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9. Natick, MA and Indianapolis, IN (January 25, 2006) - Boston Scientific Corpora- tion (NYSE: BSX) and Guidant Corporation (NYSE: GDT) today announced that the

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9. Natick, MA and Indianapolis, IN (January 25, 2006) - Boston Scientific Corpora- tion (NYSE: BSX) and Guidant Corporation (NYSE: GDT) today announced that the Board of Directors of Guidant has unanimously approved and entered into the merger agreement provided to Guidant by Boston Scientific on January 17, 2006. Under that agreement, Boston Scientific will acquire all the outstanding shares of Guidant for a combination of cash and stock worth $80 per Guidant share, or approximately $27 billion in aggregate. Prior to entering into this agreement with Boston Scientific, Guidant terminated its merger agreement with Johnson & Johnson. Under the terms of the merger agreement between Boston Scientific and Guidant, each share of Guidant common stock will be exchanged for $42.00 in cash and $38.00 in Boston Scientific common stock, based on the average closing price of Boston Scientific common stock during the 20 consecutive trading day period ending three days prior to the closing date. If the average closing price of Boston Scientific common stock during this period is less than $22.62, Guidant sharehold- ers will receive 1.6799 Boston Scientific shares for each share of Guidant common stock, and if the average closing price of Boston Scientific common stock during this period is greater than $28.86, Guidant shareholders will receive 1.3167 Boston Scientific shares for each share of Guidant common stock. Guidant shareholders will own approximately 36 percent of the combined company. (a) Assuming this deal was completed as originally announced, draw the payoff to shareholders of Guidant at closing as a function of the Boston Scientific stock market value. (b) Show how the payoffs to Guidant shareholders can be replicated using com- binations of zero coupon bonds (borrowing/lending), Boston Scientific stock, and options on Boston Scientific stock. Be precise about relevant quantities and strike prices. (c) Suppose the day after the merger announcement, the FDA announces some negative information about Boston Scientific and the company's stock price falls by 7%. (True story.) How would this affect the value of each of the underlying positions you described in part (b)

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