UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF INDIANA

GORDON MANNING, Individually and On Behalf o1

All Others Similarly Situated, )

Plaintiff, )

vs. )

GUIDANT CORPORATION, RONALD W. )DOLLENS, GUIDO J. NEELS, and KEITH E. )BRAUER, )

Defendants. )

CIVIL ACTION NO .

CLASS ACTION COMPLAINT

JURY TRIAL DEMANDED-3 i

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Plaintiff, Gordon Manning("Plaintiff'), alleges the following based upon the investigation of Plaintiff s

counsel, which included, among other things, a review ofthe defendants' public documents, conference

calls and announcements made by defendants, United States Securities and Exchange Commission ("SEC" )

filings, wire and press releases published by and regarding Guidant Corporation ("Guidant" or the

"Company") securities analysts' reports and advisories about the Company, and information readil y

obtainable on the Internet .

NATURE OF THE ACTION AND OVERVIEW

1 . This is a federal class action on behalf of purchasers of the publicly traded securities o f

Guidant between December 15, 2004 and June 23, 2005 (the "Class Period"), seeking to pursue remedie s

under the Securities Exchange Act of 1934 (the "Exchange Act")

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2. Guidant describes itself as a company that "pioneers lifesaving technology, giving a n

opportunity for better life today to millions of cardiac and vascular patients worldwide . "

3 . On December 15, 2004, Guidant management entered into a $24 .5 billion merger deal with

Johnson & Johnson . While the Company pointed to its defibrillator business as a key component of that

deal, the Complaint alleges it concealed from investors significant unaddressed product defect and liability

issues ofthe Company's implantable defibrillator product lines . Although life-threatening, defendants knew

or consciously disregarded the fact that these mechanical problems were difficult to characterize and

observe in implanted patients, making it unlikely that any temporary physical disablement in patients would

be attributed to device malfunction.

4. On June 17, 2005, the FDA issued a nationwide recall notification, impacting Guidant' s

implantable defibrillators and cardiac resynchronization therapy defibrillators. Within that notification, the

Food and Drug Administration ("FDA") advised the public that the malfunction of Guidant's devices coul d

lead to a serious, life-threatening event for a patient . By June 20, 2005, shares of Guidant fell $3 .36 per

share, or 4 .23 percent, to close at $70 .33 per share on heavy trading volume .

Then, on June 24, 2005, Guidant announced that it was voluntarily advising physicians

about important safety information regarding certain devices. Guidant apprised FDA ofthis action, and

the FDA may classify this action as a recall . At this time, Guidant was in the very early stages of a diligent

evaluation of the component failure . Moreover, the Company stated that as a precautionary measure ,

physicians should discontinue implants of these devices pending further notice .

6. On news ofthis, shares of Guidant fell $4 .70 per share, or 6 .85 percent, to close at $63 .90

per share on unusually heavy volume .

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7. The complaint alleges that defendants' Class Period representations regarding Guidant wer e

materially false and misleading when made because defendants concealed the following : (1) that defendants

knew as early as 2002 that its defibrillator products were defective and caused harm to patients ; (2) that

defendants concealed the fact that its defibrillator products were defective in order to maintain the revenu e

stream it received from its lucrative defibrillator products and make itself a more attractive merger

candidate ; and (3) that once Guidant forged a deal with Johnson & Johnson, defendants continued t o

conceal from its shareholders and public that its defibrillator products were defective because suc h

information caused an overwhelming threat to the Guidant/Johnson & Johnson deal .

8 . Moreover, defendants were motivated to commit the fraudulent scheme alleged herein so

that Guidant insiders, including the Individual Defendants, could sell their personally held Guidant stock a t

artificially inflated prices . All told, Guidant insiders sold a total of894,081 of their personally held share s

for gross proceeds of $65,703,975,60 . (Emphasis added . )

JURISDICTION AND

9. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the

Exchange Act, (15 U . S .C . § § 78j (b) and 78t (a)), and Rule IOb -5 promulgated thereunder (17 C .F.R.

§240.1 Ob-5) .

10. This Court has jurisdiction over the subject matter ofthis action pursuant to §27 ofth e

Exchange Act (15 U.S.C. § 78aa) and 28 U.S .C . § 1331 . -

11 . Venue is proper in this Judicial District pursuant to §27 ofthe Exchange Act, 15 U.S .C .

§ 78aa and 28 U.S.C . § 1391(b). Many of the acts and transactions alleged herein , including the

preparation and dissemination of materially false and misleading information, occurred in substantial part

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in this Judicial District . Additionally, the Company maintains a principal executive office in this Judicial

District .

12 . In connection with the acts, conduct and other wrongs alleged in this complaint, defendants ,

directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limite d

to, the United States mails, interstate telephone communications and the facilities of the national securitie s

exchange .

PARTIES

13 . Plaintiff, Gordon Manning, as set forth in the accompanying certification, incorporated b y

reference herein, purchased Guidant securities at artificially inflated prices during the Class Period and has

been damaged thereby.

14 . Defendant Guidant is an Indiana corporation with its principal place of business located a t

111 Monument Circle, 29th Floor, Indianapolis, IN 46204-5129 .

15 . Defendant Ronald W. Dollens ("Dollens") was, at all relevant times, the Company' s

President and Chief Executive Officer .

16. Defendant Guido J. Neels ("Heels") was, at all relevant times, the Company's Chie f

Operating Officer .

17 . Defendant Keith E. Brauer ("Brauer") was, at all relevant times, the Company's Chief

Financial Officer .

18 . Defendants Dollens, Neels, and Brauer are referred to hereinafter as the "Individua l

Defendants ." The Individual Defendants, because of their positions with the Company, possessed the

power and authority to control the contents ofGuidant's quarterly reports, press releases and presentation s

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to securities analysts, money and portfolio managers and institutional investors, i .e ., the market . Each

defendant was provided with copies of the Company's reports and press releases alleged herein to b e

misleading prior to or shortly after their issuance and had the ability and opportunity to prevent thei r

issuance or cause them to be corrected . Because of their positions and access to material non-public

information available to them, each of these defendants knew that the adverse facts specified herein ha d

not been disclosed to and were being concealed from the public and that the positive representations whic h

were being made were then materially false and misleading . The Individual Defendants are liable for th e

false statements pleaded herein, as those statements were each "group-published" information, the result

of the collective actions of the Individual Defendants .

SUBSTANTIVE ALLEGATIONS

Background

19 . Guidant and its subsidiaries provide therapeutic medical solutions for customers, patients,

and healthcare systems worldwide. The company develops, manufactures, and markets products that focu s

on the treatment of cardiac arrhythmias, heart failure, and coronary and peripheral disease, includin g

implantable defibrillator systems, implantable pacemaker systems, coronary stent systems, angioplast y

systems, cardiac surgery systems, and Peripheral systems .

Materially False And MisleadingStatements Issued During The Class Period

20. The Class Period commences on December 15, 2004 . At that time, the Company issued

a press release announcing that Johnson & Johnson and Guidant had entered into a definitive agreemen t

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whereby Johnson & Johnson would acquire Guidant for $25 .4 billion in fully diluted equity value . With

respect to the deal, the Company stated :

Under the terms of the agreement, each share ofGuidant common stockwill be exchanged for $30.40 in cash and $45 .60 in Johnson & Johnsoncommon stock, provided the average Johnson & Johnson common stockprice is between $55 .45 and $67 .09 during the 15-day trading periodending three days prior to the transaction closing . Each Guidant shareexchanged would be converted into Johnson & Johnson common stockof not more than .8224 and not less than .6797 shares, plus $30 .40 incash. The transaction has an estimated net acquisition cost of $23 .9billion, as ofthe close ofbusiness on December 15, 2004, based uponGuidant's approximately 334 million fully diluted shares outstanding, netof estimated cash on hand at the time of closing .

Guidant and Cordis Corporation, a Johnson & Johnson Company, willbecome part of a newly created cardiovascular device unit withinJohnson & Johnson. The newly created franchise will be named Guidantwhile the Cordis name will be retained for select businesses within thefranchise . The franchise will be operated consistent with the Johnson &Johnson operating principle of decentralized management, whichprovides for focused management and fosters an entrepreneurial culture .This business unit will report to Nicholas J . Valeriani, a member oftheJohnson & Johnson Executive Committee .

"The combination ofthese businesses will enable us to bring innovative

new therapies to patients and their physicians in this very important and

fast growing therapeutic area," said William C . Weldon, Chairman and

Chief Executive Officer of Johnson & Johnson . "Bringing Guidant into

the Johnson & Johnson family of companies builds on our history of

strategic acquisitions and partnerships that provide a foundation for

sustained leadership and growth."

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This new organization will enable Johnson & Johnson to better addressthe needs of patients around the world who require treatment for heartfailure and sudden cardiac death. This patient population continues to besignificantly underserved. Additionally, Guidant's technology platforms,such as implantable micro-electronics, could be applied to current andfuture Johnson & Johnson products as part of future efforts to createinnovative and advanced technologies in other healthcare areas, such asthe neuromodulation market.

In the interventional cardiology market, this business combinationprovides the capability to accelerate development of new technologicallyadvanced products . This new business can utilize Cordis' expertise,intellectual property and experience in drug development, coatingtechnology and polymers . Together with Guida nt's str ength in rapid andinnovative development of scent platforms and delivery systems, thecombined company will bring superior products to the market faster thaneither company could on its own .(Emphasis added .)

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21 . On January 27, 2005, Guidant reported full-year 2004 sales of $3 .8 billion, representing

sales growth of $121 million or 3 percent versus the prior year . Foreign currency translations favorably

impacted revenue by $88 million . Net income for the full-year 2004 was $524 million versus $330 millio n

in 2003. For the fourth quarter of 2004, the company reported sales of $968 million, representing sale s

growth of $28 million or 3 percent versus the fourth quarter of the prior year . Foreign currency translations

favorably impacted revenue by $22 million . Net income for the fourth quarter was $105 million versus

$205 million in the fourth quarter of 2003 . Fourth quarter net income reflects $104 million of additiona l

tax expense due to the planned repatriation of cash under the American Jobs Creation Act of 2004 . With

respect to defibrillator sales, the Company stated: "Worldwide implantable defibrillator sales increased 1 8

percent to $1 .8 billion; U. S . implantable defibrillator sales grew 15 percent to $1 .4 billion . "

22. Commenting on these results, defendant Dollens stated :

"Guidant's financial performance in 2004 was in line with expectations setearly in the year and reflected a strong implantable defibrillator market,contributions from emerging businesses, and the company's resiliency inthe face of a challenging stent environment ." Dollens continued, "As weenter 2005, we look forward to continued strong growth in theimplantable defibrillator market, a moderation in our coronary stentrevenue erosion, continued acceleration of our emerging businesses andthe closing of the company's merger with Johnson & Johnson . "

23 . With respect to the Johnson & Johnson merger, the Company stated :

Merger Update

As previously announced on December 15, 2004, Guidant and Johnson& Johnson entered into a definitive agreement whereby Johnson &Johnson will acquire Guidant for $76 per share or $25 .4 billion in fullydiluted equity value . The company has recently submitted its U .S .Hart-Scott-Rodino filing. Next steps in the merger include an antitrust filingin Europe, responding to requests for additional information from

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government authorities, the filing of a preliminary proxystatement/prospectus with the Securities and Exchange Commission anda meeting of Company shareholders anticipated in the spring .

24. On April 21, 2005, Guidantreported first quarter sales of $953 million, representing sale s

growth of $19 million or 2 percent versus the prior year . Foreign currency translations favorably impacted

revenue by $13 million. Net income for the quarter was $162 million versus $139 million in the first quarter

of 2004, up 16 percent . With respect to defibrillator sales, the Company stated : "Worldwide implantabl e

defibrillator sales increased 18 percent to $478 million ; U .S. implantable defibrillator sales were $36 6

million."

25 . Commenting on these results, defendant Dollens stated :

"Guidant's results this quarter reflect solid operating performance throughcontinued financial discipline and strong revenue growth in implantabledefibrillators and our emerging businesses . As planned, we are makingtimely progress toward the closing ofthe company's merger with Johnson

& Johnson .

. . . As we look to the future, we expect strong growth in the implantable

defibrillator market supported by expanded Medicare reimbursement,limited erosion in our coronary stent revenue, and increased contributionsfrom our emerging businesses ."

26 . With respect to the Johnson & Johnson merger, the Company stated :

Merger UpdateAs previously announced on December 15, 2004, Guidant and Johnson& Johnson entered into a definitive agreement whereby Johnson &Johnson will acquire Guidant for $76 per share or $25 .4 billion in fully

diluted equity value .

Merger related milestones in the quarter included U . S . and Europeanregulatory filings as well as providing proxy materials to companyshareholders in connection with the special meeting to approve the mergeron April 27, 2005. If approved by Guidant shareholders, the transaction

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will remain subject to receipt of regulatory approvals as well as othercustomary closing conditions . As expected, the company anticipatesentering the second phase of European Commission review of thetransaction this week . As previously announced, Johnson & Johnson andthe company received a request for additional information (second

request) from the Federal Trade Commission on February 18, 2005 andare in the process of responding .

The announced acquisition price of $76 per share reflects $30 .40 in cashand $45.60 in Johnson & Johnson common stock per share, provided thevolume weighted average trading price of Johnson & Johnson commonstock price is between $55 .45 and $67.09 during the 15-day tradingperiod ending three days prior to the transaction closing . Outside thisrange, each Guidant share exchanged will be converted into a fixednumber of shares of Johnson & Johnson common stock equal to . 8224shares (at $55 .45 or below) or .6797 shares (at $67 .09 or above), plus$30.40 in cash. On April 20, the closing price for common shares ofJohnson & Johnson was $68 .10 .

27. On March 24, 2005, Guidant filed its Proxy Statement Pursuant to Section 14(a) of th e

Securities Exchange Act of 1934 with the SEC . Therein, the Company stated the following with respec t

to the merger :

Reasons for the Merger and Recommendation ofthe Guidant Board ofDirectors

At a special meeting held on December 15, 2004, with one directorabsent because of a pre-existing commitment, the Guidant board ofdirectors unanimously determined that the merger is in the best interests ofGuidant and its shareholders, adopted the merger agreement andrecommended that Guidant shareholders vote "FOR" approval of themerger agreement.

In reaching its decision to adopt the merger agreement andrecommend that Guidant shareholders vote to approve the mergeragreement, the Guidant board of directors considered a number of factors,

including the following :

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Market Price . The Guidant board of directors considered the value ofthe merger consideration to be received by Guidant shareholders in themerger, including the fact that, if the volume weighted average tradingprice of Johnson & Johnson's common stock during the 15 trading daysending three trading days prior to the completion ofthe merger is between

$55 .45 and $67.09, Guidant shareholders will receive, for each share ofGuidant common stock that they own, merger consideration with a value

of $76 .00. This merger consideration would consist of $30.40 in cash and$45 .60 in Johnson & Johnson common stock, which would provide a

premium of approximately 24 .7% to Guidant shareholders based on theaverage trading price of Guidant common stock during the six monthsprior to the trading day immediately before the day on which the mergerwas announced. The Guidant board of directors also considered the factthat, because the exchange ratio for the stock portion of the mergerconsideration becomes fixed outside this range, the value of the mergerconsideration to be received by Guidant shareholders will be less than$76.00 to the extent that the volume weighted average trading price ofJohnson & Johnson's common stock during the 15 trading days endingthree trading days prior to the completion of the merger falls below

$55 .45 and will be more than $76 .00 to the extent that the volumeweighted average trading price of Johnson & Johnson's common stockduring such period rises above $67 .09 .

® Form of Merger Consideration. The Guidant board of directorsconsidered that the stock portion of the merger consideration will permitGuidant shareholders to exchange their shares of Guidant common stockfor shares of Johnson & Johnson common stock and retain an equityinterest in the combined enterprise and the related opportunity to share in

its future growth. The Guidant board of directors also reviewed the currentand historical results of operations and the trading prices and dailyvolumes for Johnson & Johnson common stock and considered theliquidity that holding shares of Johnson & Johnson common stock wouldprovide to Guidant shareholders who do not wish to continue to holdshares of Johnson & Johnson common stock following the merger .

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® the ability to combine Johnson Johnson's expertise in drugcoating technology and the manufacturing of drug-eluting stentswith Guidant's expertise in stent design and stent delivery system s

• Guidant gaining access to Johnson & Johnson's strengths in developing

long-term product pipelines, improving clinical outcomes, integrating

technologies, securing regulatory approvals and supporting the adoption

of new therapies

® Johnson & Johnson gaining access to Guidant's strengths in improvingdevices brought to market, supplying products to customers and sales andmarketing and

® the potential to apply Guidant's technology platforms (such asimplantable micro-electronic devices and site-specific therapies) to currentand future Johnson & Johnson products .

(Emphasis added.)

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28. Additionally, Guidant stated the following risk factors that could impede the merger :

® Potential Risks. The Guidant board of directors considered a numberofpotential risks, as well as related mitigating factors, in connection withits evaluation of the merger. These risks include the potential diversion ofmanagement resources from operational matters and the opportunity costsassociated with the merger prior to the completion or abandonment ofthemerger. Other risks considered by the Guidant board of directorsincluded :

® the possibility that the merger might not be completed as a result ofthe

failure to receive regulatory approvals or satisfy other closing conditions,which could result in significant distractions of Guidant's employees andincreased expenses from an unsuccessful attempt to complete the merger

® under the terms of the merger agreement, prior to the completion orabandonment of the merger Guidant will be required to conduct itsbusiness only in the ordinary course consistent with past practice andsubject to operational restrictions and

® Guidant would be required to pay a $750 million termination fee if themerger agreement is terminated under specified circumstances andGuidant later agrees to or consummates a takeover proposal .

In the judgment of Guidant' s board of directors , however, these potentialrisks were more than offset by the potential benefits of the mergerdiscussed above .

29. On April 27, 2005, Guidant announced that at a special meeting of shareholders held i n

Indianapolis, Guidant shareholders overwhelmingly approved the agreement whereby Johnson & Johnso n

would acquire Gui dint for $76 per share or $25 .4 billion in fully diluted equity. Commenting on thi s ,

defendant Dollens stated :

"Guidant's strong innovative and entrepreneurial culture provides afoundation for an excellent strategic fit with Johnson & Johnson . We firmlybelieve this business combination offers an unprecedented breadth o f

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capabilities and resources that will accelerate the growth of new therapiesand technologies, benefiting millions of patients around the world . "

30. The statements contained in ¶¶ 20-29 were materially false and misleading when mad e

because defendants concealed the following : (1) that defendants knew as early as 2002 that its defibrillato r

products were defective and caused harm to patients ; (2) that defendants concealed the fact that its

defibrillator products were defective in order to maintain the revenue stream it received from its lucrativ e

defibrillator products and make itself a more attractive merger candidate ; and (3) that once Guidant forge d

a deal with Johnson & Johnson, defendants continued to conceal from its shareholders and public that it s

defibrillator products were defective because such information caused an overwhelming threat to th e

Guidant/Johnson & Johnson deal .

The Truth Begins to Emerge

31 . On May 25, 2005, Guidant issued a press release with the headline "Guidant Notifie s

Physicians Regarding VENTAK 1861 PRIZM 2 DR Implantable Defibrillator ." Therein, the Company

stated :

Guidant Corporation (NYSE: GDT) initiated a communication tophysicians regarding the clinical performance of its VENTAK PRIZM®2 DR Model 1861 implantable defibrillator. There have been 26 reports

of failure including one recent death . Approximately 24,000 of these

devices are currently implanted worldwide. In its May 23, 2005, letter to

physicians, the company .describes a rare failure that results in the device'sinabilityto deliver therapy. The problem is in Guidant's VENTAKPRTZ .M

2 DR implantable defibrillators manufactured prior to November 2002 .Devices manufactured after this date are not affected.

Any patient with a VENTAK PRIZM 2 DR should consult with theirphysician ifthey have questions regarding their device, particularly if theyhave recently received a defibrillation shock . Guidant recommends thatphysicians continue monitoring patients every three months as describe d

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in the labeling . Guidant does not recommend early replacement of thesedevices . The overall device reliability remains high .

Guidant has worked with the Food and Drug Administration (FDA) onthis communication and Guidant will continue working with the FDA onthis issue, including any subsequent communication that may be helpful for

patients or physicians .

32. On June 14, 2005, The New York Times published an article with headline "Implants With

Flaws: Disclosure And Delay ." Therein, reporter Barry Meier wrote the following :

Under F .D .A. rules, producers of medical devices must report productproblems and inform the agency when they decide to recall a product oralert physicians about an issue . But the agency gives manufacturers

discretion over how to judge the seriousness of a problem . Differentcompanies -- as the recent incidents involving Guidant and Medtronicsuggest -- may come to different conclusions about what needs to be

disclosed to doctors .

Guidant, which is based in Indianapolis, has come under fire fromphysicians and others for its decision not to tell doctors that one of itsdefibrillator models had a design flaw that made it prone toshort-circuiting. The company said it had made all the required reportsto the F .D.A . ; the agency is now reviewing how Guidant handled the

episode .

But even after Guidant executives learned in March about

another case, one involving the death of the 21-year-old college

student in whom the device failed, they did not inform doctors .

Executives of Guidant, which agreed in December to be purchased

by Johnson & Johnson for $25 .4 billion, have defended their

actions, saying that the model is highly reliable and that replacing

it would unnecessarily expose patients to surgical risks . Two of the

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company ' s outside medical consultants said in recent interviewsthat Guidant executives did not alert them about the problem until

the executives realized it was going to be publicized .

(Emphasis added . )

33 . Then, on June 17, 2005, the FDA issued a nationwide recall notification, impacting

Guidant's implantable defibrillators and cardiac resynchronization therapy defibrillators . Within that

notification, the FDA advised the public that the malfunction of Guidant's devices could lead to a serious ,

life-threatening event for a patient .

34. Also on June 17, 2005, Guidant issued apress release with the headline "Guidant Initiate s

Worldwide Physician Communications Regarding Important Safety Information and Corrective Actio n

about Implantable Cardiac Defibrillators ." Therein, the Company stated :

Guidant Corporation (NYSE : GDT) said today it is voluntarily advising

physicians about important safety information regarding certain devices .

Guidant has apprised FDA of these actions, and FDA has indicated that

it will classify them as recalls . These communications advise physicians

and their patients of safety information and are intended to limit adverse

events . Physicians should use this information to decide how best to treat

their patients .

The devices are :

VENTAK PRIZM 2 DR (Model 1861 ) ICDs manufactured on or

before April 16, 2002 .CONTAKRENEWAL (Model 11135) and CONTAKRENEWAL 2

(Model H155 ) CRT-Ds manufactured on or before August 26, 2004 .

VENT_ AX_ PRIZM AVT, VITALITY A VT, RENEWAL 3 AVT andRENEWAL 4 AVT ICDs (All series numbers) .

VENTAK PRIZM 2 DR Device s

As previously announced in May, Guidant communicated to physiciansabout a failure involving deterioration in awire insulator within the leadconnector block that, in conjunction with other factors, results in a shor t

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to the backfill tube, resulting in the device's inability to deliver therapy .As of today, there have been twenty-eight reports of this failureworldwide, including one death, in 26,000 devices built prior to an April2002 change in the device . No failures have been observed in thedevices built after the April 2002 change. Approximately 17,000 devicesbuilt before April 2002 remain in service, including approximately 13,900in the United States .

For patients who have these VENTAK PRIZM 2 DR devices, Guidantrecommends that physicians continue with normal follow-up patient visits

at three month intervals . In addition, patients who have recently receiveda defibrillation shock should consult with their physician . . . . If a patientand physician decide to replace one of these devices , Guidant willprovide a replacement at no charge .

CONTAK RENEWAL Devices

Guidant is communicating to physicians about a failure in its CONTAKRENEWAL (Model H135 ) and CONTAK RENEWAL 2 (ModelH155 ) cardiac resynchronization therapy defibrillators manufactured onor before August 26 , 2004. The failure involves deterioration in a wireinsulator within the lead connector block that , in conjunction with otherfactors, results in a sho rt to the active titanium case and results in thedevice's inability to deliver therapy . Fifteen reports of this failure modehave been confirmed in devices built on or before August 26, 2004 fromapproximately 16,000 devices implanted worldwide . This includes apatient death on May 30 , 2005 involving a device returned earlier thisweek. The device is still being tested but it appears to have experiencedthis failure in conjunction with attempted delivery of at least onehigh-voltage therapy. Approximately 11,900 devices built on or beforeAugust 26 , 2004 remain in service , including approximately 6,700 in theUnited States .

it is Guidant 's recommendation to physicians that patients with these

CONTAK RENEWAL devices should continue with normal follow-upvisits at three-month intervals . In addition , patients who have recently

received a defibrillation shock should consult with their physician. If ayellow warning screen appears on the programmer,the physician should

fully trouble-shoot. For additional information and recommendations, see

http://www.guidant.com/physician-communications/RENEWAL-RE

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NEWAL2.pdf. If a patient and physician decide to replace one of thesedevices , Guidant will provide a replacement at no charge .

VENTAK PRIZM AVT, VITALITY AVT, and RENEWAL AVT

Devices

Guidant is communicating to physicians about certain Guidant ICD andCRT-D devices that include atrial therapy capabilities all serialnumbers ofVENTAK PRIZM AVT, VITALITY AVT, RENEWAL 3AVT and RENEWAL 4 AVT . Theseproducts are subject to amemoryerror, which may affect available therapy . Two incidents have beenconfirmed , neither of which resulted in death or injury, fromapproximately 21,000 devices implanted worldwide, includingapproximately 18,000 implanted in the United States . Guidant isrecommending aprogramming change that can reduce the risk ofthisissue and that can be implemented at the next office visit . For additionalinformation and recommendations, seehttp://www.guidant . com/physician communications /AVT.pdf Guidant

is developing anon-invas ive software solution for this issue, expected by

year-end.

"Patient safety is paramount and our highest priority," stated Ronald W.

Dollens, president and CEO, Guidant Corporation. "As a leadingmanufacturer of lifesaving technology, Guidant takes seriously itsresponsibility to create the most reliable products and services, enhance

patient outcomes and limit adverse events to patients . The purpose ofthe

company's recent communications is to share information with physiciansand patients aboutproblems in a small subset of Gl idant devices . We will

work with physicians as they decide how best to treat their patients . "

Dollens continued, "Guidant is committed to establishing industryguidelines and processes to determine when, how and under whatcircumstances adverse events should be communicated to doctors andpatients . Guidant hopes to workwith FDA, other regulatory agenciesand physicians to convene a panel to assist the medical device industryin establishing clear guidelines ."

35 . On news of this, shares of Guidant fell $1 .20 per share to close at $72 .46 per share.

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3 6 . Lastly, on June 24, 2005, Guidant announced that it was voluntarily advising physician s

about important safety information regarding certain devices . Guidant apprised FDA ofthis action, and

the FDA may classify this action as a recall . At this time, Guidant was in the very early stages of a diligen t

evaluation of the component failure . Moreover, the Company stated that as a precautionary measure ,

physicians should discontinue implants of these devices pending further notice .

37. On news ofthis, shares of Guidant fell $4 .70 per share, or 6 .85 percent, to close at $63 .90

per share on unusually heavy volume .

PLAINTIFF'S CLASS ACTION ALLEGATION S

38. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedur e

23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased the securities of Guidan t

between December 15, 2004 and June 23, 2005, inclusive (the "Class Period") and who were damaged

thereby. Excluded from the Class are defendants, the officers and directors of the Company, at all relevant

times, members oftheir immediate families and their legal representatives, heirs, successors or assigns an d

any entity in which defendants have or had a controlling interest .

39. The members of the Class are so numerous that j oinder ofall members is impracticable .

Throughout the Class Period, Guidant's securities were actively traded on the NYSE. While the exact

number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropri-

ate discovery, Plaintiff believes that there are hundreds or thousands ofinembers in the proposed Class .

Record owners and other members ofthe Class may be identified from records maintained by Guidant o r

its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar

to that customarily used in securities class actions .

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40 . Plaintiff's claims are typical ofthe claims ofthe members ofthe Class as all members ofthe

Class are similarly affected by defendants' wrongful conduct in violation of federal law that is complaine d

of herein .

41 . Plaintiffwill fairly and adequately protect the interests of the members ofthe Class and ha s

retained counsel competent and experienced in class and securities litigation .

42. Common questions of law and fact exist as to all members of the Class and predominate

over any questions solely affecting individual members ofthe Class . Among the questions of law and fact

common to the Class are :

(a) whether the federal securities laws were violated by defendants' acts as alleged herein ;

(b) whether statements made by defendants to the investing public during the Class Perio d

misrepresented material facts about the business, operations and management of Guidant ; and

(c) to what extent the members of the Class have sustained damages and the proper

measure of damages .

43. A class action is superior to all other available methods for the fair and efficient adjudicatio n

ofthis controversy since joinder of all members is impracticable . Furthermore, as the damages suffered

by individual Class members maybe relatively small, the expense and burden of individual litigation mak e

it impossible for members of the Class to individually redress the wrongs done to them . There will be no

difficulty in the management of this action as a class action .

UNDISCLOSED ADVERSE FACT S

44. The market for Guidant's securities was open, well-developed and efficient at al l

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relevant times . As a result ofthese materially false and misleading statements and failures to disclose ,

Guidant's securities traded at artificially inflated prices during the Class Period . Plaintiffand other members

of the Class purchased or otherwise acquired Guidant's securities relying upon the integrity of the marke t

price of Guidant's securities and market information relating to Guidant, and have been damaged thereby .

45 . During the Class Period, defendants materially misled the investing public, thereb y

inflating the price of Giiidant's securities, by publicly issuing false and misleading statements and omittin g

to disclose material facts necessary to make defendants' statements, as set forth herein, not false an d

misleading . Said statements and omissions were materially false and misleading in that they failed to

disclose material adverse information and misrepresented the truth about the Company, its business an d

operations, as alleged herein .

46. At all relevant times, the material misrepresentations and omissions particularized in this

Complaint directly or proximately caused or were a substantial contributing cause of the damages sustaine d

by Plaintiff and other members of the Class . As described herein, during the Class Period, defendant s

made or caused to be made a series of materially false or misleading statements about Guidant's business,

prospects and operations . These material misstatements and omissions had the cause and effect of creating

in the market an unrealistically positive assessment of Guidant and its business, prospects and operations ,

thus causing the Company's securities to be overvalued and artificially inflated at all relevant times .

Defendants' materially false and misleading statements during the Class Period resulted in Plaintiff and othe r

members ofthe Class purchasing the Company's securities at artificially inflated prices, thus causing th e

damages complained of herein .

LOSS CAUSATION

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47 . Defendants' wrongful conduct, as alleged herein, directly and proximately caused the

economic loss suffered by Plaintiff and the Class .

48 . During the Class Period, Plaintiff and the Class purchased securities of Guidant at artificially

inflated prices and were damaged thereby . The price of Guidant common stock declined when the

misrepresentations made to the market, and/or the information alleged herein to have been concealed from

the market, and/or the effects thereof, were revealed, causing investors' losses .

ADDITIONAL SCIENTER ALLEGATIONS

49 . As alleged herein, defendants acted with scienter in that defendants knew that the publi c

documents and statements issued or disseminated in the name ofthe Company were materially false an d

misleading; knew that such statements or documents would be issued or disseminated to the investin g

public ; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such

statements or documents as primary violations ofthe federal securities laws . As set forth elsewhere herein

in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding Guidant, thei r

control over, and/or receipt and/or modification of Guidant allegedly materially misleading misstatement s

and/or their associations with the Company which made them privy to confidential proprietary informatio n

concerning Guidant, participated in the fraudulent scheme alleged herein .

50. Defendants knew and/or recklessly disregarded the falsity and misleading nature ofthe

information which they caused to be disseminated to the investing public . The ongoing fraudulent scheme

described in this complaint could not have been perpetrated over a substantial period of time, as ha s

occurred, without the knowledge and complicity ofthe personnel at the highest level of the Company ,

including the Individual Defendants .

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51 . Moreover, defendants were motivated to commit the fraudulent scheme alleged herein s o

that Guidant insiders, including the Individual Defendants, could sell their personally held Guidant stock a t

artificially inflated prices . All told, Guidant insiders sold a total of894,081 oftheir personally held share s

for gross proceeds of $65,703,975.60:

NAME

Beverly H. Lorel l

Ronald N. Spaulding

Guido J. Neels

J.B . King

Keith E. Brauer

Ronald W. Dollens

Roger Marchetti

DATE I AMOUNT PRICE I GROSS PROCEED S

05/17/200505/23/2005

23,300 @ $73 .550

22,667 @ $74 .000

Total Shares Sold:44,967

$1,713,715.00$1,677,358.00Gross Proceeds:

$3,391,073.00

01/31/200504/27/200505/10/2005

02/08/2005

02/18/2005

01/31/200504/27/2005

04/07/200504/27/2005

01/31/200504/27/2005

50,000 @ $72 .10012,430 @ $74 .0008,200 @ $73 .250Total Shares Sold:70,630

60,000 @ $73 .000Total Shares Sold:60,000

248,944 @ $73 .200Total Shares Sold:248,944

50,000 @$72 .24019,079 @$74 .000Total Shares Sold:69,079

271,404 @ $74 .130

48,661 @ $74.000

Total Shares Sold:320,065

9,000 @ $72.1709,264 @ $74.000Total Shares Sold:18,264

$3,605,000.00

$919,820$600,650 .00

Gross Proceeds:$5,125,470.00

$4,380,000.00Gross Proceeds :$4,380,000.00

$18,222,700.08Gross Proceeds:$18,222,700.08

$3,612,000 .00

$1,411,846.00Gross Proceeds:

$5,023,846.00

$20,119,178.52

$3,600,914

Gross Proceeds :

$23,720,092.52

$649,530 .00$685,536 .00

Gross Proceeds:$1,335,066

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William F. Mcconnell, 01/31/2005 52,000 @ $72.230 $3,755,960 .00Jr . 04/27/2005 10,132 @ $74 .000 $749,768 .00

Total Shares Sold: Gross Proceeds:62,132 $4,505,728.00

Total Shares Sold: Gross Proceeds:

894,081 $65,703,975.60

(Emphasis added .)

Applicability Of Presumption Of Reliance :Fraud-On-The-Market Doctrin e

52. At all relevant times, the market for Guidant securities was an efficient market for th e

following reasons, among others :

(a) Guidant stock met the requirements for listing, and was listed and actively traded on th e

NYSE, a highly efficient and automated market ;

(b) As a regulated issuer, Guidant filed periodic public reports with the SEC and the

NYSE;

(c) Guidant regularly communicated with public investors via established marke t

communication mechanisms, including through regular disseminations ofpress releases on the national

circuits of major newswire services and through other wide-ranging public disclosures, such a s

communications with the financial press and other similar reporting services; and

(d) Guidant was followed by several securities analysts employed by maj or brokerage

firms who wrote reports which were distributed to the sales force and certain customers of their respective

brokerage firms . Each of these reports was publicly available and entered the public marketplace .

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53 . As a result of the foregoing, the market for Guidant securities promptly digested curren t

information regarding Guidant from all publicly-available sources and reflected such information in Guidant

stock price . Under these circumstances, all purchasers of Guidant securities during the Class Perio d

suffered similar injury through their purchase of Guidant securities at artificially inflated prices and a

presumption of reliance applies .

NO SAFE HARBO R

54. The statutory safe harbor provided for forward-looking statements under certai n

circumstances does not apply to any ofthe allegedly false statements pleaded in this complaint . Many of

the specific statements pleaded herein were not identified as "forward-looking statements" when made .

To the extent there were any forward-looking statements, there were no meaningful cautionary statement s

identifying important factors that could cause actual results to differ materially from those in the purportedly

forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any

forward-looking statements pleaded herein, defendants are liable for those false forward-looking statement s

because at the time each of those forward-looking statements was made, the particular speaker knew tha t

the particular forward-looking statement was false, and/or the forward-looking statement was authorize d

and/or approved by an executive officer of Guidant who knewthat those statements were false when made.

FIRST CLAIMViolation Of Section 10(b) Of

The Exchange Act Against And Rule 10b-5Promulgated Thereunder Against All Defendant s

55 . Plaintiff repeats and realleges each and every allegation contained above as if fully set forth

herein .

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56 . During the Class Period, defendants carried out a plan, scheme and course of conduct

which was intended to and, throughout the Class Period, did : (i) deceive the investing public, includin g

Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and other members ofthe Clas s

to purchase Guidant securities at artificially inflated prices . In furtherance of this unlawful scheme, plan and

course of conduct, defendants, and each of them, took the actions set forth herein .

57. Defendants (a) employed devices, schemes, and artifices to defraud ; (b) made untrue

statements of material fact and/or omitted to state material facts necessary to make the statements no t

misleading ; and (c) engaged in acts, practices, and a course of business which operated as a fraud and

deceit upon the purchasers ofthe Company's securities in an effort to maintain artificially high market price s

for Guidant securities in violation of Section 10(b) ofthe Exchange Act and Rule I Ob-5. All defendant s

are sued either as primary participants in the wrongful and illegal conduct charged herein or as controllin g

persons as alleged below.

58 . Defendants, individually and in concert, directly and indirectly, by the use, means o r

instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuou s

course of conduct to conceal adverse material information about the business, operations and future

prospects of Guidant as specified herein .

59. These defendants employed devices, schemes and artifices to defraud, while in possessio n

of material adverse non-public information and engaged in acts, practices, and a course of conduct a s

alleged herein in an effort to assure investors of Guidant value and performance and continued substantia l

growth, which included the making of, or the participation in the making of, untrue statements of materia l

facts and omitting to state material facts necessary in order to make the statements made about Guidant

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and its business operations and future prospects in the light ofthe circumstances under which they wer e

made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a

course of business which operated as a fraud and deceit upon the purchasers of Guidant securities durin g

the Class Period .

60 . Each of the Individual Defendants' primary liability, and controlling person liability, arise s

from the following facts : (i) the Individual Defendants were high-level executives and/or directors at the

Company during the Class Period and members of the Company' s management team or had control

thereof; (ii) each ofthese defendants, by virtue ofhis responsibilities and activities as a senior officer and/o r

director of the Company was privy to and participated in the creation, development and reporting of th e

Company's internal budgets, plans, projections and/or reports ; (iii) each of these defendants enjoyed

significant personal contact and familiarity with the other defendants and was advised of and had acces s

to other members of the Company's management team, internal reports and other data and informatio n

about the Company's finances, operations, and sales at all relevant times ; and (iv) each ofthese defendants

was aware of the Company's dissemination of information to the investing public which they knew or

recklessly disregarded was materially false and misleading .

61 . The defendants had actual knowledge ofthe misrepresentations and omissions ofmateria l

facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and t o

disclose such facts, even though such facts were available to them . Such defendants' material

misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of

concealing Guidant's operating condition and future business prospects from the investing public an d

supporting the artificially inflated price of its securities . As demonstrated by defendants' overstatements

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and misstatements of the Company's business, operations and earnings throughout the Class Period ,

defendants, ifthey did not have actual knowledge ofthe misrepresentations and omissions alleged, wer e

reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary t o

discover whether those statements were false or misleading .

62. As a result ofthe dissemination ofthe materially false and misleading information and failure

to disclose material facts, as set forth above, the market price of Guidant securities was artificially inflated

during the Class Period . In ignorance ofthe fact that market prices of Guidant's publicly-traded securitie s

were artificially inflated, and relying directly or indirectly on the false and misleading statements made b y

defendants, or upon the integrity ofthe market in which the securities trades, and/or on the absence o f

material adverse information that was known to or recklessly disregarded by defendants but not disclose d

in public statements by defendants during the Class Period, Plaintiff and the other members ofthe Clas s

acquired Guidant securities during the Class Period at artificially high prices and were damaged thereby .

63 . At the time of said misrepresentations and omissions, Plaintiff and other members ofth e

Class were ignorant of their falsity, and believed them to be true . Had Plaintiff and the other members o f

the Class and the marketplace known the truth regarding the problems that Guidant was experiencing ,

which were not disclosed by defendants, Plaintiff and other members of the Class would not have pur-

chased or otherwise acquired their Guidant securities, or, ifthey had acquired such securities during th e

Class Period, they would not have done so at the artificially inflated prices which they paid.

64 . By virtue ofthe foregoing, defendants have violated Section 10(b) ofthe Exchange Act ,

and Rule 10b-5 promulgated thereunder.

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65. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and the othe r

members of the Class suffered damages in connection with their respective purchases and sales of th e

Company's securities during the Class Period .

SECOND CLAIMViolation Of Section 20(a) O f

The Exchange Act Against the Individual Defendants

66. Plaintiff repeats and realleges each and every allegation contained above as if fully set fort h

herein.

67. The Individual Defendants acted as controlling persons of Guidant within the meaning o f

Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and their

ownership and contractual rights, participation in and/or awareness of the Company's operations and/o r

intimate knowledge of the false financial statements filed by the Company with the SEC and disseminated

to the investing public, the Individual Defendants had the power to influence and control and did influence

and control, directly or indirectly, the decision-making of the Company, including the content and

dissemination of the various statements which Plaintiff contend are false and misleading. The Individual

Defendants were provided with or had unlimited access to copies of the Company' s reports, press releases ,

public filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after thes e

statements were issued and had the ability to prevent the issuance of the statements or cause the statement s

to be corrected .

68 . In particular, each of these defendants had direct and supervisory involvement in the day-

to-day operations ofthe Company and, therefore, is presumed to have had the power to control or influ-

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ence the particular transactions giving rise to the securities violations as alleged herein, and exercised th e

same .

69. As set forth above, Guidant and the Individual Defendants each violated Section 10(b) and

Rule I Ob-5 by their acts and omissions as alleged in this Complaint . By virtue of their positions as

controlling persons, the Individual Defendants are liable pursuant to Section 20(a) ofthe Exchange Act .

As a direct and proximate result of defendants' wrongful conduct, Plaintiff and other members of the Clas s

suffered damages in connection with theirpurchases ofthe Company's securities during the Class Period .

WHEREFORE, Plaintiff prays for relief and judgment, as follows :

(a) Determining that this action is a proper class action, designating Plaintiff as Lead

Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal Rules of Civi l

Procedure and Plaintiffs counsel as Lead Counsel ;

(b) Awarding compensatory damages in favor of Plaintiff and the other Class member s

against all defendants, j ointly and severally, for all damages sustained as a result of defendants' wrongdoing ,

in an amount to be proven at trial, including interest thereon ;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in thi s

action, including counsel fees and expert fees ; and

(d) Such other and further relief as the Court may deem just and proper .

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JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury .

Dated : July 1, 2005 Respectfully submitted ,

COHEN & MALAD, LLP

By : 'A~~"VIrwin B . LevinRichard E. ShevitzScott D . GilchristOne Indiana Square

Suite 1400Indianapolis, IN 46204

Telephone: 317-636-6481Facsimile: 317-636-2593

Local Counselfor Plaintiff

Attorneys for Plaintiff

OF COUNSEL :

SUSMAN GODFREY L .L.P .William Christopher CarmodyShawn J . Rabin901 Main Street, Suite 4100Dallas, Texas 75202-3775(214) 754-1900

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