Employee Savings And Stock Ownership Plan

THE GUIDANT EMPLOYEE SAVINGS
AND STOCK OWNERSHIP PLAN


January 1, 2003 Restatement


TABLE OF CONTENTS
-----------------


Page


ESTABLISHMENT AND PURPOSE......................................................1


ARTICLE I. DEFINITIONS.......................................................2
1.01. Definitions.......................................................2


ARTICLE II. ELIGIBILITY......................................................13
2.01. General..........................................................13
2.02. Special Status Employees.........................................13
2.03. Year of Eligibility Service......................................13
2.04. Hour of Service..................................................13
2.05. Special Rules for Crediting Hours of Service.....................14
2.06. Reemployment.....................................................15


ARTICLE III. NON-ESOP CONTRIBUTIONS...........................................15
3.01. Salary Reduction Contributions...................................15
3.02. Election of Salary Reduction Contributions.......................15
3.03. Limitations on Salary Reduction Contributions....................16
3.04. Return of Excess Deferrals and Excess Salary Reduction
Contributions....................................................18
3.05. Nonforfeitability of Contributions...............................20
3.06. Employer Contributions...........................................20
3.07. Contributions Not Recoverable by Employer........................24
3.08. Return of Employer Contributions.................................24
3.09. Rollover Contributions...........................................24
3.10. Hardship Distributions Under Other Plans.........................25


ARTICLE IV. LIMITATIONS ON ANNUAL ADDITIONS..................................25
4.01. Basic Limitation.................................................25
4.02. Definitions......................................................26
4.03. Preclusion of Excess Annual Additions............................27
4.04. Disposal of Excess Annual Additions..............................27
4.05. Other Defined Contribution Plans.................................27


ARTICLE V. INVESTMENT PROVISIONS............................................27
5.01. Investment Options--Salary Reduction Contributions and Rollover
Contributions....................................................27
5.02. Change of Investment Directions..................................28
5.03. Failure to Make Investment Direction.............................28
5.04. Direction To Invest in Two or More Funds.........................28
5.05. Transfers Between Funds..........................................29
5.06. Company Stock Fund...............................................29
5.07. Trustee's Investment Discretion..................................29
5.08. Transferred Participant Loans....................................30


ARTICLE VI. PARTICIPANTS' ACCOUNTS...........................................30


6.01. Separate Accounts................................................30
6.02. Accounting for Units Under Investment Funds......................31
6.03. Value of Units...................................................32
6.04. Units Credited To Participant Accounts...........................32


ARTICLE VII. HARDSHIP WITHDRAWALS FROM SALARY REDUCTION CONTRIBUTIONS
ACCOUNTS.........................................................32
7.01. Withdrawals......................................................32


ARTICLE VIII. WITHDRAWALS FROM NON-SALARY REDUCTION CONTRIBUTION
ACCOUNTS........................................................34
8.01. Voluntary Withdrawals............................................34
8.02. Categories of Contributions......................................34
8.03. Restrictions Applicable to Participants with Less Than Five
Years of Service.................................................35
8.04. General Provisions Applicable to Withdrawals.....................36


ARTICLE IX. RESTRICTIONS ON WITHDRAWALS......................................36
9.01. Restrictions Upon Number of Withdrawals..........................36
9.02. Notice Requirements for Withdrawals..............................36


ARTICLE X. PAYMENTS UPON TERMINATION OF EMPLOYMENT..........................37
10.01. Terms of Payment.................................................37
10.02. Beneficiary and Payment Upon Death...............................44
10.03. Inability To Locate Payee........................................46
10.04. Qualified Domestic Relations Orders..............................46


ARTICLE XI. METHODS OF PAYING WITHDRAWALS AND PAYMENTS........................46
11.01. Payment from Company Stock Fund..................................46
11.02. Optional Direct Rollover.........................................47


ARTICLE XII. ADMINISTRATION...................................................47
12.01. Administrative Committee.........................................47
12.02. Appointment, Resignation, and Organization of Committees.........47
12.03. Powers and Duties of the Employee Benefits Committee.............49


ARTICLE XIII. TITLE TO ASSETS AND MANAGEMENT OF FUNDS.........................51
13.01. Fund Advisory Committee..........................................51
13.02. Trustee..........................................................51


ARTICLE XIV. MISCELLANEOUS PROVISIONS.........................................52
14.01. Nonalienation....................................................52
14.02. Spendthrift Provision............................................53
14.03. Nonguarantee.....................................................53
14.04. Indemnification of Certain Fiduciaries...........................53
14.05. Payments from the end............................................54
14.06. Employment Rights................................................55
14.07. Voting Rights....................................................55
14.08. Tender Offers....................................................55


-ii-


14.09. Governing Law....................................................57
14.10. Merger or Consolidation..........................................57
14.11. Transfer from Affiliate..........................................57
14.12. Reorganization...................................................58
14.13. Loans to Participants............................................58
14.14. Transfer From Sulzer Medica USA Retirement Plan..................59
14.15. Transfer From EVT Plan...........................................60
14.16. Transfer From InControl Plan.....................................61
14.17. Transfer From CTS Plan...........................................61
14.18. Transfer From DVI Plan...........................................61


ARTICLE XV. AMENDMENT OR TERMINATION.........................................61
15.01. Internal Revenue Approval, ERISA Compliance......................61
15.02. Modification and Termination.....................................61
15.03. Termination of Participation by Subsidiaries and Affiliate.......62
15.04. Distribution on Termination......................................63


ARTICLE XVI. AGENT FOR SERVICE OF PROCESS.....................................63


ARTICLE XVII. TOP HEAVY PLAN..................................................63
17.01. General Rule.....................................................63
17.02. Top-Heavy Plan...................................................63
17.03. Definitions......................................................64
17.04. Requirements Applicable if Plan is Top-Heavy.....................66


ARTICLE XVIII. PAYSOP ACCOUNT.................................................67
18.01. Transfer of Assets...............................................67
18.02. Investment In the Company Stock Fund.............................67
18.03. Withdrawal of PAYSOP Accounts....................................67
18.04. Distribution of PAYSOP Accounts..................................67
18.05. Qualified Domestic Relations Orders..............................68


ARTICLE XIX. ESOP PROVISIONS..................................................68
19.01. Introduction.....................................................68
19.02. Definitions......................................................69
19.03. Eligibility......................................................69
19.04. Employer Contributions...........................................69
19.05. Payment to Trustee...............................................74
19.06. Limits on Annual Additions.......................................75
19.07. Limits on Employer Contributions.................................76
19.08. Vesting and Forfeitures..........................................77
19.09. ESOP Accounts....................................................77
19.10. Payment of Dividends.............................................77
19.11. ESOP Shares Fund.................................................78
19.12. Exempt Loan Provisions...........................................79
19.13. Distribution of ESOP Accounts....................................84
19.14. Withdrawal and Diversification Rights............................84


-iii-


19.15. Voting and Tendering of Company Securities.......................85
19.16. Election Regarding Dividends.....................................85


ARTICLE XX. AMENDMENT OF THE PLAN FOR EGTRRA..................................86
20.01. Adoption and Effective Date of Amendment.........................86
20.02. Supersession of Inconsistent Provisions..........................86
20.03. Limitation on Contributions......................................86
20.04. Increase In Compensation Limit...................................87
20.05. Modification of Top-Heavy Rules..................................87
20.06. Direct Rollovers of Plan Distributions...........................89
20.07. Rollovers Disregarded in Involuntary Cash-Outs...................89
20.08. Repeal of Multiple Use Test......................................90
20.09. Elective Deferrals: Contribution Limitation.....................90
20.10. Catch-Up Contributions...........................................90
20.11. Suspension Period Following Hardship Distribution................90


ARTICLE XXI. MINIMUM DISTRIBUTION REQUIREMENTS................................90
21.01. General Rules....................................................90
21.02. Time and Manner of Distribution..................................91
21.03. Required Minimum Distributions During Participant's Lifetime.....92
21.04. Required Minimum Distributions After Participant's Death.........92
21.05. Election of Five Year Rule.......................................94
21.06. Definitions......................................................94


-iv-


THE GUIDANT EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
(2003 Restatement)


ESTABLISHMENT AND PURPOSE
-------------------------


Guidant Corporation (the "Company") hereby amends and restates The Guidant Employee Savings and Stock Ownership Plan ("Plan"), which was originally effective as of January 1, 1995. Except as otherwise specified in the Plan, the effective date of this amendment and restatement is January 1, 2003. The purpose of the Plan is to help the Company's eligible employees, and the eligible employees of its subsidiary and affiliated companies that adopt the Plan, to provide additional security for their retirement by (1) affording those employees the means of making regular savings and (2) providing Employer Contributions invested in stock of Guidant Corporation as an incentive to enhance their individual performance and the performance of Guidant Corporation.


The Plan contains an employee stock ownership plan (the "ESOP"), which is designed to invest exclusively in qualifying employer securities. The non-ESOP portion of the Plan (the "Profit-Sharing Plan") is intended to be a profit-sharing plan that is qualified under Code section 401(a), with a cash or deferred arrangement qualified under Code section 401(k). The ESOP is intended to be a stock bonus plan and an employee stock ownership plan qualified under Code sections 401(a) and 4975(e)(7) and described in ERISA section 407(d)(6). The Profit-Sharing Plan and the ESOP together are designed to constitute a single plan under Treasury Regulation ss. 1.414(1)-l(b)(1). The Plan is also designed to satisfy the requirements of ERISA. The Trust Fund maintained under the Plan is intended to be tax-exempt under Code section 501(a).


Guidant Corporation was previously a wholly-owned subsidiary of Eli Lilly and Company. All of the stock of Guidant Corporation was distributed to the shareholders of Eli Lilly and Company in a tax-free reorganization within the meaning of Code section 368(a)(1)(D). Following adoption of this Plan, employees of Guidant Corporation and its affiliates who were participating in The Lilly Employee Savings Plan had their ESOP and PAYSOP accounts in The Lilly Employee Savings Plan transferred to this Plan. In addition, the Advanced Cardiovascular Systems, Inc. Employee Savings Plan, the Cardiac Pacemakers, Inc. Employee Savings Plan, and the Origin Medsystems, Inc. Employee Savings Plan were merged into this Plan, and all employees who were participating in those plans now participate in this Plan. The Employees' 401(k) Plan of Devices for Vascular Intervention, Inc. will be merged into this Plan as soon as practicable after March 31, 2003. To the extent the accounts of employees who were participating in The Lilly Employee Savings Plan or an affiliate plan were transferred to or merged into this Plan, any beneficiary designation or any other applicable agreement, elections, or consents that participants, spouses, or beneficiaries validly executed under those plans shall be honored by this Plan, to the extent not inconsistent with this Plan and unless otherwise required by law.


The Plan, as amended from time to time, shall be known as "The Guidant Employee Savings and Stock Ownership Plan." The rights to benefits of any employee whose employment terminated prior to the effective date of this restatement or any subsequent


amendment shall be determined solely by the provisions of the Plan in effect at the time of termination of employment, unless the Plan expressly provides otherwise.


ARTICLE I. DEFINITIONS
----------------------


1.01. Definitions.
-----------


(a) The following words and phrases shall have the following
meanings unless a different meaning is plainly required by the
context:


(1) Base Earnings. The term "Base Earnings" means base pay
on, or converted to, a monthly basis, provided that in no event
shall base earnings include amounts paid as commissions or sales
bonuses. Base earnings shall include base pay that would have
been paid to the Participant during the Plan Year in the absence
of a salary reduction agreement but are excluded from gross
income pursuant to Code section 125, 132(f) or 402(g). For a
Participant's initial year of participation in the Plan, Base
Earnings will be recognized for the entire Plan Year.


Notwithstanding any other provision of the Plan to the
contrary, except for purposes of Section 3.01, the Base Earnings
of each Participant taken into account under the Plan in any Plan
Year shall not exceed $150,000, as adjusted for increases in the
limitation pursuant to Code section 401 (a)(17)(B).


(2) Base Earnings Plus Commissions. The term "Base Earnings
Plus Commissions" means, with respect to a Participant for a
period, the sum of the Participant's Base Earnings for the period
plus any amounts paid to the Participant as sales commissions
during the period. For this purpose, "sales commissions" means
sales commissions (whether revenue based, unity based, or
otherwise) and sales bonuses (whether quarterly, monthly, annual,
percentage to revenue, unit, or otherwise) to which a Participant
is entitled due to the sale of an Employer's products by the
Participant. Base Earnings Plus Commissions shall include any
Base Earnings or sales commissions that would have been paid to a
Participant during a Plan Year in the absence of a salary
reduction agreement but are excluded from gross income pursuant
to Code section 125, 132(f) or 402(g). For a Participant's
initial year of participation in the Plan, Base Earnings Plus
Commissions will be recognized for the entire Plan Year.


Notwithstanding any other provision of the Plan to the
contrary, except for purposes of Section 3.01, the Base Earnings
Plus Commissions of each Participant taken into account under the
Plan in any Plan Year shall not exceed $150,000, as adjusted for
increases in the limitation pursuant to Code section
401(a)(17)(B).


-2-


(3) Board of Directors. The term "Board of Directors" means
the Board of Directors of the Company.


(4) Code. The term "Code" means the Internal Revenue Code
of 1986, as amended from time to time, and interpretive rules and
regulations.


(5) Company. The term "Company" means Guidant Corporation.


(6) Disabled Employee. The term "Disabled Employee" means
an Employee who is unable to perform the material duties of his
regular occupation with the Employer in the same salary grade
that is commensurate with the Employee's education, training, and
experience; provided that the inability results from an injury or
illness that requires the Employee to be under the care of a
licensed physician; and provided further that the inability is
not attributable to intentionally self-inflicted injuries
(whether sane or insane), or to active participation in a riot.
The term "Disability" means the condition that causes the
Employee to become a Disabled Employee.


(7) Employee. The term "Employee" means a person


(A) Who


(i) is a citizen of the United States, but not a
resident of the Commonwealth of Puerto Rico, employed
by an Employer, or


(ii) is a citizen or resident of the United
States, designated by the Company as an international
service employee, employed by a Qualified Subsidiary
and as to whom no contributions under a funded plan of
deferred compensation are being provided by any person
other than the Company with respect to the remuneration
paid to such person by the Qualified Subsidiary; and


(B) who receives regular compensation from an Employer
or Qualified Subsidiary that the Employer or Qualified
Subsidiary initially reports on a federal wage and tax
statement (Form W-2); and


(C) who is not a member of a recognized
collective-bargaining unit, unless there is a
collective-bargaining agreement making the Plan applicable
to members of that unit.


(D) The term "Employee" also means a person, who, in
addition to meeting the requirement of Section
1.01(a)(7)(C),


-3-


(i) is not a citizen of the United States;


(ii) is not a resident of the Commonwealth
of Puerto Rico;


(iii) is employed by an Employer or an affiliate
(as defined in Section 1.01(a)(26)(A)(ii)); and


(iv) has been selected for participation in the
Plan by the Salary Committee of the Company or its
designee.


(E) The term "Employee" also means a Leased Employee
who is an employee of Eli Lilly and Company providing
services to the Company, but does not include any other
Leased Employees.


(F) The term "Employee" also means a person who, in
addition to meeting the requirement of Section
1.01(a)(7)(C),


(i) is a resident of the Commonwealth of Puerto
Rico;


(ii) is employed by an Employer and classified
as a global service employee; and


(iii) receives regular compensation from the
Employer through a payroll in the United States.


(G) The term "Employee" also means a person who, in
addition to meeting the requirement of Section
1.01(a)(7)(C),


(i) is not a citizen or permanent resident of
the United States;


(ii) is eligible to participate in one or more
employee benefit plans maintained by an Employer or
Qualified Subsidiary (other than the Plan); and


(iii) receives regular compensation from an
Employer or Qualified Subsidiary through a payroll in
the United States for services performed in the United
States, that the Employer or Qualified Subsidiary
initially reports on a federal wage and tax statement
(Form W-2).


A person who meets the requirements of Section 1.01(a)
(7)(A)(ii), (B), and (C), or a person who meets the requirements
of Section


-4-


1.01(a)(7)(D) and is not employed by an Employer, shall be deemed
to be an Employee of the Company for purposes of the Plan.


(8) Employee Benefits Committee. The term "Employee
Benefits Committee" means the committee established pursuant to
Section 12.01 to administer the Plan.


(9) Employer. The term "Employer" means the Company and any
subsidiary and affiliated company specifically designated by the
Board of Directors as such for the purposes of this Plan,
provided that the subsidiary or affiliated company adopts this
Plan by resolution of its own board of directors. A subsidiary or
affiliated company shall cease to be an Employer as of the date
on which the subsidiary or affiliated company ceases to be a
member of the controlled group (within the meaning of Code
section 414(b) or 414(c)) of which the Company is a member.


(10) Employer Contribution. The term "Employer Contribution"
means the Minimum Matching Contributions, Additional Matching
Contributions, and Basic Contributions that an Employer makes to
the Profit-Sharing Plan pursuant to Section 3.06 or to the ESOP
pursuant to Section 19.04, any forfeitures that are allocated to
Participants' Accounts pursuant to Section 3.06 or 19.04, and any
employer contributions made under a Prior Savings Plan that are
transferred to or merged into this Plan.


(11) ERISA. The term "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time, and
interpretive rules and regulations.


(12) Excess Salary Reduction Contribution. The term "Excess
Salary Reduction Contribution" means, with respect to any
Participant, that portion of the amount that he has elected to
have contributed to the Profit-Sharing Plan as a Salary Reduction
Contribution pursuant to Section 3.02 but that exceeds the actual
deferral percentage limitations described in Section 3.03(a).


(13) Fund Advisory Committee. The term "Fund Advisory
Committee" means the committee established pursuant to Section
13.01.


(14) Leased Employee. The term "Leased Employee" means any
person who is not an employee of the Company (including, for
purposes of this paragraph, an affiliate of the Company) and who
provides services to the Company, provided that (i) the services
are provided pursuant to an agreement between the Company 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


-5-


control of the Company; provided that, an individual shal ...