferral ratio shall be determined as if such elective deferrals (as well as qualified nonelective or qualified ) are made under a single arrangement, and if two or more of the cash or deferred arrangements have different Plan Years, all Plan Years ending with or within the same calendar year shall be treated as a single Plan Year;

     (iii) The applicable period for determining Compensation for each Participant for a Plan Year shall be the 12-month period ending on the last day of such Plan Year; provided, that to the extent permitted under Regulations, the Committee may choose, on a uniform basis, to treat as the applicable period only that portion of the Plan Year during which the individual was eligible to make Elective Contributions;

     (iv) Qualified Nonelective Contributions made on behalf of Participants who are eligible to receive Elective Contributions shall be treated as Elective Contributions to the extent permitted by Regulation section 1.401(k)-1(a)(6);

     (v) In the event that the Plan satisfies the requirements of Code sections 401(k), 410(a)(4), or 410(b) only if aggregated with one or more other plans with the same Plan Year, or if one or more other plans with the same Plan Year satisfy such Code sections only if aggregated with this Plan, then this Section shall be applied by determining the actual deferral ratios as if all such plans were a single plan;

     (vi) An employee who would be a Participant but for the failure to make Elective Contributions shall be treated as a Participant on whose behalf no Elective Contributions are made; and

     (vii) Elective Contributions which are made on behalf of non-Highly Compensated Employees which could be used to satisfy the Code section 401(k)(3) limits but are not necessary to be taken into account in order to satisfy such limits, may instead be taken into account for purposes of the Code section 401(m) limits to the extent permitted by Regulation sections 1.401(m)-2(a)(6).

     (c) Actual deferral percentages. Each Plan Year, the actual deferral ratios for all Highly Compensated Employees who are eligible for Elective Contributions for a Plan Year shall be averaged to determine the actual deferral percentage for the highly compensated group for the Plan Year, and the actual deferral ratios for all Employees who are not Highly Compensated Employees but are eligible for Elective Contributions for the Plan Year shall be averaged to determine the actual deferral percentage for the non-highly compensated group for the Plan Year.

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     (d) Actual deferral percentage tests. For a Plan Year, at least one of the following tests must be satisfied:

     (i) the highly compensated group’s actual deferral percentage for the Plan Year does not exceed 125% of the current year actual deferral percentage for the non-highly compensated group; or

     (ii) the excess of the actual deferral percentage for the highly compensated group for the Plan Year over the current year actual deferral percentage for the nonhighly compensated group does not exceed two percentage points, and the actual deferral percentage for the highly compensated group for the Plan Year does not exceed twice the current year actual deferral percentage for the nonhighly compensated group.

For purposes of satisfying the above tests for a Plan Year, the “current year actual deferral percentage for the nonhighly compensated group” refers to the actual deferral percentage determined for the current Plan Year for the nonhighly compensated group. Whether a Participant is considered within the highly compensated or nonhighly compensated group will be based upon the Participant’s Compensation during the preceding Plan Year.

     (e) Adjustments by Committee. If, prior to the time all Elective Contributions for a Plan Year have been contributed to the Trust, the Committee determines that Elective Contributions are being made at a rate which will cause the Code section 401(k)(3) limits to be exceeded for the Plan Year, the Committee may, in its sole discretion, limit the amount of Elective Contributions to be made with respect to one or more Highly Compensated Employees for the balance of the Plan Year by suspending or reducing Elective Contribution elections to the extent the Committee deems appropriate. Any Elective Contributions which would otherwise be made to the Trust shall instead be paid to the affected Participant in cash.

     (f) Excess contributions. If the Code section 401(k)(3) limits have not been met for a Plan Year after all contributions for the Plan Year have been made, the Committee will determine the amount of excess contributions with respect to Participants who are Highly Compensated Employees in the manner prescribed by Code section 401(k)(8) and by applicable regulations.

     (g) Distribution of excess contributions. A Participant’s excess contributions, adjusted for income, will be designated by the Participating Employer as a distribution of excess contributions and distributed to the Participant. The income allocable to excess contributions is equal to the allocable gain or loss for the Plan Year, plus, for the Plan Years commencing on January 1, 2006 and January 1, 2007, the allocable gain or loss for the period between the end of the Plan Year and the date of distribution (the “gap period”). Income allocable to excess contributions for the Plan Year shall be determined by multiplying the gain or loss attributable to the Participant’s Elective Contribution Account and QNEC Account balances by a fraction, the numerator of which is the excess contributions for the Participant for the Plan Year, and the denominator of which is the

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sum of the Participant’s Elective Contribution Account and QNEC Account balances as of the beginning of the Plan Year plus the Participant’s Elective Contributions and Qualified Nonelective Contributions for the Plan Year. Income allocable to excess contributions for the gap period (for the 2006 and 2007 Plan Years) shall be determined in accordance with the safe harbor method set forth in Regulation section 1.401(k)-2(b)(2)(iv)(D). Distribution of excess contributions will be made after the close of the Plan Year to which the contributions relate, but within 12 months after the close of such Plan Year. Excess contributions shall be treated as annual additions under the Plan, even if distributed under this paragraph.

     (h) Special rules. For purposes of distributing excess contributions, the amount distributed with respect to a Highly Compensated Employee for a Plan Year shall be reduced by the amount of excess deferrals previously distributed to the Highly Compensated Employee for his or her taxable year ending with or within such Plan Year.

     (i) Recordkeeping requirement. The Committee, on behalf of the Participating Employers, shall maintain such records as are necessary to demonstrate compliance with the Code section 401(k)(3) limits, including the extent to which Qualified Nonelective Contributions are taken into account in determining the actual deferral ratios.

     (j) Excise tax where failure to correct. If the excess contributions are not corrected within 2¹/2 months after the close of the Plan Year to which they relate, the Participating Employers will be liable for a 10 percent excise tax on the amount of excess contributions attributable to them, to the extent provided by Code section 4979. Qualified Nonelective Contributions properly taken into account under this Section for the Plan Year may enable the Plan to avoid having excess contributions, even if the contributions are made after the close of the 2¹/2 month period.

     14.5. Code Section 401(m) Limits.

     (a) In General. Matching Contributions made under the Plan, other than the safe harbor contributions described in Article 6 for a Plan Year after December 31, 2010, are subject to the limits of Code section 401(m), as more fully described below. The Plan provisions relating to the 401(m) limits are to be interpreted and applied in accordance with Code sections 401(m) and 401(a)(4), which are hereby incorporated by reference, and in such manner as to satisfy such other requirements relating to Code section 401(m) as may be prescribed by the Secretary of the Treasury from time to time.

     (b) Actual contribution ratios. For each Plan Year, the Administrator will determine the “actual contribution ratio” for each Participant who is eligible for Matching Contributions. The actual contribution ratio shall be the ratio, calculated to the nearest one-hundredth of one percent, of the sum of the Matching Contributions and Qualified Nonelective Contributions which are not treated as Elective Contributions made on behalf of the Participant for the Plan Year, to the Participant’s Compensation for the Plan Year. For purposes of determining a Participant’s actual contribution ratio:

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     (i) A Matching Contribution will be taken into account only if the Contribution is allocated to a Participant’s Account as of a date within the Plan Year, is actually paid to the Trust no later than 12 months after the close of the Plan Year, and is made on behalf of a Participant on account of the Participant’s Elective Contributions for the Plan Year;

     (ii) in the case of a Participant who is a Highly Compensated Employee for the Plan Year and is eligible to have Matching Contributions or employee contributions (including amount treated as Matching Contributions) allocated to his or her accounts under two or more plans maintained by an Affiliated Employer which may be aggregated for purposes of Code sections 410(b) and 401(a)(4), the Participant’s actual contribution ratio shall be determined as if such contributions are made under a single plan, and if two or more of the plans have different Plan Years, all Plan Years ending with or within the same calendar year shall be treated as a single Plan Year;

     (iii) the applicable period for determining Compensation for each Participant for a Plan Year shall be the 12-month period ending on the last day of such Plan Year; provided that to the extent permitted under Regulations, the Administrator may choose, on a uniform basis, to treat as the applicable period only that portion of the Plan Year during which the individual was eligible for Matching Contributions;

     (iv) Elective Contributions not applied to satisfy the Code section 401(k)(3) limits and Qualified Nonelective Contributions not treated as Elective Contributions may be treated as Matching Contributions to the extent permitted by Regulation section 1.401(m)-2(a)(6);

     (v) in the event that the Plan satisfies the requirements of Code sections 401(k), 410(a)(4), or 410(b) only if aggregated with one or more other plans with the same Plan Year, or if one or more other plans with the same Plan Year satisfy such Code sections only if aggregated with this Plan, then this Section shall be applied by determining the actual deferral ratios as if all such plans were a single plan; and

     (vi) any forfeitures under the Plan which are applied against Matching Contributions shall be treated as Matching Contributions.

     (c) Actual contribution percentages. Each Plan Year, the actual contribution ratios for all Highly Compensated Employees who are eligible for Matching Contributions for a Plan Year shall be averaged to determine the actual contribution percentage for the highly compensated group for the Plan Year, and the actual contribution ratios for all Employees who are not Highly Compensated Employees but are eligible for Matching Contributions for the Plan Year shall be averaged to determine the actual contribution percentage for the nonhighly compensated group for the Plan Year.

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     (d) Actual contribution percentage tests. For a Plan Year, at least one of the following tests must be satisfied:

     (i) the highly compensated group’s actual contribution percentage for the Plan Year does not exceed 125% of the current year actual contribution percentage for the nonhighly compensated group; or

     (ii) the excess of the actual contribution percentage for the highly compensated group for the Plan Year over the current year actual contribution percentage for the nonhighly compensated group does not exceed two percentage points, and the actual contribution percentage for the highly compensated group for the Plan Year does not exceed twice the current year actual contribution percentage for the nonhighly compensated group.

For purposes of satisfying the above tests for a Plan Year, the “current year actual contribution percentage for the nonhighly compensated group” refers to the actual contribution percentage determined for the current Plan Year for the nonhighly compensated group. Whether a Participant is considered within the highly compensated or nonhighly compensated group will be based upon the Participant’s Compensation during the preceding Plan Year.

     (e) Adjustments by Administrator. If, prior to the time all Matching Contributions for a Plan Year have been contributed to the Trust, the Administrator determines that such contributions are being made at a rate which will cause the Code section 401(m) limits to be exceeded for the Plan Year, the Administrator may, in its sole discretion, limit the amount of such contributions to be made with respect to one or more Highly Compensated Employees for the balance of the Plan Year by limiting the amount of such contributions to the extent the Administrator deems appropriate.

     (f) Excess aggregate contributions. If the Code section 401(m) limits have not been satisfied for a Plan Year after all contributions for the Plan Year have been made, the excess of the aggregate amount of the Matching Contributions (and any Qualified Nonelective Contribution or elective deferral taken into account in computing the actual contribution percentages) actually made on behalf of Highly Compensated Employees for the Plan Year over the maximum amount of such contributions permitted under Code section 401(m)(2)(A) shall be considered to be “excess aggregate contributions.” The Committee will determine the amount of excess aggregate contributions with respect to Participants who are Highly Compensated Employees in the manner prescribed by Code section 401(m)(6)(C) and by applicable regulations.

     (g) Distribution of excess aggregate contributions. A Participant’s excess aggregate contributions, adjusted for income, will be designated by the Participating Employer as a distribution of excess aggregate contributions, and distributed to the Participant. The income allocable to excess aggregate contributions is equal to the allocable gain or loss for the taxable year of the individual, plus, for the Plan Years commencing on January 1, 2006 and January 1, 2007, the allocable gain or loss for the period between the end of the taxable year and the date of distribution (the “gap period”).

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Income allocable to excess aggregate contributions for the taxable year shall be determined by multiplying the gain or loss attributable to the Participant’s Matching Contribution Account balances by a fraction, the numerator of which is the excess aggregate contributions for the Participant for the Plan Year, and the denominator of which is the sum of the Participant’s Matching Contribution Account balances as of the beginning of the Plan Year plus the Participant’s Matching Contributions for the Plan Year. Distribution of excess aggregate contributions will be made after the close of the Plan Year to which the contributions relate, but within 12 months after the close of such Plan Year. Excess aggregate contributions shall be treated as employer contributions for purposes of Code sections 401(a)(4), 404, and 415 even if distributed from the Plan.

     (h) Recordkeeping requirement. The Administrator, on behalf of the Participating Employers, shall maintain such records as are necessary to demonstrate compliance with the Code section 401(m) limits, including the extent to which Elective Contributions and Qualified Nonelective Contributions are taken into account in determining the actual contribution ratios.

     (i) Excise tax where failure to correct. If the excess aggregate contributions are not corrected within 2¹/2 months after the close of the Plan Year to which they relate, the Participating Employers will be liable for a 10 percent excise tax on the amount of excess aggregate contributions attributable to them, to the extent provided by Code section 4979. Qualified Nonelective Contributions properly taken into account under this section for the Plan Year may enable the Plan to avoid having excess aggregate contributions, even if the contributions are made after the close of the 2¹/2 month period.

     14.6. Code Section 401(k)(3) and 401(m) Limits after 2010. For Plan Years after December 31, 2010, the provisions of Article 6 shall describe the ADP and ACP nondiscrimination testing requirements satisfied by the Safe Harbor Matching Contributions described therein.

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ARTICLE 15. SPECIAL TOP-HEAVY PROVISIONS.

     15.1. Provisions to Apply. The provisions of this Article shall apply for any top-heavy Plan Year notwithstanding anything to the contrary in the Plan.

     15.2. Minimum Contribution. For any Plan Year which is a top-heavy plan year, the Participating Employers shall contribute to the Trust a minimum contribution on behalf of each Participant who is not a key employee for such year and who has not separated from service from the Affiliated Employers by the end of the Plan Year, regardless of whether or not the Participant has elected to make Elective Contributions for the Year. The minimum contribution shall, in general, equal 3% of each such Participant’s Compensation, but shall be subject to the following special rules:

     (a) If the largest contribution on behalf of a key employee for such year, taking into account only Elective Contributions, Matching Contributions (if any), Discretionary Contributions and Qualified Nonelective Contributions, is equal to less than 3% of the key employee’s Compensation, such lesser percentage shall be the minimum contribution percentage for Participants who are not key employees. This special rule shall not apply, however, if the Plan is required to be included in an aggregation group and enables a defined benefit plan to meet the requirements of Code section 401(a)(4) or 410.

     (b) No minimum contribution will be required with respect to a Participant who is also covered by another top-heavy defined contribution plan of an Affiliated Employer which meets the vesting requirements of Code section 416(b) and under which the Participant receives the top-heavy minimum contribution.

     (c) If a Participant is also covered by a top-heavy defined benefit plan of an Affiliated Employer, “5%” shall be substituted for “3%” above in determining the minimum contribution.

     (d) The minimum contribution with respect to any Participant who is not a key employee for the particular year will be offset by any Discretionary Contributions and any Qualified Nonelective Contributions, but not any other type of contribution otherwise made for the Participant’s benefit for such year. Notwithstanding the foregoing, for Plan Years beginning after December 31, 2001, the minimum contribution described above will be offset also by any Matching Contributions made for the Participant’s benefit for such year.

     (e) If additional minimum contributions are required under this Section, such contributions shall be credited to the Participant’s Discretionary Contribution Account.

     (f) A minimum contribution required under this Section shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation for the year because of (i) the Participant’s failure to complete 1,000 hours of service (or any equivalent provided in the Plan), or (ii) the Participant’s failure

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to make mandatory contributions or Elective Contributions to the Plan, or (iii) Compensation less than a stated amount.

     15.3. Adjustment to Limitation on Benefits. With respect to Plan Years prior to January 1, 2001, for purposes of the Code section 415 limits, the definitions of “defined contribution plan fraction” and “defined benefit plan fraction” contained therein shall be modified, for any Plan Year which is a top-heavy Plan Year, by substituting “1.0” for “1.25” in Code sections 415(e)(2)(B) and 415(e)(3)(B).

     15.4. Definitions. For purposes of these top-heavy provisions, the following terms have the following meanings:

     (a) “key employee” means a key employee described in Code section 416, and “non-key employee” means any employee who is not a key employee (including employees who are former key employees);

     (b) “top-heavy plan year” means a Plan Year if any of the following conditions exist (unless Safe Harbor Matching Contributions under Article 6 are the only employer contributions to the Plan):

     (i) the top-heavy ratio for the Plan exceeds 60 percent and the Plan is not part of any required aggregation group or permissive aggregation group of plans;

     (ii) this Plan is a part of a required aggregation group of plans but not part of a permissive aggregation group and the top-heavy ratio for the group of plans exceeds 60 percent; or

     (iii) the Plan is part of a required aggregation group and part of a permissive aggregation group of plans and the top-heavy ratio for the permissive aggregation group exceeds 60 percent.

     (c) “top-heavy ratio”:

     (i) If the employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the employer has not maintained any defined benefit plan which during the 5-year period ending on the determination date(s) has or has had accrued benefits, the top-heavy ratio for the Plan alone or for the required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the account balances of all key employees on the determination date(s) (including any part of any account balance distributed in the 1-year period ending on the determination date(s)), and the denominator of which is the sum of all account balances (including any part of an account balance distributed in the 1-year period ending on the determination date(s) and in the case of a distribution made for a reason other than separation from service, death or disability, including any such amount distributed in the 5-year period ending in determination dates(s)), both computed in accordance with Code section 416. Both the numerator and the denominator of the top-heavy ratio

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are increased to reflect any contribution not actually made as of the determination date, but which is required to be taken into account on that date under Code section 416.

     (ii) If the employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the determination date(s) has or has had any accrued benefits, the top-heavy ratio for any required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all key employees, determined in accordance with (i) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all key employees as of the determination date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants, determined in accordance with (i) above, and the present value of all accrued benefits under the defined benefit plan or plans for all participants as of the determination date(s), all determined in accordance with Code section 416. The accrued benefits under a defined benefit plan in both the numerator and denominator of the top-heavy ratio are increased for any distribution of an accrued benefit made in the 1-year period ending on the determination date.

     (iii) For purposes of (i) and (ii) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the determination date, except as provided in Code section 416 for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a participant (A) who is not a key employee but who was a key employee in a prior year, or (B) who has not been credited with at least one Hour of Service with any employer maintaining the plan at any time during the 1-year period ending on the determination date will be disregarded. The calculation of the top-heavy ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code section 416. Deductible employee contributions will not be taken into account for purposes of computing the top-heavy ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the determination dates that fall within the same calendar year.

     (iv) The accrued benefit of a Participant other than a key employee shall be determined under (A) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the employer, or (B) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code section 411(b)(1)(C).

     (d) The “permissive aggregation group” is the required aggregation group of plans plus any other plan or plan of the employer which, when considered as a group with

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the required aggregation group, would continue to satisfy the requirements of Code sections 401(a)(4) and 410.

     (e) The “required aggregation group” is (i) each qualified plan of the employer in which at least one key employee participates or participated at any time during the determination period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the employer which enables a plan described in (i) to meet the requirements of Code sections 401(a)(4) and 410(b).

     (f) For purposes of computing the top-heavy ratio, the “valuation date” shall be the last day of the applicable plan year.

     (g) For purposes of establishing present value to compute the top-heavy ratio, any benefit shall be discounted only for mortality and interest based on the interest and mortality rates specified in the defined benefit plan(s), if applicable.

     (h) The term “determination date” means, with respect to the initial plan year of a plan, the last day of such plan year and, with respect to any other plan year of a plan, the last day of the preceding plan year of such plan. The term “applicable determination date” means, with respect to the Plan, the determination date for the Plan Year of reference and, with respect to any other plan, the determination date for any plan year of such plan which falls within the same calendar year as the applicable determination date of the Plan.

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ARTICLE 16. MISCELLANEOUS.

     16.1. Exclusive Benefit Rule. No part of the corpus or income of the Trust allocable to the Plan will be used for or diverted to purposes other than for the exclusive benefit of each Participant and Beneficiary, except as otherwise provided under the provisions of the Plan relating to Qualified Domestic Relations Orders, the payment of reasonable expenses of administering the Plan, the return of contributions upon nondeductibility or mistake of fact, or the failure of the Plan to qualify initially.

     16.2. Limitation of Rights. Neither the establishment of the Plan or the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to any Participant or other person any legal or equitable right against any Participating Employer or Committee or Trustee, except as provided herein, and in no event will the terms of employment or service of any Participant be modified or in any way be affected hereby. It is a condition of the Plan, and each Participant expressly agrees by his or her participation herein, that each Participant will look solely to the assets held in the Trust for the payment of any benefit to which he or she is entitled under the Plan.

     16.3. Nonalienability of Benefits. The benefits provided hereunder will not be subject to the voluntary or involuntary alienation, assignment, garnishment, attachment, execution or levy of any kind, and any attempt to cause such benefits to be so subjected will not be recognized, except to the extent required by law or to comply with a court order pursuant to subparagraph 401(a)(13)(C) of the Code. However, if the Committee receives any Qualified Domestic Relations Order that requires the payment of benefits hereunder or the segregation of any Account, such benefits shall be paid, and such Account segregated, in accordance with the applicable requirements of such Order, consistent with the provisions of the Plan and the requirements in the Code. In addition, the Account balance may be pledged as security for a loan from the Plan in accordance with the Plan’s loan procedures.

     16.4. Adequacy of Delivery. Any payment to be made under the Plan by the Trustee may be made by the Trustee’s check. Mailing to a person or persons entitled to distributions hereunder at the addresses designated by the Participating Employer or Committee shall be adequate delivery by the Trustee of such distributions for all purposes. In the event the whereabouts of a person entitled to benefits under the Plan cannot be determined after diligent search by the Committee, the Committee may place the benefits in a federally insured, interest-bearing bank account opened in the name of such person. Such action shall constitute a full distribution of such benefits under the terms of the Plan and Trust.

     16.5. Reclassification of Employment Status. Notwithstanding anything herein to the contrary, an individual who is not characterized or treated as a common law employee of a Participating Employer shall not be eligible to participate in the Plan. However, in the event that such an individual is reclassified or deemed to be reclassified as a common law employee of a Participating Employer, the individual shall be eligible to participate in the Plan as of the actual date of such reclassification (to the extent such individual otherwise qualifies as an Eligible Employee hereunder). If the effective date of any such reclassification is prior to the actual date

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of such reclassification, in no event shall the reclassified individual be eligible to participate in the Plan retroactively to the effective date of such reclassification.

     16.6. Veterans’ Reemployment and Benefits Rights. Effective December 12, 1994 and notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code section 414(u).

     16.7. Governing law. The Plan and Trust will be construed, administered and enforced according to the laws of Massachusetts to the extent such laws are not preempted by ERISA.

     16.8. Authority to Correct Operational Defects. The Committee will have full discretionary power and authority to correct any “operational defect” of the Plan in any manner or by any method it deems appropriate in its sole discretion in order to cause the Plan (i) to operate in accordance with its terms or (ii) to maintain its tax-qualified status under the Code. For purposes of this Section, an “operational defect” is any operational or administrative action (or inaction) in connection with the Plan which, in the judgment of the Committee, fails to conform with the terms of the Plan or causes or could cause the Plan to lose its tax-qualified status under the Code.

     16.9. Electronic Forms. Notwithstanding any Plan provision to the contrary, to the extent the Committee allows any form or document under the Plan to be provided, completed or changed by means of telephone, computer or other paperless media, a paper document shall not be required for such form or document to be effective under the Plan.

     IN WITNESS WHEREOF, the Plan Sponsor has caused this instrument to be signed in its name and on its behalf by its duly authorized officer, this ____day of December, 2010.

BOSTON SCIENTIFIC CORPORATION
 

By:  

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Schedule A

(As of January 1, 2011)

Participating Employer	State of Incorporation
Asthmatx, Inc.	Delaware
Boston Scientific Corporation	Delaware
Boston Scientific Miami Corporation	Florida
Boston Scientific Neuromodulation Corp.	Delaware
Boston Scientific Scimed, Inc.	Delaware
Boston Scientific Wayne Corporation	New Jersey
Cardiac Pacemakers Inc.	Minnesota
Corvita Corporation	Florida
EndoVascular Technologies, Inc.	Delaware
Enteric Medical Technologies, Inc.	Delaware
EP Technologies, Inc.	Delaware
Guidant Delaware Holding Corp.	Delaware
Guidant Holdings, Inc.	Indiana
Guidant Intercontinental Corp.	Indiana
Guidant LLC	Indiana
Guidant Sales LLC	Indiana
Target Therapeutics, Inc.	Delaware

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Schedule B

Special Provisions Regarding Former Participants in Other Plans

     The following plans have been merged into this Plan as of the dates indicated below. Any elections made by participants in such plans with respect to contributions, beneficiaries, investments, loans or benefit distributions shall carry over and be treated as if made under this Plan, except as otherwise provided by the Committee.

     1. Cardiovascular Imaging Systems, Inc. 401(k) Salary Reduction Plan and Trust

     On October 3, 1995, the Cardiovascular Imaging Systems, Inc. 401(k) salary reduction plan was merged into this Plan.

Special participation rules (Section 3.1(c)):	No
Special rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):	No
QJSA rules applicable (Section 11.7):	Yes
Optional forms of payment to preserve (Sections 11.1 and 11.7):

Immediate life annuity.

Immediate life annuity with a period certain of 10, 15, or 20 years.

Immediate annuity for the life of the Participant, with a survivor annuity for the Participant’s beneficiary which is 100%, 66 2/3% or 50% of the amount payable during the life of the Participant.

Any combination of the above options and the benefit forms described in Section 11.1.

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     2. Scimed Life Systems, Inc. Retirement Savings and Profit Sharing Plan

     Effective January 1, 1996, the Scimed Life Systems, Inc. Retirement Savings and Profit Sharing Plan was merged into this Plan.

Special participation rules (Section 3.1(c)):	No
Special rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):	No
QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	No

     3. Symbiosis Corporation 401(k) Plan and Trust

     Effective June 1, 1996, the Symbiosis Corporation 401(k) Plan and Trust was merged into this Plan.

Special Participation rules (Section 3.1(c)):	No
Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):	No
QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

     4. American Home Products Corporation Savings Plan

     Effective June 1, 1996, the accounts under the American Home Products Corporation Savings Plan attributable to Participants employed by Symbiosis Corporation were merged into this Plan.

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Special Participation rules (Section 3.1(c)):	No
Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting Rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):
Withdrawal from after-tax contribution account
(Once per Plan Year; $500 minimum)
QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

     5. EPT 401(k) Plan

     Effective as of the close of business on December 31, 1996, the EPT 401(k) Plan is hereby merged into this Plan.

Special participation rules (Section 3.1(c)): Yes

(i) Any individual who is a participant in the EPT 401(k) Plan (the “Former Plan”) on December 31, 1996 shall become a Participant in the Plan as of January 1, 1997.

(ii) Each other Employee of EP Technologies, Inc. shall be subject to the participation rules under Section 3.1.

Special rules regarding allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40):	Yes

(i) Any individual who is a participant in the EPT 401(k) Plan (the “Former Plan”) on December 31, 1996 and who is actively employed by the Plan Sponsor or an Affiliated Employer on or after December 31, 1996 shall have a 100% nonforfeitable interest in the portion of his or her Accounts under this Plan that are attributable to the transfer of his or her employer matching contribution account balance, if any, from the Former Plan.

(ii) Any individual who is actively employed by EP Technologies, Inc. on December 31, 1996 and who has 3 or more years of service for purposes of calculating vesting (as determined under the Former Plan) shall have a vested

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interest in a percentage of his or her Discretionary Contribution Account under the Plan, if any, determined in accordance with the following schedule and based on his or her Years of Service for Vesting:

Years of Service	Applicable
for Vesting	Nonforfeitable Percentage
3 but less than 4		75	%
4 or more		100	%

     Special in-service withdrawal rules (Section 9.9(a)):

Hardship withdrawals allowed from any account
which is 100% vested.

QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

     6. Heart Technology, Inc. 401(k) Profit Sharing Plan

     Effective as of the close of business on December 31, 1996, the Heart Technology, Inc. 401(k) Profit Sharing Plan is hereby merged into this Plan.

Special Participation rules (Section 3.1(c)): Yes

(i) Any individual who is a participant in the Heart Technology, Inc. 401(k) Profit Sharing Plan (the “Former Plan”) on December 31, 1996 shall become a Participant in the Plan as of January 1, 1997.

(ii) Any individual who is an active employee of Boston Scientific Corporation Northwest Technology Center, Inc. on December 31, 1996 and who has satisfied the eligibility requirements under the Former Plan as of December 31, 1996 (age 18 and the earlier of 6 months continuous employment or 1 year of service), but who has not yet enrolled in the Former Plan shall become a Participant in the Plan on the first Entry Date on or after January 1, 1997 on which such individual (a) is an Eligible Employee and (b) has in effect a Compensation Reduction Authorization described in Section 4.2.

(iii) Any individual who is an active employee of Boston Scientific Corporation Northwest Technology Center, Inc. on December 31, 1996 and who has not yet satisfied the eligibility requirements under the Former Plan as of December 31, 1996 shall become a Participant in the Plan as of the Entry Date coinciding with or next following the date on which the individual (a) satisfies the eligibility requirements under Section 3.1, substituting age 18 for age 21 in Section

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3.1(b)(iii), (b) is an Eligible Employee and (c) has in effect a Compensation Reduction Authorization described in Section 4.2.

(iv) Each other Employee of Boston Scientific Corporation Northwest Technology Center, Inc. shall be subject to the participation rules under Section 3.1.

Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting Rules (Sections 8.6 and 2.40):	Yes

Any individual who is a participant in the Heart Technology, Inc. 401(k) Profit Sharing Plan (the “Former Plan”) on December 31, 1996 and who is an active employee of the Plan Sponsor or an Affiliated Employer on or after December 31, 1996 shall have a 100% nonforfeitable interest in the portion of his or her Accounts under this Plan that are attributable to the transfer of his or her employer matching contribution account balance, if any, from the Former Plan.

Special in-service withdrawal rules (Section 9.9(a)): Yes

In-service withdrawals of rollover account; limited to once per year.

QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

     7. Meadox Medicals, Inc. Employees’ Savings Plan

     Effective as of the close of business on December 31, 1996, the Meadox Medicals, Inc. Employees’ Savings Plan is hereby merged into this Plan.

Special Participation rules (Section 3.1(c)): Yes

(i) Any individual who is a participant in the Meadox Medicals, Inc. Employees’ Savings Plan (the “Former Plan”) on December 31, 1996 shall become a Participant in the Plan as of January 1, 1997.

(ii) Any individual who is an active employee of Meadox Medicals, Inc. on December 31, 1996, but who has not yet enrolled in the Former Plan shall become a Participant in the Plan on any Entry Date on or after January 1, 1997, provided on such Entry Date such individual (a) is an Eligible Employee and (b) has in effect a Compensation Reduction Authorization described in Section 4.2. (iii) Each other Employee of Meadox Medicals, Inc. shall be subject to the participation rules under Section 3.1.

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Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting Rules (Sections 8.6 and 2.40):	Yes

Any individual who is a participant in the Meadox Medicals, Inc. Employees’ Retirement Plan (the “Former Plan”) on December 31, 1996 and is an active employee of the Plan Sponsor or an Affiliated Employer on or after December 31, 1996 shall have a 100% nonforfeitable interest in the portion of his or her Accounts under this Plan that are attributable to the transfer of his or her employer matching contribution account balance, if any, from the Former Plan.

Special in-service withdrawal rules (Section 9.9(a)):	Yes
After-tax contribution account.	No
QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

     8. Target Therapeutics, Inc. 401(k) Plan and Trust

     Effective as of the close of December 31, 1997, the Target Therapeutics, Inc. 401(k) Plan and Trust was merged into this Plan.

Special Participation rules (Section 3.1(c)):	No
Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):	No
QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

     9. Pfizer Savings and Investment Plan

     Effective as of the close of November 30, 1998, the portion of the Pfizer Savings and Investment Plan and trust benefitting employees of Schneider (USA) Inc. and Corvita Corporation was merged into this Plan.

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Special Participation rules (Section 3.1(c)): Yes

(i) Individuals who were employed by Schneider (USA) Inc. or Corvita Corporation on September 10, 1998 may participate in this Plan pursuant to Section 3.1(c) without regard to the age requirement of that Section.

(ii) Any Employee who was a participant in the Pfizer Savings and Investment Plan on September 9, 1998 shall become a Participant in this Plan as of September 10, 1998.

(iii) Each other individual who becomes an Employee of Schneider (USA) Inc. or Corvita Corporation shall be subject to the general participation rules of Section 3.1.

Special Rules re allocation of transferred accounts (Section 7.6(a)): Yes

In order to administer special distribution options with respect to contributions attributable to the NAMIC USA Corporation Profit Sharing and Incentive Savings Plan, Pfizer matching contributions and Pfizer after-tax employee contributions (and earnings on all such contributions) such contributions (and related earnings) shall be transferred into separate accounts or subaccounts under this Plan.

Special Vesting rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):	Yes

The Pfizer matching contribution account, after-tax employee contribution account, and former NAMIC accounts (attributable to contributions other than elective contributions) can be withdrawn in-service at any time.

Pfizer and NAMIC elective contribution accounts can be withdrawn on account of hardship or disability.

QJSA rules applicable (Section 11.7): Yes

(i) Former participants of the Pfizer Savings and Investment Plan must obtain spousal consent for loans and hardship withdrawals from their Pfizer accounts.

(ii) Accounts of Participants for whom NAMIC Accounts are maintained (i.e., former participants of the NAMIC USA Corporation Profit Sharing and Incentive Plan) are subject to the QJSA rules with respect to those accounts.

Optional forms of payment to preserve (Sections 11.1 and 11.7) Yes

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(i) Lump sum withdrawals or distributions from the Pfizer stock fund can be distributed in shares of Pfizer common stock (with cash in lieu of any fractional shares) at the Participant’s election.

(ii) NAMIC Accounts, in addition to the benefit forms described under Section 11.1 and 11.7, can be distributed as follows:

Immediate annuity for the life of the Participant, with a survivor
annuity for the Participant’s beneficiary which is 50% of the amount
payable during the life of the Participant.

Immediate life annuity.

Other annuity options.

     10. Catheter Innovations, Inc. 401(k) Retirement Savings Plan

     Effective as of the close of December 31, 2001, the Catheter Innovations, Inc. 401(k) Retirement Savings Plan (the “Catheter Innovations Plan”) and Trust shall be merged into this Plan.

Special Participation rules (Section 3.1(c)):	No
Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):	No
QJSA rules applicable (Section 11.7):	Yes
Optional forms of payment to preserve (Sections 11.1 and 11.7):

50% joint and survivor annuity.

Straight life annuity.

Single life annuity with period of certain of five, ten or fifteen years.

Single life annuity with installment refund

50%, 66(%, or 100% joint and survivor annuity with installment refund.

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Fixed period annuity for any period of whole months which is not less than sixty and does not exceed the life expectancy of the Participant and the named Beneficiary.

Installments.

     11. Quanam Medical Corporation 401(k) Plan

     Effective as of the close of December 31, 2001, the Quanam Medical Corporation 401(k) Plan (the “Quanam Plan”) and Trust shall be merged into this Plan.

Special Participation rules (Section 3.1(c)):	No
Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40):	No
Special in-service withdrawal rules (Section 9.9(a)):	No
QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

     12. Interventional Technologies, Inc. 401(k) Plan

     Effective as of the close of December 31, 2001, the Interventional Technologies, Inc. 401(k) Plan (the “IVT Plan”) and Trust shall be merged into this Plan.

Special Participation rules (Section 3.1(c)):	No
Special Rules re allocation of transferred accounts (Section 7.6(a)):	No
Special Vesting rules (Sections 8.6 and 2.40	No
Special in-service withdrawal rules (Section 9.9(a)):	No
QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	None

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     13. The Guidant Employee Savings and Stock Ownership Plan

     Effective as of the close of June 1, 2008, The Guidant Employee Savings and Stock Ownership Plan and Trust (the “Guidant ESSOP”) shall be merged into this Plan.

Special Participation rules (Section 3.1(c)): Yes

(i) Any individual who is a participant in the Guidant ESSOP on May 31, 2008 shall become a Participant in the Plan as of June 1, 2008.

(ii) Any individual who is an active employee of Guidant Corporation on May 31, 2008, but who has not yet become a participant in the Guidant ESSOP as of such date, shall become eligible to participate in the Plan as of June 1, 2008 and shall be subject to the Plan’s automatic election rules under Section 4.2.

(iii) Each other employee of Guidant Corporation shall be subject to the Plan’s general participation rules under Section 3.1.

Special Matching Contribution Rules (Section 4.3): Yes

In order to allocate the Financed Shares remaining in the Guidant ESSOP’s Suspense Account (as such terms are defined in the Guidant ESSOP) solely to individuals who were participants in the Guidant ESSOP as of May 31, 2008, all Matching Contributions under this Plan to individuals who were participants in the Guidant ESSOP as of May 31, 2008 shall be made in Shares instead of cash until such time as the Financed Shares are exhausted; provided, however, that any Participants in the Plan who receive Matching Contributions in the form of Shares shall have the same diversification rights with respect to such Shares as provided in Sections 5.06(b) and 19.14(b) of the Guidant ESSOP as in effect on May 31, 2008. This portion of the Plan shall be deemed to be an employee stock ownership plan under Code section 4975(e)(7) and ERISA section 407(d)(6), and shall be administered in a manner consistent with the requirements applicable thereto, including without limitation those applicable to Shares purchased with the proceeds of an Exempt Loan.

Special Rules re allocation of transferred accounts (Section 7.6(a)): Yes

In order to administer special in-service withdrawal, diversification and distribution options with respect to Minimum Matching Contributions, Additional Matching Contributions and Basic Contributions made to Guidant ESSOP Participants’ ESOP Accounts (as such terms are defined in the Guidant ESSOP as of May 31, 2008), such amounts (and earnings thereon) shall be transferred into separate accounts or subaccounts under this Plan.

Special Vesting rules (Sections 8.6 and 2.40): Yes

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Any individual who is a participant in, and who has a forfeitable interest under, the Guidant ESSOP as of May 31, 2008 shall, as of the date on which he or she returns to the employ of an Affiliated Employer, have a 100% nonforfeitable interest in the portions of his or her Accounts under this Plan that are attributable to the transfer of such forfeitable interest; provided, that such return to the employ of an Affiliated Employer occurs prior to the date on which the individual incurs (or would have incurred) five consecutive One Year Periods of Severance within the meaning of Sections 10.01(a) and 19.08(b) of the Guidant ESSOP.

Special in-service withdrawal rules (Section 9.9(a)): Yes

The Guidant ESSOP PAYSOP, ESOP Pre-Split Matching, Company Matching, Intermedics Matching Accounts (as such terms are defined in the Guidant ESSOP as of May 31, 2008) may be withdrawn in-service at any time, but not more than once per year.

Post-retirement, pre-distribution withdrawals shall be permitted consistent with Sections 10.01(b)(3) and 19.13(d) of the Guidant ESSOP as of May 31, 2008.

QJSA rules applicable (Section 11.7):	No
Optional forms of payment to preserve (Sections 11.1 and 11.7):	Yes

Distributions rights that were applicable to a Participant’s ESOP Account, if any, under the Guidant ESSOP, as of May 31, 2008, shall continue to apply to the portion of such Participant’s Account under this Plan that is attributable to the transfer of his or her ESOP Account from the Guidant ESSOP.

Special Normal Retirement Age (Section 2.23): Yes

The Normal Retirement Age shall be age 65 with respect to a Participant’s accounts transferred from the Guidant ESSOP.

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[THIS PAGE INTENTIONALLY LEFT BLANK]

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Schedule C

     Other Employer Contributions. The Participating Employers shall contribute to the Plan such other amounts as the Board of Directors determined on behalf of certain eligible Participants as set forth in this Schedule. Such contributions were made in cash and allocated to the Employer Contribution Account of each eligible Participant as set forth in this Schedule.

Special 1998 Contribution

     Pursuant to Section C.1, during the 1998 Plan Year, the Participating Employers made a special contribution on behalf of certain Participants (as listed below) in the amounts as indicated:

Participants Receiving		Amount of Special
Special 1998 Contribution		1998 Contribution
Anderson	Connie	$	1,196.07
Colon	Eleanor	$	702.99
Davis	Andrew	$	3,621.51
Khammanivong	Lounh	$	133.28
Lynch	Elizabeth	$	955.41
Montuori	John	$	59.59
Munoz	Mauro	$	498.25
Murley	Joyce	$	113.59
Ouk	Dara	$	139.34
Panescu	Dorin	$	210.66
Reineck	Jean	$	17.25
Shah	Krunal	$	287.47
Vierra	Jean	$	1,277.98
Zweirs	Douglas	$	3,323.15
Schallehn	Marcia	$	494.02
Lambert	Jose	$	974.21
Miranda	Gilbert	$	1,817.55
Vnuk	Theresa	$	216.67
Bliss	Mark	$	1,123.34
McCoy	Michael	$	936.33
Bautista	Amalia	$	81.91
Bean Jr	James I	$	210.87
Born	John	$	861.98
Brennan	Eileen F.	$	181.17
Duran	Julio	$	192.01
Fissenden	Lawrence P	$	176.37
Gomez	Boris	$	188.68
Johnson	Jeffrey	$	624.93
Laguerre	Anne G	$	117.76
Lindberg	Berndt E	$	170.25
Meintsma	Kathryn	$	305.60
Mistry	Illa	$	284.25
Murley	Rebecca	$	85.38

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Participants Receiving		Amount of Special
Special 1998 Contribution		1998 Contribution
Nguyen	Amy N	$	56.07
Ooley	Adam C	$	90.99
Rooney	Robert J.	$	63.53
Sabic	Tereza	$	27.88
Scouton	Patricia A	$	80.82
Springer	James A	$	76.49
Stewart	Jack D	$	323.88
Sutherlin	Todd	$	487.28
Swenson	Gregory	$	633.79
Teoh	Clifford	$	647.08
Tyburski	Karen	$	337.98
Vanarsdale	Timothy L	$	48.98
Williams	Denny L	$	112.18
Winders	Patricia L	$	61.21
Mack	Aggie	$	135.08
Mendez	Rafael	$	446.86
Brown	Roland	$	554.46
Hanson	Ilene A	$	132.66
Hass	Katherine A	$	123.31
Panuganti	Vijayasri	$	166.80
Pless	Nina M	$	58.07
Nguon	Sokha	$	110.47
Capece	Brian	$	349.39
Hanley	Steven	$	584.17
Duffy	James	$	763.93
Bot	Marc	$	896.45
Bergquist	Jonathan	$	386.20
Croci	Steven	$	3,008.25
Horkey	Natasha	$	105.39
Martinez	Lisa	$	609.11
Quinn	Patricia	$	326.29
Vela	Juan	$	373.92
Wathen	Peggy	$	9.83
Watson	Gisela	$	28.49
White	William	$	19.66
Bennett	Michael	$	4,334.80
Caneda	Jorge	$	561.89
Cielinski	Carrie	$	285.85
Duckett	Tammie	$	939.51
Koprowski	Janet	$	2,590.23
Leblanc	Ronald	$	1,521.94
Robertson	Tammy	$	93.24
Schmidt	Jennifer	$	202.93
Singh	Sarwesh	$	440.24
Smith	Johnnie	$	68.57
Stephenson	Marie	$	65.00
Takock	Aykham	$	227.72
Talbot	Connie	$	471.05
Tool	Sandra	$	840.78
Wei	Kuo-Shiun	$	4,630.44
Carrillo Jr.	Oscar	$	703.96

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Participants Receiving		Amount of Special
Special 1998 Contribution		1998 Contribution
Josef	Corazon	$	382.88
Khao	Sarith	$	232.73
Roberts	Barbara	$	1,278.94
Vennes	Robert	$	2,278.61
Zhong	Sheng-Ping	$	2,054.13
Miller	Connie	$	1,531.31
Miller	Paul	$	1,573.04
Jertson	John	$	266.33
Colonna	Douglas	$	310.94
Markle	Charlotte	$	287.02
Flores	Anita	$	130.32
Oza	Paritosh	$	276.74

Special Year 2000 Contribution

     Pursuant to Section C.1, during the 2000 Plan Year, the Participating Employers made a special contribution on behalf of certain Participants (as listed below) in the amounts as indicated:

Participants Receiving		Amount of Special
Special 2000 Contribution		2000 Contribution
Poublon	John A.	$	123.42
O’Mara	Robert J.	$	122.92
Hauer	Lillian R.	$	259.15
Paige	Corrine F.	$	213.16
Carpenter	Flo	$	129.82
Wetherbee	William A.	$	147.18
Greer	David A.	$	7.54
Randall	Bryan L.	$	94.76
Hebert	Charles B.	$	131.84
Bennett	Ronald W.	$	138.69
Chow	Stephen Y.	$	262.10
Silveira	Rachelle L.	$	1,151.11
Oukaroune	Souphaly	$	10.64
Fedie	Byron	$	25.12

Special Contribution for Certain Former Employees of Cardiac Pathways

     Pursuant to Section C.1, the Participating Employers made, in 2002, a special contribution on behalf of each Participant who (i) formerly participated in the Cardiac Pathways Corporation 401(k) Plan (the “Cardiac Plan”), (ii) earned in the aggregate less than $60,000 in 2001 from Boston Scientific Corporation and Cardiac Pathways Corporation, and (iii) was actively employed by Boston Scientific Corporation as of the last day of the Plan Year. Such contribution for each eligible Participant shall equal 35% of such Participant’s “projected elective deferral amount”. For purposes of this paragraph, “projected elective deferral amount” means the amount that the Participant would have deferred under the Cardiac Plan from

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August 8, 2001 through December 31, 2001 if the Cardiac Plan had not been terminated and if the Participant’s elective deferral election under the Cardiac Plan as of August 7, 2001 had remained the same for the remainder of the year.

Special Discretionary Contribution for 2004

     Special Discretionary Contribution. For the Plan Year ending on December 31, 2004, the Participating Employers contributed a Discretionary Contribution to the Plan solely in accordance with the following provisions, notwithstanding any provision in Section 4.4 to the contrary (such Discretionary Contribution made pursuant to these provisions to be referred to as the “Special Discretionary Contribution”). The Special Discretionary Contribution was made in cash and credited to the Accounts of Employees who:

     (i) were Eligible Employees on the last day of the Plan Year, or

     (ii) had ceased to be Eligible Employees during the Plan Year by reason of severance from employment after attaining age 62 or on account of death or Disability;

provided, however, that each such Employee (x) had satisfied the age requirement of Section 3.1(b)(iii) as of the last day of the Plan Year (or satisfied such age requirement as of the date of death, severance from employment, or Disability, if applicable under clause (ii) of this sentence), and (y) was not a nonresident alien who has no United States source income.

     (b) The amount of any such Special Discretionary Contribution that was allocated and credited to the Discretionary Contribution Account of each Employee described in subsection (a) above was determined according to the following formula:

     3% x C x Y

where C meant such Employee’s Compensation for the Plan Year ending on December 31, 2004, and Y meant one-twelfth of the Employee’s number of complete months of service with an Affiliated Employer, determined at the close of the Plan Year ending on December 31, 2004. For purposes of determining an Employee’s months of service under the immediately preceding sentence, an Employee who was employed by a business or employer that the Plan Sponsor acquired through the acquisition either of assets or stock had his or her prior service with such other employer taken into account as if it were service with an Affiliated Employer, provided that such Employee was employed by such other employer immediately prior to such acquisition. The amount allocated hereunder to any Employee was reduced to the extent necessary to satisfy the limitation of Section 14.2, and to prevent the allocation from exceeding $41,000, and the excess was not reallocated to any other Employee.

Notwithstanding the provisions of Section 2.8(c), solely for purposes of allocating this Special Discretionary Contribution for the Plan Year ending December 31, 2004, Compensation did not include commissions actually paid to any Employee for such Plan Year, but instead included an

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amount equal to the average annual aggregate commissions paid to any Employee for the three Plan Years ending in 2002, 2003, and 2004.

     Vesting of Special Discretionary Contributions. Notwithstanding the provisions of Section 8.2, a Participant who was an Eligible Employee on December 31, 2007 shall have a vested interest in 100% of any Special Discretionary Contribution that was allocated to his or her Discretionary Contribution Account.

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EX-10.61

Exhibit 10.61

DIRECTORS AND OFFICERS

INDEMNIFICATION AGREEMENT

     AGREEMENT, effective as of [Date], between Boston Scientific Corporation, a Delaware corporation (the “Company”), and the individual whose name appears on the signature page hereof (the “Indemnitee”).

     WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available;

     WHEREAS, Indemnitee is a director or officer of the Company;

     WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability in order to enhance Indemnitee’s continued service to the Company in an effective manner and in part to provide Indemnitee with specific contractual assurance that the indemnification protection provided by the Certificate of Incorporation and Bylaws of the Company will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of such Certificate of Incorporation and Bylaws or any change in the composition of the Company’s Board of Directors or acquisition transaction relating to the Company), and in order to induce Indemnitee to continue to provide services to the Company as an officer and/or director thereof, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies;

     NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the Company directly or, at its request, another enterprise, and intending to be legally bound hereby, the parties agree as follows:

     1. Certain Definitions.

          (a) Change in Control: shall be deemed to have occurred if (i) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly of securities of the Company representing twenty percent (20%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the

Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the stockholders of the Company approve a merger or consolidation of the company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company’s assets.

          (b) Claim: any threatened, pending or completed action, suit, proceeding or alternate dispute resolution mechanism, or any injury, hearing or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternate dispute resolution mechanism, whether civil, criminal, administrative, investigative or other.

          (c) Expenses: include attorneys’ fees and all other costs, travel expenses, fees of experts, transcript costs, filing fees, witness fees, telephone charges, postage, delivery service fees, expenses and obligations of any nature whatsoever paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event.

          (d) Indemnifiable Event: any event or occurrence that takes place either prior to or after the execution of this Agreement related to the fact that Indemnitee is or was an officer, director, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity.

          (e) Potential Change in Control: shall be deemed to have occurred if (i) the Company enters into an agreement or arrangement, the consummation of which would result in the occurrence of a Change in Control; (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company action in such capacity or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing ten percent (10%) or more of the combined voting power of the Company’s then outstanding Voting Securities, increases his or her beneficial ownership of such securities by five percent (5%) or more over the percentage so owned by such person on the date

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hereof; or (iv) the Board adopts a resolution to the effect that, for purpose of this Agreement, a Potential Change in Control has occurred.

          (f) Reviewing Party: any appropriate person or body consisting of a member or members of the Company’s Board of Directors or any other person or body appointed by the Board who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.

          (g) Independent Legal Counsel: Independent Legal Counsel shall refer to an attorney, selected in accordance with the provisions of Section 3 hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last five (5) years (other than in connection with seeking indemnification under this Agreement). Independent Legal Counsel shall not be any person who, under the applicable standards of professional conduct then prevailing, would have conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement, nor shall Independent Legal Counsel be any person who has been sanctioned or censured for ethical violations of applicable standards of professional conduct.

          (h) Voting Securities: any securities of the Company which vote generally in the election of directors.

     2. Basic Indemnification Arrangement.

          (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reasons of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law as soon as practicable but in any event no later than thirty (30) days after written demand is presented to the Company, against any and all Expenses, judgment, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (including the creation of the trust referred to in Section 4 hereof). If so requested by Indemnitee, the Company shall advance (within five (5) business days of such request) any and all Expenses to Indemnitee (an “Expense Advance”). Notwithstanding anything in this Agreement to the contrary and except as provided in Section 5, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such claim.

          (b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 3 hereof is

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involved) that Indemnitee would not be permitted to be indemnified under applicable law; and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee shall not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be selected by the Board of Directors. If there has been a Change in Control (other than a change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control), the Reviewing party shall be the Independent Legal Counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the State of Delaware or the Commonwealth of Massachusetts having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, or the legal or factual bases therefor and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.

     3. Change in Control.

     The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control) then Independent Legal Counsel shall be selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld) and such Independent Legal Counsel shall determine whether the Indemnitee is entitled to indemnity payments and Expense Advances under this Agreement or any other agreement or Certificate of Incorporation or By-Laws of the Company now or hereinafter in effect relating to Claims for Indemnifiable Events. Such Independent Legal Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee will be permitted to be indemnified. The Company agrees to pay the reasonable fees of the Independent Legal Counsel and to indemnify fully such Independent Legal Counsel against any

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and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of Independent Legal Counsel pursuant hereto.

     4. Establishment of Trust.

     In the event of a Potential Change in Control, the Company shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee and from time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for and defending any Claim relating to an Indemnifiable Event, and any and all judgments, fines, penalties and settlement amounts of any and all Claims relating to an Indemnifiable Event from time to time actually paid or claimed, reasonably anticipated or proposed to be paid. The amount or amounts to be deposited in the trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party, in any case in which the Independent Legal Counsel referred to above is involved. The terms of the trust shall provide that upon a Change in Control (i) the trust shall not be revoked or the principal thereof invaded, without the written consent of Indemnitee; (ii) the trustee shall advance, within five (5) business days of a request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the trust under the circumstances under which Indemnitee would be required to reimburse the Company under Section 2(b) of this Agreement); (iii) the trust shall continue to be funded by the Company in accordance with the funding obligation set forth above; (iv) the trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise: and (v) all unexpended funds in such trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement. The trustee shall be chosen by Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its obligations under this Agreement. All income earned on the assets held in the trust shall be reported as income by the Company for federal, state, local and foreign tax purposes.

     5. Indemnification for Additional Expenses.

     The Company shall indemnify Indemnitee against any and all expenses (including attorneys’ fees), if requested by Indemnitee, which are incurred by Indemnitee in connection with any claim asserted against or in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Certificate of Incorporation or By-Laws of the Company now or hereafter in effect relating to Claims for Indemnifiable Events; and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be.

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     6. Partial Indemnity, Etc.

     If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgment, fines, penalties and amounts paid in settlement of a claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

     7. Defense to Indemnification, Burden of Proof and Presumptions.

     It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for expenses incurred in defending a Claim in advance of its final disposition where the required undertaking has been tendered to the Company) that the Indemnitee has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any determination by the Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. Neither the failure of the Company (including its board of Directors, Independent Legal Counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, Independent Legal Counsel, or stockholders) that the Indemnitee had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

     8. Non-exclusivity, Etc.

     The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Certificate of Incorporation or By-Laws of the Company or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Certificate of Incorporation and By-Laws of the Company and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

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     9. No Construction as Employment Agreement.

     Nothing contained herein shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries.

     10. Liability Insurance.

     To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer.

     11. Period of Limitations.

     No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors, administrators or personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, and any claim or cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such period shall govern.

     12. Amendments, Etc.

     No supplement, modification nor amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

     13. Subrogation.

     In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

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     14. No Duplication of Payments.

     The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Certificate of Incorporation or By-Laws of the Company or otherwise) of the amounts otherwise indemnifiable hereunder.

     15. Binding Effect, Etc.

     This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation and otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as officer of the Company or of any other enterprise at the Company’s request.

     16. Severability.

     The provisions of this Agreement shall be severable in the event that any of the provision hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

     17. Governing Law.

     This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contacts made and to be performed in such state without giving effect to the principles of conflicts of laws.

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     19. Counterparts.

     This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered 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, the parties hereto have duly executed and delivered this Agreement as of the day first written above.

BOSTON SCIENTIFIC CORPORATION

/s/ J. Raymond Elliott Name: J. Raymond Elliott

Title: President and Chief Executive Officer

Indemnitee: [Name]

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EX-12

EXHIBIT 12

BOSTON SCIENTIFIC CORPORATION
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(unaudited)

	Year Ended December 31,
(in millions)	2010			2009			2008			2007			2006
Fixed charges
Interest expense and amortization of debt issuance costs (a)	$	393		$	407		$	468		$	570		$	435
Interest portion of rental expense		18			20			18			14			16
Total fixed charges		411			427			486			584			451
Earnings
(Loss) income before income taxes		(1,063	)		(1,308	)		(2,031	)		(569	)		(3,535	)
Fixed charges, per above		411			427			486			584			451
Total (deficit) earnings, adjusted	$	(652	)	$	(881	)	$	(1,545	)	$	15		$	(3,084	)
Ratio of earnings to fixed charges (b)											0.03

(a) The interest expense included in fixed charges above reflects only interest on third party indebtedness and excludes any interest expense accrued on uncertain tax positions, as permitted by Financial Accounting Standards Board Accounting Standards CodificationÔ Topic 740, Income Taxes (formerly FASB Interpretation No. 48, Accounting for Income Taxes).

(b) Earnings were deficient by $652 million in 2010, $881 million in 2009, $1.545 billion in 2008, and $3.084 billion in 2006

EX-21

EXHIBIT 21

List of World-wide subsidiaries of Boston Scientific as of February 10, 2011 Structure of ownership and control:

Boston Scientific wholly owns or has a majority interest in all of the below mentioned entities.

Arter Re Insurance Company, Ltd. (Bermuda)
Asthmatx, Inc. (Delaware)
Boston Scientific (Malaysia) Sdn. Bhd. (Malaysia)
Boston Scientific (South Africa) (Proprietary) Limited (South Africa)
Boston Scientific (Thailand) Ltd. (Thailand)
Boston Scientific (UK) Limited (England)
Boston Scientific AG (Switzerland)
Boston Scientific Argentina S.A. (Argentina)
Boston Scientific Asia Pacific Pte. Ltd. (Singapore)
Boston Scientific Benelux NV (Belgium)
Boston Scientific Capital Japan Nin-I Kumiai (Japan)
Boston Scientific Ceska republika s.r.o. (Czech Republic)
Boston Scientific Clonmel Limited (Ireland)
Boston Scientific Colombia Limitada (Colombia)
Boston Scientific Cork Limited (Ireland)
Boston Scientific Danmark ApS (Denmark)
Boston Scientific de Costa Rica S.R.L. (Costa Rica)
Boston Scientific de Mexico, S.A. de C.V. (Mexico)
Boston Scientific de Venezuela, C.A. (Venezuela)
Boston Scientific del Caribe, Inc. (Puerto Rico)
Boston Scientific Distribution Ireland Limited (Ireland)
Boston Scientific do Brasil Ltda. (Brazil)
Boston Scientific Europe S.P.R.L. (Belgium)
Boston Scientific Far East B.V. (The Netherlands)
Boston Scientific Foundation, Inc. (Massachusetts)
Boston Scientific Funding LLC (Delaware)
Boston Scientific Gesellschaft m.b.H. (Austria)
Boston Scientific Hellas S.A. (Greece)
Boston Scientific Hong Kong Limited (Hong Kong)
Boston Scientific Hungary Trading Limited Liability Company (Hungary)
Boston Scientific Iberica, S.A. (Spain)
Boston Scientific International B.V. (The Netherlands)
Boston Scientific International Finance Limited (Ireland)
Boston Scientific International Holding Limited (Ireland)
Boston Scientific International Limited (Ireland)
Boston Scientific International S.A. (France)
Boston Scientific Ireland Limited (Ireland)
Boston Scientific Israel Limited (Israel)
Boston Scientific Japan K.K. (Japan)
Boston Scientific Korea Co., Ltd. (Korea)
Boston Scientific Latin America B.V. (Chile) Limitada (Chile)
Boston Scientific Latin America B.V. (The Netherlands)
Boston Scientific Lebanon SAL (Lebanon)
Boston Scientific Limited (England)
Boston Scientific Limited (Ireland)
Boston Scientific Ltd./Boston Scientifique Ltee. (Canada)
Boston Scientific Medizintechnik GmbH (Germany)
Boston Scientific Miami Corporation (Florida)
Boston Scientific Middle East SAL (Offshore) (Lebanon)
Boston Scientific Nederland B.V. (The Netherlands)
Boston Scientific Neuromodulation Corporation (Delaware)
Boston Scientific New Zealand Limited (New Zealand)
Boston Scientific Norge AS (Norway)

1

Boston Scientific Philippines, Inc. (Philippines)
Boston Scientific Polska Sp. Z o.o. (Poland)
Boston Scientific Portugal — Dispositivos Medicos, Lda
Boston Scientific Pty. Ltd. (Australia)
Boston Scientific S.A.S. (France)
Boston Scientific S.p.A. (Italy)
Boston Scientific Scimed, Inc. (Minnesota)
Boston Scientific Suomi Oy (Finland)
Boston Scientific Sverige AB (Sweden)
Boston Scientific Technologie Zentrum GmbH (Germany)
Boston Scientific TIP Gerecleri Limited Sirketi (Turkey)
Boston Scientific Tullamore Limited, in liquidation (Ireland)
Boston Scientific Uruguay S.A. (Uruguay)
Boston Scientific Wayne Corporation (New Jersey)
BSC Capital S.à r.l. (Luxembourg)
BSC International Holding Limited (Ireland)
BSC International Medical Trading (Shanghai) Co., Ltd. (China)
BSM Tip Gerecleri Limited Sirketi (Turkey)
CAM Acquisition Corp. (Delaware)
Cardiac Pacemakers, Inc. (Minnesota)
Corvita Corporation (Florida)
Corvita Europe S.A. (Belgium)
CryoCor, Inc. (Delaware)
DCI Merger Corp. (Delaware)
EndoVascular Technologies, Inc. (Delaware)
Emerger Acquisition Corp. (Delaware)
Enteric Medical Technologies, Inc. (Delaware)
EP Technologies, Inc. (Delaware)
GCI Acquisition Corp. (Delaware)
Guidant (Thailand) Ltd. (Thailand)
Guidant LLC (Indiana)
Guidant do Brasil Ltda. (in dormancy) (Brazil)
Guidant Europe NV (Belgium)
Guidant Group B.V. (Netherlands)
Guidant Holdings B.V. (Netherlands)
Guidant Holdings, Inc. (Indiana)
Guidant India Private Limited (India)
Guidant Intercontinental Corporation (Indiana)
Guidant Puerto Rico B.V. (Netherlands)
Guidant Sales LLC (Indiana)
Intelect Medical, Inc. (Delaware)
InterVentional Technologies Europe Limited, in liquidation (Ireland)
Labcoat Limited, in liquidation (Ireland)
Precision Vascular Systems, Inc. (Utah)
Remon Medical Technologies, Inc. (Delaware)
Remon Medical Technologies, Inc. (Israel)
RMI Acquisition Corp. (California)
RVT Acquisition Corp. (Delaware)
Sadra Medical, Inc. (Delaware)
Schneider (Europe) GmbH (Switzerland)
SMI Merger Corp. (Delaware)
Stream Enterprises LLC (Delaware)
Tahoe Acquisition Corp. (Delaware)
Target Therapeutics, Inc. (Delaware)

2

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-25033, 333-25037, 333-76380, 333-36636, 333-61056, 333-61060, 333-98755, 333-111047, 333-131608, 333-133569, 333-134932 and 333-151280; Form S-3 Nos. 333-37255, 333-64887, 333-64991, 333-61994, 333-76346, 333-119412, 333-132626, and 333-163621; and Form S-4 Nos. 333-22581 and 333-131608) of Boston Scientific Corporation and where applicable, in the related Prospectuses of our reports dated February 17, 2011, with respect to the consolidated financial statements and schedule of Boston Scientific Corporation, and the effectiveness of internal control over financial reporting of Boston Scientific Corporation, included in this Annual Report (Form 10-K) for the year ended December 31, 2010.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 17, 2011

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, J. Raymond Elliott, certify that:

1. I have reviewed this Annual Report on Form 10-K of Boston Scientific 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 17, 2011	/s/ J. Raymond Elliott
	J. Raymond Elliott
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Jeffrey D. Capello, certify that:

1. I have reviewed this Annual Report on Form 10-K of Boston Scientific 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 17, 2011	/s/ Jeffrey D. Capello
	Jeffrey D. Capello
	Executive Vice President and   Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER 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 Boston Scientific Corporation (the “Company”) for the period ending December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

(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 Boston Scientific Corporation.

By:	/s/ J. Raymond Elliott
	J. Raymond Elliott
	President and Chief Executive Officer
	February 17, 2011

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER 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 Boston Scientific Corporation (the “Company”) for the period ending December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

(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 Boston Scientific Corporation.

By:	/s/ Jeffrey D. Capello
	Jeffrey D. Capello
	Executive Vice President and Chief Financial Officer
	February 17, 2011