BRISTOL MYERS SQUIBB CO (Form: 10-Q, Received: 10/23/2008 11:25:09)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

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

FOR THE TRANSITION PERIOD FROM TO

Commission file number: 1-1136

BRISTOL-MYERS SQUIBB COMPANY

(Exact name of registrant as specified in its charter)

Delaware

22-0790350

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

345 Park Avenue, New York, N.Y. 10154

(Address of principal executive offices) (Zip Code)

(212) 546-4000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 the filing requirements for at least the past 90 days. Yes x No ¨

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

At September 30, 2008, there were 1,979,611,750 shares outstanding of the Registrant’s $.10 par value common stock.

BRISTOL-MYERS SQUIBB COMPANY

INDEX TO FORM 10-Q

SEPTEMBER 30, 2008


PART I—FINANCIAL INFORMATION

Item 1.
Financial Statements:
Consolidated Statements of Earnings		3
Consolidated Statements of Comprehensive Income and Retained Earnings		4
Consolidated Balance Sheets		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations		32

Item 3.
Quantitative and Qualitative Disclosures About Market Risk		55

Item 4.
Controls and Procedures		55

PART II—OTHER INFORMATION

Item 1.
Legal Proceedings		55

Item 1A.
Risk Factors		55

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds		56

Item 6.
Exhibits		56

Signatures		57

PART I—FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENTS OF EARNINGS

Dollars and Shares in Millions, Except Per Share Data

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
EARNINGS
Net Sales	$	5,254		$	4,601		$	15,348		$	13,135

Cost of products sold		1,634			1,478			4,874			4,152
Marketing, selling and administrative		1,208			1,105			3,507			3,260
Advertising and product promotion		362			338			1,101			950
Research and development		834			802			2,442			2,338
Acquired in-process research and development		—			—			32			—
Provision for restructuring, net		26			—			67			44
Litigation expense, net		30			—			32			14
Gain on sale of product assets		—			(247	)		—			(273	)
Equity in net income of affiliates		(164	)		(139	)		(478	)		(393	)
Other expense, net		169			8			188			29

Total Expenses, net		4,099			3,345			11,765			10,121
Earnings from Continuing Operations Before Income Taxes and Minority Interest		1,155			1,256			3,583			3,014
Provision for income taxes		308			292			896			535
Minority interest, net of taxes		259			211			730			546

Net Earnings from Continuing Operations		588			753			1,957			1,933

Discontinued Operations:
Earnings, net of taxes		8			105			107			321
Gain on Disposal, net of taxes		1,982			—			1,939			—

		1,990			105			2,046			321

Net Earnings	$	2,578		$	858		$	4,003		$	2,254

Earnings per Common Share
Basic:
Net Earnings from Continuing Operations	$	0.30		$	0.38		$	0.99		$	0.98
Discontinued Operations:
Earnings, net of taxes		—			0.05			0.06			0.17
Gain on Disposal, net of taxes		1.00			—			0.98			—

Net Earnings per Common Share	$	1.30		$	0.43		$	2.03		$	1.15

Diluted:
Net Earnings from Continuing Operations	$	0.30		$	0.38		$	0.98		$	0.98
Discontinued Operations:
Earnings, net of taxes		—			0.05			0.05			0.16
Gain on Disposal, net of taxes		0.99			—			0.97			—

Net Earnings per Common Share	$	1.29		$	0.43		$	2.00		$	1.14


Average Common Shares Outstanding:
Basic		1,977			1,974			1,976			1,968
Diluted		2,004			2,012			2,006			2,005

Dividends declared per common share	$	0.31		$	0.28		$	0.93		$	0.84

The accompanying notes are an integral part of these financial statements.

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME AND RETAINED EARNINGS

Dollars in Millions

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
COMPREHENSIVE INCOME

Net Earnings	$	2,578		$	858		$	4,003		$	2,254
Other Comprehensive Income/(Loss):
Foreign currency translation		(49	)		40			(23	)		74
Deferred gains/(losses) on derivatives qualifying as hedges, net of tax liability of $30 and net of tax benefit of $14 for the three months ended September 30, 2008 and 2007, respectively; and net of tax liability of $27 and net of tax benefit of $15 for the nine months ended September 30, 2008 and 2007, respectively		67			(27	)		36			(28	)
Deferred gains on pension and other postretirement benefits, net of tax liability of $23 and $15 for the three months ended September 30, 2008 and 2007, respectively; and $49 and $30 for the nine months ended September 30, 2008 and 2007, respectively		7			27			70			85
Deferred gains/(losses) on available for sale securities, net of tax benefit of $1 for the three months ended September 30, 2007; and net of tax benefit of $1 for both the nine months ended September 30, 2008 and 2007		134			(1	)		25			(1	)

Total Other Comprehensive Income		159			39			108			130

Comprehensive Income	$	2,737		$	897		$	4,111		$	2,384


RETAINED EARNINGS

Retained Earnings at January 1							$	19,762		$	19,845
Cumulative effect of adoption of FIN No. 48								—			27
Net Earnings								4,003			2,254
Cash dividends declared								(1,846	)		(1,663	)

Retained Earnings at September 30							$	21,919		$	20,463

The accompanying notes are an integral part of these financial statements.

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED BALANCE SHEETS

Dollars in Millions, Except Share and Per Share Data

(UNAUDITED)


	September 30, 2008			December 31, 2007
ASSETS

Current Assets:
Cash and cash equivalents	$	7,173		$	1,801
Marketable securities		258			424
Receivables, net of allowances of $133 in 2008 and $180 in 2007		4,224			4,240
Inventories, net		2,055			2,162
Deferred income taxes, net of valuation allowances		691			851
Prepaid expenses		378			310
Assets held for sale		—			560

Total Current Assets		14,779			10,348

Property, plant and equipment, net		5,360			5,650
Goodwill		4,841			4,998
Other intangible assets, net		1,212			1,330
Deferred income taxes, net of valuation allowances		1,119			2,716
Other assets		1,165			1,130

Total Assets	$	28,476		$	26,172


LIABILITIES

Current Liabilities:
Short-term borrowings	$	135		$	1,891
Accounts payable		1,441			1,442
Accrued expenses		2,897			2,951
Deferred income		832			447
Accrued rebates and returns		769			763
U.S. and foreign income taxes payable		199			296
Dividends payable		618			614
Accrued litigation liabilities		60			205
Liabilities related to assets held for sale		—			35

Total Current Liabilities		6,951			8,644

Pension liabilities and other postretirement liabilities		695			782
Deferred income		809			714
U.S. and foreign income taxes payable		455			537
Other liabilities		508			552
Long-term debt		6,120			4,381

Total Liabilities		15,538			15,610

Commitments and contingencies (Note 20)

STOCKHOLDERS’ EQUITY

Preferred stock, $2 convertible series: Authorized 10 million shares; issued and outstanding 5,672 in 2008 and 5,815 in 2007, liquidation value of $50 per share		—			—
Common stock, par value of $.10 per share: Authorized 4.5 billion shares; 2.2 billion issued in both 2008 and 2007		220			220
Capital in excess of par value of stock		2,800			2,722
Restricted stock		(77	)		(97	)
Accumulated other comprehensive loss		(1,353	)		(1,461	)
Retained earnings		21,919			19,762

		23,509			21,146
Less cost of treasury stock — 226 million common shares in 2008 and 2007		(10,571	)		(10,584	)

Total Stockholders’ Equity		12,938			10,562

Total Liabilities and Stockholders’ Equity	$	28,476		$	26,172

The accompanying notes are an integral part of these financial statements.

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(UNAUDITED)


	Nine Months Ended September 30,
	2008			2007
Cash Flows From Operating Activities:
Net earnings	$	4,003		$	2,254
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		449			373
Amortization		187			265
Deferred income tax expense/(benefit)		1,629			(175	)
Litigation settlement expense, net		32			14
Stock-based compensation expense		132			97
Provision for restructuring		67			44
Gain on sale of product assets and businesses		(3,434	)		(273	)
Acquired in-process research and development		32			—
Impairment charges and asset write-offs		247			7
Loss on disposal of property, plant and equipment and investment in other companies		21			12
Equity income in excess of cash distributions from affiliates		(23	)		(36	)
Unfunded pension expense		81			129
Changes in operating assets and liabilities:
Receivables		(598	)		(366	)
Inventories		(75	)		(105	)
Prepaid expenses and other assets		(92	)		(19	)
Litigation settlement payments, net of insurance recoveries		(178	)		(318	)
Accounts payable and accrued expenses		516			389
Product liability		(13	)		(13	)
U.S. and foreign income taxes payable		385			(44	)
Deferred income and other liabilities		(27	)		288

Net Cash Provided by Operating Activities		3,341			2,523

Cash Flows From Investing Activities:
Proceeds from sale of marketable securities		280			19,159
Purchases of marketable securities		(248	)		(19,096	)
Additions to property, plant and equipment and capitalized software		(656	)		(593	)
Proceeds from disposal of property, plant and equipment and investment in other companies		74			24
Proceeds from sale of product assets and businesses		4,531			273
Purchase of Kosan Biosciences, Inc., net		(191	)		—
Proceeds from sale and leaseback of properties		227			—
Other investments		(12	)		(3	)

Net Cash Provided by/(Used in) Investing Activities		4,005			(236	)

Cash Flows From Financing Activities:
Short-term repayments		(1,717	)		(41	)
Long-term debt borrowings/(repayments)		1,579			(1,301	)
Issuances of common stock under stock plans and excess tax benefits from share-based payment arrangements		4			312
Dividends paid		(1,845	)		(1,659	)

Net Cash Used in Financing Activities		(1,979	)		(2,689	)

Effect of Exchange Rates on Cash and Cash Equivalents		5			31

Increase/(Decrease) in Cash and Cash Equivalents		5,372			(371	)
Cash and Cash Equivalents at Beginning of Period		1,801			2,018

Cash and Cash Equivalents at End of Period	$	7,173		$	1,647

The consolidated statements of cash flows include the activities of discontinued operations.

The accompanying notes are an integral part of these financial statements.

Note 1. Basis of Presentation and New Accounting Standards

Bristol-Myers Squibb Company (which may be referred to as Bristol-Myers Squibb, BMS or the Company) prepared these unaudited consolidated financial statements following the requirements of the Securities and Exchange Commission and United States (U.S.) generally accepted accounting principles (GAAP) for interim reporting. Under those rules, certain footnotes and other financial information that are normally required by GAAP for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Form 10-Q. These consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position at September 30, 2008 and December 31, 2007, the results of its operations for the three and nine months ended September 30, 2008 and 2007, and its cash flows for the nine months ended September 30, 2008 and 2007. These unaudited consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (2007 Form 10-K).

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be indicative of full year operating results. Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company recognizes revenue when substantially all the risks and rewards of ownership have transferred to the customer. Generally, revenue is recognized at the time of shipment of products; however, for certain sales made by the Nutritionals segment and certain non-U.S. businesses in the Pharmaceuticals segment, revenue is recognized on the date of receipt by the purchaser. Revenues are reduced at the time of recognition to reflect expected returns that are estimated based on historical experience. Additionally, provisions are made at the time of revenue recognition for all discounts, rebates and estimated sales allowances based on historical experience updated for changes in facts and circumstances, as appropriate. Such provisions are recorded as a reduction of revenue.

In addition, the Company includes alliance revenue in net sales. The Company has agreements to promote pharmaceuticals discovered by other companies. Alliance revenue is based upon a percentage of the Company’s copromotion partners’ net sales and is earned when the related product is shipped by the copromotion partners and title passes to their customer.

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions are employed in estimates used in determining values of intangible assets; restructuring charges and accruals; sales rebate and return accruals; legal contingencies; tax assets and tax liabilities; stock-based compensation; retirement and postretirement benefits (including the actuarial assumptions); financial instruments, including marketable securities with no observable market quotes; as well as in estimates used in applying the revenue recognition policy. Actual results may differ from the estimated results.

Effective January 1, 2008, the Company adopted Emerging Issues Task Force (EITF) Issue No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities . Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided. The Company’s adoption of EITF No. 07-3 did not have a material effect on the Company’s consolidated financial statements.

Effective January 1, 2008, the Company adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities , including an amendment of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities , which permits an entity to measure certain financial assets and financial liabilities at fair value. The objective of SFAS No. 159 is to improve financial reporting by allowing entities to mitigate volatility in reported earnings caused by the measurement of related assets and liabilities using different attributes, without having to apply complex hedge accounting provisions. Under SFAS No. 159, entities that elect the fair value option (by instrument) will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option election is irrevocable, unless a new election date occurs. SFAS No. 159 establishes presentation and disclosure requirements to help financial statement users understand the effect of the entity’s election on its earnings, but does not eliminate disclosure requirements of other accounting standards. Assets and liabilities that are measured at fair value must be displayed on the face of the balance sheet. The Company chose not to elect the fair value option for its financial assets and liabilities existing at January 1, 2008, and did not elect the fair value option on financial assets and liabilities transacted in the nine months ended September 30, 2008. Therefore, the adoption of SFAS No. 159 had no impact on the Company’s consolidated financial statements.

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, for financial assets and liabilities and any other assets and liabilities carried at fair value. This pronouncement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. On November 14, 2007, the FASB agreed to a one-year deferral for the

Note 1. Basis of Presentation and New Accounting Standards (Continued)

implementation of SFAS No. 157 for other non-financial assets and liabilities. The Company’s adoption of SFAS No. 157 did not have a material effect on the Company’s consolidated financial statements for financial assets and liabilities and any other assets and liabilities carried at fair value.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, as an amendment to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities . SFAS No. 161 requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The fair value of derivative instruments and their gains and losses will need to be presented in tabular format in order to present a more complete picture of the effects of using derivative instruments. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of adopting this pronouncement.

Note 2. Alliances and Investments

Sanofi

The Company has agreements with Sanofi-Aventis (Sanofi) for the codevelopment and cocommercialization of AVAPRO*/AVALIDE* (irbesartan/irbesartan-hydrochlorothiazide), an angiotensin II receptor antagonist indicated for the treatment of hypertension and diabetic nephropathy, and PLAVIX* (clopidogrel), a platelet aggregation inhibitor. The worldwide alliance operates under the framework of two geographic territories; one in the Americas (principally the U.S., Canada, Puerto Rico and Latin American countries) and Australia and the other in Europe and Asia. Accordingly, two territory partnerships were formed to manage central expenses, such as marketing, research and development and royalties, and to supply finished product to the individual countries. In general, at the country level, agreements either to copromote (whereby a partnership was formed between the parties to sell each brand) or to comarket (whereby the parties operate and sell their brands independently of each other) are in place. The agreements expire on the later of (i) with respect to PLAVIX*, 2013 and, with respect to AVAPRO*/AVALIDE*, 2012 in the Americas and Australia and 2013 in Europe and Asia and (ii) the expiration of all patents and other exclusivity rights in the applicable territory. The Company acts as the operating partner for the territory covering the Americas and Australia and owns a 50.1% majority controlling interest in this territory. Sanofi’s ownership interest in this territory is 49.9%. As such, the Company consolidates all country partnership results for this territory and records Sanofi’s share of the results as a minority interest, net of taxes, which was $250 million and $206 million for the three months ended September 30, 2008 and 2007, respectively, and $714 million and $532 million for the nine months ended September 30, 2008 and 2007, respectively. The Company recorded net sales in this territory and in comarketing countries outside this territory (Germany, Italy, Spain and Greece) of $1,773 million and $1,562 million for the three months ended September 30, 2008 and 2007, respectively, and $5,108 million and $4,256 million for the nine months ended September 30, 2008 and 2007, respectively.

Cash flows from operating activities of the partnerships in the territory covering the Americas and Australia are recorded as operating activities within the Company’s consolidated statement of cash flows. Distributions of partnership profits to Sanofi and Sanofi’s funding of ongoing partnership operations occur on a routine basis and are also recorded within operating activities on the Company’s consolidated statement of cash flows.

Sanofi acts as the operating partner for the territory covering Europe and Asia and owns a 50.1% majority controlling interest in this territory. The Company’s ownership interest in this territory is 49.9%. The Company accounts for the investment in partnership entities in this territory under the equity method and records its share of the results in equity in net income of affiliates in the consolidated statement of earnings. The Company’s share of net income from these partnership entities before taxes was $163 million and $143 million for the three months ended September 30, 2008 and 2007, respectively, and $487 million and $392 million for the nine months ended September 30, 2008 and 2007, respectively.

The Company routinely receives distributions of profits and provides funding for the ongoing operations of the partnerships in the territory covering Europe and Asia. These transactions are recorded as operating activities within the Company’s consolidated statement of cash flows.

The Company and Sanofi have an alliance for the copromotion of irbesartan. The Company recognized other income of $8 million in each of the three month periods ended September 30, 2008 and 2007, respectively, and $24 million in each of the nine month periods ended September 30, 2008 and 2007, respectively, related to the amortization of deferred income associated with Sanofi’s $350 million payment to the Company for their acquisition of an interest in the irbesartan license for the United States upon formation of the alliance. The unrecognized portion of the deferred income amounted to $130 million and $154 million at September 30, 2008 and December 31, 2007, respectively, and will continue to amortize through 2013, the expected expiration of the license.

Note 2. Alliances and Investments (Continued)

The following is the summarized financial information for the Company’s equity investments in the partnership with Sanofi for the territory covering Europe and Asia:


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2008		2007		2008		2007
Net sales	$	881	$	788	$	2,704	$	2,273
Gross profit		657		606		2,048		1,753
Net income		318		294		978		801

Otsuka

The Company has a worldwide commercialization agreement with Otsuka Pharmaceutical Co., Ltd. (Otsuka), to codevelop and copromote with Otsuka ABILIFY* (aripiprazole) for the treatment of schizophrenia, bipolar disorders and major depressive disorders, except in Japan, China, Taiwan, North Korea, South Korea, the Philippines, Thailand, Indonesia, Pakistan and Egypt. Under the terms of the agreement, the Company purchases the product from Otsuka and performs finish manufacturing for sale by the Company or Otsuka to third-party customers. The product is currently copromoted with Otsuka in the United Kingdom (UK), Germany, France and Spain. In the U.S., Germany and Spain, where the product is invoiced to third-party customers by the Company on behalf of Otsuka, the Company records alliance revenue for its 65% contractual share of third-party net sales and records all expenses related to the product. The Company recognizes this alliance revenue when ABILIFY* is shipped and all risks and rewards of ownership have transferred to third-party customers. In the UK, France and Italy, where the Company is presently the exclusive distributor for the product, the Company records 100% of the net sales and related cost of products sold and expenses. The Company also has an exclusive right to sell ABILIFY* in other countries in Europe, the Americas and a number of countries in Asia. In these countries, the Company records 100% of the net sales and related cost of products sold.

The agreement expires in November 2012 in the U.S. For the entire European Union (EU), the agreement expires in June 2014. In each other country where the Company has the exclusive right to sell ABILIFY*, the agreement expires on the later of the 10th anniversary of the first commercial sale in such country or expiration of the applicable patent in such country.

The Company recorded net sales for ABILIFY* of $564 million and $420 million for the three months ended September 30, 2008 and 2007, respectively, and $1,547 million and $1,198 million for the nine months ended September 30, 2008 and 2007, respectively. The Company amortized into cost of products sold $1 million in each of the three month periods ended September 30, 2008 and 2007, and $5 million in each of the nine month periods ended September 30, 2008 and 2007 for previously capitalized milestone payments. The unamortized capitalized payment balance is recorded in other intangible assets, and was $24 million at September 30, 2008 and $29 million at December 31, 2007, and will continue to amortize through 2012, the expected expiration of the agreement.

ImClone

The Company has a commercialization agreement expiring in September 2018 with ImClone Systems Incorporated (ImClone) for the codevelopment and copromotion of ERBITUX* (cetuximab) in the U.S. ERBITUX* is indicated for use in the treatment of patients with metastatic colorectal cancer and for use in the treatment of squamous cell carcinoma of the head and neck. Under the agreement, ImClone receives a distribution fee based on a flat rate of 39% of net sales in North America. In October 2007, the Company and ImClone amended their codevelopment agreement with Merck KGaA to provide for cocommercialization of ERBITUX* in Japan, which expires in 2032. ImClone has the ability to terminate the agreement after 2018 if it determines that it is commercially unreasonable for ImClone to continue. ERBITUX* received marketing approval in Japan in July 2008 for the use of ERBITUX* in treating patients with advanced or recurrent colorectal cancer.

The Company recorded net sales for ERBITUX* of $184 million and $185 million for the three months ended September 30, 2008 and 2007, and $567 million and $507 million for the nine months ended September 30, 2008 and 2007, respectively. The Company amortized into cost of products sold $9 million in each of the three months ended September 30, 2008 and 2007, respectively, and $28 million in each of the nine months ended September 30, 2008 and 2007, respectively, for previously capitalized milestone payments. The unamortized portion of the approval payments is recorded in other intangible assets, and was $369 million at September 30, 2008 and $397 million at December 31, 2007, and will continue to amortize through 2018, the remaining term of the agreement.

The Company acquired an investment in ImClone upon execution of the commercialization agreement. The Company accounts for its investment in ImClone under the equity method and records its share of the results, adjusted for revenue recognized by ImClone for pre-approved milestone payments made by the Company prior to 2004, in equity in net income of affiliates in the consolidated statement of earnings. The Company recorded equity income of $2 million and an equity loss of $1 million for the three months ended September 30, 2008 and 2007, respectively, and an equity loss of $3 million and equity income of $8 million for the nine months ended September 30, 2008 and 2007, respectively. The Company’s recorded investment and the market value of its holdings in ImClone common stock was $113 million and approximately $898 million at September 30, 2008, respectively, and $114 million

Note 2. Alliances and Investments (Continued)

and approximately $619 million at December 31, 2007, respectively. The Company holds 14.4 million shares of ImClone stock, representing approximately 17% of ImClone’s shares outstanding at both September 30, 2008 and December 31, 2007. On a per share basis, the carrying value of the ImClone investment and the closing market price of the ImClone shares at September 30, 2008 were $7.87 and $62.40, respectively, compared to $7.92 and $43.00, respectively, at December 31, 2007.

Eli Lilly and Company (Lilly) commenced a tender offer of $70 per share on October 14, 2008 for the outstanding shares of ImClone’s common stock. Based on Bristol-Myers Squibb’s ownership of 14.4 million shares of ImClone, the Company expects to receive approximately $1.0 billion in cash upon Lilly’s acceptance of the Company’s tendering of its shares. The Company will continue to have marketing rights to ERBITUX* and believes it has rights to ImClone’s investigational compound IMC-11F8.

Gilead

The Company and Gilead Sciences, Inc. (Gilead) have a joint venture to develop and commercialize ATRIPLA* (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg), a once-daily single tablet three-drug regimen combining the Company’s SUSTIVA (efavirenz) and Gilead’s TRUVADA* (emtricitabine and tenofovir disoproxil fumarate), in the U.S., Canada and Europe. ATRIPLA* was approved by Health Canada in October 2007 and by the European Commission in December 2007 for commercialization in the 27 countries of the EU, as well as Norway and Iceland.

The Company records revenue for ATRIPLA* in a limited number of EU countries where the Company agreed to purchase the product from Gilead and distribute it to third party customers. Gilead records all other ATRIPLA* revenues and consolidates the results of the joint venture in its operating results. The Company records net sales for the bulk efavirenz component of ATRIPLA* upon sales of that product by the joint venture with Gilead or by Gilead to third-party customers. The Company’s net sales for the efavirenz component is determined by applying a percentage to ATRIPLA* revenue, which approximates revenue for the SUSTIVA brand. The Company recorded efavirenz revenues of $155 million and $87 million for the three months ended September 30, 2008 and 2007, respectively, and $405 million and $236 million for the nine months ended September 30, 2008 and 2007, respectively, related to ATRIPLA* sales, and $1 million of ATRIPLA* sales for both the three and nine months ended September 30, 2008. The Company accounts for its participation in the U.S. joint venture under the equity method of accounting and records its share of the joint venture results in equity in net income of affiliates in the consolidated statement of earnings. The Company recorded an equity loss on the U.S. joint venture with Gilead of $2 million in each of the three month periods ended September 30, 2008 and 2007, respectively, and $6 million and $7 million for the nine months ended September 30, 2008 and 2007, respectively.

AstraZeneca

In January 2007, the Company entered into two worldwide (except for Japan) codevelopment and cocommercialization agreements with AstraZeneca PLC (AstraZeneca), one for the codevelopment and cocommercialization of saxagliptin, a DPP-IV inhibitor (Saxagliptin Agreement), and one for the codevelopment and cocommercialization of dapagliflozin, a sodium-glucose cotransporter-2 (SGLT2) inhibitor (SGLT2 Agreement). Both compounds are being studied for the treatment of diabetes and were discovered by the Company. Under the terms of the agreements, the Company received from AstraZeneca an upfront payment of $100 million in January 2007. In October 2008, the Company received from AstraZeneca a milestone payment of $50 million for the June 2008 filing of the New Drug Application to the Food and Drug Administration (FDA) for ONGLYZA*. The companies have proposed the name ONGLYZA* which, if approved by the FDA and the European Medicines Evaluation Agency will serve as the trade name for saxagliptin.

The upfront payment was deferred and is being recognized over the useful life of the products into other income. The Company amortized into other income $1 million of upfront payments for each of the three month periods ended September 30, 2008 and 2007, and $5 million in each of the nine month periods ended September 30, 2008 and 2007. The unamortized portion of the upfront payments was $88 million at September 30, 2008 and $93 million at December 31, 2007. Additional milestone payments are expected to be received by the Company upon the successful achievement of various development and regulatory events as well as sales-related milestones. Under the Saxagliptin Agreement, the Company could receive up to $300 million if all development and regulatory milestones are met and up to an additional $300 million if all sales-based milestones are met. Under the SGLT2 Agreement, the Company could receive up to $350 million if all development and regulatory milestones are met and up to an additional $300 million if all sales-based milestones are met. Under each agreement, the Company and AstraZeneca also share in development and commercialization costs. The majority of development costs under the initial development plans through 2009 will be paid by AstraZeneca and any additional development costs will generally be shared equally. The Company records development costs related to saxagliptin and dapagliflozin net of AstraZeneca’s share in research and development expenses. Under each agreement, the two companies will jointly develop the clinical and marketing strategy and share commercialization expenses and profits/losses equally on a global basis, excluding Japan, and the Company will manufacture both products.

Note 2. Alliances and Investments (Continued)

Pfizer

In April 2007, the Company and Pfizer Inc. (Pfizer) entered into a worldwide codevelopment and cocommercialization agreement for apixaban, an anticoagulant discovered by the Company being studied for the prevention and treatment of a broad range of venous and arterial thrombotic conditions. In accordance with the terms of the agreement, Pfizer made an upfront payment of $250 million to the Company in May 2007, which was deferred and is being recognized over the life of the agreement into other income. In December 2007, the Company and Pfizer agreed to include Japan in the worldwide agreement. In connection with the Japan agreement, Pfizer made an additional upfront payment of $40 million in December 2007 which was deferred and is being recognized over the useful life of the product into other income. The Company amortized into other income $5 million and $4 million of the upfront payments for the three months ended September 30, 2008 and 2007, respectively, and $14 million and $7 million for the nine months ended September 30, 2008 and 2007, respectively. The unamortized portion of the upfront payments was $265 million at September 30, 2008 and $279 million at December 31, 2007. Pfizer will fund 60% of all development costs effective January 1, 2007 going forward, and the Company will fund 40%. The Company records apixaban development costs net of Pfizer’s share in research and development expenses. The Company may also receive additional payments of up to $780 million from Pfizer based on development and regulatory milestones. The companies will jointly develop the clinical and marketing strategy, will share commercialization expenses and profits/losses equally on a global basis, and will manufacture product under this arrangement.

Note 3. Restructuring

In December 2007, the Company announced a three-year Productivity Transformation Initiative (PTI) to fundamentally change the way it runs its business to meet the challenges of a changing business environment and to take advantage of the diverse opportunities in the marketplace as the Company is transformed into a next-generation biopharmaceutical company. In July 2008, the Company announced its expansion of the PTI to include additional productivity initiatives through 2012. Costs associated with the implementation of the December 5, 2007 announcement are estimated to be between $0.9 billion to $1.1 billion on a pre-tax basis. The Company is in the process of identifying projects to implement under the July 24, 2008 expansion of the PTI and will provide additional information on the expansion of the PTI and its expected costs by year end. The exact timing of the recognition of the PTI charges cannot be predicted with certainty and will be affected by the existence of triggering events for expense recognition under U.S. GAAP, among other factors.

As part of the overall PTI, the Company incurred charges of $107 million and $329 million in the three and nine months ended September 30, 2008, respectively. Included in these charges are net termination benefits of $25 million and $64 million for the three and nine months ended September 30, 2008, respectively, and other exit costs of $1 million and $3 million for the three and nine months ended September 30, 2008, respectively. The PTI charges, including the termination benefits and other exit costs, are primarily included in cost of products sold; marketing, selling and administrative expenses; and provision for restructuring. In connection with the PTI, the Company aims to achieve a culture of continuous improvement to enhance its efficiency, effectiveness and competitiveness and substantially improve its cost base.

2008 Activities

The net charges include termination benefits for workforce reductions of approximately 310 and 680 manufacturing, selling and administrative personnel, primarily in the U.S. and Europe for the three and nine months ended September 30, 2008, respectively.

The following table presents details of expenses incurred by segment and Corporate/Other in connection with the PTI activities:


	Three Months Ended September 30, 2008						Nine Months Ended September 30, 2008
	Termination Benefits		Other Exit Costs		Total		Termination Benefits		Other Exit Costs		Total
Dollars in Millions
Pharmaceuticals	$	19	$	1	$	20	$	51	$	2	$	53
Nutritionals		—		—		—		2		—		2
Corporate/Other		5		—		5		11		—		11

Subtotal		24		1		25		64		2		66
Changes in estimates		1		—		1		—		1		1

Provision for restructuring, net	$	25	$	1	$	26	$	64	$	3	$	67

Note 3. Restructuring (Continued)

2007 Activities

The net charges include termination benefits for workforce reductions of approximately 50 and 500 manufacturing, selling and administrative personnel primarily in the U.S., Latin America and Europe for the three and nine months ended September 30, 2007, respectively.

The following table presents details of expenses by segment and Corporate/Other:


	Three Months Ended September 30, 2007								Nine Months Ended September 30, 2007
	Termination Benefits			Other Exit Costs		Total			Termination Benefits			Other Exit Costs		Total
Dollars in Millions
Pharmaceuticals	$	5		$	—	$	5		$	35		$	—	$	35
Nutritionals		—			—		—			1			—		1
Corporate/Other		1			—		1			13			1		14

Subtotal		6			—		6			49			1		50
Changes in estimates		(6	)		—		(6	)		(6	)		—		(6	)

Provision for restructuring, net	$	—		$	—	$	—		$	43		$	1	$	44

The following table represents the reconciliation of restructuring liabilities and spending against those liabilities:


	Termination Liability			Other Exit Costs Liability			Total
Dollars in Millions
Liability as of January 1, 2008	$	168		$	(1	)	$	167
Charges		64			2			66
Spending		(104	)		(1	)		(105	)
Change in estimates		—			1			1
Gain on divestiture ⁽¹⁾		(2	)		—			(2	)

Liability as of September 30, 2008	$	126		$	1		$	127

(1)	Gain on divestiture represents reversal of $2 million liability previously accrued for ConvaTec restructuring charges.

In addition to termination and other charges, the Company recorded $53 million and $17 million of manufacturing network rationalization charges, primarily including accelerated depreciation charges, for the three months ended September 30, 2008 and 2007, respectively, and $207 million and $46 million for the nine months ended September 30, 2008 and 2007, respectively. These charges were primarily recorded in cost of products sold on the consolidated statement of earnings and primarily relate to the Pharmaceuticals segment.

Note 4. Acquisitions and Divestitures

On September 15, 2008, Mead Johnson Nutritionals filed a registration statement with the U.S. Securities and Exchange Commission for an initial public offering (IPO) of its Class A common stock. The Company plans to sell approximately 10% and no more than 20% of Mead Johnson Nutritionals to the public through the IPO and to retain at least an 80% equity interest in the new company as part of the Company’s overall business portfolio for the foreseeable future. After extensively considering strategic options, management believes this plan will allow Mead Johnson Nutritionals to implement its growth plan, increase shareholder value and maintain its important financial contribution to the Company. The execution of the plan is dependent upon and subject to a number of factors and uncertainties including business and market conditions. The registration statement relating to these securities has not yet become effective. These securities may not be sold nor may offers to buy these securities be accepted before the time the registration statement becomes effective. This footnote shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

In August 2008, the Company completed the divestiture of its ConvaTec business. In January 2008, the Company completed the divestiture of Bristol-Myers Squibb Medical Imaging. See “—Note 5. Discontinued Operations” for further discussions of these divestitures.

On June 26, 2008, the Company completed the acquisition of Kosan Biosciences, Inc. (Kosan), a cancer therapeutics company with a library of novel compounds, including Hsp90 inhibitors for cancer and microtubule stabilizers, which may have additional potential in neurodegenerative diseases, for a net purchase price of approximately $191 million. The transaction was accounted for under the purchase method of accounting and therefore the excess purchase price over the fair value of the net assets acquired per the preliminary valuation was allocated to goodwill. In connection with this transaction, the Company recorded approximately $32 million in acquisition-related in-process research and development charges in the second quarter of 2008.

In July 2007, the Company completed the sale of the BUFFERIN* and EXCEDRIN* brands in Japan, Asia (excluding China and Taiwan) and certain Oceanic countries to Lion Corporation (Japan) for $247 million in cash. As a result of this transaction, the Company recognized a pre-tax gain of $247 million ($144 million, net of tax) in the third quarter of 2007.

Note 5. Discontinued Operations

On August 1, 2008, the Company completed the divestiture of its ConvaTec business to Cidron Healthcare Limited, an affiliate of Nordic Capital Fund VII and Avista Capital Partners L.P. (Avista) for a gross purchase price of approximately $4.1 billion, resulting in a pre-tax gain of $3.4 billion, $2.0 billion net of tax, which is included in discontinued operations. The gross purchase price includes an estimated post-closing purchase price adjustment based on the Company’s estimate of the closing working capital of the ConvaTec business and therefore the purchase price and transaction gain are subject to future adjustment based on the actual closing working capital of the ConvaTec business, pursuant to the terms of the Stock and Asset Purchase Agreement, dated May 3, 2008. In addition, in the nine months ended September 30, 2008, the Company recorded in discontinued operations a curtailment loss of $5 million and special termination benefits of $13 million associated with the re-measurement of the U.S. and Japan pension plans’ obligations and assets triggered by the decision to sell the ConvaTec business. The results of the ConvaTec business, which previously were reported as a separate operating segment, are included in earnings from discontinued operations, net of taxes, for all periods presented.

In January 2008, the Company completed the divestiture of Bristol-Myers Squibb Medical Imaging (Medical Imaging) to Avista for a gross purchase price of approximately $525 million, before post-closing working capital adjustments, resulting in a pre-tax gain of $25 million and an after-tax loss of $43 million, which are included in discontinued operations. The results of the Medical Imaging business, which previously were included in the former Other Health Care operating segment, are included in earnings from discontinued operations, net of taxes, for all periods presented. The net assets associated with the Medical Imaging business, totaling approximately $525 million, were reclassified to assets and liabilities held for sale as of December 31, 2007.

For a period of time, the Company will continue to generate cash flows and to report income statement activity in other expense, net associated with both the ConvaTec and the Medical Imaging businesses. The activities that give rise to these cash flows and income statement activities are transitional in nature and generally result from agreements that are intended to facilitate the orderly transfer of business operations. The agreements include, among others, services for accounting, customer service, distribution and manufacturing. These activities for both the ConvaTec and the Medical Imaging businesses are not expected to be material to the Company’s results of operations or cash flows. The ConvaTec agreements extend for periods generally less than 24 months, with the majority ranging between six and 18 months from the transaction close date, subject in certain cases to limited extensions. The Medical Imaging agreements extend for periods generally less than 24 months, with the majority ranging between three and six months from the transaction close date, subject in certain cases to closing extensions. The transitional service fees, net of identifiable direct costs, are recognized in other expense, net and amounted to $6 million and $10 million during the three and nine months ended September 30, 2008, respectively.

Note 5. Discontinued Operations (Continued)

The following summarized financial information related to the ConvaTec and Medical Imaging businesses has been segregated from continuing operations and reported as discontinued operations through the date of disposition and does not reflect the costs of certain services provided to ConvaTec and Medical Imaging. Such costs, which were not allocated by the Company to ConvaTec and Medical Imaging, were for services, which included, without limitation, legal counsel, insurance, external audit fees, payroll processing, certain human resource services and information technology systems support.


	Three Months Ended September 30, 2008							Three Months Ended September 30, 2007
Dollars in Millions	ConvaTec		Medical Imaging			Total		ConvaTec		Medical Imaging		Total
Net sales	$	120	$	7		$	127	$	292	$	157	$	449

Earnings (loss) from discontinued operations:
Earnings (loss) before income taxes	$	28	$	(13	)	$	15	$	86	$	69	$	155
Curtailment losses and special termination benefits		2		—			2		—		—		—
Provision (benefit) for income taxes		8		(3	)		5		31		19		50

Earnings (loss) from discontinued operations, net of taxes	$	18	$	(10	)	$	8	$	55	$	50	$	105


	Nine Months Ended September 30, 2008							Nine Months Ended September 30, 2007
Dollars in Millions	ConvaTec		Medical Imaging			Total		ConvaTec		Medical Imaging		Total
Net sales	$	732	$	33		$	765	$	832	$	487	$	1,319

Earnings (loss) from discontinued operations:
Earnings (loss) before income taxes	$	194	$	(8	)	$	186	$	258	$	212	$	470
Curtailment losses and special termination benefits		18		—			18		—		—		—
Provision (benefit) for income taxes		63		(2	)		61		90		59		149

Earnings (loss) from discontinued operations, net of taxes	$	113	$	(6	)	$	107	$	168	$	153	$	321

The consolidated statements of cash flows include the ConvaTec and Medical Imaging businesses through the date of disposition. The Company uses a centralized approach to the cash management and financing of its operations and, accordingly, debt was not allocated to these businesses.

Note 5. Discontinued Operations (Continued)

The following table includes Medical Imaging assets and liabilities that have been segregated and classified as assets held for sale and liabilities related to assets held for sale, as appropriate, in the consolidated balance sheet as of December 31, 2007. The amounts presented below were adjusted to exclude cash and intercompany receivables and payables between the business held for sale and the Company, which were excluded from the divestiture. In addition, goodwill at December 31, 2007 of $2 million has been excluded from the following summary of net assets held for sale and was considered in determining the pre-tax gain on sale in the first quarter of 2008. These assets are not generating operating results or cash flows and were included in the table below as assets held for sale at December 31, 2007.


Dollars in Millions	December 31, 2007
Medical Imaging
Assets
Receivables, net of allowances of $2	$	62
Inventories, net		20
Other assets		31
Property, plant and equipment, net		174
Other intangible assets, net		273

Total assets held for sale		560


Liabilities
Accounts payable		12
Accrued liabilities		23

Total liabilities related to assets held for sale		35


Net assets held for sale	$	525

Note 6. Earnings Per Share

The numerator for basic earnings per share is net earnings available to common stockholders. The numerator for diluted earnings per share is net earnings available to common stockholders with interest expense added back for the assumed conversion of the convertible debt into common stock. The denominator for basic earnings per share is the weighted-average number of common stock outstanding during the period. The denominator for diluted earnings per share is weighted-average shares outstanding adjusted for the effect of dilutive stock options, restricted shares and assumed conversion of the convertible debt into common stock. The computations for basic and diluted earnings per common share are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
Amounts in Millions, Except Per Share Data	2008		2007		2008		2007
Basic:
Net Earnings from Continuing Operations	$	588	$	753	$	1,957	$	1,933

Discontinued Operations:
Earnings, net of taxes		8		105		107		321
Gain on Disposal, net of taxes		1,982		—		1,939		—

Net Earnings	$	2,578	$	858	$	4,003	$	2,254


Basic Earnings Per Share:
Average Common Shares Outstanding - Basic		1,977		1,974		1,976		1,968

Net Earnings from Continuing Operations	$	0.30	$	0.38	$	0.99	$	0.98

Discontinued Operations:
Earnings, net of taxes		—		0.05		0.06		0.17
Gain on Disposal, net of taxes		1.00		—		0.98		—

Net Earnings per Common Share	$	1.30	$	0.43	$	2.03	$	1.15


Diluted:
Net Earnings from Continuing Operations	$	588	$	753	$	1,957	$	1,933
Interest expense on conversion of convertible debt, net of taxes		4		10		16		28

Net Earnings from Continuing Operations used for Diluted Earnings per Common Share Calculation		592		763		1,973		1,961
Discontinued Operations:
Earnings, net of taxes		8		105		107		321
Gain on Disposal, net of taxes		1,982		—		1,939		—

Net Earnings	$	2,582	$	868	$	4,019	$	2,282


Diluted Earnings Per Share:
Average Common Shares Outstanding		1,977		1,974		1,976		1,968
Conversion of convertible debt		24		29		27		29
Incremental shares outstanding assuming the exercise/vesting of dilutive stock options/restricted stock		3		9		3		8

Average Common Shares Outstanding - Diluted		2,004		2,012		2,006		2,005


Net Earnings from Continuing Operations	$	0.30	$	0.38	$	0.98	$	0.98

Discontinued Operations:
Earnings, net of taxes		—		0.05		0.05		0.16
Gain on Disposal, net of taxes		0.99		—		0.97		—

Net Earnings per Common Share	$	1.29	$	0.43	$	2.00	$	1.14

Weighted-average shares issuable upon the exercise of stock options, which were not included in the diluted earnings per share calculation because they were anti-dilutive, were 138 million and 84 million for the three months ended September 30, 2008 and 2007, respectively, and 141 million and 78 million for the nine months ended September 30, 2008 and 2007, respectively.

Note 7. Other Expense, Net

The components of other expense, net were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Dollars in Millions
Interest expense	$	84		$	109		$	237		$	325
Interest income		(37	)		(69	)		(111	)		(184	)
Impairment charge of marketable securities		224			—			247			—
Foreign exchange transaction (gains)/losses		(51	)		21			(34	)		24
Other, net		(51	)		(53	)		(151	)		(136	)

Other expense, net	$	169		$	8		$	188		$	29

Interest expense was decreased by net interest swap gains of $17 million and $39 million for the three and nine months ended September 30, 2008, respectively, and increased by net interest swap losses of $4 million and $8 million for the three and nine months ended September 30, 2007, respectively. Interest income relates primarily to interest earned on cash, cash equivalents and investments in marketable securities. See “—Note 10. Marketable Securities” for further detail on impairment of marketable securities. Other, net includes income from third-party contract manufacturing, certain royalty income and expense, gains and losses on disposal of property, plant and equipment, certain other litigation matters, ConvaTec and Medical Imaging net transitional service fees, and amortization of certain upfront payments related to the Company’s alliances. See “—Note 2. Alliances and Investments.”

Note 8. Income Taxes

The effective income tax rate on earnings from continuing operations before minority interest and income taxes was 26.7% and 25.0% for the three and nine months ended September 30, 2008, respectively, compared to 23.2% and 17.8% for the three and nine months ended September 30, 2007, respectively. The higher tax rate in the three months ended September 30, 2008 compared to the same period in 2007 was primarily due to earnings mix in high tax jurisdictions in 2008, the impairment of auction rate securities and the benefit of the research and development credit in 2007, which expired on December 31, 2007. The tax rate for the nine months ended September 30, 2007 was favorably impacted due to a tax benefit of $105 million in the first quarter of 2007. This benefit related to the favorable resolution of certain tax matters with the Internal Revenue Service related to the deductibility of litigation settlement expenses and U.S. foreign tax credits claimed. The tax rate for the nine months ended September 30, 2008 was favorably impacted by a benefit of $91 million of tax related to the effective settlement of the 2002-2003 audit with the Internal Revenue Service. The effective settlement was related to the Joint Committee of Congress approval of a Foreign Tax Credit Carrryback Claim to 2000 and 2001. The Company received a cash refund of approximately $432 million, including interest, in the third quarter of 2008.

On October 3, 2008, President Bush signed the Emergency Economic Stabilization Act of 2008 (The Act). The Act extended the Research and Development Credit for both 2008 and 2009. The Company will record the benefit of the Research and Development Credit for all of 2008 in the fourth quarter. The Act also extended through 2009 a deferral for certain payments (interest, dividends, rents and royalties) between commonly controlled foreign corporations.

U.S. income taxes have not been provided on the earnings of certain low tax non-U.S. subsidiaries that are not projected to be distributed this year since the Company has invested or expects to invest such earnings indefinitely offshore. If, in the future, these earnings are repatriated to the U.S., or if the Company determines such earnings will be remitted in the foreseeable future, additional tax provisions would be required.

The Company has recorded significant deferred tax assets related to U.S. foreign tax credit, research tax credit and charitable contribution carryforwards. The charitable contribution carryforwards are expected to be fully utilized by the end of 2008 due to the Medical Imaging and ConvaTec divestitures. The foreign tax credit and research credit carryforwards expire in varying amounts beginning in 2012. It is anticipated that there will be a significant reduction to the foreign tax credit and research tax credit carryforward due to the Medical Imaging and ConvaTec divestitures. Realization of foreign tax credit, research tax credit and charitable contribution carryforwards are dependent on generating sufficient domestic-sourced taxable income prior to their expiration. Although realization is not assured, management believes it is more likely than not that these deferred tax assets will be realized.

The Company classifies interest expense and penalties related to unrecognized tax benefits as income tax expense. The Company is currently under examination by a number of tax authorities, including all of the major jurisdictions listed in the table below, which have potential adjustments to tax for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. The Company anticipates that it is reasonably possible that the total amount of unrecognized tax benefits at September 30, 2008 will

Note 8. Income Taxes (Continued)

decrease in the range of approximately $195 million to $235 million in the next 12 months as a result of the settlement of certain tax audits and other events. The expected range of settlements, within the next 12 months, has increased slightly from the year end disclosure. The expected change in unrecognized tax benefits, primarily settlement related, will involve the payment of additional taxes, the adjustment of certain deferred taxes, and/or the recognition of tax benefits. The Company also anticipates that it is reasonably possible that new issues will be raised by tax authorities which may require increases to the balance of unrecognized tax benefits. However, an estimate of such increases cannot reasonably be made.

The Company files income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is subject to U.S. Federal, state and local, and non-U.S. income tax examinations by tax authorities. The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes against the Company based upon tax years currently under audit and subsequent years that will likely be audited:


U.S.		2002 to 2008
Canada		2001 to 2008
France		2004 to 2008
Germany		1999 to 2008
Italy		2002 to 2008
Mexico		2003 to 2008

Note 9. Fair Value Measurement

As stated in “—Note 1. Basis of Presentation and New Accounting Standards”, on January 1, 2008, the Company adopted the methods of fair value as described in SFAS No. 157 to value its financial assets and liabilities. As defined in SFAS No. 157, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

Note 9. Fair Value Measurement (Continued)

Financial assets and liabilities carried at fair value at September 30, 2008 are classified in the table below in one of the three categories described above:


	Level 1		Level 2		Level 3		Total
Dollars in Millions
U.S. Treasury Bills	$	1,256	$	—	$	—	$	1,256
Equity Securities		24		—		—		24
U.S. Treasury-Backed Securities		—		4,990		—		4,990
Interest Rate Swap Derivative Assets		—		151		—		151
Foreign Exchange Derivative Assets		—		51		—		51
Auction Rate Securities		—		—		213		213
Floating Rate Securities		—		—		178		178

Total assets at fair value ⁽¹⁾	$	1,280	$	5,192	$	391	$	6,863


	Level 1		Level 2		Level 3		Total
Dollars in Millions
Interest Rate Swap Derivative Liabilities	$	—	$	89	$	—	$	89
Foreign Exchange Derivative Liabilities		—		12		—		12
Natural Gas Contracts		—		2		—		2

Total liabilities at fair value ⁽¹⁾	$	—	$	103	$	—	$	103

(1)

The Company chose not to elect the fair value option as prescribed by SFAS No. 159 for its financial assets and liabilities that had not been previously carried at fair value. Therefore, material financial assets and liabilities not carried at fair value, such as the Company’s investment in ImClone, short- and long-term debt obligations and trade accounts receivable and payable, are still reported at their carrying values.

Due to the lack of observable market quotes on the Company’s auction rate securities (ARS) portfolio, the Company utilizes valuation models that rely exclusively on Level 3 inputs including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation of the Company’s ARS investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact the Company’s valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity. During the second quarter of 2008, the Company sold the portion of its ARS portfolio that contained sub-prime mortgages as its underlying collateral for $45 million, for a gain of $2 million. During the third quarter of 2008, the Company recorded an impairment charge of $224 million related to certain ARS. The impairment charge included an additional $64 million decline in value during the period as well as $160 million which was previously determined to be temporary as of June 30, 2008. The Company continued to adjust ARS to fair value based on third party valuation models including indicative pricing and other non-observable evidence of fair value, including internal valuation models. The third quarter impairment charge was required after an analysis of other-than-temporary impairment factors, including the severity of decline and current market conditions.

The Company’s floating rate securities (FRS) are primarily rated AA/A2 or better with several securities on negative watch. FRS are long-term debt securities with coupons that are reset periodically against a benchmark interest rate. The underlying assets of the FRS consist primarily of consumer loans, auto loans, collateralized loan obligations, monoline securities, asset-backed securities, and corporate bonds and loans. Since the latter part of 2007, the general FRS market became less liquid or active due to the continuing credit and liquidity concerns. As a result, there is no availability of observable market quotes in the active market (Level 1 inputs) or market quotes on similar or identical assets or liabilities, or inputs that are derived principally from or corroborated by observable market data by correlation or other means (Level 2 inputs). The Company marks-to-market its FRS based on indicative pricing. Those indicative price quotes represent the individual broker’s own assessments based on similar assets as well as using valuation techniques and analyzing the underlying assets of FRS. Due to the current lack of an active market for the Company’s FRS and the general lack of transparency into their underlying assets, the Company also relies on other qualitative analysis including discussions with brokers and fund managers, default risk underlying the security and overall capital market liquidity (Level 3 inputs) to value its FRS portfolio. In the three and nine months ended September 30, 2008, the Company received $2 million and $105 million, respectively, of principal at par primarily on FRS that matured in March 2008.

Note 9. Fair Value Measurement (Continued)

For financial assets and liabilities that utilize Level 1 and Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including LIBOR and EURIBOR yield curves, foreign exchange forward prices, bank price quotes for forward starting swaps, NYMEX futures pricing and common stock price quotes. Below is a summary of valuation techniques for Level 1 and Level 2 financial assets and liabilities:

•

U.S. Treasury Bills and Treasury-Backed Securities – valued at the quoted market price from broker or dealer quotations or transparent pricing sources at the reporting date.

•

Equity securities – valued using quoted stock prices from New York Stock Exchange or National Association of Securities Dealers Automated Quotation System at the reporting date.

•

Interest rate swap derivative assets and liabilities – valued using LIBOR and EURIBOR yield curves at the reporting date. Counterparties to these contracts are highly-rated financial institutions, none of which experienced any significant downgrades in the nine months ended September 30, 2008.

•

Foreign exchange derivative assets and liabilities – valued using quoted forward foreign exchange prices at the reporting date. Counterparties to these contracts are highly-rated financial institutions, none of which experienced any significant downgrades in the nine months ended September 30, 2008.

•

Natural gas forward contracts – valued using NYMEX futures prices for natural gas at the reporting date. Counterparties to these contracts are highly-rated financial institutions, none of which experienced any significant downgrades in the nine months ended September 30, 2008.

Although the Company has not elected the fair value option for financial assets and liabilities existing at January 1, 2008 or transacted in the nine months ended September 30, 2008, any future transacted financial asset or liability will be evaluated for the fair value election as prescribed by SFAS No. 159 and will be fair valued under the provisions of SFAS No. 157. The Company did not elect the fair value option for its $1.6 billion Senior Notes issued on May 1, 2008.

Note 10. Marketable Securities

The following tables summarize the Company’s current and non-current marketable securities, which include U.S. dollar-denominated FRS and ARS, both of which are accounted for as available for sale debt securities.


September 30, 2008	Cost		Fair Value		Carrying Value		Unrealized Loss in Accumulated OCI
Dollars in Millions
Current
Floating rate securities	$	116	$	94	$	94	$	(22	)
U.S. Treasury Bills		135		135		135		—
Other		29		29		29		—

Total current	$	280	$	258	$	258	$	(22	)

Non-current
Available for sale
Auction rate securities ⁽¹⁾	$	464	$	213	$	213	$	(27	)
Floating rate securities		141		84		84		(57	)

Total non-current	$	605	$	297	$	297	$	(84	)


December 31, 2007	Cost		Fair Value		Carrying Value		Unrealized Loss in Accumulated OCI
Dollars in Millions
Current
Floating rate securities	$	362	$	337	$	337	$	(25	)
Other		87		87		87		—

Total current	$	449	$	424	$	424	$	(25	)

Non-current
Available for sale
Auction rate securities ⁽²⁾	$	811	$	419	$	419	$	(117	)

Total non-current	$	811	$	419	$	419	$	(117	)

(1)	The Company recorded a pre-tax impairment charge of $224 million in earnings at September 30, 2008 related to these securities.

(2)	The Company recorded a pre-tax impairment charge of $275 million in earnings at December 31, 2007 related to these securities.

The following table summarizes the activity for those financial assets where fair value measurements are estimated utilizing Level 3 inputs (ARS and FRS).


				Non-current
	Current FRS			FRS			ARS			Total
Dollars in Millions
Carrying value at January 1, 2008	$	337		$	—		$	419		$	756
Settlements		(105	)		—			(49	)		(154	)
Transfers between current and non-current		(104	)		104			—			—
Total losses
Included in earnings		—			—			(247	)		(247	)
Included in other comprehensive income		(34	)		(20	)		90			36

Carrying value at September 30, 2008	$	94		$	84		$	213		$	391

On December 31, 2007, the Company’s carrying value in FRS amounted to $337 million. In the three and nine months ended September 30, 2008, the Company received $2 million and $105 million, respectively, of principal at par primarily on FRS that matured in March 2008. In the nine months ended September 30, 2008, the Company reduced the carrying value of the remaining FRS by $54 million to $178 million. The Company assessed this decline in fair market value to be temporary, and recorded the decline as an unrealized loss in accumulated OCI. In addition, in the first quarter of 2008, the Company reclassified $104 million of the remaining FRS with maturity dates beyond 2009 from current assets to non-current assets, as the Company expects these FRS to recover their values beyond the next 12 months due to liquidity concerns and the continued uncertainty in the capital markets.

Note 10. Marketable Securities (Continued)

On December 31, 2007, the Company’s carrying value in ARS amounted to $419 million. In the first quarter of 2008, the Company received $4 million at par value of partial calls on its ARS and in addition recorded an impairment charge of $25 million on ARS that were previously assessed as other-than-temporarily impaired. In the second quarter of 2008, the Company sold the portion of its ARS portfolio that contained sub-prime mortgages as its underlying collateral for $45 million, for a gain of $2 million. During the third quarter of 2008, the Company recorded an impairment charge of $224 million related to certain ARS. The impairment charge included an additional $64 million decline in value during the period as well as $160 million which was previously determined to be temporary as of June 30, 2008. The Company continued to adjust ARS to fair value based on third party valuation models and other non-observable evidence of fair value. The third quarter impairment charge was required after an analysis of other-than-temporary impairment factors, including the severity of decline and current financial market conditions.

Note 11. Receivables

The major categories of receivables were as follows:


Dollars in Millions	September 30, 2008		December 31, 2007
Trade receivables	$	2,679	$	2,805
Alliance partners receivables		1,413		824
Income tax refund claims		52		472
Miscellaneous receivables		213		319

		4,357		4,420
Less allowances		133		180

Receivables, net	$	4,224	$	4,240

For additional information on the Company's alliance partners, see “—Note 2. Alliances and Investments.”

Note 12. Inventories

The major categories of inventories were as follows:


Dollars in Millions	September 30, 2008		December 31, 2007
Finished goods	$	862	$	904
Work in process		772		834
Raw and packaging materials		421		424

Inventories, net	$	2,055	$	2,162

Note 13. Property, Plant and Equipment

The major categories of property, plant and equipment were as follows:


Dollars in Millions	September 30, 2008		December 31, 2007
Land	$	151	$	185
Buildings		4,508		4,696
Machinery, equipment and fixtures		4,150		4,418
Construction in progress		769		915

		9,578		10,214
Less accumulated depreciation		4,218		4,564

Property, plant and equipment, net	$	5,360	$	5,650

Note 14. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2008 were as follows:


Dollars in Millions	Pharmaceuticals Segment		Nutritionals Segment		ConvaTec/ Medical Imaging			Total
Balance at January 1, 2008	$	4,603	$	113	$	282		$	4,998
Adjustments:
Reduction due to sale of Medical Imaging		—		—		(2	)		(2	)
Reduction due to sale of ConvaTec		—		—		(280	)		(280	)
Purchase price and allocation adjustments		125		—		—			125

Balance at September 30, 2008	$	4,728	$	113	$	—		$	4,841

Goodwill of $132 million was recorded as a result of the Kosan acquisition, while a $7 million goodwill reduction was recorded as a result of establishing an additional deferred tax asset related to the 2007 acquisition of Adnexus. See “— Note 4. Acquisitions and Divestitures” for further detail.

At September 30, 2008 and December 31, 2007, other intangible assets consisted of the following:


Dollars in Millions	September 30, 2008		December 31, 2007
Patents/Trademarks	$	157	$	179
Less accumulated amortization		101		99

Patents/Trademarks, net		56		80


Licenses		651		663
Less accumulated amortization		239		215

Licenses, net		412		448


Technology		1,214		1,214
Less accumulated amortization		743		660

Technology, net		471		554


Capitalized Software		998		917
Less accumulated amortization		725		669

Capitalized Software, net		273		248


Other intangible assets, net	$	1,212	$	1,330

Amortization expense for other intangible assets for the three months ended September 30, 2008 and 2007 was $61 million and $89 million, respectively, and for the nine months ended September 30, 2008 and 2007 was $187 million and $265 million, respectively. Included in amortization expense for the nine months ended September 30, 2008 was $1 million of amortization expense related to the ConvaTec discontinued operations. Included in amortization expense for the three and nine months ended September 30, 2007 was $17 million and $51 million, respectively, of amortization expense related to the Medical Imaging discontinued operations and $1 million and $3 million, respectively, of amortization expense related to the ConvaTec discontinued operations.

Expected amortization expense related to the September 30, 2008 net carrying amount of other intangible assets follows:


Years Ending December 31:		Dollars in Millions
2008 (three months)		$61
2009		235
2010		229
2011		210
2012		168
Later Years		309

Note 15. Accumulated Other Comprehensive Income/(Loss)

The accumulated balances related to each component of other comprehensive income/(loss), net of taxes, were as follows:


Dollars in Millions	Foreign Currency Translation			Derivatives Qualifying as Effective Hedges			Pension and Other Postretirement Benefits			Available for Sale Securities			Accumulated Other Comprehensive Income/(Loss)
Balance at January 1, 2007	$	(424	)	$	(23	)	$	(1,211	)	$	13		$	(1,645	)
Other comprehensive income/(loss)		74			(28	)		85			(1	)		130

Balance at September 30, 2007	$	(350	)	$	(51	)	$	(1,126	)	$	12		$	(1,515	)


Balance at January 1, 2008	$	(325	)	$	(37	)	$	(973	)	$	(126	)	$	(1,461	)
Other comprehensive income/(loss)		(23	)		36			70			25			108

Balance at September 30, 2008	$	(348	)	$	(1	)	$	(903	)	$	(101	)	$	(1,353	)

Note 16. Business Segments

The Company has two reportable segments—Pharmaceuticals and Nutritionals. The Pharmaceuticals segment is comprised of the global pharmaceutical and international consumer medicines businesses. The Nutritionals segment consists of Mead Johnson Nutritionals, primarily an infant formula and children’s nutritionals business.

The following table summarizes the Company’s net sales and earnings from continuing operations before minority interest and income taxes by business segment.


	Three Months Ended September 30,									Nine Months Ended September 30,

	Net Sales				Earnings From Continuing Operations Before Minority Interest and Income Taxes					Net Sales				Earnings From Continuing Operations Before Minority Interest and Income Taxes
Dollars in Millions	2008		2007		2008			2007		2008		2007		2008			2007
Pharmaceuticals	$	4,510	$	3,926	$	1,403		$	977	$	13,173	$	11,234	$	3,849		$	2,807
Nutritionals		744		675		200			196		2,175		1,901		645			536


Total Segments		5,254		4,601		1,603			1,173		15,348		13,135		4,494			3,343
Corporate/Other		—		—		(448	)		83		—		—		(911	)		(329	)

Total	$	5,254	$	4,601	$	1,155		$	1,256	$	15,348	$	13,135	$	3,583		$	3,014

Corporate/Other consists principally of interest income, interest expense, certain administrative expenses and certain corporate programs, impairment charges of ARS, amortization of certain upfront payments, restructuring charges and certain other litigation matters.

Note 16. Business Segments (Continued)

Net sales of the Company’s key products were as follows:


	Net Sales by Products
	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2008		2007		2008		2007
Pharmaceuticals
Cardiovascular
PLAVIX*	$	1,439	$	1,254	$	4,134	$	3,381
AVAPRO/AVALIDE		334		309		974		876
PRAVACHOL		34		86		176		353
Virology
REYATAZ		342		273		963		790
SUSTIVA Franchise (total revenue)		294		237		849		696
BARACLUDE		144		72		388		176
Oncology
ERBITUX*		184		185		567		507
TAXOL		91		102		286		308
SPRYCEL		82		46		224		102
IXEMPRA		25		—		76		—
Affective (Psychiatric) Disorders
ABILIFY* (total revenue)		564		420		1,547		1,198
Immunoscience
ORENCIA		119		60		312		156
Other Pharmaceuticals		858		882		2,677		2,691

Total Pharmaceuticals		4,510		3,926		13,173		11,234

Nutritionals
ENFAMIL		295		281		872		802
Other Nutritionals		449		394		1,303		1,099

Total Nutritionals		744		675		2,175		1,901


Total	$	5,254	$	4,601	$	15,348	$	13,135

Note 17. Pension and Other Postretirement Benefit Plans

The net periodic benefit cost of the Company’s defined benefit pension and postretirement benefit plans included the following components:


	Three Months Ended September 30,												Nine Months Ended September 30,
	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
Dollars in Millions	2008			2007			2008			2007			2008			2007			2008			2007
Service cost — benefits earned during the period	$	55		$	61		$	2		$	3		$	174		$	184		$	6		$	7
Interest cost on projected benefit obligation		98			88			9			8			294			261			29			27
Expected return on plan assets		(118	)		(110	)		(7	)		(6	)		(354	)		(328	)		(21	)		(19	)
Amortization of prior service cost/(benefit)		3			4			(1	)		(1	)		8			9			(3	)		(3	)
Amortization of loss		24			34			1			1			73			103			4			4

Net periodic benefit cost		62			77			4			5			195			229			15			16
Curtailments, settlements and special termination benefits		2			1			(1	)		(1	)		18			2			(1	)		(1	)

Total net periodic benefit cost	$	64		$	78		$	3		$	4		$	213		$	231		$	14		$	15

Net actuarial loss and prior service cost amortized from accumulated OCI into net periodic benefit costs for the three months ended September 30, 2008 and 2007 were $27 million and $38 million for pension benefits, respectively, and were de minimis for other benefits. For the nine months ended September 30, 2008 and 2007, net actuarial loss and prior service cost amortized from accumulated OCI were $81 million and $112 million for pension benefits, respectively. Other benefits amortized from accumulated OCI were $2 million and $1 million in the nine months ended September 30, 2008 and 2007, respectively.

Concurrent with the agreement to sell ConvaTec, a revaluation of various pension plans’ assets and obligations was performed. The revaluation resulted in a settlement and a net curtailment loss of $5 million and special termination benefits of $13 million. These gains and losses were included in discontinued operations in the second and third quarters of 2008.

Contributions

For the three and nine months ended September 30, 2008, there were no contributions to the U.S. pension plans and contributions to the international plans were $57 million and $95 million, respectively. For the three and nine months ended September 30, 2007, contributions to the U.S. pension plans were $20 million, and contributions to the international plans were $19 million and $52 million, respectively. Although no minimum contributions will be required, the Company expects to make cash contributions to the U.S. pension plans in 2008 but has not yet determined an amount. The Company expects contributions to the international plans to be in the range of $140 million to $160 million for the year ending December 31, 2008. There will be no cash funding for other benefits.

Those cash benefit payments from the Company, which are classified as contributions under SFAS No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits – an amendment of FASB Statements No. 87, 88 and 106 , for the three and nine months ended September 30, 2008, totaled $13 million and $37 million for pension benefits, respectively, and $16 million and $43 million for other postretirement benefits, respectively.

Note 18. Employee Stock Benefit Plans

The following table summarizes stock-based compensation expense, net of taxes, related to employee stock options, restricted stock, and long-term performance awards for the three and nine months ended September 30, 2008 and 2007:


	Three Months Ended September 30,						Nine Months Ended September 30,
Dollars in Millions	2008			2007			2008			2007
Cost of products sold	$	5		$	3		$	14		$	10
Marketing, selling and administrative		26			19			79			59
Research and development		13			9			39			29

Total stock-based compensation expense		44			31			132			98
Deferred tax benefit		(14	)		(10	)		(43	)		(34	)

Stock-based compensation expense, net of taxes	$	30		$	21		$	89		$	64

Note 18. Employee Stock Benefit Plans (Continued)

Stock Options

Information related to stock option grants and exercises under the Company’s Stock Award and Incentive Plans are summarized as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
Amounts in Millions, Except Per Share Data	2008		2007		2008		2007
Stock options granted		0.1		0.1		18.2		14.6
Weighted-average grant-date fair value (per share)	$	4.42	$	6.62	$	4.96	$	6.03
Total intrinsic value of stock options exercised	$	0.5	$	4.2	$	1.1	$	31.9
Cash proceeds from exercise of stock options	$	0.5	$	18.0	$	4.2	$	319.3

At September 30, 2008, there was $118 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 2.6 years.

At September 30, 2008, there were 137.5 million and 103.1 million of stock options outstanding and exercisable, respectively, with a weighted-average exercise price of $35.47 and $39.08, respectively. The aggregate intrinsic value for these outstanding and exercisable stock options was $7.9 million and $2.9 million, respectively, and represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $20.85 on September 30, 2008, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable at September 30, 2008 was 0.5 million.

The fair value of employee stock options granted in 2008 and 2007 was estimated on the date of the grant using the Black-Scholes option pricing model for stock options with a service condition, and the Monte Carlo simulation model for options with service and market conditions. The following table presents the weighted-average assumptions used in the valuation:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
Expected volatility	31.5	%	28.1	%	31.0	%	29.0	%
Risk-free interest rate	3.5	%	4.7	%	3.3	%	4.7	%
Dividend yield	4.8	%	4.1	%	4.3	%	4.5	%
Expected life	7.0 years		6.3 years		6.7 years		6.3 years

Restricted Stock

The Company’s Stock Award and Incentive Plans provide for the granting of common stock to key employees, subject to restrictions as to continuous employment. Restrictions generally expire over a four-year period from the date of grant. Compensation expense is recognized over the restricted period. During the first quarter of 2007, the Company began granting restricted stock units instead of restricted stock. At September 30, 2008, there were 10.1 million shares of restricted stock and restricted stock units outstanding under the plan. For the three months ended September 30, 2008 and 2007, less than 0.1 million and 0.1 million shares, respectively, of restricted stock and restricted stock units were granted with a weighted-average fair value of $21.14 and $29.54 per share, respectively. For the nine months ended September 30, 2008 and 2007, 5.3 million and 3.5 million shares, respectively, of restricted stock and restricted stock units were granted with a weighted-average fair value of $22.25 and $27.10 per share, respectively.

At September 30, 2008, there was $173 million of total unrecognized compensation cost related to unvested restricted stock and restricted stock units, which is expected to be recognized over a weighted-average period of 2.8 years. The total fair value of shares and share units that vested during the three months ended September 30, 2008 and 2007 was $4 million and $5 million, respectively, and during the nine months ended September 30, 2008 and 2007 was $52 million and $32 million, respectively.

Long-Term Performance Awards

The 2008 through 2010 three-year cycle award has annual goals, set at the beginning of each performance period, based 50% on earnings per share and 50% on sales. Maximum performance will result in a maximum payout of 165%. If threshold targets are not met for the performance period, no payment will be made under the performance award plan.

For the 2008 through 2010 performance period, a second performance award was granted on a one-time basis. This Special Performance Share Award has annual goals, set at the beginning of each performance period, based 50% on pre-tax operating margin and 50% on operating cash flow. Maximum performance will result in a maximum payout of 165%. If threshold targets are not met for the performance period, no payment will be made under the performance award plan.

Note 18. Employee Stock Benefit Plans (Continued)

The 2008 through 2010 awards do not contain a market condition, and the fair value of these awards was based on the closing trading price of the Company’s common stock on the grant date.

At September 30, 2008, there were 1.6 million performance shares outstanding under the Company’s Stock Award and Incentive Plans with $28 million of total unrecognized compensation cost, which is expected to be recognized over a weighted-average period of 1.8 years. There were no performance shares granted during the three months ended September 30, 2008 and 2007. During the nine months ended September 30, 2008 and 2007, 1.2 million and 0.3 million performance shares were granted, with a weighted average fair value of $21.50 and $27.35 per share, respectively.

Note 19. Short-Term Borrowings and Long-Term Debt

The components of long-term debt were as follows:


Dollars in Millions	September 30, 2008		December 31, 2007
5.875% Notes due 2036	$	1,344	$	1,284
6.125% Notes due 2038		1,001		—
4.375% Euro Notes due 2016		697		688
4.625% Euro Notes due 2021		677		662
5.25% Notes due 2013		618		614
5.45% Notes due 2018		594		—
6.80% Debentures due 2026		382		383
7.15% Debentures due 2023		371		365
6.88% Debentures due 2097		296		296
Floating Rate Convertible Senior Debentures due 2023		50		—
5.75% Industrial Revenue Bonds due 2024		35		34
1.81% Yen Notes due 2010		33		31
Variable Rate Industrial Revenue Bonds due 2030		15		15
Other		7		9

	$	6,120	$	4,381

In September 2008, the Company repaid $1,150 million principal amount of the $1,200 million aggregate principal amount of Floating Rate Convertible Senior Debentures due 2023, as a result of a redemption by the note holders. All or a portion of the remaining balance of $50 million can be redeemed by the holders at par on September 15, 2013 and 2018, or if a fundamental change in ownership of the Company occurs, and has been reclassified to long-term debt as of September 30, 2008. All or a part of the remaining debt is also callable at par at any time by the issuer.

In August 2008 and February 2008, the Company repaid the $400 million 4.00% Notes due 2008 and $117 million of the 1.10% Yen Notes due 2008, respectively.

On May 1, 2008, the Company issued $600 million aggregate principal amount of 5.45% Notes due 2018 and $1 billion aggregate principal amount of its 6.125% Notes due 2038 (collectively, the “May 1, 2008 Issued Notes”) in a registered public offering. Interest payments are made May 1 and November 1 of each year, beginning on November 1, 2008. The May 1, 2008 Issued Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured indebtedness. The Company may redeem the May 1, 2008 Issued Notes, in whole or in part, at any time at a redemption price equal to the greater of par value or an amount calculated based upon the sum of the present values of the remaining scheduled payments as set forth in the prospectus supplement dated April 28, 2008.

In the first quarter of 2008, the Company entered into an aggregate $600 million notional amount 30-year forward starting interest rate swaps terminating in June 2008 with several financial institutions. The forward starting interest rate swaps were settled on April 30, 2008 at a loss of $19 million. This loss is being deferred in other comprehensive income/(loss) and is being amortized to interest expense over the life of the 6.125% Notes due 2038.

The Company entered into fixed-to-floating interest rate swaps for $4.9 billion (U.S. dollar value at September 30, 2008) of its long-term debt. In the nine months ended September 30, 2008, in conjunction with the issuance of May 1, 2008 Issued Notes, the Company executed several fixed-to-floating interest rate swaps to convert $1.2 billion of the $1.6 billion newly-issued fixed rate debt to variable rate debt.

Note 20. Legal Proceedings and Contingencies

Various lawsuits, claims, proceedings and investigations are pending involving the Company and certain of its subsidiaries. In accordance with SFAS No. 5, Accounting for Contingencies , the Company records accruals for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These matters involve antitrust, securities, patent infringement, pricing, sales and marketing practices, environmental, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage.

The most significant of these matters are described in “Item 8. Financial Statements and Supplemental Data—Note 22. Legal Proceedings and Contingencies” in the Company’s 2007 Form 10-K. The following discussion is limited to certain recent developments related to these previously described matters, and certain new matters that have not previously been described in a prior report. Accordingly, the disclosure below should be read in conjunction with the Company’s 2007 Form 10-K and Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008. Unless noted to the contrary, all matters described in those earlier reports remain outstanding and the status is consistent with what has previously been reported.

There can be no assurance that there will not be an increase in the scope of pending matters or that any future lawsuits, claims, proceedings or investigations will not be material.

INTELLECTUAL PROPERTY

PLAVIX* Litigation

PLAVIX* is currently the Company’s largest product ranked by net sales. Net sales of PLAVIX* were approximately $4.8 billion for the year ended December 31, 2007 and $4.1 billion for the nine months ended September 30, 2008. U.S. net sales of PLAVIX* for the same periods were $4.1 billion and $3.6 billion, respectively. The PLAVIX* patents are subject to a number of challenges in the U.S., including the litigation with Apotex Inc. and Apotex Corp. (Apotex) described below, and in other less significant markets for the product. It is not possible reasonably to estimate the impact of these lawsuits on the Company. However, loss of market exclusivity of PLAVIX* and sustained generic competition would be material to the Company’s sales of PLAVIX*, results of operations and cash flows, and could be material to the Company’s financial condition and liquidity. The Company and its product partner, Sanofi, (the Companies) intend to vigorously pursue enforcement of their patent rights in PLAVIX*.

PLAVIX* Litigation – United States

Patent Infringement Litigation against Apotex and Related Matters

As previously disclosed, in April 2007, the Company received a subpoena from the New York State Attorney General’s Office — Antitrust Bureau (NYAG) for documents related to the proposed settlement agreement with Apotex to settle the pending patent infringement lawsuit. The Company and the NYAG are currently in discussions regarding resolution of this matter.

PLAVIX* Litigation – International

PLAVIX* – Canada (Apotex, Inc.)

As previously disclosed, in April 2007, Apotex filed a lawsuit in Canada in the Ontario Superior Court of Justice (Superior Court) entitled Apotex Inc., et al. v. Sanofi-Aventis, et al. , seeking a payment of $60 million, plus interest related to the break-up of the proposed settlement agreement. In January 2008, the Superior Court granted defendants’ motions to dismiss on the grounds of forum non conveniens and subject matter jurisdiction. Apotex has appealed the decision to the Court of Appeal for Ontario. On October 10, 2008, the Court of Appeal dismissed the lawsuit. Apotex has 60 days in which to file an appeal to the Supreme Court of Canada.

PLAVIX* – Australia

As previously disclosed, Sanofi was notified that, in August 2007, GenRx Proprietary Limited (GenRx) obtained regulatory approval of an application for clopidogrel bisulfate 75 mg tablets in Australia. GenRx, formerly a subsidiary of Apotex, has since changed its name to Apotex. In August 2007, Apotex filed an application in the Federal Court of Australia seeking revocation of Sanofi’s Australian Patent No. 597784 (Case No. NSD 1639 of 2007). Sanofi filed counterclaims of infringement and sought an injunction. On September 21, 2007, the Australian court granted Sanofi’s injunction. A subsidiary of the Company was subsequently added as a party to the proceedings. In February 2008, a second company, Spirit Pharmaceuticals Pty. Ltd., also filed a revocation suit against the same patent. This case was consolidated with the Apotex case and a trial occurred in April. On August 12, 2008, the Federal Court of Australia held that claims of Patent No. 597784 covering clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate salts are valid. The Federal Court also held that the process claims, pharmaceutical composition claims, and a claim directed to clopidogrel and its pharmaceutically acceptable salts are invalid. In view of this decision, it is possible a generic company could develop and seek registration in Australia for an alternate salt form of clopidogrel (other than bisulfate, hydrochloride, hydrobromide, or taurocholate). The Company and Sanofi filed notices of appeal in the Full Court of the Federal Court of Australia appealing the holding of invalidity of the claim covering clopidogrel and its pharmaceutically acceptable salts, process claims, and pharmaceutical composition claims, which have stayed the Federal Court’s ruling. Apotex filed a notice of appeal appealing the holding of validity of the clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate claims.

Note 20. Legal Proceedings and Contingencies (Continued)

PLAVIX* – Germany

As previously disclosed, in 2007, YES Pharmaceutical Development Services GmbH (YES Pharmaceutical) filed an application for marketing authorization in Germany for an alternate salt form of clopidogrel. This application relied on data from studies that were originally conducted by Sanofi and BMS for PLAVIX*. In May 2008, the German health authority (Bfarm) granted marketing authorization to the YES Pharmaceutical product. Data protection for PLAVIX* did not expire until July 2008. Sanofi and BMS filed an objection to the grant of the marketing authorization on the grounds that their data exclusivity rights had been infringed. YES Pharmaceutical and its partners sought immediate enforcement of the marketing authorization, which was denied by Bfarm. YES Pharmaceutical and its partners then filed a legal motion for immediate enforcement before the administrative court, which was granted. YES Pharmaceutical’s partners, Hexal and Ratiopharm, began and continue to market the product in Germany. Sanofi and BMS appealed the decision of the administrative court, but this appeal has been rejected by the administrative appeal court. The third party objection before Bfarm is still pending. YES Pharmaceutical and its partners have announced that they plan to seek marketing authorization in other EU countries in addition to Germany. Also, the Company believes that other companies have filed for generic approvals in the EU of a clopidogrel containing product after the expiration of the data protection period. These applications are pending.

OTHER INTELLECTUAL PROPERTY LITIGATION

ORENCIA

As previously disclosed, in August 2006, ZymoGenetics, Inc. filed a complaint against the Company in the U.S. District Court for the District of Delaware. The complaint alleges that the Company’s manufacture and sales of ORENCIA infringe U.S. Patents Nos. 5,843,725 and 6,018,026. On October 22, 2008, the Company and ZymoGenetics, Inc. entered into a Release and Licence Agreement under which the Company received a nonexclusive, worldwide license to ZymoGenetics, Inc.’s patents claiming Ig fusion proteins in exchange for a lump sum payment of $21 million to be paid in the fourth quarter of 2008. Pursuant to the agreement, the patent infringement lawsuit will be terminated.

ENFAMIL

On September 15, 2008, the Company and its wholly-owned subsidiary Mead Johnson & Co. filed a patent infringement lawsuit against Abbott Laboratories and Abbott Nutrition (Abbott) in U.S. District Court for the Southern District of Indiana for infringement of its U.S. Patent No. 7,040,500. The companies allege that Abbott’s sale of certain cans of SIMILAC* infant formula powder infringes the ‘500 patent. The companies have filed for a preliminary injunction, which request remains pending.

GENERAL COMMERCIAL LITIGATION

Clayworth Litigation

As previously disclosed, the Company, together with a number of other pharmaceutical manufacturers, was named as a defendant in an action filed in California State Superior Court in Oakland, James Clayworth et al. v. Bristol-Myers Squibb Company, et al ., alleging that the defendants conspired to fix the prices of pharmaceuticals by agreeing to charge more for their drugs in the U.S. than they charge outside the U.S., particularly Canada, and asserting claims under California’s Cartwright Act and unfair competition law. The plaintiffs sought trebled monetary damages, injunctive relief and other relief. In December 2006, the Court granted the Company and the other manufacturers’ motion for summary judgment based on the pass-on defense, and judgment was then entered in favor of defendants. In January 2007, a notice of appeal with respect to the judgment was filed. In July 2008, judgment in favor of defendants was affirmed by the California Court of Appeals. Plaintiffs filed a petition for review with the California Supreme Court, which remains pending. It is not possible at this time reasonably to assess the outcome of this lawsuit or its impact on the Company in the event plaintiffs are successful on appeal.

SHAREHOLDER DERIVATIVE ACTIONS

On July 31, 2007, certain members of the Board of Directors, current and former officers and the Company were named in two derivative actions filed in the New York State Supreme Court, John Frank v. Peter Dolan, et al. (07-602580) and Donald Beebout v. Peter Dolan, et al. (07-602579) , and one derivative action filed in the federal district court, Steven W. Sampson v. James D. Robinson, III, et al. (07-CV-6890) . The complaints allege breaches of fiduciary duties for allegedly failing to disclose material information relating to efforts to settle the PLAVIX* patent infringement litigation with Apotex. Plaintiffs seek monetary damages on behalf of the Company, contribution and indemnification. By decision filed on December 13, 2007, the state court granted motions to dismiss the complaints, Frank and Beebout , relating to certain members of the Board of Directors, but did not dismiss the complaints as to the former officers. By decision dated August 20, 2008, the federal district court granted the Company’s motion to dismiss the Sampson action. Plaintiffs have filed a motion for reconsideration, which is pending before the court.

Note 20. Legal Proceedings and Contingencies (Continued)

SECURITIES LITIGATION

In Re Bristol-Myers Squibb, Co. Securities Litigation

As previously disclosed, in June and July 2007, two putative class action complaints, Minneapolis Firefighters’ Relief Assoc. v. Bristol-Myers Squibb Co., et al. (07 CV 5867) and Jean Lai v. Bristol-Myers Squibb Company, et al., were filed in the U.S. District for the Southern District of New York against the Company, the Company’s former Chief Executive Officer, Peter Dolan and former Chief Financial Officer, Andrew Bonfield. The complaints allege violations of securities laws for allegedly failing to disclose material information relating to efforts to settle the PLAVIX* patent infringement litigation with Apotex. On September 20, 2007, the Court dismissed the Lai case without prejudice, changed the caption of the case to In re Bristol-Myers Squibb, Co. Securities Litigation , and appointed Ontario Teachers’ Pension Plan Board as lead plaintiff. On October 15, 2007, Ontario Teachers’ Pension Plan Board filed an amended complaint making similar allegations as the earlier filed complaints, naming an additional former officer but no longer naming Andrew Bonfield as a defendant. By decision dated August 20, 2008, the federal district court denied defendants’ motions to dismiss.

The Company intends to defend itself vigorously in this litigation. It is not possible at this time to reasonably assess the outcome of these lawsuits, or the potential impact on the Company.

PRICING, SALES AND PROMOTIONAL PRACTICES LITIGATION AND INVESTIGATIONS

AWP Litigation

As previously disclosed, the Company, together with a number of other pharmaceutical manufacturers, is a defendant in a number of private class actions as well as suits brought by the attorneys general of numerous states alleging that defendants caused the Average Wholesale Prices (AWPs) of their products to be inflated, thereby injuring government programs, entities and persons who reimbursed prescription drugs based on AWPs. The Company remains a defendant in seven state attorneys’ general suits pending in federal and state courts around the country. The Company has reached a settlement in principle in the case in Alabama state court that was scheduled to proceed to trial in October 2008.

As previously reported, one set of class actions, together with a suit by the Arizona attorney general, have been consolidated in the U.S. District Court for the District of Massachusetts (AWP MDL). In September 2008, the Court in the AWP MDL issued an order certifying multi-state classes for a class of Medigap insurers and a class of third-party payors and individuals who paid or reimbursed for drugs based on AWP.

It is not possible at this time to reasonably assess the outcome of these lawsuits or their potential impact on the Company.

California 340B Litigation

As previously disclosed, in August 2005, the County of Santa Clara filed a purported class action against the Company and numerous other pharmaceutical manufacturers on behalf of itself and a putative class of other cities and counties in California, as well as the covered entities that purchased drugs pursuant to the 340B drug discount program. In July 2006, the U.S. District Court for the Northern District of California dismissed the lawsuit with prejudice for failure to state a claim and plaintiff appealed to the U.S. Court of Appeals for the Ninth Circuit. In September 2008, the Ninth Circuit reversed District Court’s dismissal and reinstated the lawsuit.

It is not possible at this time to reasonably assess the outcome of this lawsuit, or its potential impact on the Company.

Note 21. Subsequent Event

In October 2008, the Company signed an agreement to sell its manufacturing facility located in Giza, Egypt and the 20 mature pharmaceutical products manufactured in the facility to GlaxoSmithKline plc for $210 million. The sale is expected to be completed in the fourth quarter of 2008.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Bristol-Myers Squibb Company (which may be referred to as Bristol-Myers Squibb, BMS or the Company) is a global biopharmaceutical and related health care products company whose mission is to extend and enhance human life by providing the highest quality pharmaceutical and related health care products. The Company is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceutical and related health care products.

Financial Highlights

For the third quarter of 2008, the Company reported global net sales of $5.3 billion, an increase of 14%, including a 3% favorable foreign exchange impact, compared to the same period in 2007. The growth was driven by a 15% increase in pharmaceutical net sales to $4.5 billion as well as a 10% increase in nutritional net sales to $744 million.

Diluted net earnings per common share from continuing operations was $0.30 in the third quarter of 2008 compared with $0.38 in the corresponding period in 2007. The 2008 results included charges of $224 million attributed to the impairment of auction rate securities (ARS) and $107 million associated with the implementation of the Productivity Transformation Initiative (PTI), whereas the 2007 results include a $247 million gain associated with the sale of a product asset. During the third quarter of 2008, the Company generated $1.4 billion of cash from operating activities, obtained proceeds of $4.1 billion associated with the sale of its ConvaTec business and used approximately $1.2 billion to redeem most of its Floating Rate Convertible Senior Debentures.

Strategy

The Company continues to execute its multi-year strategy and is transforming the Company into a next-generation biopharmaceutical company. The Company is focused on building for the future by maximizing the value of its non-pharmaceutical businesses, expanding and strengthening the pipeline both through developing its current portfolio of compounds and through strategic acquisitions, partnerships and other collaborative arrangements, increasing investment to improve the growth of its marketed products, and managing costs proactively.

Central to the Company’s strategy is the PTI, which will be expanded to achieve an additional $1.0 billion in projected annual cost savings and cost avoidance by 2012 in addition to the previously announced strategy to realize $1.5 billion in annual cost savings and cost avoidance by 2010. The Company is on track to achieve the $1.5 billion in annual cost savings and cost avoidance by 2010. Costs associated with achieving the $1.5 billion in annual cost savings and cost avoidance by 2010 are estimated to be between $0.9 billion to $1.1 billion on a pre-tax basis. Costs associated with the expansion of PTI for an additional $1.0 billion in cost savings and cost avoidance through 2012 have not yet been determined. The Company has incurred approximately $0.6 billion of costs to date in connection with the implementation of the PTI, including approximately $0.1 billion in the third quarter of 2008.

Consistent with the Company’s objective to maximize the value of its non-pharmaceutical businesses, in August 2008, the Company completed the sale of its ConvaTec business for a gross purchase price of approximately $4.1 billion, subject to customary post-closing adjustments, to Cidron Healthcare Limited, an affiliate of Nordic Capital Fund VII and Avista Capital Partners L.P. (Avista).

On September 15, 2008, Mead Johnson Nutritionals filed a registration statement with the U.S. Securities and Exchange Commission for an initial public offering of its Class A Common Stock. The Company plans to sell approximately 10% and no more than 20% of Mead Johnson Nutritionals through an initial public offering and to retain at least an 80% equity interest in the new company as part of the Company’s overall business portfolio for the foreseeable future. After extensively considering strategic options, management believes this plan will allow Mead Johnson Nutritionals to implement its growth plan, increase shareholder value and maintain its important financial contribution to the Company. The execution of the plan is dependent upon and subject to a number of factors and uncertainties including business and market conditions.

The Company continues to focus on supplementing its internal research and development portfolio with strategic partnerships and acquisitions. In August 2008, the Company entered into an agreement with PDL BioPharma Inc. (PDL) to license and commercialize Elotuzumab, PDL’s blood cancer drug for the treatment of multiple myeloma.

Eli Lilly and Company (Lilly) commenced a tender offer of $70 per share on October 14, 2008 for the outstanding shares of ImClone Systems Incorporated’s (ImClone) common stock. Based on Bristol-Myers Squibb’s ownership of 14.4 million shares of ImClone, the Company expects to receive approximately $1.0 billion in cash upon Lilly’s acceptance of the Company’s tendering of its shares. The Company will continue to have marketing rights to ERBITUX* and believes it has the rights to ImClone’s investigational compound IMC-11F8.

In the third quarter of 2008, the Company increased, and has plans to continue to increase, its investment to improve growth in its key products, which include PLAVIX* (clopidogrel bisulfate), ABILIFY* (aripiprazole), REYATAZ (atazanavir sulfate), the SUSTIVA Franchise (efavirenz), ERBITUX* (cetuximab), ORENCIA (abatacept), BARACLUDE (entecavir), SPRYCEL (dasatinib) and IXEMPRA (ixabepilone).

New Product and Pipeline Developments

In October 2008, the U.S. Food and Drug Administration (FDA) approved the use of REYATAZ (atazanavir sulfate) 300 milligram once-daily boosted with ritonavir 100 milligram as part of combination therapy in previously untreated (treatment-naïve) HIV-1 infected patients. This use of once-daily REYATAZ/ritonavir in HIV-1 infected treatment-naïve adult patients is based upon 48-week results from the CASTLE study, which demonstrated similar antiviral efficacy of REYATAZ/ritonavir to twice-daily lopinavir/ritonavir, each as part of HIV combination therapy in treatment-naïve HIV-1 infected adult patients. Data from the CASTLE study was published in the August 23 issue of The Lancet.

In September 2008, Bristol-Myers Squibb and its development partner Medarex, Inc. announced updated survival data from three Phase II studies of ipilimumab in patients with advanced metastatic melanoma (stage III or IV) who had been previously treated. Study results showed that approximately half of patients who received ipilimumab (10 mg/kg) remained alive beyond one year.

In September 2008, at the annual meeting of the American Society for Therapeutic Radiology and Oncology, the Company and its development partner ImClone announced ERBITUX* five year data showing significant improvements in overall survival for patients with locally or regionally advanced head and neck cancer. In the September 10, 2008 issue of the New England Journal of Medicine, the EXTREME study was published and it showed that ERBITUX* improved survival in first-line recurrent and/or metastatic head and neck cancer.

In September 2008, at the annual meeting of the European Association for the Study of Diabetes, the Company and its development partner AstraZeneca announced results of Phase III studies of ONGLYZA (saxagliptin), when used in combination with metformin as an initial therapy, when added to solfonylorea or thiazolidinedione in patients with inadequately controlled type 2 diabetes significantly lowered A1C and demonstrated significant improvements across key measures of glucose control.

In September 2008, at the annual meeting of the European Society of Cardiology, the Company and its development partner Pfizer announced a Phase II study (APPRAISE-1) of apixaban – a novel anticoagulant – provided encouraging trends suggesting that anticoagulation with apixaban on top of current standards of care and continued beyond the initial hospitalization may reduce the risk of a second heart attack, stroke or death.

In August 2008, the Company and its development partner Pfizer announced that the primary endpoint was not met in a Phase III study of apixaban for prevention of venous thromboembolism (VTE) in patients undergoing total knee replacement. The rate of the primary efficacy endpoint on apixaban was numerically similar to that observed with enoxaparin, but did not meet the pre-specified statistical criteria for non-inferiority compared to enoxaparin. The results of the trial do not necessitate any changes in protocols of any other ongoing apixaban studies. The companies are considering further studies in preventing VTE in knee surgery and will not submit the U.S. regulatory filing for VTE prevention in the second half of 2009, as previously communicated. Programs directed toward prevention of VTE, including EMEA registration studies, treatment of VTE, Acute Coronary Systems and in the prevention of stroke in atrial fibrillation continue as planned.

In August 2008, the Company entered into an agreement with PDL BioPharma, Inc. for the global development and commercialization of elotuzumab, an anti-CS1 antibody currently in Phase I development for multiple myeloma.

In July 2008, the Company and its partner AstraZeneca announced that regulatory submissions for ONGLYZA (saxagliptin) were made in both the United States and in Europe on June 30 and July 1, respectively. The concurrent European filing further demonstrates the Company’s commitment to rapidly bring forward new medicines for serious unmet medical needs like Type II diabetes. In September 2008, the FDA announced it has accepted the filing.

Three Months Results of Operations


	Three Months Ended September 30,
								% of Net Sales
Dollars in Millions	2008			2007			% Change	2008		2007
Net Sales	$	5,254		$	4,601		14%
Earnings from Continuing Operations before Minority Interest and Income Taxes	$	1,155		$	1,256		(8)%	22.0	%	27.3	%
Provision for Income Taxes	$	308		$	292		5%
Effective tax rate		26.7	%		23.2	%
Net Earnings from Continuing Operations	$	588		$	753		(22)%	11.2	%	16.4	%

Third quarter 2008 net sales increased 14% to $5,254 million, including a 3% favorable foreign exchange impact, compared to the same period in 2007, driven by increased pharmaceutical net sales which totaled $4,510 million in the third quarter of 2008. U.S. net sales increased 14% to $3,064 million in the third quarter of 2008 compared to the same period in 2007, primarily due to increased sales of PLAVIX*, ABILIFY*, the HIV and hepatitis portfolio and ORENCIA partially offset by increased charges for sales returns of PRAVACHOL (Pravastatin). International net sales increased 14% to $2,190 million, including a 7% favorable foreign exchange impact. Nutritional net sales increased 10% to $744 million, including a 3% foreign exchange impact, compared to the same period in 2007.

The composition of the change in net sales is as follows:


		Analysis of % Change
Three Months Ended September 30,	Total Change	Volume	Price	Foreign Exchange
2008 vs. 2007	14%	8%	3%	3%

In general, the Company’s business is not seasonal. For information on U.S. pharmaceutical prescriber demand, reference is made to the table within the Pharmaceuticals section below, which sets forth a comparison of changes in net sales to the estimated total prescription growth (for both retail and mail order customers) for the Company’s key pharmaceutical products sold by the U.S. Pharmaceuticals business.

The Company operates in two reportable segments—Pharmaceuticals and Nutritionals.


	Three Months Ended September 30,
	Net Sales					% of Total Net Sales
Dollars in Millions	2008		2007		% Change	2008		2007
Pharmaceuticals	$	4,510	$	3,926	15%	85.8	%	85.3	%
Nutritionals		744		675	10%	14.2	%	14.7	%

Net Sales	$	5,254	$	4,601	14%	100.0	%	100.0	%

The Company recognizes revenue net of various sales adjustments to arrive at net sales as reported on the consolidated statement of earnings. These adjustments are referred to as gross-to-net sales adjustments. The reconciliation of the Company’s gross sales to net sales by each significant category of gross-to-net sales adjustments were as follows:


	Three Months Ended September 30,
Dollars in Millions	2008			2007
Gross Sales	$	5,952		$	5,250
Gross-to-Net Sales Adjustments
Prime Vendor Charge-Backs		(129	)		(127	)
Women, Infants and Children (WIC) Rebates		(202	)		(242	)
Managed Health Care Rebates and Other Contract Discounts		(93	)		(84	)
Medicaid Rebates		(52	)		(27	)
Cash Discounts		(78	)		(62	)
Sales Returns		(69	)		(27	)
Other Adjustments		(75	)		(80	)

Total Gross-to-Net Sales Adjustments		(698	)		(649	)

Net Sales	$	5,254		$	4,601

Pharmaceuticals

The composition of the change in pharmaceutical net sales is as follows:


		Analysis of % Change
Three Months Ended September 30,	Total Change	Volume	Price	Foreign Exchange
2008 vs. 2007	15%	10%	2%	3%

U.S. pharmaceutical net sales increased 18% to $2,708 million in the third quarter of 2008 compared to $2,302 million in the same period in 2007, primarily due to increased sales of PLAVIX* ABILIFY*, the HIV and hepatitis portfolio and ORENCIA partially offset by increased charges for sales returns of PRAVACHOL (Pravastatin). International pharmaceutical net sales increased 11%, including a 7% favorable foreign exchange impact, to $1,802 million for the third quarter of 2008 compared to $1,624 million in the same period in 2007. The increase was primarily due to increased sales of BARACLUDE, ABILIFY*, SPRYCEL and the HIV portfolio. The Company’s reported international net sales do not include copromotion sales reported by its alliance partner, Sanofi-Aventis (Sanofi) for PLAVIX* and AVAPRO*/AVALIDE*, which continue to show growth in the third quarter of 2008.

Key pharmaceutical products and their net sales, representing 81% and 78% of total pharmaceutical net sales in the third quarter of 2008 and 2007, respectively, are as follows:


	Three Months Ended September 30,
Dollars in Millions	2008		2007		% Change
Cardiovascular
PLAVIX*	$	1,439	$	1,254	15	%
AVAPRO/AVALIDE		334		309	8	%
PRAVACHOL		34		86	(60	)%
Virology
REYATAZ		342		273	25	%
SUSTIVA Franchise (total revenue)		294		237	24	%
BARACLUDE		144		72	100	%
Oncology
ERBITUX*		184		185	(1	)%
TAXOL		91		102	(11	)%
SPRYCEL		82		46	78	%
IXEMPRA		25		—	—
Affective (Psychiatric) Disorders
ABILIFY*		564		420	34	%
Immunoscience
ORENCIA		119		60	98	%

•

Sales of PLAVIX*, a platelet aggregation inhibitor that is part of the Company’s alliance with Sanofi, increased 15%, including a 1% favorable foreign exchange impact. Sales of PLAVIX* increased 17% in the U.S. to $1,263 million in the third quarter of 2008 from $1,080 million in the same period in 2007, primarily due to higher average net selling prices and higher demand. Estimated total U.S. prescription demand for PLAVIX* increased 7% compared to the same period in 2007. While market exclusivity for PLAVIX* is expected to expire in 2011 in the U.S. and 2013 in the major European markets, the composition-of-matter patent for PLAVIX* is the subject of litigation. For additional information on the PLAVIX* litigations, see “Item 1. Financial Statements—Note 20. Legal Proceedings and Contingencies.” Data protection for PLAVIX* expired on July 15, 2008 in the European Union (EU). In most of the major markets within Europe, the product benefits from national patents, expiring in 2013, which specifically claim the bisulfate form of clopidogrel. In the remainder of EU member states, however, where there is no composition-of-matter patent covering clopidogrel bisulfate, competitors are seeking regulatory approval to enter those markets with generic clopidogrel bisulfate. In addition, at least one group of competitor companies has received marketing authorization for, and has started to market, an alternative salt form of clopidogrel in Germany. The competitor companies have announced that they plan to seek marketing authorization in other EU countries in addition to Germany.

•

Sales of AVAPRO*/AVALIDE*, an angiotensin II receptor blocker for the treatment of hypertension, also part of the Sanofi alliance, increased 8%, including a 3% favorable foreign exchange impact. U.S. sales increased 7% to $189 million in the third quarter of 2008 from $176 million in the same period in 2007, primarily due to higher average net selling prices, partially offset by lower demand. Estimated total U.S. prescription demand decreased approximately 7% compared to 2007. International sales increased 9%, including a 6% favorable foreign exchange impact, to $145 million compared to $133 million in the same period in 2007.

•

Sales of PRAVACHOL, an HMG Co-A reductase inhibitor, decreased 60%, despite a 4% favorable foreign exchange impact, due to increased charges for sales returns in the U.S. and continued generic competition in the U.S. and key European markets.

•

Sales of REYATAZ, a protease inhibitor for the treatment of HIV, increased 25%, including a 4% favorable foreign exchange impact. U.S. sales increased 25% to $176 million in the third quarter of 2008 from $141 million in the same period in 2007, primarily due to higher demand. Estimated total U.S. prescription demand increased approximately 18% compared to the same period in 2007. International sales increased 26%, including a 7% favorable foreign exchange impact, to $166 million in the third quarter of 2008 from $132 million in the same period in 2007.

•

Sales of the SUSTIVA Franchise, a non-nucleoside reverse transcriptase inhibitor for the treatment of HIV, increased 24%, including a 2% favorable foreign exchange impact. U.S. sales increased 23% to $185 million in the third quarter of 2008 from $151 million in the same period in 2007, primarily due to higher demand for ATRIPLA* (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg) and higher average selling prices, partially offset by lower demand for SUSTIVA. Estimated total U.S. prescription growth increased approximately 15% compared to 2007. International sales increased 27%, including a 6% favorable foreign exchange impact, to $109 million in the third quarter of 2008 from $86 million in the same period in 2007. Total revenue for the SUSTIVA Franchise includes sales of SUSTIVA, as well as revenue from bulk efavirenz included in the combination therapy ATRIPLA*, a once-daily single tablet three-drug regimen for HIV intended as a stand-alone therapy or in combination with other antiretrovirals. ATRIPLA* is sold through joint venture arrangements with Gilead Sciences, Inc. (Gilead). The Company records revenue for the bulk efavirenz component of ATRIPLA* upon sales of ATRIPLA* to third-party customers. For additional information on revenue recognition of the SUSTIVA Franchise, see “Item 1. Financial Statements—Note 2. Alliances and Investments.”

•

Sales of BARACLUDE, an oral antiviral agent for the treatment of chronic hepatitis B, increased 100% due to continued growth across all markets.

•

Sales of ERBITUX*, which is sold by the Company almost exclusively in the U.S., were relatively flat at $184 million in the third quarter of 2008 compared to $185 million in the same period in 2007 due to a non-recurring increase in the third quarter 2007 sales attributed to a conversion to an open distributor model. ERBITUX* is marketed by the Company under a distribution and copromotion agreement with ImClone.

•

Sales of TAXOL, an anti-cancer agent sold almost exclusively in international markets, decreased 11% despite a 7% favorable foreign exchange impact. The decrease is primarily due to increased generic competition in Japan.

•

Sales for SPRYCEL, an oral inhibitor of multiple tyrosine kinases, increased 78%, including a 10% favorable foreign exchange impact. U.S. sales increased 24% to $21 million in the third quarter of 2008 from $17 million in the same period in 2007 due to higher demand and higher average net selling prices. Estimated total U.S. prescription demand increased approximately 29% compared to 2007. International sales increased 110%, including a 15% favorable foreign exchange impact, to $61 million compared to $29 million in the same period in 2007.

•

Sales of IXEMPRA, a microtubule inhibitor for the treatment of patients with metastatic or locally advanced breast cancer, were $25 million in the third quarter of 2008. IXEMPRA was launched in the U.S. in October 2007.

•

Total revenue for ABILIFY*, an antipsychotic agent for the treatment of schizophrenia, bipolar disorders and major depressive disorders, increased 34%, including a 3% favorable foreign exchange impact. U.S. sales increased 32% to $435 million in the third quarter of 2008 from $329 million in the same period in 2007, primarily due to higher demand, driven by a new indication for major depressive disorders that was approved in the fourth quarter of 2007. Estimated total U.S. prescription demand increased approximately 26% compared to the same period last year. International sales increased 42%, including a 12% favorable foreign exchange impact, to $129 million in the third quarter of 2008 from $91 million in the same period in 2007, due to continued growth in European markets. Total revenue for ABILIFY* primarily consists of alliance revenue representing the Company’s 65% share of net sales in countries where it copromotes with Otsuka Pharmaceutical Co., Ltd. (Otsuka) and the product is distributed by an Otsuka affiliate. For information on patent litigations relating to ABILIFY*, see “Item 8. Financial Statements—Note 22. Legal Proceedings and Contingencies” in the 2007 Form 10-K. For additional information on revenue recognition of ABILIFY*, see “Item 1. Financial Statements—Note 2. Alliances and Investments.”

•

Sales of ORENCIA, a fusion protein indicated for patients with moderate to severe rheumatoid arthritis, increased 98%, including a 3% favorable foreign exchange impact, primarily due to strong growth in the U.S. and increasing contributions in Europe where ORENCIA was launched in May 2007.

The estimated U.S. prescription change data provided above includes information only from the retail and mail order channels and does not reflect information from other channels, such as hospitals, institutions and long-term care, among others. The estimated prescription data is based on the Next-Generation Prescription Service (NGPS) version 2.0 data provided by IMS Health (IMS), a supplier of market research for the pharmaceutical industry, as described below.

The Company has calculated the estimated total U.S. prescription change based on NGPS data on a weighted-average basis to reflect the fact that mail order prescriptions include a greater volume of product supplied compared to retail prescriptions. Mail order prescriptions typically reflect a 90-day prescription whereas retail prescriptions typically reflect a 30-day prescription. The calculation is derived by multiplying NGPS mail order prescription data by a factor that approximates three and adding to this the NGPS retail prescriptions. The Company believes that this calculation of the estimated total U.S. prescription change based on the weighted-average approach with respect to the retail and mail order channels provides a superior estimate of total prescription demand. The Company uses this methodology for its internal demand forecasts.

Estimated End-User Demand

The following tables set forth for each of the Company’s key pharmaceutical products sold by the U.S. Pharmaceuticals business, for the three months ended September 30, 2008 compared to the same period in the prior year: (i) total U.S. net sales for the period; (ii) change in reported U.S. net sales for the period; (iii) estimated total U.S. prescription change for the retail and mail order channels calculated by the Company based on NGPS data on a weighted-average basis and (iv) months of inventory on hand in the distribution channel.


	Three Months Ended September 30, 2008
	Total U.S.			Change in U.S.		Change in U.S.		At September 30, 2008
	Net Sales			Net Sales ^(a)		Total Prescriptions ^(b)		Months on Hand
PLAVIX*	$	1,263		17	%	7	%	0.4
AVAPRO/AVALIDE		189		7		(7	)	0.5
PRAVACHOL		(18	)	**		(52	)	0.8
REYATAZ		176		25		18		0.5
SUSTIVA Franchise ^(c ⁾ (total revenue)		185		23		15		0.5
BARACLUDE		36		64		59		0.5
ERBITUX* ^(d)		182		(1	)	N/A		0.5
SPRYCEL		21		24		29		0.8
IXEMPRA ^{(d, e)}		24		—		N/A		0.6
ABILIFY*		435		32		26		0.4
ORENCIA ^(d ⁾		97		70		N/A		0.4


	Three Months Ended September 30, 2007
	Total U.S.		Change in U.S.		Change in U.S. Total		At September 30, 2007
	Net Sales		Net Sales ^(a)		Prescriptions ^(b)		Months on Hand
PLAVIX*	$	1,080	128	%	86	%	0.4
AVAPRO/AVALIDE		176	11		(4	)	0.4
PRAVACHOL		17	(77	)	(78	)	0.7
REYATAZ		141	9		10		0.5
SUSTIVA Franchise ^(c ⁾ (total revenue)		151	18		19		0.6
BARACLUDE		22	57		70		0.5
ERBITUX* ^(d)		183	6		N/A		0.3
SPRYCEL		17	55		**		0.7
IXEMPRA ^{(d, e)}		—	—		N/A		—
ABILIFY*		329	27		10		0.4
ORENCIA ^(d ⁾		57	68		N/A		0.4

(a)	Reflects percentage change in net sales in dollar terms, including change in average selling prices and wholesaler buying patterns.

(b)	Derived by multiplying NGPS mail order prescription data by a factor that approximates three and adding to this the NGPS retail prescriptions.

(c)

The SUSTIVA Franchise (total revenue) includes sales of SUSTIVA, as well as revenue of bulk efavirenz included in the combination therapy, ATRIPLA*. The change in U.S. total prescriptions growth for the SUSTIVA Franchise includes both SUSTIVA and ATRIPLA* prescription units. The estimated months on hand only includes SUSTIVA.

(d)	ERBITUX*, ORENCIA and IXEMPRA are parenterally administered products and do not have prescription-level data as physicians do not write prescriptions for these products.

(e)	IXEMPRA was launched in the U.S. in October 2007.

**	Change is in excess of 200%.

The estimated prescription change data reported throughout this Form 10-Q only include information from the retail and mail order channels and do not reflect information from other channels, such as hospitals, institutions and long-term care, among others. The data provided by IMS are a product of IMS’ own recordkeeping processes and are themselves estimates based on IMS’ sampling procedures, subject to the inherent limitations of estimates based on sampling and a margin of error.

The Company continuously seeks to improve the quality of its estimates of prescription change amounts and ultimate patient/consumer demand through review of its methodologies and processes for calculation of these estimates and review and analysis of its own and third parties’ data used in such calculations. The Company expects that it will continue to review and refine its methodologies and processes for calculation of these estimates and will continue to review and analyze its own and third parties’ data used in such calculations.

Pursuant to the U.S. Securities and Exchange Commission (SEC) Consent Order described below under “—SEC Consent Order”, the Company monitors the level of inventory on hand in the U.S. wholesaler distribution channel and, outside of the U.S., in the direct customer distribution channel. The Company is obligated to disclose products with levels of inventory in excess of one month on hand or expected demand, subject to a de minimis exception. In the case of the Company’s U.S. Pharmaceuticals products at September 30, 2008, there were no products to disclose. In the case of the Company’s International Pharmaceuticals and Nutritionals products, the following products had estimated levels of inventory in the distribution channel in excess of one month on hand at June 30, 2008.

At June 30, 2008, DAFALGAN, an analgesic product sold principally in Europe, had approximately 1.4 months of inventory on hand at direct customers compared to approximately 1.2 months of inventory on hand at December 31, 2007. The level of inventory on hand was due primarily to the ordering patterns of private pharmacists in France.

At June 30, 2008, EFFERALGAN, an analgesic product, had approximately 1.3 months of inventory on hand compared to 0.9 months of inventory on hand at December 31, 2007. The level of inventory on hand was due primarily to the ordering patterns of private pharmacists in France as well as the launch of a Depon Odis distributor in Greece.

At June 30, 2008, VIDEX/VIDEX EC, an antiviral product, had approximately 1.6 months of inventory on hand at direct customers compared to 1.3 months of inventory on hand at December 31, 2007. The level of inventory on hand maintained by the Company was due primarily to government purchasing patterns in Brazil. The Company was contractually obligated to provide VIDEX/VIDEX EC to the Brazilian government upon placement of an order for product by the government. Under the terms of the contract, the Company had no control over the inventory levels relating to such orders. No VIDEX/VIDEX EC has been sold to the Brazilian government since January 2008, when the Company completed delivery per contact requirements.

In the U.S., for all products sold exclusively through wholesalers or through distributors, the Company determines its months on hand estimates using information with respect to inventory levels of product on hand and the amount of out-movement of products provided by the Company’s three largest wholesalers, which accounted for approximately 92% of total gross sales of U.S. Pharmaceuticals products in the third quarter of 2008, and provided by the Company’s distributors. Factors that may influence the Company’s estimates include generic competition, seasonality of products, wholesaler purchases in light of increases in wholesaler list prices, new product launches, new warehouse openings by wholesalers and new customer stockings by wholesalers. In addition, such estimates are calculated using third-party data, which represent their own record-keeping processes and, as such, may also reflect estimates.

For pharmaceutical products in the U.S. that are not sold exclusively through wholesalers or distributors and for the Company’s Pharmaceuticals business outside of the U.S. and Nutritionals business units around the world, the Company has significantly more direct customers, limited information on direct customer product level inventory and corresponding out-movement information and the reliability of third-party demand information, where available, varies widely. In cases where direct customer product level inventory, ultimate patient/consumer demand or out-movement data do not exist or are otherwise not available, the Company has developed a variety of other methodologies to calculate estimates of such data, including using such factors as historical sales made to direct customers and third-party market research data related to prescription trends and end-user demand. Accordingly, the Company relies on a variety of methods to estimate direct customer product level inventory and to calculate months on hand for these business units. Factors that may affect the Company’s estimates include generic competition, seasonality of products, direct customer purchases in light of price increases, new product or product presentation launches, new warehouse openings by direct customers, new customer stockings by direct customers and expected direct customer purchases for governmental bidding situations. As such, all of the information required to estimate months on hand in the direct customer distribution channel for non-U.S. Pharmaceuticals business for the quarter ended September 30, 2008 is not available prior to the filing of this quarterly report on Form 10-Q. The Company will disclose any product with levels of inventory in excess of one month on hand or expected demand, subject to a de minimis exception, in its annual report Form 10-K for the year ended December 31, 2008.

Nutritionals

The composition of the change in nutritional net sales is as follows:


		Analysis of % Change
Three Months Ended September 30,	Total Change	Volume	Price	Foreign Exchange
2008 vs. 2007	10%	(2)%	9%	3%

Key nutritional product lines and their net sales, representing 97% of total nutritional net sales in both the third quarter of 2008 and 2007, are as follows:


	Three Months Ended September 30,
Dollars in Millions	2008		2007		% Change
Infant Formulas	$	497	$	469	6%
ENFAMIL		295		281	5%
Toddler/Children’s Nutritionals		221		183	21%

Worldwide nutritional net sales increased 10%, including a 3% favorable foreign exchange impact, to $744 million in the third quarter of 2008 from $675 million in the same period in 2007. Nine percent of this increase is due to price changes in response to higher dairy product costs. U.S. nutritional net sales decreased 10% to $275 million in the third quarter of 2008 from $304 million in the same period in 2007, primarily due to the 2007 timing of contract transactions under the Women, Infants and Children Rebates program. International nutritional net sales increased 26%, including a 5% favorable foreign exchange impact, to $469 million in the third quarter of 2008 from $371 million in the same period in 2007, primarily due to growth in both infant formulas and children’s nutritionals.

Geographic Areas

In general, the Company’s products are available in most countries in the world. The largest markets are in the U.S., France, China, Canada, Spain, Mexico, Japan, Germany and Italy. The Company’s net sales by geographic areas were as follows:


	Three Months Ended September 30,
	Net Sales					% of Total Net Sales
Dollars in Millions	2008		2007		% Change	2008		2007
United States	$	3,064	$	2,683	14%	58	%	58	%
Europe, Middle East and Africa		1,147		987	16%	22	%	22	%
Other Western Hemisphere		421		409	3%	8	%	9	%
Pacific		622		522	19%	12	%	11	%

Total	$	5,254	$	4,601	14%	100	%	100	%

Sales in the U.S. increased 14% in the third quarter of 2008 compared to the same period in 2007, primarily due to items previously discussed in “—Item 2. Pharmaceuticals.”

Sales in Europe, Middle East and Africa increased 16%, including a 9% favorable foreign exchange impact, primarily due to sales growth in major European markets for REYATAZ, SPRYCEL, ABILIFY*, BARACLUDE, and ORENCIA, partially offset by increased generic competition for PRAVACHOL.

Sales in the Other Western Hemisphere countries increased 3%, including a 5% favorable foreign exchange impact, primarily due to the increased sales of key nutritional products in Mexico, as well as increased sales of REYATAZ and SPRYCEL across major other Western Hemisphere markets.

Sales in the Pacific region increased 19%, including a 5% favorable foreign exchange impact, primarily due to increased sales of key nutritional products in China and the Philippines and BARACLUDE in China and Japan.

Expenses


	Three Months Ended September 30,
	Expenses							% of Net Sales
Dollars in Millions	2008			2007			% Change	2008		2007
Cost of products sold	$	1,634		$	1,478		11%	31.1	%	32.1	%
Marketing, selling and administrative		1,208			1,105		9%	23.0	%	24.0	%
Advertising and product promotion		362			338		7%	6.9	%	7.3	%
Research and development		834			802		4%	15.9	%	17.4	%
Provision for restructuring, net		26			—		—	0.5	%	—
Litigation expense, net		30			—		—	0.6	%	—
Gain on sale of product assets		—			(247	)	100%	—		(5.3	)%
Equity in net income of affiliates		(164	)		(139	)	(18)%	(3.2	)%	(3.0	)%
Other expense, net		169			8		**	3.2	%	0.2	%

Total Expenses, net	$	4,099		$	3,345		23%	78.0	%	72.7	%

**	Change is in excess of 200%.

•

Cost of products sold, as a percentage of net sales, decreased to 31.1% in the third quarter of 2008 compared to 32.1% in the same period in 2007. Costs of products sold include manufacturing rationalization charges of $53 million related to the implementation of the PTI in 2008, or 1.0% of net sales, compared to $17 million of rationalization charges recorded in the third quarter of 2007, or 0.4% of net sales, and an unfavorable foreign exchange impact. The increased manufacturing rationalization charges and unfavorable foreign exchange impact in 2008 are more than offset by manufacturing costs improvements from previously implemented initiatives and favorable product mix.

•

Marketing, selling and administrative increased 9%, including an unfavorable 3% foreign exchange impact, primarily due to the implementation cost associated with the PTI.

•

Advertising and product promotion increased 7%, including an unfavorable 2% foreign exchange impact, primarily due to increased investment in the international nutritionals business.

•

Research and development increased 4%, including an unfavorable 1% foreign exchange impact. Research and development included charges of $37 million in 2008 for upfront and milestone payments, as compared to $60 million in the third quarter of 2007. Excluding these charges, the increase in research and development primarily reflects increased development for pipeline compounds. Research and development dedicated to pharmaceutical products was 17.9% of pharmaceutical net sales in the third quarter of 2008 compared to 19.8% in 2007, reflecting higher pharmaceutical net sales.

•

Restructuring programs in the third quarter of 2008, which are included in the PTI that began in late 2007, have been implemented to realign and streamline operations in order to increase productivity, to reduce operating expenses and to rationalize the Company’s mature brand portfolio, manufacturing network, research facilities, sales and marketing organizations, as well as to standardize and simplify processes and services. The PTI is expected to generate approximately $1.5 billion in annual cost savings and cost avoidance by 2010 with an additional $1.0 billion in cost savings and cost avoidance by 2012. For additional information on restructuring, see “Item 1. Financial Statements—Note 3. Restructuring” and for additional information on the PTI, see “—Strategy” above.

•

Litigation expense was related to settlements of certain litigation matters. For additional information on litigation charges, see “Item 1. Financial Statements—Note 20. Legal Proceedings and Contingencies – Pricing, Sales and Promotional Practices Litigation and Investigations.”

•

The gain on sale of product assets in 2007 was for the sale of the BUFFERIN* and EXCEDRIN* brands in Japan, Asia (excluding China and Taiwan) and certain Oceanic countries. For additional information, see “Item I. Financial Statements – Note 4. Acquisitions and Divestitures.”

•

Equity in net income of affiliates is principally related to the Company’s international joint venture with Sanofi. For additional information on equity in net income of affiliates, see “Item 1. Financial Statements—Note 2. Alliances and Investments.”

•

The components of other expense, net were as follows:


	2008			2007
Dollars in Millions
Interest expense	$	84		$	109
Interest income		(37	)		(69	)
Impairment of marketable securities		224			—
Foreign exchange transaction (gains)/losses		(51	)		21
Other, net		(51	)		(53	)

Other expense, net	$	169		$	8

Interest expense decreased approximately 23% primarily due to net interest rate swap gains of $17 million attributed to decreasing interest rates as well as a reduced average effective interest rate in 2008 on the Floating Rate Convertible Senior Debentures due 2023 when compared to prior year.

Interest income relates primarily to interest earned on cash, cash equivalents and investments in marketable securities. The 46% decrease from prior year is attributed to a change in mix of the Company’s short-term investment portfolio as well as a decrease in rates of returns on short-term marketable securities, including U.S. Treasury bills, when compared to the prior year.

The impairment of marketable securities balance is attributed to the Company’s impairment of its auction rate securities. See “Item 1. Financial Statements—Note 10. Marketable Securities” for further detail.

The fluctuation in foreign exchange transaction (gains)/losses relates primarily to the favorability in foreign exchange rates on non-qualifying foreign exchange hedges and on the re-measurement of non-functional currency denominated transactions when compared to the prior period.

Other, net includes income from third-party contract manufacturing, certain royalty income and expense, gains and losses on disposal of property, plant and equipment, certain other litigation matters, ConvaTec and Medical Imaging net transitional service fees, and amortization of certain upfront payments related to the Company’s alliances.

During the quarters ended September 30, 2008 and 2007, the Company recorded specified (income)/expense items that affected the comparability of results of the periods presented herein, which are set forth in the following tables:

Three Months Ended September 30, 2008


Dollars in Millions	Cost of products sold		Marketing, selling and administrative		Research and development		Provision for restructuring, net		Litigation expense, net		Other (income)/ expense, net		Total
Productivity Transformation Initiative:
Downsizing and streamlining of worldwide operations	$	—	$	—	$	—	$	26	$	—	$	—	$	26
Accelerated depreciation and other shutdown costs		53		—		—		—		—		—		53
Process standardization implementation costs		—		28		—		—		—		—		28

		53		28		—		26		—		—		107
Litigation Matters:
Litigation settlement		—		—		—		—		30		—		30

Other:
Mead Johnson Nutritionals charges		—		9		—		—		—		—		9
Product liability		—		—		—		—		—		2		2
Upfront and milestone payments		—		—		37		—		—		—		37
Auction rate securities impairment		—		—		—		—		—		224		224

	$	53	$	37	$	37	$	26	$	30	$	226		409

Income taxes on items above														(87	)

Decrease to Net Earnings from Continuing Operations													$	322

Three Months Ended September 30, 2007


Dollars in Millions	Cost of products sold		Research and development		Gain on sale of product assets			Other (income)/ expense, net			Total
Litigation Matters:
Insurance recovery	$	—	$	—	$	—		$	(11	)	$	(11	)
Product liability		—		—		—			5			5

		—		—		—			(6	)		(6	)

Other:
Upfront and milestone payments		—		60		—			—			60
Accelerated depreciation and asset impairment		17		—		—			—			17
Gain on sale of product assets		—		—		(247	)		—			(247	)

	$	17	$	60	$	(247	)	$	(6	)		(176	)

Income taxes on items above												82

(Increase) to Net Earnings from Continuing Operations											$	(94	)

Earnings From Continuing Operations Before Minority Interest and Income Taxes


	Three Months Ended September 30,
Dollars in Millions	2008			2007		% Change
Pharmaceuticals	$	1,403		$	977	44%
Nutritionals		200			196	2%

Total segments		1,603			1,173	37%
Corporate/Other		(448	)		83	**

Total	$	1,155		$	1,256	(8)%

**	Change is in excess of 200%.

Pharmaceuticals

Earnings from continuing operations before minority interest and income taxes increased 44%, primarily due to increased sales of PLAVIX*, ABILIFY*, the HIV and hepatitis portfolio and ORENCIA, as well as an increase in equity in net income of affiliates and favorable net foreign exchange movements, partially offset by a moderate rate of increase in operating expenses, increase in manufacturing rationalization charges related to the implementation of the PTI and continued investment in research and development.

Nutritionals

Earnings from continuing operations before minority interest and income taxes increased 2%, primarily due to increased international net sales offset by continued investment in advertising and product promotions.

Corporate/Other

Loss from continuing operations before minority interest and income taxes was $448 million in the third quarter of 2008 compared to a gain income of $83 million in the third quarter of 2007. The difference was primarily due to impairment charge of ARS, higher costs associated with the implementation of the PTI, higher restructuring and litigation expenses in 2008, and gain on sale of product assets in 2007, partially offset by favorable net foreign exchange movements.

Income Taxes

The effective income tax rate on earnings from continuing operations before minority interest and income taxes was 26.7% for the three months ended September 30, 2008 compared to 23.2% for the three months ended September 30, 2007. The higher tax rate in the three months ended September 30, 2008 compared to the same period in 2007 was primarily due to earnings mix in high tax jurisdictions in 2008, the impairment of auction rate securities and the benefit of the research and development credit in 2007, which expired on December 31, 2007. For additional information on new tax legislation and other tax matters, see “Item 1. Financial Statements—Note 8. Income Taxes”.

Minority Interest

Minority interest, net of taxes increased to $259 million in 2008 from 2007, primarily resulting from an increase in earnings in the Company’s partnership with Sanofi for the territory covering the Americas related to increased PLAVIX* sales.

Discontinued Operations


	Three Months Ended September 30, 2008							Three Months Ended September 30, 2007
Dollars in Millions	ConvaTec		Medical Imaging			Total		ConvaTec		Medical Imaging		Total
Net sales	$	120	$	7		$	127	$	292	$	157	$	449

Earnings (loss) from discontinued operations:
Earnings (loss) before income taxes	$	28	$	(13	)	$	15	$	86	$	69	$	155
Curtailment losses and special termination benefits		2		—			2		—		—		—
Provision (benefit) for income taxes		8		(3	)		5		31		19		50

Earnings (loss) from discontinued operations, net of taxes	$	18	$	(10	)	$	8	$	55	$	50	$	105


	Nine Months Ended September 30, 2008							Nine Months Ended September 30, 2007
Dollars in Millions	ConvaTec		Medical Imaging			Total		ConvaTec		Medical Imaging		Total
Net sales	$	732	$	33		$	765	$	832	$	487	$	1,319

Earnings (loss) from discontinued operations:
Earnings (loss) before income taxes	$	194	$	(8	)	$	186	$	258	$	212	$	470
Curtailment losses and special termination benefits		18		—			18		—		—		—
Provision (benefit) for income taxes		63		(2	)		61		90		59		149

Earnings (loss) from discontinued operations, net of taxes	$	113	$	(6	)	$	107	$	168	$	153	$	321

Nine Months Results of Operations

Except as noted below, the factors affecting the third quarter comparisons all affected the nine month comparisons.


	Nine Months Ended September 30,
								% of Net Sales
Dollars in Millions	2008			2007			% Change	2008		2007
Net Sales	$	15,348		$	13,135		17%
Earnings from Continuing Operations before Minority Interest and Income Taxes	$	3,583		$	3,014		19%	23.3	%	22.9	%
Provision for Income Taxes	$	896		$	535		67%
Effective tax rate		25.0	%		17.8	%
Net Earnings from Continuing Operations	$	1,957		$	1,933		1%	12.8	%	14.7	%

Net sales for the first nine months of 2008 increased 17% to $15.3 billion, including a 4% favorable foreign exchange impact, compared to the same period in 2007. U.S. net sales increased 17% to $8.9 billion in 2008 compared to the same period in 2007, primarily due to increased sales of PLAVIX*, ABILIFY*, the HIV and hepatitis portfolio and ORENCIA, partially offset by increased charges for sales returns and generic competition for PRAVACHOL. International net sales increased 16%, including a 10% favorable foreign exchange impact, to $6.5 billion.

The composition of the change in net sales is as follows:


		Analysis of % Change
Nine Months Ended September 30,	Total Change	Volume	Price	Foreign Exchange
2008 vs. 2007	17%	9%	4%	4%

The percent of the Company’s net sales by segment were as follows:


	Nine Months Ended September 30,
	Net Sales						% of Total Net Sales
Dollars in Millions	2008		2007		% Change		2008		2007
Pharmaceuticals	$	13,173	$	11,234	17	%	85.8	%	85.5	%
Nutritionals		2,175		1,901	14	%	14.2	%	14.5	%

Net Sales	$	15,348	$	13,135	17	%	100.0	%	100.0	%

The reconciliation of the Company’s gross sales to net sales by each significant category of gross-to-net sales adjustments were as follows:


	Nine Months Ended September 30,
Dollars in Millions	2008			2007
Gross Sales	$	17,347		$	15,084
Gross-to-Net Sales Adjustments
Prime Vendor Charge-Backs		(383	)		(416	)
Women, Infants and Children (WIC) Rebates		(602	)		(670	)
Managed Health Care Rebates and Other Contract Discounts		(270	)		(239	)
Medicaid Rebates		(145	)		(123	)
Cash Discounts		(209	)		(176	)
Sales Returns		(139	)		(92	)
Other Adjustments		(251	)		(233	)

Total Gross-to-Net Sales Adjustments		(1,999	)		(1,949	)

Net Sales	$	15,348		$	13,135

The activities and ending balances of each significant category of gross-to-net sales adjustments were as follows:


Dollars in Millions	Prime Vendor Charge-Backs			Women, Infants and Children (WIC) Rebates			Managed Health Care Rebates and Other Contract Discounts			Medicaid Rebates			Cash Discounts			Sales Returns			Other Adjustments			Total
Balance at January 1, 2007	$	63		$	230		$	111		$	137		$	18		$	221		$	124		$	904
Provision related to sales made in current period		551			845			340			176			238			137			328			2,615
Provision related to sales made in prior periods		—			3			(7	)		(7	)		1			18			(1	)		7
Returns and payments		(551	)		(880	)		(306	)		(181	)		(233	)		(201	)		(334	)		(2,686	)
Impact of foreign currency translation		—			—			6			—			—			4			10			20
Discontinued operations		7			—			(10	)		—			—			(1	)		1			(3	)

Balance at December 31, 2007		70			198			134			125			24			178			128			857
Provision related to sales made in current period		383			603			276			155			208			96			250			1,971
Provision related to sales made in prior periods		—			(1	)		(6	)		(10	)		1			43			1			28
Returns and payments		(390	)		(585	)		(260	)		(144	)		(200	)		(141	)		(258	)		(1,978	)
Impact of foreign currency translation		—			—			3			—			—			(2	)		(1	)		—
Discontinued operations		(23	)		—			(1	)		—			(1	)		(3	)		(8	)		(36	)

Balance at September 30, 2008	$	40		$	215		$	146		$	126		$	32		$	171		$	112		$	842

In 2008, the Company recorded gross-to-net sales adjustments related to sales made in prior periods. The significant items included charges for sales returns of $43 million primarily related to higher than expected returns for certain non-exclusive products.

Pharmaceuticals

The composition of the change in pharmaceutical net sales is as follows:


		Analysis of % Change
Nine Months Ended September 30,	Total Change	Volume	Price	Foreign Exchange
2008 vs. 2007	17%	10%	3%	4%

For the nine months ended September 30, 2008, worldwide pharmaceutical net sales increased 17%, including a 4% favorable foreign exchange impact. U.S. pharmaceutical net sales increased 20% to $7,792 million from $6,489 in 2007, primarily due to increased sales of PLAVIX*, ABILIFY*, the HIV and hepatitis portfolio and ORENCIA partially offset by increased charges for sales returns and generic competition for PRAVACHOL (Pravastatin). International pharmaceutical net sales increased 13%, including a 10% favorable foreign exchange impact, to $5,381 million in the first nine months of 2008 from $4,745 million in 2007, primarily due to increased sales of BARACLUDE, ABILIFY* and SPRYCEL.

Key pharmaceutical products and their net sales, representing 80% and 76% of total pharmaceutical net sales in the first nine months of 2008 and 2007, respectively, are as follows:


	Nine Months Ended September 30,
Dollars in Millions	2008		2007		% Change
Cardiovascular
PLAVIX*	$	4,134	$	3,381	22%
AVAPRO/AVALIDE		974		876	11%
PRAVACHOL		176		353	(50)%
Virology
REYATAZ		963		790	22%
SUSTIVA Franchise (total revenue)		849		696	22%
BARACLUDE		388		176	120%
Oncology
ERBITUX*		567		507	12%
TAXOL		286		308	(7)%
SPRYCEL		224		102	120%
IXEMPRA		76		—	—
Affective (Psychiatric) Disorders
ABILIFY* (total revenue)		1,547		1,198	29%
Immunoscience
ORENCIA		312		156	100%

•

Sales of PLAVIX* increased 22%, including a 1% favorable foreign exchange impact. U.S. sales increased 25% to $3,609 million in the first nine months of 2008 from $2,882 million in the same period in 2007, primarily due to higher demand and the impact of residual sales of generic clopidogrel bisulfate in 2007. Estimated total U.S. prescription demand for clopidogrel bisulfate (branded and generic) increased approximately 4% in the first nine months of 2008 compared to 2007, while estimated total U.S. prescription demand for branded PLAVIX* increased 26% in the same period. For further discussion of certain issues related to IMS’ revised data for PLAVIX*, see “—Estimated End-User Demand” above.

•

Sales of AVAPRO*/AVALIDE* increased 11%, including a 5% favorable foreign exchange impact. U.S. sales increased 7% to $547 million in 2008 from $509 million in the same period in 2007. Estimated total U.S. prescription demand decreased approximately 7% compared to 2007. International sales increased 16%, including an 11% favorable foreign exchange impact, to $427 million in the first nine months of 2008 from $367 million in the same period in 2007.

•

Sales of PRAVACHOL decreased 50%, despite a 4% favorable foreign exchange impact. Estimated total U.S. prescription demand decreased approximately 78% compared to 2007.

•

Sales of REYATAZ increased 22%, including a 5% favorable foreign exchange impact. U.S. sales increased 17% to $495 million in the first nine months of 2008 from $422 million in the same period in 2007. Estimated total U.S. prescription demand increased approximately 15% compared to 2007. International sales increased 27%, including an 11% favorable foreign exchange impact, to $468 million in the first nine months of 2008 from $368 million in the same period in 2007, primarily due to increased demand.

•

Total revenue for the SUSTIVA Franchise increased 22%, including a 4% favorable foreign exchange impact. U.S. sales increased 20% to $531 million in the first nine months of 2008 from $442 million in the same period in 2007. Estimated total U.S. prescription growth increased approximately 14% compared to 2007. International sales increased 25%, including a 10% favorable foreign exchange impact, to $318 million in the first nine months of 2008 from $254 million in the same period in 2007.

•

Sales of ERBITUX* increased 12%, primarily due to increased demand for usage in the treatment of head and neck and colorectal cancer.

•

Total revenue for ABILIFY* increased 29%, including a 3% favorable foreign exchange impact. U.S. sales increased 26% to $1,186 in the first nine months of 2008 from $944 million in the same period in 2007. Estimated total U.S. prescription demand increased approximately 20% compared to 2007. International sales increased 42%, including a 15% favorable foreign exchange impact, to $361 million in the first nine months of 2008 from $254 million in the same period in 2007.

Estimated End-User Demand

The following tables set forth for each of the Company’s key pharmaceutical products sold by the U.S. Pharmaceuticals business, for the nine months ended September 30, 2008 compared to the same period in the prior year: (i) total U.S. net sales for the period; (ii) change in reported U.S. net sales for the period; and (iii) estimated total U.S. prescription change for the retail and mail order channels calculated by the Company based on NGPS data on a weighted-average basis.


	Nine Months Ended September 30, 2008						Nine Months Ended September 30, 2007
	Total U.S. Net Sales		Change in U.S. Net Sales ^(a)		Change in U.S. Total Prescriptions ^(b)		Total U.S. Net Sales		Change in U.S. Net Sales ^(a)		Change in U.S. Total Prescriptions ^(b)
PLAVIX*	$	3,609	25	%	26	%	$	2,882	25	%	6	%
AVAPRO/AVALIDE		547	7		(7	)		509	9		(3	)
PRAVACHOL		7	(94	)	(78	)		121	(76	)	(82	)
REYATAZ		495	17		15			422	14		13
SUSTIVA Franchise ^(c ⁾ (total revenue)		531	20		14			442	26		22
BARACLUDE		100	69		60			59	84		86
ERBITUX* ^(d)		560	12		N/A			501	4		N/A
SPRYCEL		62	51		42			41	**		**
IXEMPRA ^{(d, e)}		75	—		N/A			—	—		N/A
ABILIFY*		1,186	26		20			944	25		12
ORENCIA ^(d ⁾		257	71		N/A			150	163		N/A

(a)	Reflects percentage change in net sales in dollar terms, including change in average selling prices and wholesaler buying patterns.

(b)	Derived by multiplying NGPS mail order prescription data by a factor that approximates three and adding to this the NGPS retail prescriptions.

(c)

The SUSTIVA Franchise (total revenue) includes sales of SUSTIVA, as well as revenue of bulk efavirenz included in the combination therapy, ATRIPLA*. The change in U.S. total prescriptions growth for the SUSTIVA Franchise includes both branded SUSTIVA and ATRIPLA* prescription units. The estimated months on hand only includes branded SUSTIVA.

(d)	ERBITUX*, ORENCIA and IXEMPRA are parenterally administered products and do not have prescription-level data as physicians do not write prescriptions for these products.

(e)	IXEMPRA was launched in the U.S. in October 2007.

**	Change is in excess of 200%.

For an explanation of the data presented above and the calculation of such data, see “—Three Months Results of Operations.”

Nutritionals

The composition of the change in nutritional net sales is as follows:


		Analysis of % Change
Nine Months Ended September 30,	Total Change	Volume	Price	Foreign Exchange
2008 vs. 2007	14%	1%	9%	4%

Key nutritional product lines and their net sales, representing 97% and 96% of total nutritional net sales in the first nine months of 2008 and 2007, respectively, are as follows:


	Nine Months Ended September 30,
Dollars in Millions	2008		2007		% Change
Infant Formulas	$	1,462	$	1,326	10%
ENFAMIL		872		802	9%
Toddler/Children’s Nutritionals		641		507	26%

Worldwide nutritional net sales increased 14%, including a 4% favorable foreign exchange impact. U.S. nutritional net sales decreased 2% to $836 million in the first nine months of 2008 from $853 million in the same period in 2007, primarily due to decreased sales of infant formulas. International nutritional net sales increased 28%, including an 8% favorable foreign exchange impact, to $1,339 million in the first nine months of 2008 from $1,048 million in the same period in 2007, primarily due to growth in both infant formula and children’s nutritionals.

Geographic Areas

The Company’s net sales by geographic areas were as follows:


	Nine Months Ended September 30,
	Net Sales					% of Total Net Sales
Dollars in Millions	2008		2007		% Change	2008		2007
United States	$	8,853	$	7,548	17%	58	%	57	%
Europe, Middle East and Africa		3,443		2,908	18%	22	%	22	%
Other Western Hemisphere		1,246		1,157	8%	8	%	9	%
Pacific		1,806		1,522	19%	12	%	12	%

Total	$	15,348	$	13,135	17%	100	%	100	%

Sales in the U.S. increased 17%, primarily due to items previously discussed in “—Pharmaceuticals” above.

Sales in Europe, Middle East and Africa increased 18%, including a 12% favorable foreign exchange impact.

Sales in the Other Western Hemisphere countries increased 8%, including an 8% favorable foreign exchange impact.

Sales in the Pacific region increased 19%, including an 8% favorable foreign exchange impact, primarily due to increased sales of BARACLUDE and AVAPRO*/AVALIDE* across all regions, as well as key nutritional products, partially offset by increased generic competition for PRAVACHOL.

Expenses


	Nine Months Ended September 30,
	Expenses							% of Net Sales
Dollars in Millions	2008			2007			% Change	2008	2007
Cost of products sold	$	4,874		$	4,152		17%	31.8%	31.6%
Marketing, selling and administrative		3,507			3,260		8%	22.8%	24.8%
Advertising and product promotion		1,101			950		16%	7.2%	7.2%
Research and development		2,442			2,338		4%	15.9%	17.8%
Acquired in-process research and development		32			—		—	0.2%	—
Provision for restructuring, net		67			44		52%	0.5%	0.3%
Litigation expense, net		32			14		129%	0.2%	0.1%
Gain on sale of product assets		—			(273	)	100%	—	(2.0)%
Equity in net income of affiliates		(478	)		(393	)	(22)%	(3.1)%	(2.9)%
Other expense, net		188			29		**	1.2%	0.2%

Total Expenses, net	$	11,765		$	10,121		16%	76.7%	77.1%

**	Change is in excess of 200%.

•

Cost of products sold, as a percentage of net sales, increased to 31.8% in the first nine months of 2008 compared to 31.6% in the same period in 2007. Costs of products sold include manufacturing rationalization charges of $207 million related to the implementation of the PTI in 2008, or 1.3% of net sales, compared to $46 million of rationalization charges recorded in 2007, or 0.4% of net sales. The increased manufacturing rationalization charges in 2008 are partially offset by manufacturing costs improvements from previously implemented initiatives and favorable product mix.

•

Marketing, selling and administrative increased 8%, including an unfavorable 4% foreign exchange impact, primarily due to higher selling expenses in support of key products. General and administrative expenses increased from 2007 levels resulting from the implementation costs of the productivity initiatives, partially offset by the ongoing productivity initiatives.

•

Advertising and product promotion increased 16%, including an unfavorable 4% foreign exchange impact, primarily due to increased promotions for new indications of ABILIFY* in the U.S. and Europe, increased investment in ORENCIA, and increased investment in international Nutritionals business.

•

Research and development increased 4%, including an unfavorable 1% foreign exchange impact. Research and development includes charges of $88 million in 2008 for upfront and milestone payments compared to $157 in the same period in 2007. Research and development dedicated to pharmaceutical products was 17.9% of pharmaceutical net sales in the first nine months of 2008 compared to 20.2% in the same period in 2007 and reflect the impact of higher net sales.

•

Acquired in-process research and development of $32 million in the first nine months of 2008 is attributed to the acquisition of Kosan. For additional information on the acquisition, see “Item 1. Financial Statements—Note 4. Acquisitions and Divestitures.”

•

Restructuring charges recorded under the PTI for the nine months ended September 30, 2008 amounted to $67 million. For additional information on restructuring, see “Item 1. Financial Statements – Note 3. Restructuring” and for additional information on the PTI, see “—Strategy” above.

•

Litigation expense was related to the settlement of certain litigation matters. See “Item 1. Financial Statements—Note 20. Legal Proceedings and Contingencies – Pricing, Sales and Promotional Practices Litigation and Investigations.”

•

The gain on sale of product assets in 2007 was for the sale of the BUFFERIN* and EXCEDRIN* brands in Japan, Asia (excluding China and Taiwan) and certain Oceanic countries, as well as certain assets from the dermatology products portfolio. For additional information, see “Item 1. Financial Statements—Note 4. Acquisitions and Divestitures.”

•

The components of other expense, net were as follows:


	Nine Months Ended September 30,
Dollars in Millions	2008			2007
Interest expense	$	237		$	325
Interest income		(111	)		(184	)
Impairment of marketable securities		247			—
Foreign exchange transaction (gains)/losses		(34	)		24
Other, net		(151	)		(136	)

Other expense, net	$	188		$	29

Interest expense decreased approximately 27% primarily due to net interest rate swap gains of $39 million as well as a reduced average effective rate in 2008 on the Floating Rate Convertible Senior Debentures due 2023 when compared to prior year.

Interest income decreased approximately 40% primarily due to the change in mix in the Company’s short-term investment portfolio as well as a decrease in the rate of returns on short-term investments, including Treasury bills, when compared to the prior year.

The fluctuation in foreign exchange transaction (gains)/losses is attributed to the favorability in foreign exchange rates on non-qualifying foreign exchange hedges and on the re-measurement of non-functional currency denominated transactions when compared to the prior period.

During the nine months ended September 30, 2008 and 2007, the Company recorded specified (income)/expense items that affected the comparability of results of the periods presented herein, which are set forth in the following tables:

Nine Months Ended September 30, 2008


Dollars in Millions	Cost of products sold		Marketing, selling and administrative		Research and development		Provision for restructuring, net		Litigation expense, net		Other (income)/ expense, net			Total
Productivity Transformation Initiative:
Downsizing and streamlining of worldwide operations	$	—	$	—	$	—	$	67	$	—	$	—		$	67
Accelerated depreciation and other shutdown costs		207		—		—		—		—		—			207
Process standardization implementation costs		—		64		—		—		—		—			64
Gain on sale and leaseback of properties		—		—		—		—		—		(9	)		(9	)

		207		64		—		67		—		(9	)		329
Litigation Matters:
Litigation settlement		—		—		—		—		32		—			32

Other:
Mead Johnson Nutritionals charges		—		10		—		—		—		—			10
Product liability		—		—		—		—		—		18			18
Upfront and milestone payments		—		—		88		—		—		—			88
Acquired in-process research and development		—		—		32		—		—		—			32
Auction rate securities impairment		—		—		—		—		—		247			247

	$	207	$	74	$	120	$	67	$	32	$	256			756

Income taxes on items above															(154	)

Decrease to Net Earnings from Continuing Operations														$	602

Nine Months Ended September 30, 2007


Dollars in Millions	Cost of products sold		Research and development		Provision for restructuring, net		Litigation expense, net		Other (income)/ expense, net			Gain on sale of product assets			Total
Litigation Matters:
Litigation settlement	$	—	$	—	$	—	$	14	$	—		$	—		$	14
Insurance recovery		—		—		—		—		(11	)		—			(11	)
Product liability		—		—		—		—		5			—			5

		—		—		—		14		(6	)		—			8

Other:
Upfront and milestone payments		—		157		—		—		—			—			157
Accelerated depreciation and asset impairment		46		—		—		—		—			—			46
Downsizing and streamlining of worldwide operations		—		—		44		—		—			—			44
Gain on sale of product assets		—		—		—		—		—			(273	)		(273	)

	$	46	$	157	$	44	$	14	$	(6	)	$	(273	)		(18	)

Income taxes on items above																37
Change in estimate for taxes on a prior year specified item																(39	)

(Increase) to Net Earnings from Continuing Operations															$	(20	)

Earnings From Continuing Operations Before Minority Interest and Income Taxes


	Nine Months Ended September 30,
Dollars in Millions	2008			2007			% Change
Pharmaceuticals	$	3,849		$	2,807		37	%
Nutritionals		645			536		20	%

Total segments		4,494			3,343		34	%
Corporate/Other		(911	)		(329	)	177	%

Total	$	3,583		$	3,014		19	%

Pharmaceuticals

Earnings from continuing operations before minority interest and income taxes increased 37% primarily due to increased sales of PLAVIX ^* , ABILIFY ^* , the HIV and hepatitis portfolio and ORENCIA, as well as an increase in equity in net income of affiliates and favorable net foreign exchange movements partially offset by a moderate rate of increase in operating expenses, increase in manufacturing rationalization charges related to the implementation of the PTI and continued investment in research and development.

Nutritionals

Earnings from continuing operations before minority interest and income taxes increased 20% primarily due to increased international net sales offset by continued investment in advertising and product promotions.

Corporate/Other

The increase in loss from continuing operations before minority interest and income taxes from prior period was primarily due to impairment of marketable securities, higher costs associated with the implementation of the PTI, higher restructuring and litigation expenses in 2008, and gain on sale of product assets in 2007, partially offset by favorable net foreign exchange movements.

Income Taxes

The effective income tax rate on earnings from continuing operations before minority interest and income taxes was 25.0% for the nine months ended September 30, 2008 compared to 17.8% for the nine months ended September 30, 2007. The 2007 tax rate was favorably impacted by a tax benefit of $105 million due to the favorable resolution of certain tax matters with the Internal Revenue Service related to the deductibility of litigation settlement expenses and U.S. foreign tax credits claimed. The lower tax rate in 2007 was also due to the research and development tax credit, which expired on December 31, 2007. The tax rate for the nine months ended September 30, 2008 was impacted by earnings mix in high tax jurisdictions and the favorable benefit of $91 million of tax related to the effective settlement of the 2002-2003 audit with the Internal Revenue Service. For additional information on new tax legislation, see “Item 1. Financial Statements— Note 8. Income Taxes.”

Financial Position, Liquidity and Capital Resources

Cash, cash equivalents and marketable securities were approximately $7.4 billion at September 30, 2008, compared to $2.2 billion at December 31, 2007. The Company continues to maintain a sufficient level of working capital, which was approximately $7.8 billion at September 30, 2008 and $1.7 billion at December 31, 2007. In 2008 and future periods, the Company expects cash generated by its U.S. operations, together with existing cash, cash equivalents, marketable securities and borrowings from the capital markets, to be sufficient to cover cash needs for working capital, capital expenditures (which the Company expects to include substantial investments in facilities to increase and maintain the Company’s capacity to provide biologics on a commercial scale), milestone payments and dividends paid in the U.S. Cash and cash equivalents, marketable securities, the conversion of other working capital items and borrowings are expected to fund near-term operations outside the U.S.

On December 31, 2007, the Company’s carrying value in floating rate securities (FRS) amounted to $337 million. In the three and nine months ended September 30, 2008, the Company received $2 million and $105 million, respectively, of principal at par primarily on FRS that matured in March 2008. In the nine months ended September 30, 2008, the Company reduced the carrying value of the remaining FRS by $54 million to $178 million. The Company assessed this decline in fair market value to be temporary, and recorded the decline as an unrealized loss in accumulated other comprehensive income (OCI). In addition, in the first quarter of 2008, the Company reclassified $104 million of the remaining FRS with maturity dates beyond 2009 from current assets to non-current assets, as the Company expects these FRS to recover their full or substantial values beyond the next 12 months due to liquidity concerns and the continued uncertainty in the capital markets.

On December 31, 2007, the Company’s carrying value in ARS amounted to $419 million. In the first quarter of 2008, the Company received $4 million at par value of partial calls on its ARS and in addition the Company recorded an impairment charge of $25 million on ARS that were previously assessed as impaired. In the second quarter of 2008, the Company sold the portion of its ARS portfolio that contained sub-prime mortgages as its underlying collateral for $45 million, for a gain of $2 million. During the third quarter of 2008, the Company recorded an impairment charge of $224 million related to certain ARS. The impairment charge included an additional $64 million decline in value during the period as well as $160 million which was previously determined to be temporary as of June 30, 2008. The Company continued to adjust ARS to fair value based on third party valuation models and other non-observable evidence of fair value. The third quarter impairment charge was required after an analysis of other-than-temporary impairment factors, including the severity of decline and current financial market conditions.

As of September 30, 2008, the Company maintained a $178 million carrying value in FRS and a $213 million carrying value in ARS after adjusting for $79 million and $27 million, respectively, of unrecognized losses in accumulated other comprehensive income.

If uncertainties in the credit and capital markets continue, these markets deteriorate further or the Company experiences any additional ratings downgrades on any investments in its portfolio (including on FRS and ARS), the Company may incur additional impairments to its investment portfolio, which could negatively affect the Company’s financial condition and reported earnings. The Company believes that, based on the Company’s current level of cash, cash equivalents and marketable securities and expected operating cash flows, the current lack of liquidity in the credit and capital markets will not have a material impact on the Company’s liquidity, cash flow, financial flexibility or its ability to fund its operations, including the dividend.

Short-term borrowings were $0.1 billion at September 30, 2008, compared to $1.9 billion at December 31, 2007. In September 2008, the Company repaid $1.15 billion principal amount of the $1.2 billion aggregate principal amount of Floating Rate Convertible Senior Debentures due 2023. In August 2008 and February 2008, the Company repaid the $400 million 4.00% Notes due 2008 and $117 million of the 1.10% Yen Notes due 2008, respectively. The Company maintains cash balances and short-term investments in excess of short-term borrowings. Long-term debt was $6.1 billion at September 30, 2008 compared to $4.4 billion at December 31, 2007. The increase is primarily attributed to the May 1, 2008 issuance of $600 million aggregate principal amount of 5.45% Notes due 2018 and $1 billion aggregate principal amount of its 6.125% Notes due 2038.

The Moody’s Investors Service (Moody’s) long-term and short-term credit ratings for the Company are currently A2 and Prime-1, respectively. Moody’s revised the long-term credit rating outlook to negative from stable. Standard & Poor’s (S&P) long-term and short-term credit ratings for the Company are currently A+ and A-1, respectively. S&P’s long-term credit rating remains on stable outlook. Fitch Ratings (Fitch) long-term and short-term credit ratings for the Company are currently A+ and F1, respectively. Fitch’s long-term credit rating remains on stable outlook.

The following is a discussion of working capital:


Dollars in Millions	September 30, 2008		December 31, 2007
Working capital	$	7,828	$	1,704

The increase in working capital of $6.1 billion from December 31, 2007 to September 30, 2008 was impacted by:

•

Generation of $3.3 billion of net cash provided by operating activities.

•

Increase in cash and cash equivalents due to proceeds of $4.1 billion from the sale of the ConvaTec business and issuance of $1.0 billion of 6.125% Notes due 2038 and $600 million of 5.45% Notes due 2018 of which $1.15 billion was used to repay a portion of the Floating Rate Convertible Senior Debentures due 2023, previously classified as short term.

The following is a discussion of cash flow activities:


	Nine Months Ended September 30,
Dollars in Millions	2008			2007
Cash flow provided by/(used in):
Operating activities	$	3,341		$	2,523
Investing activities		4,005			(236	)
Financing activities		(1,979	)		(2,689	)

Net cash provided by operating activities was $3,341 million in 2008 and was generated primarily from net earnings of $4,003 million, adjusted by $3,434 million of gains attributed to the sales of the ConvaTec and Medical Imaging businesses and a $247 million net impairment charge primarily related to ARS. Also, impacting cash flow from operating activities in 2008 was a $1,629 million non-cash deferred tax expense primarily associated with the ConvaTec and Medical Imaging gains on sales of businesses. Total changes in operating assets and liabilities amounted to a net use of cash of $82 million in the nine months ended September 30, 2008 and is primarily driven by an $598 million increase in receivables, due primarily to increased sales, and litigation settlement

payments of $178 million, partially offset by an increase in payables and accrued expense due to the timing of cash payments, as well as a cash inflow of $385 million from U.S. and foreign income tax payables mainly attributed to the cash refund of approximately $432 million, including interest, in the third quarter of 2008 related to the prior year foreign tax credit carryback claim.

Net cash provided by operating activities was $2,523 million in 2007 and consisted primarily of $2,254 million of net earnings, adjusted by $273 million of gains on sales of the BUFFERIN* and EXCEDRIN* brands in Japan, Asia (excluding China and Taiwan) and certain Oceanic countries and U.S. dermatology products, and a $175 million benefit attributed to the settlement of certain tax matters with the IRS, the tax effect of certain milestone payments and additional research and development credits. Total changes in operating assets and liabilities amounted to a net use of cash of $188 million in the nine months ended September 30, 2007 and is primarily driven by a $366 million increase in receivables and litigation settlement payments of $318 million, partially offset by a $389 million increase in accounts payables and $288 million cash inflow from upfront cash payments that were received from alliance partners for codevelopment and commercialization agreements entered into in 2007.

Net cash provided by investing activities was $4,005 million in 2008 and included proceeds of $4,048 million associated with the sale of the ConvaTec business, $483 million associated with the sale of Medical Imaging business, and $227 million in connection with the sale and leaseback of the Paris, France facility, partially offset by a $191 million use of cash associated with the purchase of Kosan. Net cash used in investing activities was $236 million in 2007 and included $593 million of capital expenditures, partially offset by $273 million of proceeds from the sales of the BUFFERIN* and EXCEDRIN* brands in Japan, Asia (excluding China and Taiwan) and certain Oceanic countries and U.S. dermatology products, as well as $63 million net proceeds from marketable securities.

Net cash used in financing activities was $1,979 million in 2008 and includes the September 2008 repayment of $1.15 billion par value of the Company’s Floating Rate Convertible Senior Debentures, the repayment of the $400 million 4.00% Notes due August 2008, and repayment of $117 million of 1.10% Yen Notes offset by the issuance of $600 million aggregate principal amount of 5.45% Notes due 2018 and $1.0 billion aggregate principal amount of 6.125% Notes due 2038 in May 2008, resulting in net proceeds of approximately $1,579 million. The Company increased its dividends by 11% for an increased cash use of $186 million when compared to the prior period. Cash proceeds from stock option exercises decreased to $4 million in 2008 from $312 million in 2007 due to less stock option exercises attributed to the decrease in average stock price when compared to the prior period. Cash used by financing activities in 2007 was also impacted by the repayment of the $1.3 billion Floating Rate Bank Facility.

Dividends declared per common share were $0.93 for the nine months ended September 30, 2008 and $0.84 for the nine months ended September 30, 2007. The Company paid $1,845 million and $1,659 million in dividends for the nine months ended September 30, 2008 and September 30, 2007, respectively. Dividend decisions are made on a quarterly basis by the Board of Directors.

Contractual Obligations

For a discussion of the Company’s contractual obligations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2007 Form 10-K. In the first quarter of 2008, the Company entered into a sale and leaseback of an administrative facility in Paris, France, which resulted in approximately $120 million of future lease costs over a nine-year lease period. In addition, the Company reduced a $677 million, five-year purchase obligation to a $165 million, two-year purchase obligation upon early termination.

In the second quarter of 2008, the Company entered into a 10-year, $324 million agreement with International Business Machines Corporation to support the Company’s human resources functions including payroll, benefits, recruiting and call center support, as well as to upgrade the Company’s human resources computer systems. The Company also expanded and extended its existing information technology and financial outsourcing agreements with Accenture LLC. The 10-year agreement is valued at approximately $800 million. In addition, during 2008, the Company entered into other contractual purchase obligations amounting to approximately $275 million with obligation periods ranging between one and 20 years.

SEC Consent Order

As previously disclosed, on August 4, 2004, the Company entered into a final settlement with the SEC, concluding an investigation concerning certain wholesaler inventory and accounting matters. The settlement was reached through a Consent, a copy of which was attached as Exhibit 10 to the Company’s quarterly report on Form 10-Q for the period ended September 30, 2004.

Under the terms of the Consent, the Company agreed, subject to certain defined exceptions, to limit sales of all products sold to its direct customers (including wholesalers, distributors, hospitals, retail outlets, pharmacies and government purchasers) based on expected demand or on amounts that do not exceed approximately one month of inventory on hand, without making a timely public disclosure of any change in practice. The Company also agreed in the Consent to certain measures that it has implemented including: (a) establishing a formal review and certification process of its annual and quarterly reports filed with the SEC; (b) establishing a business risk and disclosure group; (c) retaining an outside consultant to comprehensively study and help re-engineer the Company’s

accounting and financial reporting processes; (d) publicly disclosing any sales incentives offered to direct customers for the purpose of inducing them to purchase products in excess of expected demand; and (e) ensuring that the Company’s budget process gives appropriate weight to inputs that comes from the bottom to the top, and not just from the top to the bottom, and adequately documenting that process.

The Company has established a company-wide policy to limit its sales to direct customers for the purpose of complying with the Consent. This policy includes the adoption of various procedures to monitor and limit sales to direct customers in accordance with the terms of the Consent. These procedures include a governance process to escalate to appropriate management levels potential questions or concerns regarding compliance with the policy and timely resolution of such questions or concerns. In addition, compliance with the policy is monitored on a regular basis.

The Company maintains Inventory Management Agreements (IMAs) with all of its U.S. pharmaceutical wholesalers, which account for nearly 100% of total gross sales of U.S. Pharmaceuticals products. Under the current terms of the IMAs, the Company’s three largest wholesaler customers provide the Company with weekly information with respect to months on hand product-level inventories and the amount of out-movement of products. These three wholesalers currently account for approximately 92% of total gross sales of U.S. Pharmaceuticals products in the third quarter of 2008. The inventory information received from these wholesalers, together with the Company’s internal information, is used to estimate months on hand product-level inventories at these wholesalers. The Company estimates months on hand product inventory levels for its U.S. Pharmaceuticals business’s wholesaler customers other than the three largest wholesalers by extrapolating from the months on hand calculated for the three largest wholesalers. In contrast, for the Company’s Pharmaceuticals business outside of the U.S. and Nutritionals business units around the world, the Company has significantly more direct customers, limited information on direct customer product-level inventory and corresponding out-movement information and the reliability of third-party demand information, where available, varies widely. Accordingly, the Company relies on a variety of methods to estimate months on hand product-level inventories for these business units.

The Company believes the above-described procedures provide a reasonable basis to ensure compliance with the Consent.

Critical Accounting Policies

For a discussion of the Company’s critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2007 Form 10-K.

Special Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q (including documents incorporated by reference) and other written and oral statements the Company makes from time to time contain certain “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. You can identify these forward-looking statements by the fact they use words such as “should”, “expect”, “anticipate”, “estimate”, “target”, “may”, “project”, “guidance”, “intend”, “plan”, “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements are likely to relate to, among other things, the Company’s goals, plans and projections regarding its financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years. The Company has included important factors in the cautionary statements included in its 2007 Annual Report on Form 10-K, in its Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008, and in this quarterly report, particularly under “Item 1A. Risk Factors”, that the Company believes could cause actual results to differ materially from any forward-looking statement.

Although the Company believes it has been prudent in its plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. The Company undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s market risk, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s 2007 Form 10-K.

In the nine months ended September 30, 2008, the Company sold $933 million notional amount of forward contracts (in several currencies) to partially hedge the exchange impact primarily related to forecasted intercompany inventory purchases for up to the next 14 months.

In addition, in the first quarter of 2008, the Company entered into an aggregate $600 million notional amount 30-year forward starting interest rate swaps terminating in June 2008 with several financial institutions in order to hedge the variability in forecasted interest expense resulting from the probable issuance of debt in 2008. The forward starting interest rate swaps were settled on April 30, 2008 at a loss of $19 million. The loss is being deferred in other comprehensive income/(loss) and will be amortized to interest expense over the life of the 6.125% Notes due 2038. Furthermore, in the nine months ended September 30, 2008, the Company executed several fixed-to-floating interest rate swaps to convert $1.2 billion of the $1.6 billion fixed rate debt to be paid in 2018 and 2038 to variable rate debt.

In the nine months ended September 30, 2008, the Company recognized an impairment charge of $247 million on its ARS portfolio. In addition, at September 30, 2008, the Company recognized unrealized losses of $27 million related to ARS and $79 million related to FRS in accumulated other comprehensive income. If deterioration in the credit and capital markets continue, or if the Company experiences any additional ratings downgrades on any investments in its ARS and FRS portfolio, the Company may incur additional impairments to its investment portfolio, which could negatively affect the Company’s financial condition, cash flow and reported earnings. The Company believes that, based on the Company’s current level of cash, cash equivalents and marketable securities and expected operating cash flows, the current lack of liquidity in the credit and capital markets will not have a material impact on the Company’s liquidity, cash flow, financial flexibility or its ability to fund its operations, including the dividend.

Item 4. CONTROLS AND PROCEDURES

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective.

PART II—OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in “Item 1. Financial Statements—Note 20. Legal Proceedings and Contingencies,” to the interim consolidated financial statements, and is incorporated by reference herein.

Item 1A.

RISK FACTORS

There have been no material changes from the risk factors disclosed in the Company’s 2007 Form 10-K, except for the following:

Data protection for PLAVIX* has expired in the EU and PLAVIX* faces competition in European markets this year.

Data protection for PLAVIX* expired on July 15, 2008 in the European Union (EU). In most of the major markets within Europe, the product benefits from national patents, expiring in 2013, which specifically claim the bisulfate form of clopidogrel. In the remainder of EU member states, however, where there is no composition-of-matter patent covering clopidogrel bisulfate, competitors are seeking regulatory authority to enter those markets with generic clopidogrel bisulfate. In addition, at least one group of competitor companies has received marketing authorization for, and has started to market, an alternate salt form of clopidogrel in Germany. These competitor companies have announced that they plan to seek marketing authorization in other EU countries in addition to Germany. At this time, the Company cannot estimate reliably the impact of any such competition on the Company’s financial results.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes the surrenders of the Company’s equity securities in connection with stock option and restricted stock programs during the nine month period ended September 30, 2008:


Period	Total Number of Shares Purchased ^(a)	Average Price Paid per Share ^(a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(b)
Dollars in Millions, Except Per Share Data
January 1 to 31, 2008	13,431	$	26.14	—	$	2,220
February 1 to 29, 2008	16,142	$	24.13	—	$	2,220
March 1 to 31, 2008	530,289	$	22.07	—	$	2,220

Three months ended March 31, 2008	559,862

April 1 to 30, 2008	13,019	$	22.28	—	$	2,220
May 1 to 31, 2008	34,544	$	22.16	—	$	2,220
June 1 to 30, 2008	11,098	$	22.59	—	$	2,220

Three months ended June 30, 2008	58,661

July 1 to 31, 2008	9,889	$	20.80	—	$	2,220
August 1 to 31, 2008	5,932	$	21.11	—	$	2,220
September 1 to 30, 2008	60,781	$	21.24	—	$	2,220

Three months ended September 30, 2008	76,602

Nine months ended September 30, 2008	695,125

(a)	Reflects the following transactions during the nine months ended September 30, 2008 for the surrender to the Company of 695,125 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.

(b)	In June 2001, the Company announced that the Board of Directors authorized the purchase of up to $14 billion of Company common stock. During the nine months ended September 30, 2008, no shares were repurchased pursuant to this program.

Item 6.

EXHIBITS

Exhibits (listed by number corresponding to the Exhibit Table of Item 601 in Regulation S-K).


Exhibit Number and Description		Page
3.1	Bylaws of Bristol-Myers Squibb Company, as amended as of September 9, 2008 (incorporated by reference herein to Exhibit 3.1 to the Form 8-K dated September 9, 2008 and filed September 12, 2008).
10.1	Bristol-Myers Squibb Company 2002 Stock Incentive Plan, effective as of May 7, 2002 and as amended effective June 10, 2008.	E-10-1
10.2	Bristol-Myers Squibb Company 2007 Stock Award and Incentive Plan, effective as of May 7, 2002 and as amended effective June 10, 2008.	E-10-2
10.3	Bristol-Myers Squibb Company Executive Performance Incentive Plan (effective January 1, 2003 and as amended effective June 10, 2008).	E-10-3
10.4	Bristol-Myers Squibb Company 2007 Senior Executive Performance Incentive Plan (effective May 1, 2007 and as amended effective June 10, 2008).	E-10-4
10.5	Form of Performance Shares Agreement for the 2007-2009 Performance Cycle.	E-10-5
10.6	Senior Executive Severance Plan, effective as of April 26, 2007 and as amended effective June 10, 2008.	E-10-6
31a.	Section 302 Certification Letter.	E-31-1
31b.	Section 302 Certification Letter.	E-31-2
32a.	Section 906 Certification Letter.	E-32-1
32b.	Section 906 Certification Letter.	E-32-2

Indicates, in this Form 10-Q, brand names of products, which are registered trademarks not owned by the Company or its subsidiaries. ERBITUX is a trademark of ImClone Systems Incorporated; AVAPRO/AVALIDE (known in the European Union as APROVEL/KARVEA) and PLAVIX are trademarks of Sanofi-Aventis; ABILIFY is a trademark of Otsuka Pharmaceutical Co., Ltd.; TRUVADA is a trademark of Gilead Sciences, Inc.; ATRIPLA is a trademark of Bristol-Myers Squibb and Gilead Sciences, LLC; SIMILAC is a trademark of Abbott Laboratories.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BRISTOL-MYERS SQUIBB COMPANY (R EGISTRANT )

Date: October 23, 2008	By:	/s/ James M. Cornelius
		James M. Cornelius Chairman of the Board and Chief Executive Officer

Date: October 23, 2008	By:	/s/ Jean-Marc Huet
		Jean-Marc Huet Chief Financial Officer

Exhibit 10.1

BRISTOL-MYERS SQUIBB COMPANY

2002 STOCK INCENTIVE PLAN

(As Amended and Restated effective June 10, 2008)

1. Purpose: The purpose of the 2002 Stock Incentive Plan is to secure for the Company and its stockholders the benefits of the incentive inherent in common stock ownership by the officers and key employees of the Company and its Subsidiaries and Affiliates who will be largely responsible for the Company’s future growth and continued financial success and by providing long-term incentives in addition to current compensation to certain key executives of the Company and its Subsidiaries and Affiliates who contribute significantly to the long-term performance and growth of the Company and such Subsidiaries and Affiliates. It is intended that the former purpose will be effected through the granting of stock options, stock appreciation rights, dividend equivalents, restricted stock and/or restricted stock units under the Plan and that the latter purpose will be effected through an award conditionally granting performance units or performance shares under the Plan, either independently or in conjunction with and related to a nonqualified stock option grant under the Plan.

2. Definitions: For purposes of this Plan:

(a) “Affiliate” shall mean any entity in which the Company has an ownership interest of at least 20%, subject to Section 13.

(b) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “Company” shall mean the Issuer (the Bristol-Myers Squibb Company), its Subsidiaries and Affiliates.

(e) “Disability” or “Disabled” shall mean qualifying for and receiving payments under a disability plan of the Company or any Subsidiary or Affiliate either in the United States or in a jurisdiction outside of the United States, and in jurisdictions outside of the United States shall also include qualifying for and receiving payments under a mandatory or universal disability plan or program managed or maintained by the government.

(f) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(g) “Fair Market Value” shall mean the last sale price of a share of Common Stock before the 4 p.m. Eastern Time closing time (or equivalent earlier time for partial trading days) on the New York Stock Exchange, Inc. composite tape on the date of measurement as determined by the Committee or, if there were no trades on such date, on the day on which a trade occurred next preceding such date; provided, however, that Fair Market Value determined in connection with any Excluded Options/SARs (as defined in Section 6) shall conform to applicable requirements under Proposed Treasury Regulation § 1.409A-1(b)(5) and any successor regulation.

(h) “Issuer” shall mean the Bristol-Myers Squibb Company.

(i) “Prior Plan” shall mean the Bristol-Myers Squibb Company 1997 Stock Option Plan as amended and restated effective as of October 1, 2001.

(j) “Retirement” shall mean termination of the employment of an employee with the Company or a Subsidiary or Affiliate on or after (i) the employee’s 65th birthday or (ii) the employee’s 55th birthday if the employee has completed 10 years of service with the Company, its Subsidiaries and/or its Affiliates. For purposes of this Section 2(j) and all other purposes of this Plan, Retirement shall also mean termination of employment of an employee with the Company or a Subsidiary or Affiliate for any reason (other than the employee’s death, resignation, willful misconduct or activity deemed detrimental to the interests of the Company) where, on termination, (iii) the employee’s age plus

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years of service (rounded up to the next higher whole number) equals at least 70 and the employee has completed 10 years of service with the Company, its Subsidiaries and/or its Affiliates, provided the Optionee executes a general release agreement and where applicable, a non-solicitation and/or non-compete agreement with the Company or (iv) the employee is at least 50 years of age and the employee has completed 10 years of service with the Company, its Subsidiaries and/or its Affiliates provided the Optionee executes a general release agreement and, where applicable, a non-solicitation and/or non-compete agreement with the Company. This section 2(j)(iv) shall expire on January 31, 2003.

Furthermore, an employee who makes an election to retire under Article 19 of the Bristol-Myers Squibb Company Retirement Income Plan (the “Retirement Income Plan”) shall have any additional years of age and service which are credited under Article 19 of the Retirement Income Plan taken into account when determining such employee’s age and service under this Section 2(j). Such election shall be deemed a Retirement for purposes of this Section 2(j) and all other purposes of this Plan.

(k) “Subsidiary” shall mean any corporation which at the time qualifies as a subsidiary of the Company under the definition of “subsidiary corporation” in Section 424 of the Code.

3. Amount of Stock: The amount of stock which may be made subject to grants of options or awards of performance units under the Plan in calendar year 2002 shall not exceed an amount equal to the amount of shares available for, and not made subject to, grants of options or awards under the Prior Plan as of the day before the effective date of this plan. With respect to each succeeding year, the amount of stock which may be made subject to grants of options or awards of performance units under the Plan shall not exceed an amount equal to (i) 0.9% of the outstanding shares of the Company’s Common Stock on January 1 of such year plus, subject to this Section 3, (ii) in any year the number of shares equal to the amount of shares that were available for grants and awards in the prior year but were not made subject to a grant or award in such prior year, (iii) the number of shares that were subject to options or awards granted hereunder or under the Prior Plan, which options or awards terminated, were cancelled or forfeited or expired in the prior year without being exercised, or were forfeited and returned to the Company after exercise (iv) the number of shares participants tendered in the prior year to pay the purchase price of options in accordance with Section 6(b)(5), and (v) the number of shares the Company retained or caused participants to surrender in the prior year to satisfy Withholding Tax requirements in accordance with Section 11 . No individual may be granted options or awards under Sections 6, 7 or 8 in the aggregate, in respect of more than 3,000,000 shares of the Company’s Common Stock in a calendar year, subject to adjustment in number and kind pursuant to Section 10. Aggregate shares issued under performance share and performance unit awards made pursuant to Section 7 and restricted stock and restricted stock unit awards made pursuant to Section 8 may not exceed 20,000,000 shares over the life of the Plan, subject to adjustment in number and kind pursuant to Section 10. Common Stock issued hereunder may be authorized and reissued shares or issued shares acquired by the Company or its Subsidiaries on the market or otherwise.

4. Administration: The Plan shall be administered under the supervision of the Board of Directors of the Company which shall exercise its powers, to the extent herein provided, through the agency of a Compensation and Management Development Committee (the “Committee”) which shall be appointed by the Board of Directors of the Company. The Committee shall consist of not less than three (3) members of the Board who meet the definition of “outside director” under the provisions of Section 162(m) of the Code and the definition of “non-employee directors” under the provisions of the Exchange Act or rules or regulations promulgated thereunder. No act of the Committee shall be void or deemed without authority solely because a member of the Committee, at the time such action was taken, did not meet a qualification requirement under this Section 4.

The Committee, from time to time, may adopt rules and regulations (“Regulations”) for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate. The interpretation and construction of any provision of the Plan by the Committee shall, unless otherwise determined by the Board of Directors, be final and conclusive.

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The Committee shall maintain a written record of its proceedings. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the Committee.

5. Eligibility: Options and awards may be granted only to present or future officers and key employees of the Company and its Subsidiaries and Affiliates, including Subsidiaries and Affiliates which become such after the adoption of the Plan. Any officer or key employee of the Company or of any such Subsidiary or Affiliate shall be eligible to receive one or more options or awards under the Plan. Any director who is not an officer or employee of the Company or one of its Subsidiaries or Affiliates and any member of the Committee, during the time of the member’s service as such or thereafter, shall be ineligible to receive an option or award under the Plan. The adoption of this Plan shall not be deemed to give any officer or employee any right to an award or to be granted an option to purchase Common Stock of the Company, except to the extent and upon such terms and conditions as may be determined by the Committee.

6. Stock Options: Stock options under the Plan shall consist of incentive stock options under Section 422 of the Code or nonqualified stock options (options not intended to qualify as incentive stock options), as the Committee shall determine. In addition, the Committee may grant stock appreciation rights in conjunction with an option, as set forth in Section 6(b)(11), or may grant awards in conjunction with an option, as set forth in Section 6(b)(10) (an “Associated Option”).

Each option shall be subject to the following terms and conditions:

(a) Grant of Options. The Committee shall (1) select the officers and key employees of the Company and its Subsidiaries and Affiliates to whom options may from time to time be granted, (2) determine whether incentive stock options or nonqualified stock options are to be granted, (3) determine the number of shares to be covered by each option so granted, (4) determine the terms and conditions (not inconsistent with the Plan) of any option granted hereunder (including but not limited to restrictions upon the options, circumstances, if any, under which options or option gains may be forfeited, conditions of their exercise, or on the shares of Common Stock issuable upon exercise thereof), (5) determine whether nonqualified stock options or incentive stock options granted under the Plan shall include stock appreciation rights and, if so, shall determine the terms and conditions thereof in accordance with Section 6(b)(11) hereof, (6) determine whether any nonqualified stock options granted under the Plan shall be Associated Options, (7) determine whether the options or stock appreciation rights are to be excluded from being a deferral arrangement under Proposed Treasury Regulation § 1.409A-1(b)(5) and any successor regulation (“Excluded Options/SARs”) or will comply with other applicable provisions of Section 409A or exemptions thereunder (“409A Options/SARs”) and (8) prescribe the form of the instruments necessary or advisable in the administration of options.

(b) Terms and Conditions of Option. Any option granted under the Plan shall be evidenced by a Stock Option Agreement entered into by the Company and the optionee, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan, and in the case of an incentive stock option not inconsistent with the provisions of the Code applicable to incentive stock options, as the Committee shall prescribe:

(1) Number of Shares Subject to an Option. The Stock Option Agreement shall specify the number of shares of Common Stock subject to the Agreement. If the option is an Associated Option, the number of shares of Common Stock subject to such Associated Option shall initially be equal to the number of performance units or performance shares subject to the award, but one share of Common Stock shall be canceled for each performance unit or performance share paid out under the award.

(2) Option Price. The purchase price per share of Common Stock purchasable under an option will be determined by the Committee but will be not less than the Fair Market Value of a share of Common Stock on the date of the grant of such option.

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(3) Option Period. The period of each option shall be fixed by the Committee, but no option shall be exercisable after the expiration of ten years from the date the option is granted.

(4) Consideration. Each optionee, as consideration for the grant of an option, shall remain in the continuous employ of the Company or of one of its Subsidiaries or Affiliates for at least one year or such lesser period as the Committee shall so determine in its sole discretion from the date of the granting of such option, and no option shall be exercisable until after the completion of such one year or lesser period of employment by the optionee.

(5) Exercise of Option. An option may be exercised in whole or in part from time to time during the option period (or, if determined by the Committee, in specified installments during the option period) by giving written notice (or by such other methods of notice as the Committee designates) of exercise to the Company (or a representative designated by the Company for that purpose) specifying the number of shares to be purchased, such notice to be accompanied by payment in full of the purchase price and applicable Withholding Taxes (as defined in Section 11 hereof) due either by (i) certified or bank check, (ii) in shares of Common Stock of the Company having a Fair Market Value at the date of exercise equal to such purchase price, provided, however, that payment in shares of Common Stock of the Company will not be permitted unless at least 100 shares of Common Stock are required and delivered for such purpose and shall be subject to other restrictions as may be specified by the Company, (iii) in any combination of the foregoing, or (iv) by any other method authorized by the Committee. At its discretion, the Committee may modify or suspend any method for the exercise of stock options, including any of the methods specified in the previous sentence. Delivery of shares for exercising an option shall be made either through the physical delivery of shares or through an appropriate certification or attestation of valid ownership. No shares shall be issued until full payment therefor has been made. An optionee shall have the rights of a stockholder only with respect to shares of stock for which certificates have been issued to the optionee.

Notwithstanding anything in the Plan to the contrary, the Company may, in its sole discretion, allow the exercise of a lapsed grant if the Company determines that: (i) the lapse was solely the result of the Company’s inability to execute the exercise of an option award due to conditions beyond the Company’s control and (ii) the optionee made valid and reasonable efforts to exercise the award. In the event the Company makes such a determination, the Company shall allow the exercise to occur as promptly as possible following its receipt of exercise instructions subsequent to such determination.

(6) Nontransferability of Options. No option or stock appreciation right granted under the Plan shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and such option or stock appreciation right shall be exercisable, during the optionee’s lifetime, only by the optionee. Notwithstanding the foregoing, the Committee may set forth in a Stock Option Agreement at the time of grant or thereafter, that the options (other than Incentive Stock Options) may be transferred to members of the optionee’s immediate family, to trusts solely for the benefit of such immediate family members and to partnerships in which such family members and/or trusts are the only partners. For this purpose, immediate family means the optionee’s spouse, parents, children, stepchildren, grandchildren and legal dependants. Any transfer of options made under this provision will not be effective until notice of such transfer is delivered to the Company.

(7) Retirement and Termination of Employment Other than by Death. If an optionee shall cease to be employed by the Company or any of its Subsidiaries or Affiliates for any reason (other than termination of employment by reason of death) after the optionee shall have been continuously so employed for one year after the granting of the option, or as otherwise determined by the Committee, the option shall be exercisable only to the extent that the optionee was otherwise entitled to exercise it at the time of such cessation of employment with the Company, Subsidiary or Affiliate, unless otherwise determined by the Committee. If the cessation of employment is on account of Retirement, the option shall remain exercisable for

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the remainder of the option term (subject to Section 6(b)(9)). If the cessation of employment is not on account of Retirement or death, the option shall remain exercisable for three months after cessation of employment (or, if earlier, the remainder of the option period), unless the Committee determines otherwise. The Plan does not confer upon any optionee any right with respect to continuation of employment by the Company or any of its Subsidiaries or Affiliates.

(8) Disability of Optionee. An optionee who becomes Disabled will not be deemed to have terminated employment for the period during which, under the applicable disability pay plan of the Company, Subsidiary or Affiliate, the optionee is deemed to be employed and continues to receive disability payments. Upon the cessation of payments under such disability pay plan, (i) if the optionee returns to employment status with the Company, Subsidiary or Affiliate, he or she will not be deemed to have terminated employment, and (ii), if the optionee does not return to such employment status, he or she will be deemed to have terminated employment at the date of cessation of such disability payments, with such termination treated for purposes of the options as a Retirement, death, or voluntary termination based on the optionee’s circumstances at the time of such termination.

(9) Death of Optionee. Except as otherwise provided in subsection (13), in the event of the optionee’s death (i) while in the employ of the Company or any of its Subsidiaries or Affiliates, (ii) while Disabled as described in subsection (8) or (iii) after cessation of employment due to Retirement, the option shall be fully exercisable by the executors, administrators, legatees or distributees of the optionee’s estate, as the case may be, at any time following such death. In the event of the optionee’s death after cessation of employment for any reason other than Retirement, the option shall be exercisable by the executors, administrators, legatees or distributees of the optionee’s estate, as the case may be, at any time during the twelve month period following such death. Notwithstanding the foregoing, in no event shall an option be exercisable unless the optionee shall have been continuously employed by the Company or any of its Subsidiaries or Affiliates for a period of at least one year, or such lesser period as the Committee shall so determine in its sole discretion, after the option grant, and no option shall be exercisable after the expiration of the option period set forth in the Stock Option Agreement. In the event any option is exercised by the executors, administrators, legatees or distributees of the estate of a deceased optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the option are the duly appointed legal representatives of the deceased optionee’s estate or the proper legatees or distributees thereof.

(10) Long-Term Performance Awards. The Committee may from time to time grant nonqualified stock options under the Plan in conjunction with and related to an award of performance units or performance shares made under a Long-Term Performance Award as set forth in Section 7(b)(11). In such event, notwithstanding any other provision hereof, (i) the number of shares to which the Associated Option applies shall initially be equal to the number of performance units or performance shares granted by the award, but such number of shares shall be reduced on a one-share-for-one unit or share basis to the extent that the Committee determines pursuant to the terms of the award, to pay to the optionee or the optionee’s beneficiary the performance units or performance shares granted pursuant to such award; and (ii) such Associated Option shall be cancelable in the discretion of the Committee, without the consent of the optionee, under the conditions and to the extent specified in the award.

(11) Stock Appreciation Rights. In the case of any option granted under the Plan, either at the time of grant or by amendment of such option at any time after such grant there may be included a stock appreciation right which shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall impose, including the following:

(A) A stock appreciation right shall be exercisable to the extent, and only to the extent, that the option in which it is included is at the time exercisable, and may be exercised within such period only at such time or times as may be determined by the Committee;

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(B) A stock appreciation right shall entitle the optionee (or any person entitled to act under the provisions of subsection (9) hereof) to surrender unexercised the option in which the stock appreciation right is included (or any portion of such option) to the Company and to receive from the Company in exchange therefor that number of shares having an aggregate value equal to (or, in the discretion of the Committee, less than) the excess of the value of one share (provided such value does not exceed such multiple of the option price per share as may be specified by the Committee) over the option price per share specified in such option times the number of shares called for by the option, or portion thereof, which is so surrendered. The Committee shall be entitled to cause the Company to settle its obligation, arising out of the exercise of a stock appreciation right, by the payment of cash equal to the aggregate value of the shares the Company would otherwise be obligated to deliver or partly by the payment of cash and partly by the delivery of shares. Any such election shall be made within 30 business days after the receipt by the Committee of written notice of the exercise of the stock appreciation right. The value of a share for this purpose shall be the Fair Market Value thereof on the last business day preceding the date of the election to exercise the stock appreciation right (except as may be otherwise required under Proposed Treasury Regulation § 1.409A-1(b)(5) and any successor regulation);

(C) No fractional shares shall be delivered under this subsection (11) but in lieu thereof a cash adjustment shall be made;

(D) If a stock appreciation right included in an option is exercised, such option shall be deemed to have been exercised to the extent of the number of shares called for by the option or portion thereof which is surrendered on exercise of the stock appreciation right and no new option may be granted covering such shares under this Plan; and

(E) If an option which includes a stock appreciation right is exercised, such stock appreciation right shall be deemed to have been canceled to the extent of the number of shares called for by the option or portion thereof is exercised and no new stock appreciation rights may be granted covering such shares under this Plan.

(F) If an option which includes a stock appreciation right is forfeited pursuant to Section 6(b)(15), such stock appreciation right shall be deemed to have been forfeited to the extent of the number of shares cancelled or forfeited under the option.

(12) Incentive Stock Options. In the case of any incentive stock option granted under the Plan, the aggregate Fair Market Value of the shares of Common Stock of the Company (determined at the time of grant of each option) with respect to which incentive stock options granted under the Plan and any other plan of the Company or its parent or a Subsidiary which are exercisable for the first time by an employee during any calendar year shall not exceed $100,000 or such other amount as may be required by the Code. Only employees who are employed by the Issuer or a Subsidiary shall be eligible to receive a grant of an Incentive Stock Option. In any year, the maximum number of shares with respect to which incentive stock options may be granted shall not exceed 8,000,000 shares, subject to adjustment pursuant to Section 10.

(13) Rights of Transferee. Notwithstanding anything to the contrary herein, if an option has been transferred in accordance with Section 6(b)(6), the option shall be exercisable solely by the transferee. The option shall remain subject to the provisions of the Plan, including that it will be exercisable only to the extent that the optionee or optionee’s estate would have been entitled to exercise it if the optionee had not transferred the option. In the event of the death of the optionee prior to the expiration of the right to exercise the transferred option, the period during which the option shall be exercisable will terminate on the date one year following the

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date of the optionee’s death. In the event of the death of the transferee prior to the expiration of the right to exercise the option, the period during which the option shall be exercisable by the executors, administrators, legatees and distributees of the transferee’s estate, as the case may be, will terminate on the date one year following the date of the transferee’s death. In no event will the option be exercisable after the expiration of the option period set forth in the Stock Option Agreement. The option shall be subject to such other rules as the Committee shall determine.

(14) Change in Control. In the event an optionee’s employment with the Company terminates for a qualifying reason during the three (3) year period following a change in control of the Company and prior to the exercise of options granted under this Plan, all outstanding options shall become immediately fully vested and exercisable notwithstanding any provisions of the Plan or of the applicable stock option agreement to the contrary.

(A) For the purpose of this Plan a change in control shall be deemed to have occurred on the earlier of the following dates:

(1) The date any Person (as defined in Section 13(d)(3) of the Securities and Exchange Act) shall have become the direct or indirect beneficial owner of thirty percent (30%) or more of the then outstanding common shares of the Company;

(2) The date of consummation of a merger or consolidation of the Company with any other corporation other than (i) a merger or consolidation which would result in the voting securities of the company outstanding immediately prior thereto continuing to represent at least 51% of the combined voting power of the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company in which no Person acquires more than 50% of the combined voting power of the Company’s then outstanding securities;

(3) The date the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets;

(4) The date there shall have been a change in the composition of the Board of Directors of the Company within a two- (2) year period such that a majority of the Board does not consist of directors who were serving at the beginning of such period together with directors whose initial nomination for election by the Company’s stockholders or, if earlier, initial appointment to the Board, was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the two- (2) year period together with the directors who were previously so approved.

(B) For purposes of this Plan provision, a qualifying termination shall be deemed to have occurred under the following circumstances:

(1) A Company initiated termination for reason other than the employee’s death, resignation without good cause, willful misconduct or activity deemed detrimental to the interests of the Company provided the optionee executes a general release and, where applicable, a non-solicitation and/or non-compete agreement with the Company;

(2) The optionee resigns with good cause, which includes (i) a substantial adverse alteration in the nature or status of the optionee’s responsibilities, (ii) a reduction in the optionee’s base salary and/or levels of entitlement or participation under any incentive plan, award program or employee benefit

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program without the substitution or implementation of an alternative arrangement of substantially equal value, or, (iii) the Company requiring the optionee to relocate to a work location more than fifty (50) miles from his/her work location prior to the change in control.

(C) For any Award that constitutes a “deferral of compensation” under Code Section 409A (and which is not grandfathered), the following additional provisions apply:

(1) The term “substantial” relating to the adverse alteration in the nature or status of participant’s responsibilities under (B)(2)(i) above means “material” within the meaning of Treasury Regulation § 1.409A-1(n); and

(2) An event that would otherwise constitute “good cause” hereunder shall not constitute good cause (i) if the participant fails to provide notice to the Company of the circumstances constituting good cause within 90 days after the participant first becomes aware of such event and at least 30 days before participant’s termination for good cause, (ii) if the participant fails to provide a notice of termination to the Company, with such notice specifying a termination date not more than 90 days after the notice is provided to the Company and not more than two years following the date the circumstances constituting good cause first arose; or (iii) if the Company has fully corrected the circumstances that constitute good cause within 30 days of receipt of notice under clause (i) above.

(15) Special Forfeiture Provisions. The Committee may, in its discretion, provide in a Stock Option Agreement that, in the event that the optionee engages, within a specified period after termination of employment, in certain activity specified by the Committee that is deemed detrimental to the interests of the Company (including, but not limited to, the breach of any non-solicitation and/or non-compete agreements with the Company), the optionee will forfeit all rights under any options and/or stock appreciation rights that remain outstanding as of the time of such act and will return to the Company an amount of shares with a Fair Market Value (determined as of the date such shares are returned) or, in the case of stock appreciation rights that are settled in cash, an amount of cash, equal to the amount of any gain realized upon the exercise of any option or stock appreciation right that occurred within a specified time period.

7. Long-term Performance Awards : Awards under the Plan shall consist of the conditional grant to the participants of a specified number of performance units or performance shares. The conditional grant of a performance unit to a participant will entitle the participant to receive a specified dollar value, variable under conditions specified in the award, if the performance objectives specified in the award are achieved and the other terms and conditions thereof are satisfied. The conditional grant of a performance share to a participant will entitle the participant to receive a specified number of shares of Common Stock of the Company, or the equivalent cash value, if the objective(s) specified in the award are achieved and the other terms and conditions thereof are satisfied.

Each award will be subject to the following terms and conditions:

(a) Grant of Awards. The Committee shall (1) select the officers and key executives of the Company and its Subsidiaries and Affiliates to whom awards may from time to time be granted, (2) determine the number of performance units or performance shares covered by each award, (3) determine the terms and conditions of each performance unit or performance share awarded and the award period and performance objectives with respect to each award, (4) determine the periods during which a participant may request the Committee to approve deferred payment of a percentage (not less than 25%) of an award (the “Deferred Portion”), subject to Section 13, and the interest or rate of return thereon or the basis on which such interest or rate of return thereon is to be determined, (5) determine whether payment with respect to the portion of an award which has not been deferred (the “Current Portion”) and the payment with respect to the Deferred Portion of an award shall be made entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock,

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(6) determine whether the award is to be made independently of or in conjunction with a nonqualified stock option granted under the Plan, (7) determine the circumstances, if any, under which an award may be cancelled or forfeited, and (8) prescribe the form of the instruments necessary or advisable in the administration of the awards.

(b) Terms and Conditions of Award. Any award conditionally granting performance units or performance shares to a participant shall be evidenced by a Performance Unit Agreement or Performance Share Agreement, as applicable, executed by the Company and the participant, in such form as the Committee shall approve, which Agreement shall contain in substance the following terms and conditions applicable to the award and such additional terms and conditions as the Committee shall prescribe:

(1) Number and Value of Performance Units. The Performance Unit Agreement shall specify the number of performance units conditionally granted to the participant. If the award has been made in conjunction with the grant of an Associated Option, the number of performance units granted shall initially be equal to the number of shares which the participant is granted the right to purchase pursuant to the Associated Option, but one performance unit shall be canceled for each share of the Company’s Common Stock purchased upon exercise of the Associated Option or for each stock appreciation right included in such option that has been exercised. The Performance Unit Agreement shall specify the threshold, target and maximum dollar values of each performance unit and corresponding performance objectives as provided under Section 6(b)(5). No payout under a performance unit award to an individual participant may exceed 0.15% of the pre-tax earnings of the Company for the fiscal year which coincides with the final year of the performance unit period.

(2) Number and Value of Performance Shares. The Performance Share Agreement shall specify the number of performance shares conditionally granted to the participant. If the award has been made in conjunction with the grant of an Associated Option, the number of performance shares granted shall initially be equal to the number of shares which the participant is granted the right to purchase pursuant to the Associated Option, but one performance share shall be canceled for each share of the Company’s Common Stock purchased upon exercise of the Associated Option or for each stock appreciation right included in such option that has been exercised. The Performance Share Agreement shall specify that each Performance Share will have a value equal to one (1) share of Common Stock of the Company.

(3) Award Periods. For each award, the Committee shall designate an award period with a duration to be determined by the Committee in its discretion within which specified performance objectives are to be attained. There may be several award periods in existence at any one time and the duration of performance objectives may differ from each other.

(4) Consideration. Each participant, as consideration for the award of performance units or performance shares, shall remain in the continuous employ of the Company or of one of its Subsidiaries or Affiliates for at least one year or such lesser period as the Committee shall so determine in its sole discretion after the date of the making of such award, and no award shall be payable until after the completion of such one year or lesser period of employment by the participant.

(5) Performance Objectives. The Committee shall establish performance objectives with respect to the Company for each award period on the basis of such criteria and to accomplish such objectives as the Committee may from time to time determine. Performance criteria for awards under the Plan may include one or more of the following measures of the operating performance:


a. Earnings		d. Financial return ratios
b. Revenue		e. Total Shareholder Return
c. Operating or net cash flows		f. Market share

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The Committee shall establish the specific targets for the selected criteria. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index. These targets may be based upon the total Company or upon a defined business unit which the executive has responsibility for or influence over.

(6) Determination and Payment of Performance Units or Performance Shares Earned. As soon as practicable after the end of an award period, the Committee shall determine the extent to which awards have been earned on the basis of the Company’s actual performance in relation to the established performance objectives as set forth in the Performance Unit Agreement or Performance Share Agreement and certify these results in writing. The Performance Unit Agreement or Performance Share Agreement shall specify that, as soon as practicable after the end of each award period, the Committee shall determine whether the conditions of Sections 7(b)(4) and 7(b)(5) hereof have been met and, if so, shall ascertain the amount payable or shares which should be distributed to the participant in respect of the performance units or performance shares. In the case of a participant who has been Disabled during part of the award period, the Committee shall apply the prorationing rule, if applicable, under Section 7(b)(9). As promptly as practicable after it has determined that an amount is payable or should be distributed in respect of an award, the Committee shall cause the Current Portion of such award to be paid or distributed to the participant or the participant’s beneficiaries, as the case may be, in the Committee’s discretion, either entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock. The Deferred Portion of an award shall be contingently credited and payable to the participant over a deferred period and shall be credited with interest, rate of return or other valuation as determined by the Committee. The Committee, in its discretion, shall determine the conditions upon, and method of, payment of such Deferred Portions, subject to Section 13, and whether such payment will be made entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock.

In making the payment of an award in Common Stock hereunder, the cash equivalent of such Common Stock shall be determined by the Fair Market Value of the Common Stock on the day the Committee designates the performance units shall be payable.

(7) Nontransferability of Awards and Designation of Beneficiaries. No award under this Section of the Plan shall be transferable by the participant other than by will or by the laws of descent and distribution, except that a participant may designate a beneficiary pursuant to the provisions hereof.

If any participant or the participant’s beneficiary shall attempt to assign the participant’s rights under the Plan in violation of the provisions thereof, the Company’s obligation to make any further payments to such participant or the participant’s beneficiaries shall forthwith terminate.

A participant may name one or more beneficiaries to receive any payment of an award to which the participant may be entitled under the Plan in the event of the participant’s death, on a form to be provided by the Committee. A participant may change the participant’s beneficiary designation from time to time in the same manner.

If no designated beneficiary is living on the date on which any payment becomes payable to a participant’s beneficiary, or if no beneficiary has been specified by the participant, such payment will be payable to the person or persons in the first of the following classes of successive preference:

(i) Widow or widower, if then living,

(ii) Surviving children, equally,

(iii) Surviving parents, equally,

(iv) Surviving brothers and sisters, equally,

(v) Executors or administrators

and the term “beneficiary” as used in the Plan shall include such person or persons.

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(8) Retirement and Termination of Employment Other Than by Death. In the event of the Retirement prior to the end of an award period of a participant who has satisfied the one year employment requirement of Section 7(b)(4) with respect to an award prior to Retirement, the participant, or his estate, shall be entitled to a payment of such award at the end of the award period, pursuant to the terms of the Plan and the participant’s Performance Unit Agreement or Performance Share Agreement, provided, however, that the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such award as the number of months of the award period which have elapsed since the first day of the calendar year in which the award was made to the end of the month in which the participant’s Retirement occurs (the “period worked”)i, bears to the total number of months in the award period, subject to the attainment of performance objectives associated with the award as certified by the Committee. The period worked for purposes of this prorationing calculation shall be reduced by the number of months (including fractions) during such period in which the participant was Disabled in excess of 26 weeks. The participant’s right to receive any remaining performance units or performance shares shall be canceled and forfeited. Notwithstanding the foregoing, the Committee may, in its discretion, provide in a Performance Unit Agreement and/or Share Unit Agreement that a participant’s award or awards payable in the future will be cancelled and forfeited in the event that a participant engages, within a specified time period after termination of employment, in certain activity specified by the Committee that is deemed detrimental to the interests of the Company (including, but not limited to, the breach of any non-solicitation and/or non-compete agreements with the Company) and may require the return of award payments that were paid within a specified period of time prior to such activity. The Committee may, in its discretion, waive, in whole or in part, any cancellation and forfeiture of any performance units or performance shares provided that any such action does not affect the award of any person covered by Section 162(m) of the Code, and subject to Section 13.

Subject to Section 7(b)(6) hereof, the Performance Unit Agreement or Performance Share Agreement shall specify that the right to receive the performance units or performance shares granted to such participant shall be conditional and shall be canceled, forfeited and surrendered if the participant’s continuous employment with the Company and its Subsidiaries and Affiliates shall terminate for any reason, other than the participant’s death or Retirement prior to the end of the award period.

(9) Disability of Participant. A participant who becomes Disabled will not be deemed to have terminated employment for the period during which, under the applicable disability pay plan of the Company, Subsidiary or Affiliate, the participant is deemed to be employed and continues to receive disability payments. Upon the cessation of payments under such disability pay plan, (i) if the participant returns to employment status with the Company, Subsidiary or Affiliate, he or she will not be deemed to have terminated employment, and (ii), if the participant does not return to such employment status, he or she will be deemed to have terminated employment at the date of cessation of such disability payments, with such termination treated for purposes of the performance shares or performance units as a Retirement, death, or voluntary termination based on the participant’s circumstances at the time of such termination. In the case of any participant who has been Disabled for a period in excess of 26 weeks in the aggregate during the award period, the amount payable or shares earned in respect of an award period under Section 7(b)(6) shall be prorated by multiplying the gross amount of performance units or performance shares by a fraction the numerator of which is the length of the award period in months (including fractions) minus the number of months (including fractions) during such period in which the participant was Disabled in excess of 26 weeks, and the denominator of which is the aggregate length of the award period. The resulting number of performance units or performance shares earned shall be rounded to the nearest whole unit or share.

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The participant’s right to receive any remaining performance units shall be canceled and forfeited. The Committee may, in its discretion, waive, in whole or in part, such cancellation and forfeiture of any performance units or performance shares provided that any such action does not affect the award of any person covered by Section 162(m) of the Code, and subject to Section 13.

(10) Death of Participant. In the event of the death prior to the end of an award period of a participant who has satisfied the one year employment requirement with respect to an award prior to the date of death, the participant’s beneficiaries or estate, as the case may be, shall be entitled to a payment of such award upon the end of the award period, pursuant to the terms of the Plan and the participant’s Performance Unit Agreement or Performance Share Agreement, provided, however, that the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such award as the number of months of the award period which have elapsed since the first day of the calendar year in which the award was made to the end of the month in which the participant’s death occurs (the “period worked”), bears to the total number of months in the award period. The period worked for purposes of this prorationing calculation shall be reduced by the number of months (including fractions) during such period in which the participant was Disabled in excess of 26 weeks. The participant’s right to receive any remaining performance units or performance shares shall be canceled and forfeited. The Committee may, in its discretion, waive, in whole or in part, such cancellation and forfeiture of any performance units or performance shares.

(11) Grant of Associated Option. If the Committee determines that the conditional grant of performance units or performance shares under the Plan is to be made to a participant in conjunction with the grant of a nonqualified stock option under the Plan, the Committee shall grant the participant an Associated Option under the Plan subject to the terms and conditions of this subsection (11). In such event, such award under the Plan shall be contingent upon the participant’s being granted such an Associated Option pursuant to which: (i) the number of shares the optionee may purchase shall initially be equal to the number of performance units or performance shares conditionally granted by the award, (ii) such number of shares shall be reduced on a one-share-for-one-unit or share basis to the extent that the Committee determines, pursuant to Section 7(b)(6) hereof, to pay to the participant or the participant’s beneficiaries the performance units or performance shares conditionally granted pursuant to the award, and (iii) the Associated Option shall be cancelable in the discretion of the Committee, without the consent of the participant, under the conditions and to the extent specified herein and in Section 7(b)(6) hereof.

If no amount is payable in respect of the conditionally granted performance units or performance shares, the award and such performance units or performance shares shall be deemed to have been canceled, forfeited and surrendered, and the Associated Option, if any, shall continue in effect in accordance with its terms. If any amount is payable in respect of the performance units or performance shares and such units or shares were granted in conjunction with an Associated Option, the Committee shall, within 30 days after the determination of the Committee referred to in the first sentence of Section 7(b)(6), determine, in its sole discretion, either:

(A) to cancel in full the Associated Option, in which event the value of the performance units or performance shares payable pursuant to Sections 7(b)(5) and (6) shall be paid or the performance shares shall be distributed;

(B) to cancel in full the performance units or performance shares, in which event no amount shall be paid to the participant in respect thereof and no shares shall be distributed but the Associated Option shall continue in effect in accordance with its terms; or

(C) to cancel some, but not all, of the performance units or performance shares, in which event the value of the performance units payable pursuant to Sections 7(b)(5) and (6) which have not been canceled shall be paid and/or the performance shares shall be distributed and the Associated Option shall be canceled with respect to that number of shares equal to the number of conditionally granted performance units or performance shares that remain payable.

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Any action taken by the Committee pursuant to the preceding sentence shall be uniform with respect to all awards having the same award period. If the Committee takes no such action, it shall be deemed to have determined to cancel in full the award in accordance with clause (b) above.

(12) Change-in-Control. In the event that a long-term performance award recipient’s employment with the Company terminates for a qualifying reason (as defined in Section (6)(b)(14)(B)) during the three- (3) year period following a change in control of the Company (as that term is defined in Section 6(b)(14)(A)), the award recipient will receive the following: (i) With respect to any part of a performance award for which the number of performance units or performance shares cannot be reduced based on performance in a period or periods ending after such termination (i.e., the performance units or shares are “earned,” although they may remain subject to further vesting conditions based on service), any service, vesting or other non-performance requirement relating to such award will be deemed met and such award will be fully vested and non-forfeitable upon such qualifying termination; and (ii), with respect to any part of a performance award for which the number of performance units or performance shares remains at risk based on performance in a period or periods ending after such termination (i.e., the performance units or shares are not yet “earned”), an amount equal to the pro-rata portion of such unearned award or award opportunity (or the portion thereof that is unearned) shall vest and become non-forfeitable upon such qualifying termination, calculated assuming that any performance goal or measurement will have been achieved at the target level of achievement, and any service, vesting or other non-performance requirement relating to such pro-rata portion of the award, including a service period that would have extended after the performance period, will be deemed met; provided, however, that, in each of the cases referred to in clause (i) and (ii), any additional forfeiture conditions in the nature of a “clawback” contained in any plan or award agreement shall continue to apply to any payment; and provided further, that the vesting authorized in this Section 7(b)(12) will apply without regard to whether the award was or was not outstanding for more than one year. The pro-rata portion shall be determined based on the proportion of the performance period applicable to the unearned award elapsed from the beginning of such period until the date of termination (the “period worked”). The period worked for purposes of this prorationing calculation shall be reduced by the number of months (including fractions) during such period in which the participant was Disabled in excess of 26 weeks. A distribution under this Section 7(b)(12) will be made within 75 days after the qualifying termination, subject to Section 13 (which may require a delay in distribution until six months after the qualifying termination in some cases). Any portion of a performance award that is not deemed vested and non-forfeitable upon application of the prorationing under clause (ii) above shall be forfeited.

8. Restricted Stock and Restricted Stock Units (RSUs): Restricted stock awards under the Plan shall consist of grants of shares of Common Stock of the Issuer subject to the terms and conditions hereinafter provided. Restricted stock units (“RSUs”) under the Plan shall constitute an award conferring upon the participant a right to receive one share of Common Stock at a specified future settlement date subject to the terms and conditions hereafter provided.

(a) Grant of Awards: The Committee shall (i) select the officers and key employees to whom restricted stock or RSUs may from time to time be granted, (ii) determine the number of shares to be covered by each award granted, (iii) determine the terms and conditions (not inconsistent with the Plan) of any award granted hereunder, and (iv) prescribe the form of the agreement, legend or other instrument necessary or advisable in the administration of awards under the Plan.

(b) Terms and Conditions of Awards: Any restricted stock award or RSUs granted under the Plan shall be evidenced by an award agreement executed by the Issuer and the recipient (if deemed necessary or appropriate by the Committee), in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan as the Committee shall prescribe:

(1) Number of Shares Subject to an Award: The Restricted Stock Agreement or RSU Agreement shall specify the number of shares of Common Stock subject to the award.

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(2) Restriction Period: The period of restriction applicable to each award shall be established by the Committee but may not be less than one year. The Restriction Period applicable to each award shall commence on the award grant date.

(3) Consideration: Each recipient, as consideration for the grant of an award, shall remain in the continuous employ of the Company for at least one year or such lesser period as the Committee shall so determine in its sole discretion from the date of the granting of such award, and any shares covered by such a restricted stock award or any RSUs shall be forfeited if the recipient does not remain in the continuous employ of the Company for at least one year or lesser period from the date of the granting of the award.

(4) Restriction Criteria: The Committee shall establish the criteria upon which the restriction period shall be based. Restrictions may be based upon either the continued employment of the recipient or upon the attainment by the Company of one or more of the following measures of the operating performance:


a. Earnings		d. Financial return ratios
b. Revenue		e. Total Shareholder Return
c. Operating or net cash flows		f. Market share

The Committee shall establish the specific targets for the selected criteria. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index. Performance objectives may be established in combination with restrictions based upon the continued employment of the recipient. These targets may be based upon the total Company or upon a defined business unit which the executive has responsibility for or influence over.

In cases where objective performance criteria are established, the Committee shall determine the extent to which the criteria have been achieved and the corresponding level to which restrictions will be removed from the award or the extent to which a participant’s right to receive an award should be lapsed in cases where the performance criteria have not been met and shall certify these determinations in writing. The Committee may provide for the determination of the attainment of such restrictions in installments where deemed appropriate.

(c) Terms and Conditions of Restrictions and Forfeitures: Awards under this Section 8 shall be subject to the following restrictions and conditions:

(1) During the Restriction Period, the participant will not be permitted to sell, transfer, pledge or assign restricted stock (including the shares of Common Stock subject thereto) or RSUs awarded under this Plan.

(2) Except as provided in this Section 8, or as the Committee may otherwise determine, the participant shall have all of the rights of a stockholder of the Issuer with respect to Common Stock subject to an award of restricted stock, including the right to vote the shares and receive dividends and other distributions provided that distributions in the form of stock shall be subject to the same restrictions as the underlying restricted stock. With respect to RSUs, a participant shall have no rights of a stockholder of an Issuer until such time as the RSUs are settled and in connection therewith Common Stock is delivered to the participant. However, a participant may be awarded dividend equivalents in connection with RSUs.

(3) In the event of a participant’s Retirement or death prior to the end of the Restriction Period for a participant who has satisfied the applicable employment requirement of Section 8(b)(2) with respect to an award prior to Retirement or death, the participant, or his/her estate, shall be entitled to receive, in the case of restricted stock, or to have the risk of forfeiture lapse

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on, in the case of RSUs, that proportion (to the nearest whole share) of the number of shares subject to the award granted as the number of months of the Restriction Period which have elapsed since the award date to the date at which the participant’s Retirement or death occurs, bears to the total number of months in the Restriction Period. The participant’s right to receive any remaining shares or otherwise to any remaining portion of the award shall be canceled and forfeited and, in the case of restricted stock, the shares will be deemed to be reacquired by the Issuer. Notwithstanding the foregoing, the Committee may, in its discretion, provide in an award agreement that the participant will forfeit his or her right to receive all shares subject to the award in the event that a participant engages, within a specified time period after termination of employment, in certain activity specified by the Committee that is deemed detrimental to the interests of the Company (including, but not limited to, the breach of any non-solicitation and/or non-compete agreements with the Company) and may require the return to the Company of any shares that were received within a specified time period prior to such activity.

(4) A participant who becomes Disabled will not be deemed to have terminated employment for the period during which, under the applicable disability pay plan of the Company, Subsidiary or Affiliate, the participant is deemed to be employed and continues to receive disability payments. Upon the cessation of payments under such disability pay plan, (i) if the participant returns to employment status with the Company, Subsidiary or Affiliate, he or she will not be deemed to have terminated employment, and (ii), if the participant does not return to such employment status, he or she will be deemed to have terminated employment at the date of cessation of such disability payments, with such termination treated for purposes of the restricted stock or RSUs as a Retirement, death, or voluntary termination based on the participant’s circumstances at the time of such termination.

(5) In the event of a participant’s Retirement, death, Disability or in cases of special circumstances as determined by the Committee, the Committee may, in its sole discretion when it finds that such an action would be in the best interests of the Company, accelerate or waive in whole or in part any or all remaining time-based restrictions with respect to all or part of such participant’s restricted stock or RSUs.

(6) Upon termination of employment for any reason during the Restriction Period, subject to the provisions of paragraph (3) or (5) above or in the event that the participant fails promptly to pay or make satisfactory arrangements as to the withholding taxes as provided in the following paragraph, any remaining portion of an award of restricted stock or RSUs (including all shares) still subject to restriction shall be forfeited by the participant and will be deemed to be reacquired by the Company.

(7) A participant may, at any time prior to the expiration of the Restriction Period, waive all right to receive all or some of the shares of a restricted stock award by delivering to the Company a written notice of such waiver.

(8) Notwithstanding the other provisions of this Section 8, the Committee may adopt rules which would permit a gift by a participant of restricted stock or transfer of RSUs to members of his/her immediate family (spouse, parents, children, stepchildren, grandchildren or legal dependants) or to a Trust whose beneficiary or beneficiaries shall be either such a person or persons or the participant.

(9) Any attempt to dispose of restricted stock or transfer RSUs in a manner contrary to the restrictions shall be ineffective.

(10) The settlement date of RSUs may be at the same date as the Restriction Period ends or may be at a later date as the Committee may either specify at the time of grant of the RSUs or may permit to be elected by the participant.

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9. Determination of Breach of Conditions: The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination or reduction of the Company’s obligations in accordance with the provisions of the Plan shall be conclusive.

10. Adjustment in the Event of Change in Stock: In the event of a change in the outstanding Common Shares of the Company (including but not limited to changes in either the number of shares or the value of shares) by reason of any stock split, reverse stock split, dividend or other distribution (whether in the form of cash, shares, other securities or other property), extraordinary cash dividend, recapitalization, merger, consolidation, split-up, spin-off, reorganization, combination, repurchase or exchange of shares or other securities, the issuance of warrants or other rights to purchase shares or other securities, or other similar corporate transaction or event, if the Committee shall determine, in its sole discretion, that, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, such transaction or event equitably requires an adjustment in the aggregate number and/or class of shares available under the Plan, in the number, class and/or price of shares subject to an outstanding options and/or awards, or in the number of performance units and/or dollar value of each such unit, such adjustment shall be made by the Committee and shall be conclusive and binding for all purposes under the Plan. A participant holding an outstanding award has a legal right to an adjustment that preserves without enlarging the value of such award, with the terms and manner of such adjustment to be determined by the Committee. Notwithstanding the foregoing, no adjustments shall be made with respect to an award granted to an employee covered under Section 162(m) of the Code to the extent such adjustment would cause the award to fail to qualify as performance-based compensation under that Section.

11. Taxes:

(a)

Each participant shall, no later than the Tax Date (as defined below), pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Withholding Tax (as defined below) with respect to an option or award, and the Company shall, to the extent permitted by law, have the right to deduct such amount from any payment of any kind otherwise due to the participant. The Company shall also have the right to retain or sell without notice, or to demand surrender of, shares of Common Stock in value sufficient to cover the amount of any Withholding Tax, and to make payment (or to reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the participant. For purposes of the paragraph, the value of shares of Common Stock so retained or surrendered shall be the average of the high and low sales prices per share on the New York Stock Exchange composite tape on the date that the amount of the Withholding Tax is to be determined (the “Tax Date”) and the value of shares of Common Stock so sold shall be the actual net sale price per share (after deduction of commissions) received by the Company.

(b)

Notwithstanding the foregoing, if the stock options have been transferred, the optionee shall provide the Company with funds sufficient to pay such Withholding Tax. If such optionee does not satisfy the optionee’s tax payment obligation and the stock options have been transferred, the transferee may provide the funds sufficient to enable the Company to pay such taxes. However, if the stock options have been transferred, the Company shall have no right to retain or sell without notice, or to demand surrender from the transferee of, shares of Common Stock in order to pay such Withholding Tax.

(c)

The term “Withholding Tax” means the minimum required withholding amount applicable to the participant, including federal, state and local income taxes, Federal Insurance Contribution Act taxes and other governmental impost or levy.

(d)

Notwithstanding the foregoing, the participant shall be entitled to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Company with funds sufficient to enable the Company to pay such Withholding Tax or by requiring the Company to retain shares that are vested and deliverable in connection with the award or to accept upon delivery thereof by the participant shares of Common Stock owned by the participant having a Fair Market Value sufficient to cover the amount of such Withholding Tax. Each election by a participant to have

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shares retained or to deliver shares for this purpose shall be subject to the following restrictions: (i) the election must be in writing and be made on or prior to the Tax Date; (ii) the election must be irrevocable; (iii) the election shall be subject to the disapproval of the Committee.

12. Deferral Election: An optionee or participant shall not be permitted to elect to defer the delivery of the proceeds of the exercise of any stock option or stock appreciation rights.

13. Compliance with Code Section 409A.

(a) 409A Deferrals. Other provisions of the Plan notwithstanding, the terms of any award granted to an employee subject to United States federal income tax and which constitutes a deferral of compensation under Code Section 409A (“409A Deferrals,” which excludes any award that was both granted and vested before 2005 and therefore is deemed to be “grandfathered” under applicable IRS regulations and guidance unless such award is materially modified to become a 409A Deferral), including any authority of the Company and rights of the participant with respect to the 409A Deferrals, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A but only to the extent that such modification or limitation is permitted under Section 409A and the regulations and guidance issued thereunder. The following rules will apply to 409A Deferrals:

(i) Elections. If a participant is permitted to elect to defer an award or any payment under an award in 2005 or thereafter, such election will be permitted only at times in compliance with Section 409A (including transition rules thereunder). In 2009 and thereafter, such election shall be made in accordance with Exhibit A to the 2007 Stock Award and Incentive Plan.

(ii) Change in Distribution Terms. The Committee may, in its discretion, require or permit on an elective basis a change in the distribution terms applicable to 409A Deferrals in accordance with, and to the fullest extent permitted by, applicable guidance of the Internal Revenue Service (including Proposed Treasury Regulation § 1.409A, Preamble § XI.C, and IRS Notice 2005-1, and otherwise in accordance with Section 409A and regulations thereunder. Other provisions of this Plan notwithstanding, changes to distribution timing resulting from amendments to this Plan in 2008 shall not have the affect of accelerating distributions into 2008 or causing distributions that otherwise would have occurred in 2008 to be deferred until a year after 2008.

(iii) Exercise and Distribution. Except as provided in Section 13(a)(iv) hereof, no 409A Deferral shall be exercisable (if the exercise would result in a distribution) or otherwise distributable to a participant (or his or her beneficiary) except upon the occurrence of one of the following (or a date related to the occurrence of one of the following), which must be specified in a written document governing such 409A Deferral and otherwise meet the requirements of Treasury Regulation § 1.409A-3:

(A)

Specified Time. A specified time or a fixed schedule;

(B)

Separation from Service. The participant’s separation from service (within the meaning of Treasury Regulation § 1.409A-1(h) and other applicable rules under Section 409A); provided, however, that if the participant is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof) and any of the Company’s Stock is publicly traded on an established securities market or otherwise, settlement under this Section 13(a)(iii)(B) shall instead occur at the expiration of the six-month period under Section 409A(a)(2)(B)(i) (no acceleration of settlement during such delay

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period may occur, except upon death of the participant). In the case of installments, this delay shall not affect the timing of any installment otherwise payable after the six-month delay period. With respect to any 409A Deferral, a reference in any agreement or other governing document to a “termination of employment” which triggers a distribution shall be deemed to mean a “separation from service” within the meaning of Treasury Regulation § 1.409A-1(h). References in outstanding award agreements to Section 13(a)(iii) and (iv) shall be deemed to refer to this Section 13(a)(iii)(B) and Section 13(a)(vii);

(C)

Death. The death of the participant. Unless a specific time otherwise is stated for payment of a 409A Award upon death, such payment shall occur in the calendar year in which falls the 30 ^th day after death;

(D)

Disability. The date the participant has experienced a 409A Disability (as defined below); and

(E)

409A Ownership/Control Change. The occurrence of a 409A Ownership/Control Change (as defined below).

(iv) No Acceleration. The exercise or distribution of a 409A Deferral may not be accelerated prior to the time specified in accordance with Section 13(a)(iii) hereof, except in the case of one of the following events:

(A)

Unforeseeable Emergency. The occurrence of an Unforeseeable Emergency, as defined below, but only if the net amount payable upon such settlement does not exceed the amounts necessary to relieve such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the settlement, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation from insurance or otherwise or by liquidation of the participant’s other assets (to the extent such liquidation would not itself cause severe financial hardship), or by cessation of deferrals under the Plan. Upon a finding that an Unforeseeable Emergency has occurred with respect to a participant, any election of the participant to defer compensation that will be earned in whole or part by services in the year in which the emergency occurred or is found to continue will be immediately cancelled;

(B)

Domestic Relations Order. The 409A Deferral may permit the acceleration of the exercise or distribution time or schedule to an individual other than the participant as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code);

(C)

Conflicts of Interest. Such 409A Deferral may permit the acceleration of the settlement time or schedule as may be necessary to comply with an ethics agreement with the Federal government or to comply with a Federal, state, local or foreign ethics law or conflict of interest law in compliance with Treasury Regulation § 1.409A-3(j)(4)(iii);

(D)

Change. The Committee may exercise the discretionary right to accelerate the vesting of any unvested compensation deemed to be a 409A Deferral upon a 409A Ownership/Control Change or to terminate

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the Plan upon or within 12 months after a 409A Ownership/Control Change, or otherwise to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(ix), or accelerate settlement of such 409A Deferral in any other circumstance permitted under Treasury Regulation § 1.409A-3(j)(4).

(v) Definitions. For purposes of this Section 13, the following terms shall be defined as set forth below:

(A)

“409A Ownership/Control Change” shall be deemed to have occurred if, in connection with any event otherwise defined as a change in control under any applicable Company document, there occurs a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, as defined in Treasury Regulation § 1.409A-3(i)(5);

(B)

“409A Disability” means an event which results in the participant being (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its subsidiaries;

(C)

“Unforeseeable Emergency” means a severe financial hardship to the participant resulting from an illness or accident of the participant, the participant’s spouse, or a dependent (as defined in Code Section 152, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)) of the participant, loss of the participant’s property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant, and otherwise meeting the definition set forth in Treasury Regulation § 1.409A-3(i)(3).

(vi) Time of Distribution. In the case of any distribution of a 409A Deferral, if the timing of such distribution is not otherwise specified in the Plan or an Award agreement or other governing document, the distribution shall be made within 60 days after the date at which the settlement of the Award is specified to occur, subject to the following special rules:

(A)

The participant shall have no influence (other than permitted deferral elections) on any determination as to the tax year in which the distribution will be made during any period in which a distribution may be made (whether or not under the default rule of this Section 13(a)(vi));

(B)

In the event of a Qualifying Termination more than two years after a Change in Control, in the case of a 409A Deferral if, upon a termination other than in connection with a Change in Control, the applicable terms of the Award would have provided for a distribution at a different time(s) than the time(s) of distribution specified for the

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Qualifying Termination, the applicable terms of the Award shall take precedence so that the distribution shall occur at the time(s) specified for a pre-Change in Control separation from service (but any acceleration of the lapse of risk of forfeiture resulting from the Qualifying Termination shall still apply);

(C)

In the event that a participant incurs a Disability, the terms of an Award provide that termination of employment triggering a distribution will not occur until the end of a specified Disability period, but the participant’s circumstances constitute a “separation from service” under Treasury Regulation § 1.409A-1(h), then the participant will be deemed to have had a “separation from service” at the relevant time rather than at the end of the Disability, but the participant’s rights and benefits will be determined in a manner that does not impair the value of such rights and benefits if the separation from service were deemed to occur at the end of the specified Disability period.

(vii) Determination of “Key Employee.” For purposes of a distribution under Section 13(a)(iii)(B), status of a participant as a “key employee” shall be determined annually under the Company’s administrative procedure for such determination for purposes of all plans subject to Code Section 409A.

(viii) Non-Transferability. Other provisions of this Plan notwithstanding, no 409A Deferral or right relating thereto shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the participant or the participant’s Beneficiary.

(ix) 409A Rules Do Not Constitute Waiver of Other Restrictions. The rules applicable to 409A Deferrals under this Section 13(a) constitute further restrictions on terms of awards set forth elsewhere in this Plan. Thus, for example, a 409A Option/SAR shall be subject to restrictions, including restrictions on rights otherwise specified in Section 6(b), in order that such award shall not result in constructive receipt of income before exercise or tax penalties under Section 409A.

(x) Limitation on Setoffs. No setoff by the Company to satisfy any obligation of the participant to the Company is permitted against a 409A Deferral except at the time of distribution of such 409A Deferral.

(b) Grandfathered Awards. Any award that was both granted and vested before 2005 and which otherwise might constitute a deferral of compensation under Section 409A is intended to be “grandfathered” under Section 409A. No amendment or change to the Plan or other change (including an exercise of discretion) with respect to such a grandfathered award after October 3, 2004, shall be effective if such change would constitute a “material modification” within the meaning of applicable guidance or regulations under Section 409A, except in the case of an award that is, following such modification, compliant as a 409A Deferral or compliant with an exemption under Section 409A.

(c) Rules Applicable to Certain Participants Transferred to Affiliates. For purposes of determining eligibility for grants of Excluded 409A Options/SARs or a separation from service by any participant (where the use of the following modified definition is based upon legitimate business criteria), with respect to Excluded Options/ SARs, in applying Code Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the language “at least 20 percent” shall be used instead of “at least 80 percent” at each place it appears in Sections 1563(a)(1), (2) and (3), and in applying Treasury Regulation §1.414(c)-2 (or any successor provision) for purposes of determining trades or businesses

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(whether or not incorporated) that are under common control for purposes of Section 414(c), the language “at least 20 percent” shall be used instead of “at least 80 percent” at each place it appears in Treasury Regulation §1.414(c)-2.

(d) Distributions Upon Vesting. In the case of any award providing for a distribution upon the lapse of a risk of forfeiture, if the timing of such distribution is not otherwise specified in the Plan or an award agreement, the distribution shall be made not later than March 15 of the year following the year in which the risk of forfeiture lapsed, and if such determination is to be made promptly following the end of a performance year (as in the case of performance shares) then the determination of the level of achievement of performance and the distribution shall be made between January 1 and March 15 of the year following such performance year. In all cases, the participant shall have no influence (aside from any permitted deferral election) on any determination as to the tax year in which the distribution will be made.

(e) Limitation on Adjustments . Any adjustment under Section 10 shall be implemented in a way that complies with applicable requirements under Section 409A so that Excluded 409A Option/SARs do not, due to the adjustment, become 409A Deferrals, and otherwise so that no adverse consequences under Section 409A result to participants.

(f) Release or Other Termination Agreement . If the Company requires a participant to execute a release, non-competition, or other agreement as a condition to receipt of a payment upon or following a termination of employment, the Company will supply to the participant a form of such release or other document not later than the date of the participant’s termination of employment, which must be returned within the time period required by law and must not be revoked by the participant within the applicable time period in order for participant to satisfy any such condition. If any amount payable during a fixed period following termination of employment is subject to such a requirement and the fixed period would begin in one year and end in the next, the Company, in determining the time of payment of any such amount, will not be influenced by the timing of any action of the participant including execution of such a release or other document and expiration of any revocation period. In particular, the Company will be entitled in its discretion to deposit any such payment in escrow during either year comprising such fixed period, so that such deposited amount is constructively received and taxable income to the participant upon deposit but with distribution from such escrow remaining subject to the participant’s execution and non-revocation of such release or other document.

(g) Special Disability Provision . In case of a Disability of a participant, (i) for any Award or portion thereof that constitutes a short-term deferral for purposes of Section 409A, the Company shall determine whether the participant’s circumstances are such that the participant will not return to service, in which case such Disability will be treated as a termination of employment for purposes of determining the time of payment of such award or portion thereof then subject only to service-based vesting, and (ii) for any Award or portion thereof that constitutes a 409A Award, the Company shall determine whether there has occurred a “separation from service” as defined under Treasury Regulation § 1.409A-1(h) based on participant’s circumstances, in which case such Disability will be treated as a separation from service for purposes of determining the time of payment of such award or portion thereof then subject only to service-based vesting. In each case, the participant shall be accorded the benefit of vesting that would result in the case of Disability in the absence of this provision, so that the operation of this provision, intended to comply with Section 409A, will not disadvantage the participant. The Company’s determination hereunder will be made initially within 30 days after the Disability and each March and December thereafter.

(h) Scope and Application of this Provision. For purposes of this Section 13, references to a term or event (including any authority or right of the Company or a participant) being “permitted” under Section 409A mean that the term or event will not cause the participant to be deemed to be in constructive receipt of compensation relating to the 409A Deferral prior to the distribution of cash, shares or other property or to be liable for payment of interest or a tax penalty

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under Section 409A. The rules under this Section 13, and all other provisions relating to Section 409A, apply retroactively as of January 1, 2005. Each award outstanding between January 1, 2005 and the date of adoption of this Section 13 shall be deemed to be amended so that Section 13 shall apply to such award in accordance with the terms hereof.

14. Amendment of the Plan: The Board of Directors may amend or suspend the Plan at any time and from time to time. No such amendment of the Plan may, however, increase the maximum number of shares to be offered under options or awards, or change the manner of determining the option price, or change the designation of employees or class of employees eligible to receive options or awards, or permit the transfer or issue of stock before payment therefor in full, or, without the written consent of the optionee or participant, alter or impair any option or award previously granted under the Plan or Prior Plan. Notwithstanding the foregoing, if an option has been transferred in accordance with Section 6(b)(6), written consent of the transferee (and not the optionee) shall be necessary to alter or impair any option or award previously granted under the Plan.

15. Miscellaneous:

(a) By accepting any benefits under the Plan, each optionee or participant and each person claiming under or through such optionee or participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or made to be taken or made under the Plan by the Company, the Board, the Committee or any other Committee appointed by the Board.

(b) No participant or any person claiming under or through him shall have any right or interest, whether vested or otherwise, in the Plan or in any option, or stock appreciation right or award thereunder, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Agreement that affect such participant or such other person shall have been complied with.

(c) Nothing contained in the Plan or in any Agreement shall require the Company to segregate or earmark any cash or other property.

(d) Neither the adoption of the Plan nor its operation shall in any way affect the rights and powers of the Company or any of its Subsidiaries or Affiliates to dismiss and/or discharge any employee at any time.

16. Term of the Plan: The Plan, if approved by stockholders, will be effective May 7, 2002. The Plan shall expire on May 31, 2007 unless suspended or discontinued by action of the Board of Directors. The expiration of the Plan, however, shall not affect the rights of Optionees under options theretofore granted to them or the rights of participants under awards theretofore granted to them, and all unexpired options and awards shall continue in force and operation after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.

17. Employees Based Outside of the United States: Notwithstanding any provision of the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws in other countries in which the Company, its Affiliates and its Subsidiaries operate or have Employees, the Committee, in its sole discretion, shall have the power and authority to (i) determine which Employees employed outside the United States are eligible to participate in the Plan, (ii) modify the terms and conditions of options granted to Employees who are employed outside the United States, (iii) establish subplans, modify option exercise procedures and other terms and procedures to the extent such actions may be necessary or advisable, and (iv) grant to Employees employed in countries wherein the granting of stock options is impossible or impracticable, as determined by the Committee, stock appreciation rights with terms and conditions that, to the fullest extent possible, are substantially identical to the stock options granted hereunder.

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Exhibit 10.2

BRISTOL-MYERS SQUIBB COMPANY

2007 STOCK AWARD AND INCENTIVE PLAN

(As Amended and Restated effective June 10, 2008)

1. Purpose . The purpose of this 2007 Stock Award and Incentive Plan (the “Plan”) is to aid Bristol-Myers Squibb Company, a Delaware corporation (together with its successors and assigns, the “Company”), in attracting, retaining, motivating and rewarding employees, non-employee directors, and other service providers of the Company or its subsidiaries or affiliates, to provide for equitable and competitive compensation opportunities, to recognize individual contributions and reward achievement of Company goals, and to promote the creation of long-term value for stockholders by closely aligning the interests of Participants with those of stockholders. The Plan authorizes stock-based and cash-based incentives for Participants.

2. Definitions . In addition to the terms defined in Section 1 above and elsewhere in the Plan, the following capitalized terms used in the Plan have the respective meanings set forth in this Section:

(a) “Annual Limit” shall have the meaning specified in Section 5(b).

(b) “Award” means any Option, SAR, Restricted Stock, Stock Unit, Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other Stock-Based Award, or Performance Award, together with any related right or interest, granted to a Participant under the Plan.

(c) “Beneficiary” means the person, persons, trust or trusts designated as being entitled to receive the benefits under a Participant’s Award upon and following a Participant’s death. Unless otherwise determined by the Committee, a Participant may designate a person, persons, trust or trusts as his or her Beneficiary, and in the absence of a designated Beneficiary the Participant’s Beneficiary shall be as specified in Section 11(b)(ii). Unless otherwise determined by the Committee, any designation of a Beneficiary other than a Participant’s spouse shall be subject to the written consent of such spouse.

(d) “Board” means the Company’s Board of Directors.

(e) “Change in Control” and related terms have the meanings specified in Section 9.

(f) “Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation thereunder shall include any successor provisions and regulations, and reference to regulations includes any applicable guidance or pronouncement of the Department of the Treasury and Internal Revenue Service.

(g) “Committee” means the Compensation and Management Development Committee of the Board, the composition and governance of which is established in the Committee’s Charter as approved from time to time by the Board and subject to other corporate governance documents of the Company. No action of the Committee shall be void or deemed to be without authority due to the failure of any member, at the time the action was taken, to meet any qualification standard set forth in the Committee Charter or this Plan. The full Board may perform any function of the Committee hereunder (subject to applicable requirements of New York Stock Exchange rules and Code Section 162(m)), in which case the term “Committee” shall refer to the Board.

(h) “Covered Employee” means an Eligible Person who is a Covered Employee as specified in Section 11(j).

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(i) “Dividend Equivalent” means a right, granted under this Plan, to receive cash, Stock, other Awards or other property equal in value to all or a specified portion of the dividends paid with respect to a specified number of shares of Stock.

(j) “Effective Date” means the effective date specified in Section 11(p).

(k) “Eligible Person” has the meaning specified in Section 5.

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to any provision of the Exchange Act or rule (including a proposed rule) thereunder shall include any successor provisions and rules.

(m) “Fair Market Value” means the fair market value of Stock, Awards or other property as determined in good faith by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock on a given day shall mean the last sale price of a share of stock before the 4 p.m. Eastern Time closing time (or equivalent earlier time for partial trading days) on that day or, if there was not trading on that day, on the last preceding day on which the Stock was traded, as reported on the composite tape for securities listed on the New York Stock Exchange. Fair Market Value relating to the exercise price or base price of any Non-409A Option or SAR and relating to the market value of Stock measured at the time of exercise shall conform to applicable requirements under Code Section 409A.

(n) “409A Awards” means Awards that constitute a deferral of compensation under Code Section 409A and regulations thereunder. “Non-409A Awards” means Awards other than 409A Awards. Although the Committee retains authority under the Plan to grant Options and SARs on terms that will qualify those Awards as 409A Awards, Options, and SARs are intended to be Non-409A Awards unless otherwise expressly specified by the Committee.

(o) “Full-Value Award” means an Award relating to Stock other than (i) Options and SARs that are treated as exercisable solely for Stock under applicable accounting rules and (ii) Awards for which the Participant pays the intrinsic value directly or by forgoing a right to receive a cash payment from the Company.

(p) “Incentive Stock Option” or “ISO” means any Option designated as an incentive stock option within the meaning of Code Section 422 and qualifying thereunder.

(q) “Option” means a right to purchase Stock granted under Section 6(b).

(r) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(h).

(s) “Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person.

(t) “Performance Award” means a conditional right, granted to a Participant under Sections 6(i) or 7, to receive cash, Stock or other Awards or payments.

(u) “Restricted Stock” means Stock granted under this Plan which is subject to certain restrictions and to a risk of forfeiture.

(v) “Retirement” means a Participant’s termination of employment with the Company or a subsidiary or affiliate in the following circumstances:

(i)

At or after the Participant’s 65th birthday; or

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(ii)

At or after the Participant’s 55th birthday having completed ten years of service with the Company and/or its subsidiaries and affiliates; or

(iii)

Such termination is by the Company or a subsidiary or affiliate not for cause and is not voluntary on the part of the Participant, at or after the Participant has attained age plus years of service (rounded up to the next higher whole number) which equals at least 70 and the Participant has completed ten years of service with the Company and/or its subsidiaries and affiliates, and the Participant has executed a general release and has agreed to be subject to covenants relating to noncompetition, nonsolicitation and other commitments for the protection of the Company’s business as then may be required by the Committee.

(w) “Stock” means the Company’s Common Stock, par value $0.10 per share, and any other equity securities of the Company that may be substituted or resubstituted for Stock pursuant to Section 11(c).

(x) “Stock Units” means a right, granted under this Plan, to receive Stock or other Awards or a combination thereof at the end of a specified period. Stock Units subject to a risk of forfeiture may be designated as “Restricted Stock Units” as provided in Section 6(e)(ii).

(y) “Stock Appreciation Rights” or “SAR” means a right granted to a Participant under Section 6(c).

3. Administration .

(a) Authority of the Committee . The Plan shall be administered by the Committee, which shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants; to grant Awards; to determine the type and number of Awards, the dates on which Awards may be exercised and on which the risk of forfeiture or deferral period relating to Awards shall lapse or terminate, the acceleration of any such dates, the expiration date of any Award, whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property, and other terms and conditions of, and all other matters relating to, Awards; to prescribe documents evidencing or setting terms of Awards (such Award documents need not be identical for each Participant or each Award), amendments thereto, and rules and regulations for the administration of the Plan and amendments thereto; to construe and interpret the Plan and Award documents and correct defects, supply omissions or reconcile inconsistencies therein; and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. Decisions of the Committee with respect to the administration and interpretation of the Plan shall be final, conclusive, and binding upon all persons interested in the Plan, including Participants, Beneficiaries, transferees under Section 11(b) and other persons claiming rights from or through a Participant, and stockholders. The foregoing notwithstanding, either the Board, the Committee, or another committee of the Board may perform the functions of the Committee for purposes of granting Awards under the Plan to non-employee directors, as the Board may at any time direct.

(b) Manner of Exercise of Committee Authority . The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may act through subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 or qualifying Awards under Code Section 162(m) as performance-based compensation, in which case the subcommittee shall be subject to and have authority under the charter applicable to the Committee, and the acts of the subcommittee shall be deemed to be acts of the Committee hereunder. The Committee may delegate to one or more officers or managers of the Company or any subsidiary or affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may

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determine, to the extent that such delegation (i) will not result in the loss of an exemption under Rule 16b-3(d) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company, (ii) will not cause Awards intended to qualify as “performance-based compensation” under Code Section 162(m) to fail to so qualify, (iii) will not result in a related-person transaction with an executive officer required to be disclosed under Item 404(a) of Regulation S-K (in accordance with Instruction 5.a.ii thereunder) under the Exchange Act, and (iv) is permitted under Section 157 and other applicable provisions of the Delaware General Corporation Law.

(c) Limitation of Liability . The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Company or a subsidiary or affiliate, the Company’s independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or a subsidiary or affiliate acting at the direction or on behalf of the Committee or a delegee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.

4. Stock Subject To Plan .

(a) Overall Number of Shares Available for Delivery . Subject to adjustment as provided under Section 11(c), the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be (i) 42 million shares, plus (ii) the number of shares that, immediately prior to the Effective Date, remain available for new awards under the 2002 Stock Incentive Plan, plus (iii) the number of shares subject to awards under the 2002 Stock incentive Plan that become available in accordance with Section 4(b) after the Effective Date; provided, however, that the total number of shares with respect to which ISOs may be granted shall not exceed 42 million shares. Any shares of Stock delivered under the Plan shall consist of authorized and unissued shares or treasury shares.

(b) Share Counting Rules . The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute Awards) and make adjustments in accordance with this Section 4(b). Shares shall be counted against those reserved to the extent such shares have been delivered and are no longer subject to a risk of forfeiture. Accordingly, (i) to the extent that an Award under the Plan or an award under the 2002 Stock Incentive Plan is canceled, expired, forfeited, settled in cash, settled by delivery of fewer shares than the number underlying the Award or award, or otherwise terminated without delivery of shares to the Participant, the shares retained by or returned to the Company will not be deemed to have been delivered under the Plan or the 2002 Stock Incentive Plan; and (ii) shares that are withheld from such Award or award or separately surrendered by the Participant in payment of the exercise price or taxes relating to such Award or award shall be deemed to constitute shares not delivered and will be available under the Plan. The Committee may determine that Awards may be outstanding that relate to more shares than the aggregate remaining available under the Plan so long as Awards will not in fact result in delivery and vesting of shares in excess of the number then available under the Plan. In addition, in the case of any Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or a subsidiary or affiliate or with which the Company or a subsidiary or affiliate combines, shares delivered or deliverable in connection with such assumed or substitute Award shall not be counted against the number of shares reserved under the Plan.

5. Eligibility; Per-Person Award Limitations .

(a) Eligibility . Awards may be granted under the Plan only to Eligible Persons. For purposes of the Plan, an “Eligible Person” means (i) an employee of the Company or any subsidiary or affiliate, including any executive officer or employee director of the Company or a subsidiary or affiliate, (ii) any person who has been offered employment by the Company or a subsidiary or affiliate, provided that such prospective employee may not receive any payment or exercise any right relating to an Award until

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such person has commenced employment with the Company or a subsidiary or affiliate, (iii) any non-employee director of the Company, and (iv) any person who provides substantial services to the Company or a subsidiary or affiliate. An employee on leave of absence may be considered as still in the employ of the Company or a subsidiary or affiliate for purposes of eligibility for participation in the Plan. For purposes of the Plan, a joint venture in which the Company or a subsidiary has a substantial direct or indirect equity investment shall be deemed an affiliate, if so determined by the Committee. Holders of awards granted by a company or business acquired by the Company or a subsidiary or affiliate, or with which the Company or a subsidiary or affiliate combines, are eligible for substitute Awards granted in assumption of or in substitution for such outstanding awards in connection with such acquisition or combination transaction.

(b) Per-Person Award Limitations . In each calendar year during any part of which the Plan is in effect, an Eligible Person may be granted Awards under the Plan intended to qualify as “performance-based compensation” under Code Section 162(m) relating to up to his or her Annual Limit. A Participant’s Annual Limit, in any year during any part of which the Participant is then eligible under the Plan, shall equal [three] million shares plus the amount of the Participant’s unused Annual Limit as of the close of the previous year, subject to adjustment as provided in Section 11(c). In the case of an Award which is not valued in a way in which the limitation set forth in the preceding sentence would operate as an effective limitation satisfying applicable law (including Treasury Regulation § 1.162-27(e)(4)), an Eligible Person may not be granted Awards under the Plan authorizing the earning during any calendar year of an amount that exceeds the Eligible Person’s Annual Limit, which for this purpose shall equal $6 million plus the amount of the Eligible Person’s unused cash Annual Limit as of the close of the previous year (this limitation is separate and not affected by the number of Awards granted during such calendar year which are subject to the limitation in the preceding sentence, and the Annual Limits are subject to Section 11(h)). For this purpose, (i) “earning” means satisfying performance conditions so that an amount becomes payable, without regard to whether it is to be paid currently or on a deferred basis or continues to be subject to any service requirement or other non-performance condition, (ii) a Participant’s Annual Limit is used to the extent an amount or number of shares may be potentially earned or paid under an Award, regardless of whether such amount or shares are in fact earned or paid, and (iii) the Annual Limit applies to Dividend Equivalents under Section 6(g) only if such Dividend Equivalents are granted separately from and not as a feature of a Full-Value Award.

6. Specific Terms of Awards .

(a) General . Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Sections 11(e) and 11(k)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment or service by the Participant and terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan, subject to Section 11(k) and the terms of the Award agreement. The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Delaware General Corporation Law, and may otherwise require payment of consideration for an Award except as limited by the Plan.

(b) Options . The Committee is authorized to grant Options to Participants on the following terms and conditions:

(i)

Exercise Price. The exercise price per share of Stock purchasable under an Option (including both ISOs and non-qualified Options) shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option, subject to Section 8(a). Notwithstanding the foregoing, any substitute award granted in assumption of or in substitution for an outstanding award granted by a company or business acquired by the Company or a

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subsidiary or affiliate, or with which the Company or a subsidiary or affiliate combines may be granted with an exercise price per share of Stock other than as required above. No adjustment will be made for a dividend or other right for which the record date is prior to the date on which the stock is issued, except as provided in Section 11(c) of the Plan.

(ii)

Option Term; Time and Method of Exercise. The Committee shall determine the term of each Option, provided that in no event shall the term of any Option exceed a period of ten years from the date of grant. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid and the form of such payment (subject to Sections 11(k) and 11(l)), including, without limitation, cash, Stock (including by withholding Stock deliverable upon exercise), other Awards or awards granted under other plans of the Company or any subsidiary or affiliate, or other property, and the methods by or forms in which Stock will be delivered or deemed to be delivered in satisfaction of Options to Participants (including, in the case of 409A Awards, deferred delivery of shares subject to the Option, as mandated by the Committee, with such deferred shares subject to any vesting, forfeiture or other terms as the Committee may specify).

(iii)

ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Code Section 422.

(c) Stock Appreciation Rights . The Committee is authorized to grant SARs to Participants on the following terms and conditions:

(i)

Right to Payment. An SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee. The grant price of each SAR shall be not less than the Fair Market Value of a share of Stock on the date of grant of such SAR.

(ii)

Other Terms. The Committee shall determine the term of each SAR, provided that in no event shall the term of an SAR exceed a period of ten years from the date of grant. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR shall be free-standing or in tandem or combination with any other Award, and whether or not the SAR will be a 409A Award or Non-409A Award. The Committee may require that an outstanding Option be exchanged for an SAR exercisable for Stock having vesting, expiration, and other terms substantially the same as the Option, so long as such exchange will not result in additional accounting expense to the Company.

(d) Restricted Stock . The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions:

(i)

Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future

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service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any Award document relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon; provided, however, that the Committee may require mandatory reinvestment of dividends in additional Restricted Stock, may provide that no dividends will be paid on Restricted Stock or retained by the Participant, or may impose other restrictions on the rights attached to Restricted Stock.

(ii)

Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes.

(iii)

Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.

(iv)

Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Committee may require that any dividends paid on a share of Restricted Stock shall be either (A) paid with respect to such Restricted Stock at the dividend payment date in cash, in kind, or in a number of shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) automatically reinvested in additional Restricted Stock or held in kind, which shall be subject to the same terms as applied to the original Restricted Stock to which it relates, or (C) deferred as to payment, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in Stock Units, other Awards or other investment vehicles, subject to such terms as the Committee shall determine or permit a Participant to elect. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.

(e) Stock Units . The Committee is authorized to grant Stock Units to Participants, subject to the following terms and conditions:

(i)

Award and Restrictions. Issuance of Stock will occur upon expiration of the holding period specified for the Stock Units by the Committee (or, if permitted by the Committee, at the end of any additional deferral period elected by the Participant). In addition, Stock Units shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse at the expiration of the holding period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, and under such other circumstances as the Committee may determine at the date of grant or thereafter. Stock Units may be settled by delivery of Stock, other Awards, or a combination thereof (subject to Section 11(l)), as determined by the Committee at the date of grant or thereafter.

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(ii)

Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award document evidencing the Stock Units), all Stock Units that are at that time subject to such forfeiture conditions shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to Stock Units will lapse in whole or in part, including in the event of terminations resulting from specified causes. Stock Units subject to a risk of forfeiture shall be designated as “Restricted Stock Units” unless otherwise determined by the Committee.

(iii)

Dividend Equivalents. Unless otherwise determined by the Committee, Dividend Equivalents on the specified number of shares of Stock underlying Stock Units shall be either (A) paid with respect to such Stock Units at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Stock Units, either as a cash deferral or as a number of additional Stock Units with a value equal to the value of the Dividend Equivalents or with such value otherwise deemed reinvested in additional Stock Units, other Awards or other investment vehicles having a Fair Market Value equal to the amount of such dividends, as the Committee shall determine or permit a Participant to elect; provided, however, that the Committee may provide that no Dividend Equivalents will be paid on a given Award of Stock Units.

(f) Bonus Stock and Awards in Lieu of Obligations . The Committee is authorized to grant to Participants Stock as a bonus, or to grant Stock or other Awards in lieu of obligations of the Company or a subsidiary or affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee.

(g) Dividend Equivalents . The Committee is authorized to grant Dividend Equivalents to a Participant, which may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to restrictions on transferability, risks of forfeiture and such other terms as the Committee may specify.

(h) Other Stock-Based Awards . The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock or factors that may influence the value of Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries or affiliates or other business units. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 6(h).

(i) Performance Awards . Performance Awards, denominated in cash or in Stock or other Awards, may be granted by the Committee in accordance with Section 7.

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7. Performance Awards .

(a) Performance Awards Generally . Performance Awards may be denominated as a cash amount, number of shares of Stock, or specified number of other Awards (or a combination) which may be earned upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce or increase the amounts payable under any Award subject to performance conditions, except as limited under Section 7(b) in the case of a Performance Award intended to qualify as “performance-based compensation” under Code Section 162(m).

(b) Performance Awards Granted to Covered Employees . If the Committee determines that a Performance Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of a preestablished performance goal and other terms set forth in this Section 7(b).

(i)

Performance Goal Generally. The performance goal for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 7(b). The performance goal shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder, including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants.

(ii)

Business Criteria. One or more of the following business criteria for the Company, on a consolidated basis, and/or for specified subsidiaries or affiliates or other business units of the Company shall be used by the Committee in establishing performance goals for such Performance Awards: Net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-created models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels; operating margins, gross margins or cash margin; year-end cash; debt reductions and control of interest expense; stockholder equity; regulatory achievements; and implementation, completion or attainment of measurable objectives with respect to research, development, products or projects, production volume levels, acquisitions and divestitures, market penetration, total market capitalization, business retention, new product generation, geographic business expansion goals, cost controls and targets (including cost of capital), customer satisfaction, employee satisfaction, agency ratings, management of employment practices

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and employee benefits, supervision of litigation and information technology, implementation of business process controls, and recruiting and retaining personnel. The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the relevant performance of one or more comparable companies or an index covering multiple companies. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. The Committee may also exclude charges or items from the measurement of performance in respect of these business criteria, including those relating to (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) the effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles. Performance Goals may be particular to a Participant, the Company or a division, subsidiary, product line or other business segment of the Company, or may be based on the performance of the Company as a whole.

(iii)

Performance Period; Timing for Establishing Performance Goals. Achievement of performance goals in respect of such Performance Awards shall be measured over a performance period of up to one year or more than one year, as specified by the Committee. A performance goal shall be established not later than the earlier of (A) 90 days after the beginning of any performance period applicable to such Performance Award or (B) the time twenty-five percent (25%) of such performance period has elapsed.

(iv)

Performance Award Pool. The Committee may establish a Performance Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Company in connection with Performance Awards. The amount of such Performance Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 7(b)(ii) during the given performance period, as specified by the Committee in accordance with Section 7(b)(iv). The Committee may specify the amount of the Performance Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria.

(v)

Settlement of Performance Awards; Other Terms. Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with such Performance Awards, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of a Performance Award subject to this Section 7(b) beyond the level of payment authorized based on the level of achievement of the performance goal specified under this Section 7(b) and may not otherwise waive the requirement that the performance goal be achieved (except in the event of death or disability or other special circumstances that will not result in loss of tax deductibility with respect to the Award). Any settlement which changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards do not, solely for that reason, fail to qualify as “performance-based compensation” for purposes of Code Section 162(m). The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment by the Participant or other event (including a Change in Control) prior to the end of a performance period or settlement of such Performance Awards.

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(c) Written Determinations . Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of Performance Awards, the level of actual achievement of the specified performance goals relating to Performance Awards, and the amount of any final Performance Award shall be recorded in writing in the case of Performance Awards intended to qualify under Section 162(m). Specifically, the Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m), prior to settlement of each such Award granted to a Covered Employee, that the performance objective relating to the Performance Award and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied.

8. Certain Provisions Applicable to Awards .

(a) Stand-Alone, Additional, Tandem, and Substitute Awards . Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any subsidiary or affiliate, or any business entity to be acquired by the Company or a subsidiary or affiliate, or any other right of a Participant to receive payment from the Company or any subsidiary or affiliate; provided, however, that a 409A Award may not be granted in tandem with a Non-409A Award. Awards granted in addition to or in tandem with other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards. Subject to Sections 11(k) and (l), the Committee may determine that, in granting a new Award, the in-the-money value or fair value of any surrendered Award or award or the value of any other right to payment surrendered by the Participant may be applied to the purchase of any other Award. Any transaction otherwise authorized under this Section 8(a) remains subject to the restriction on repricing under Section 11(e).

(b) Term of Awards . The term of each Award shall be for such period as may be determined by the Committee, subject to the express limitations set forth in Sections 6(b)(ii), 6(c)(ii) and 8 or elsewhere in the Plan.

(c) Form and Timing of Payment under Awards; Deferrals . Subject to the terms of the Plan (including Sections 11(k) and (l)) and any applicable Award document, payments to be made by the Company or a subsidiary or affiliate upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events, subject to Sections 11(k) and (l). Subject to Section 11(k), installment or deferred payments may be required by the Committee (subject to Section 11(e)) or permitted at the election of the Participant on terms and conditions established by the Committee. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. In the case of any 409A Award that is vested and no longer subject to a risk of forfeiture (within the meaning of Code Section 83), such Award will be distributed to the Participant, upon application of the Participant, if the Participant has had an unforeseeable emergency within the meaning of Code Sections 409A(a)(2)(A)(vi) and 409A(a)(2)(B)(ii), in accordance with Section 409A(a)(2)(B)(ii).

9. Change in Control.

(a) Effect of “Change in Control.” In the event that there occurs a Change in Control of the Company, if the Participant’s employment with the Company and its subsidiaries and affiliates terminates in an event constituting a “Qualifying Termination” (as defined in Section 9(d)) during the three-year period following the Change in Control, the following provisions shall apply to the Participant’s Awards upon such Qualifying Termination, unless otherwise provided by the Committee in the Award document (in language specifically negating the effect of this Section 9(a)):

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(i)

In the case of an Award other than a Performance Award, all forfeiture conditions and other restrictions applicable to such Award shall lapse and such Award shall be fully payable as of the time of the Participant’s Qualifying Termination without regard to vesting or other conditions, and any such Award carrying a right to exercise that was not previously vested and exercisable shall become fully vested and exercisable as of the time of the Participant’s Qualifying Termination, and all deferral of settlement and similar restrictions applicable to such Award shall lapse and such Award shall be fully payable as of the time of such Qualifying Termination without regard to deferral conditions, subject to Section 11(k) (including any applicable six-month delay in distribution) and subject to applicable restrictions set forth in Section 11(a).

(ii)

In the case of a Performance Award, an amount equal to the pro rata portion of the Performance Award (or award opportunity relating thereto) for any performance measurement period that was in effect at the time of the Participant’s Qualifying Termination, calculated as to each such Performance Award assuming that any performance goal or measurement will have been achieved (for the entire performance period) at the target level, except that any portion of the Performance Award based on performance measured over a period that has been completed at or before the date of the Qualifying Termination shall be deemed earned based on actual performance for such period; provided, however, any additional forfeiture conditions in the nature of a “clawback” applicable to the Performance Award shall continue to apply to any payment under this Section 9(a)(ii), and shall be deemed the Participant’s covenants to be performed following the Qualifying Termination. For purposes of this Section 9(a)(ii), the pro rata portion shall be determined based on the proportion of the performance period elapsed from the beginning of such period until the date of the Qualifying Termination, and any service, vesting or other non-performance requirement relating to such Award, including a service period that would have extended after the performance period, will be deemed met. Any portion of a Performance Award in excess of the pro rata portion shall be cancelled, unless otherwise determined by the Committee. Any distribution hereunder shall be subject to Section 11(k) (including any applicable six-month delay in distribution) and subject to applicable restrictions set forth in Section 11(a).

(iii)

Awards subject to accelerated vesting and/or settlement under this Section 9(a) may be settled in cash, if and to the extent authorized by the Committee.

The Company and any successor that has assumed an Award in connection with a Change in Control must acknowledge and agree to be bound by the provisions hereof during the three-year period following the Change in Control in a legally binding agreement with the Participant.

(b) Definition of “Change in Control .” “Change in Control” means the occurrence of any one of the following events after the Effective Date:

(i)

Any Person (as defined in Section 13(d)(3) of the Securities and Exchange Act) shall have become the direct or indirect beneficial owner of thirty percent (30%) or more of the then outstanding common shares of the Company;

(ii)

The consummation of a merger or consolidation of the Company with any other corporation other than (A) a merger or consolidation which would result in the voting securities of the company outstanding immediately prior thereto continuing to represent at least fifty one percent (51%) of the combined voting power of the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company in which no Person acquires more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities;

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(iii)

The date 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 of all or substantially all the Company’s assets;

(iv)

The date there shall have been a change in the composition of the Board of Directors of the Company within a two-year period such that a majority of the Board does not consist of directors who were serving at the beginning of such period together with directors whose initial nomination for election by the Company’s stockholders or, if earlier, initial appointment to the Board, was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the two-year period together with the directors who were previously so approved.

(c) Qualifying Termination . For purposes of this Section 9, a “Qualifying Termination” shall be deemed to have occurred under the following circumstances:

(i)

A Company-initiated termination for reason other than willful misconduct, activity deemed detrimental to the interests of the Company, or disability, provided that the Participant executes a general release and, where applicable, a non-solicitation and/or non-compete agreement with the Company.

(ii)

The Participant resigns with good reason, for which purpose “good reason” means (A) a substantial adverse alteration in the nature or status of the Participant’s responsibilities, (B) a reduction in the Participant’s base salary and/or levels of entitlement or participation under any incentive plan, award program or employee benefit program without the substitution or implementation of an alternative arrangement of substantially equal value, or, (C) the Company requiring the Participant to relocate to a work location more than 50 miles from his/her work location prior to the Change in Control.

(iii)

For Awards granted on or after June 10, 2008, and for any Award granted before that date that constitutes a “deferral of compensation” under Code Section 409A, the following additional provisions apply:

(A)

The term “substantial” relating to the adverse alteration in the nature or status of Participant’s responsibilities under (ii)(A) above means “material” within the meaning of Treasury Regulation § 1.409A-1(n); and

(B)

An event that would otherwise constitute good reason hereunder shall not constitute good reason (1) if the Participant fails to provide notice to the Company of the circumstances constituting good reason within 90 days after Participant first become aware of such event and at least 30 days before Participant’s termination for good reason, (2) if the Participant fails to provide a notice of termination to the Company, with such notice specifying a termination date not more than 90 days after the notice is provided to the Company and, in the case of any such award granted before June 10, 2008, a termination date not more than two years following the date the circumstances constituting good cause first arose and, in the case of any such award granted on or after June 10, 2008, a termination date not more than 120 days following the date the Participant first became aware (or reasonably should have become aware) of the occurrence of circumstances constituting good reason, or (3) if the Company has fully corrected the circumstance that constitutes good reason within 30 days of receipt of notice under clause (i) above.

A Participant’s death or voluntary resignation without good reason will not constitute a Qualifying Termination.

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10. Additional Award Forfeiture Provisions .

The Committee may condition a Participant’s right to receive a grant of an Award, to exercise the Award, to receive a settlement or distribution with respect to the Award or to retain cash, Stock, other Awards, or other property acquired in connection with an Award, upon compliance by the Participant with specified conditions that protect the business interests of the Company and its subsidiaries and affiliates from harmful actions of the Participant, including conditions relating to non-competition, confidentiality of information relating to or possessed by the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its subsidiaries and affiliates and the officers, directors and affiliates of the Company and its subsidiaries and affiliates, and other restrictions upon or covenants of the Participant, including during specified periods following termination of employment or service to the Company. Accordingly, an Award may include terms providing for a “clawback” or forfeiture from the Participant of the profit or gain realized by a Participant in connection with an Award, including cash or other proceeds received upon sale of Stock acquired in connection with an Award.

11. General Provisions .

(a) Compliance with Legal and Other Requirements . The Company may, to the extent deemed necessary or advisable by the Committee and subject to Section 11(k), postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations. The foregoing notwithstanding, in connection with a Change in Control, the Company shall take or cause to be taken no action, and shall undertake or permit to arise no legal or contractual obligation, that results or would result in any postponement of the issuance or delivery of Stock or payment of benefits under any Award or the imposition of any other conditions on such issuance, delivery or payment, to the extent that such postponement or other condition would represent a greater burden on a Participant than existed on the 90th day preceding the Change in Control.

(b) Limits on Transferability; Beneficiaries .

(i)

No Award or other right or interest of a Participant under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Company or a subsidiary or affiliate thereof), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that, during a Participant’s lifetime, Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more of the following: (A) The Participant’s spouse, children or grandchildren (including any adopted and step children or grandchildren parents, grandparents or siblings, (B) A trust for the benefit of one or more of the Participant or the persons referred to in clause (A), (C) A partnership, limited liability company or corporation in which the Participant or the Persons referred to in clause (A) are the only partners, members or shareholders, or (D) For charitable donations; and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent (x) such transfers are permitted by the Committee,

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(y) the Committee has determined that there will be no transfer of the Award to a third party for value, and (z) such transfers otherwise comply with such other terms and conditions as the Committee may impose thereon (which may include limitations the Committee may deem appropriate in order that offers and sales under the Plan will meet applicable requirements of registration forms under the Securities Act of 1933 specified by the Securities and Exchange Commission).

(ii)

If a Participant has died and then or thereafter a payment or benefit becomes distributable under an Award, such payment or benefit will be distributed to the Participant’s Beneficiary; provided, however, that a person or trust will be deemed a Beneficiary only if it is surviving on the date of death of the Participant and if the Participant has designated such person or trust as a Beneficiary in his or her most recent written and duly filed Beneficiary designation (i.e., any new Beneficiary designation under the Plan cancels a previously filed Beneficiary designation). If no Beneficiary is living at the time of Participant’s death, any subsequent payment or benefit will be distributable to the person or persons in the first of the following classes of successive preference:

(A)

Widow or Widower, if then living

(B)

Surviving children, equally

(C)

Surviving parents, equally

(D)

Surviving brothers and sisters, equally

(E)

Executors or administrators;

and the term “Beneficiary” as used in the Plan shall include such person or persons. This provision applies to payments and benefits distributable upon vesting or after expiration of any mandatory or elective deferral period, and also to the right to exercise any option or SAR during any period in which the Award is outstanding and exercisable.

(iii)

A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award document applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

(c) Adjustments . In the event that any large, special and non-recurring dividend or other distribution (whether in the form of cash or property other than Stock), recapitalization, forward or reverse split, Stock dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate or, in the case of any outstanding Award, which is necessary in order to prevent dilution or enlargement of the rights of the Participant, then the Committee shall, in an equitable manner as determined by the Committee, adjust any or all of (i) the number and kind of shares of Stock which may be delivered in connection with Awards granted thereafter, including the number of shares available under Section 4, (ii) the number and kind of shares of Stock by which annual per-person Award limitations are measured under Section 5, (iii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards and (iv) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the Committee may make provision for a payment of cash or property to the holder of an outstanding Option (subject to Section 11(l)). In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards and performance goals and any hypothetical funding pool relating thereto) in recognition of unusual or nonrecurring events (including,

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without limitation, events described in the preceding sentence, as well as acquisitions and dispositions of businesses and assets) affecting the Company, any subsidiary or affiliate or other business unit, or the financial statements of the Company or any subsidiary or affiliate, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any subsidiary or affiliate or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that the existence of such authority (i) would cause Options, SARs, or Performance Awards granted under the Plan to Participants designated by the Committee as Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder, or (ii) would cause the Committee to be deemed to have authority to change the targets, within the meaning of Treasury Regulation 1.162-27(e)(4)(vi), under the performance goals relating to Options or SARs granted to Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder. In furtherance of the foregoing, in the event of an “equity restructuring” as defined in FAS 123R which affects the Stock, a Participant shall have a legal right to an adjustment to the Participant’s Award which shall preserve without enlarging the value of the Award, with the manner of such adjustment to be determined by the Committee in its discretion, and subject to any limitation on this right set forth in the applicable Award agreement.

(d) Tax Provisions .

(i)

Withholding. The Company and any subsidiary or affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s withholding obligations, either on a mandatory or elective basis in the discretion of the Committee, or in satisfaction of other tax obligations. Other provisions of the Plan notwithstanding, only the minimum amount of Stock deliverable in connection with an Award necessary to satisfy statutory withholding requirements will be withheld, unless withholding of any additional amount of Stock will not result in additional accounting expense to the Company.

(ii)

Required Consent to and Notification of Code Section 83(b) Election. No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award document or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision.

(iii)

Requirement of Notification Upon Disqualifying Disposition Under Code Section 421(b). If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (i.e., a disqualifying disposition), such Participant shall notify the Company of such disposition within ten days thereof.

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(e) Changes to the Plan . The Board may amend, suspend or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of stockholders or Participants; provided, however, that any amendment to the Plan shall be submitted to the Company’s stockholders for approval not later than the earliest annual meeting for which the record date is at or after the date of such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of the New York Stock Exchange, or if such amendment would materially increase the number of shares reserved for issuance and delivery under the Plan, and the Board may otherwise, in its discretion, determine to submit other amendments to the Plan to stockholders for approval. The Committee is authorized to amend outstanding awards, except as limited by the Plan. The Board and Committee may not amend outstanding Awards (including by means of an amendment to the Plan) without the consent of an affected Participant if such an amendment would materially and adversely affect the rights of such Participant with respect to the outstanding Award (for this purpose, actions that alter the timing of federal income taxation of a Participant will not be deemed material unless such action results in an income tax penalty on the Participant, and any discretion that is reserved by the Board or Committee with respect to an Award is unaffected by this provision). Without the approval of stockholders, the Committee will not amend or replace previously granted Options or SARs in a transaction that constitutes a “repricing,” which for this purpose means any of the following or any other action that has the same effect:

•

Lowering the exercise price of an option or SAR after it is granted;

•

Any other action that is treated as a repricing under generally accepted accounting principles;

•

Canceling an option or SAR at a time when its exercise price exceeds the fair market value of the underlying Stock, in exchange for another option or SAR, restricted stock, other equity, cash or other property;

provided, however, that the foregoing transactions shall not be deemed a repricing if pursuant to an adjustment authorized under Section 11(c). With regard to other terms of Awards, the authority of the Committee to waive or modify an Award term after the Award has been granted does not permit waiver or modification of a term that would be mandatory under the Plan for any Award newly granted at the date of the waiver or modification.

(f) Right of Setoff . The Company or any subsidiary or affiliate may, to the extent permitted by applicable law, deduct from and set off against any amounts the Company or a subsidiary or affiliate may owe to the Participant from time to time, including amounts payable in connection with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Company, including but not limited to amounts owed under Section 10, although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff under this Section 11(f). The foregoing notwithstanding, no setoff is permitted against a 409A Award except at the time of distribution of such 409A Award.

(g) Unfunded Status of Awards; Creation of Trusts . The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.

(h) Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, including incentive arrangements and awards which do not qualify under Code Section 162(m), and such other arrangements may be either applicable generally or only in specific cases.

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(i) Payments in the Event of Forfeitures; Fractional Shares . Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

(j) Compliance with Code Section 162(m). It is the intent of the Company that Options and SARs granted to Covered Employees and other Awards designated as Awards to Covered Employees subject to Section 7 shall constitute qualified “performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder, unless otherwise determined by the Committee at the time of allocation of an Award. Accordingly, the terms of Sections 7(b) and (c), including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee as likely to be a Covered Employee with respect to a specified fiscal year. If any provision of the Plan or any Award document relating to a Performance Award that is designated as intended to comply with Code Section 162(m) does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee or any other person discretion to increase the amount of compensation otherwise payable in connection with any such Award upon attainment of the applicable performance objectives.

(k) Certain Limitations on Awards to Ensure Compliance with Section 409A .

(i)

409A Awards and Deferrals. Other provisions of the Plan notwithstanding, the terms of any 409A Award (which for this purpose means only such an Award held by an employee subject to United States federal income tax), including any authority of the Company and rights of the Participant with respect to the 409A Award, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A but only to the extent that such modification or limitation is permitted under Section 409A and the regulations and guidance issued thereunder. The following rules will apply to 409A Awards:

(A)

Elections. If a Participant is permitted to elect to defer an Award or any payment under an Award, such election will be permitted only at times in compliance with Section 409A (including transition rules thereunder). In 2009 and thereafter, such election shall be made in accordance with Exhibit A hereto;

(B)

Changes in Distribution Terms. The Committee may, in its discretion, require or permit on an elective basis a change in the distribution terms applicable to 409A Awards (and Non-409A Awards that qualify for the short-term deferral exemption under Section 409A) in accordance with, and to the fullest extent permitted by, applicable guidance of the Internal Revenue Service (including Proposed Treasury Regulation § 1.409A, Preamble § XI.C and IRS Notice 2005-1), and otherwise in accordance with Section 409A and regulations thereunder. The Senior Vice President-Human Resources of the Company is authorized to modify any such outstanding Awards to permit election of different deferral periods provided that any such modifications may not otherwise increase the benefits to Participants or the costs of such Awards to the Company. Other provisions of this Plan notwithstanding, changes to distribution timing resulting from amendments to this Plan in 2008 shall not have the affect of accelerating distributions into 2008 or causing distributions that otherwise would have occurred in 2008 to be deferred until a year after 2008;

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(C)

Exercise and Distribution. Except as provided in Section 11(k)(i)(D) hereof, no 409A Award shall be exercisable (if the exercise would result in a distribution) or otherwise distributable to a Participant (or his or her beneficiary) except upon the occurrence of one of the following (or a date related to the occurrence of one of the following), which must be specified in a written document governing such 409A Award and otherwise meet the requirements of Treasury Regulation § 1.409A-3:

(1)

Specified Time. A specified time or a fixed schedule;

(2)

Separation from Service. The Participant’s separation from service (within the meaning of Treasury Regulation § 1.409A-1(h) and other applicable rules under Code Section 409A); provided, however, that if the Participant is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof) and any of the Company’s Stock is publicly traded on an established securities market or otherwise, settlement under this Section 11(k)(i)(C)(2) shall instead occur at the expiration of the six-month period under Section 409A(a)(2)(B)(i) (no acceleration of settlement during such delay period may occur, except upon death of the Participant). In the case of installments, this delay shall not affect the timing of any installment otherwise payable after the six-month delay period. With respect to any 409A Award, a reference in any agreement or other governing document to a “termination of employment” which triggers a distribution shall be deemed to mean a “separation from service” within the meaning of Treasury Regulation § 1.409A-1(h). References in Award agreements outstanding before June 10, 2008 to Section 11(k)(i)(D) and (E) shall be deemed to refer to this Section 11(a)(i)(C)(2) and Section 11(a)(i)(G);

(3)

Death. The death of the Participant. Unless a specific time otherwise is stated for payment of a 409A Award upon death, such payment shall occur in the calendar year in which falls the 30 ^th day after death;

(4)

Disability. The date the Participant has experienced a 409A Disability (as defined below); and

(5)

409A Ownership/Control Change. The occurrence of a 409A Ownership/Control Change (as defined below).

(D)

No Acceleration. The exercise or distribution of a 409A Award may not be accelerated prior to the time specified in accordance with Section 11(k)(i)(C) hereof, except in the case of one of the following events:

(1)

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Participant’s other assets (to the extent such liquidation would not itself cause severe financial hardship), or by cessation of deferrals under the Plan. Upon a finding that an Unforeseeable Emergency has occurred with respect to a Participant, any election of the Participant to defer compensation that will be earned in whole or part by services in the year in which the emergency occurred or is found to continue will be immediately cancelled.

(2)

Domestic Relations Order. The 409A Award may permit the acceleration of the exercise or distribution time or schedule to an individual other than the Participant as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).

(3)

Conflicts of Interest. Such 409A Award may permit the acceleration of the settlement time or schedule as may be necessary to comply with an ethics agreement with the Federal government or to comply with a Federal, state, local or foreign ethics law or conflict of interest law in compliance with Treasury Regulation § 1.409A-3(j)(4)(iii).

(4)

Change. The Committee may exercise the discretionary right to accelerate the vesting of any unvested compensation deemed to be a 409A Award upon a 409A Ownership/Control Change or to terminate the Plan upon or within 12 months after a 409A Ownership/Control Change, or otherwise to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(ix), or accelerate settlement of such 409A Award in any other circumstance permitted under Treasury Regulation § 1.409A-3(j)(4).

(E)

Definitions. For purposes of this Section 11(k), the following terms shall be defined as set forth below:

(1)

(2)

“409A Disability” means an event which results in the Participant being (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii), by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its subsidiaries.

(3)

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without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)) of the Participant, loss of the Participant’s property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, and otherwise meeting the definition set forth in Treasury Regulation § 1.409A-3(i)(3).

(F)

Time of Distribution. In the case of any distribution of a 409A Award, if the timing of such distribution is not otherwise specified in the Plan or an Award agreement or other governing document, the distribution shall be made within 60 days after the date at which the settlement of the Award is specified to occur, subject to the following special rules:

(1)

The Participant shall have no influence (other than permitted deferral elections) on any determination as to the tax year in which the distribution will be made during any period in which a distribution may be made (whether or not under the default rule of this Section 11(k)(i)(F));

(2)

In the event of a Qualifying Termination more than two years after a Change in Control, in the case of a 409A Award if, upon a termination other than in connection with a Change in Control, the applicable terms of the Award would have provided for a distribution at a different time(s) than the time(s) of distribution specified for the Qualifying Termination, the applicable terms of the Award shall take precedence so that the distribution shall occur at the time(s) specified for a pre-Change in Control separation from service (but any acceleration of the lapse of risk of forfeiture resulting from the Qualifying Termination shall still apply);

(3)

In the event that a Participant incurs a Disability, the terms of an Award provide that termination of employment triggering a distribution will not occur until the end of a specified Disability period, but the Participant’s circumstances constitute a “separation from service” under Treasury Regulation § 1.409A-1(h), then the Participant will be deemed to have had a “separation from service” at the relevant time rather than at the end of the Disability, but the Participant’s rights and benefits will be determined in a manner that does not impair the value of such rights and benefits if the separation from service were deemed to occur at the end of the specified Disability period.

(G)

Determination of “Key Employee.” For purposes of distributions under Section 11(k)(i)(C)(2), status of a Participant as a “key employee” shall be determined annually under the Company’s administrative procedure for such determination for purposes of all plans subject to Section 409A.

(H)

Non-Transferability. The provisions of Section 11(b) notwithstanding, no 409A Award or right relating thereto shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiary.

(I)

409A Rules Do Not Constitute Waiver of Other Restrictions. The rules applicable to 409A Awards under this Section 11(k)(i) constitute further restrictions on terms of Awards set forth elsewhere in this Plan. Thus, for example, a 409A Option/SAR shall be subject to restrictions, including restrictions on rights otherwise specified in Section 6(b) or 6(c), in order that such Award shall not result in constructive receipt of income before exercise or tax penalties under Section 409A.

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(ii)

Rules Applicable to Certain Participants Transferred to Affiliates. For purposes of determining eligibility for grants of Non-409A Options/SARs or a separation from service by any Participant (where the use of the following modified definition is based upon legitimate business criteria), in applying Code Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the language “at least 20 percent” shall be used instead of “at least 80 percent” at each place it appears in Sections 1563(a)(1), (2) and (3), and in applying Treasury Regulation § 1.414(c)-2 (or any successor provision) for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c), the language “at least 20 percent” shall be used instead of “at least 80 percent” at each place it appears in Treasury Regulation §1.414(c)-2.

(iii)

Distributions Upon Vesting. In the case of any Award providing for a distribution upon the lapse of a risk of forfeiture, if the timing of such distribution is not otherwise specified in the Plan or an Award agreement or other governing document, the distribution shall be made not later than March 15 of the year following the year in which the risk of forfeiture lapsed, and if a determination is to be made promptly following the end of a performance year (as in the case of performance shares) then the determination of the level of achievement of performance and the distribution shall be made between January 1 and March 15 of the year following such performance year. In all cases, the Participant shall have no influence (aside from any permitted deferral election) on any determination as to the tax year in which the distribution will be made.

(iv)

Limitation on Adjustments . Any adjustment under Section 11(c) shall be implemented in a way that complies with applicable requirements under Section 409A so that Non- 409A Option/SARs do not, due to the adjustment, become 409A Awards, and otherwise so that no adverse consequences under Section 409A result to Participants.

(v)

Release or Other Termination Agreement . If the Company requires a Participant to execute a release, non-competition, or other agreement as a condition to receipt of a payment upon or following a termination of employment, the Company will supply to the Participant a form of such release or other document not later than the date of the Participant’s termination of employment, which must be returned within the time period required by law and must not be revoked by the Participant within the applicable time period in order for Participant to satisfy any such condition. If any amount payable during a fixed period following termination of employment is subject to such a requirement and the fixed period would begin in one year and end in the next, the Company, in determining the time of payment of any such amount, will not be influenced by the timing of any action of the Participant including execution of such a release or other document and expiration of any revocation period. In particular, the Company will be entitled in its discretion to deposit any such payment in escrow during either year comprising such fixed period, so that such deposited amount is constructively received and taxable income to the Participant upon deposit but with distribution from such escrow remaining subject to the Participant’s execution and non-revocation of such release or other document.

(vi)

Special Disability Provision . In case of a Disability of a Participant, (i) for any Award or portion thereof that constitutes a short-term deferral for purposes of Section 409A, the Company shall determine whether the Participant’s circumstances are such that the Participant will not return to service, in which case such Disability will be treated as a termination of employment for purposes of determining the time of payment of such award or portion thereof then subject only to service-based vesting, and (ii) for any Award or portion thereof that constitutes a 409A Award, the Company shall determine

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whether there has occurred a “separation from service” as defined under Treasury Regulation § 1.409A-1(h) based on Participant’s circumstances, in which case such Disability will be treated as a separation from service for purposes of determining the time of payment of such award or portion thereof then subject only to service-based vesting. In each case, the Participant shall be accorded the benefit of vesting that would result in the case of Disability in the absence of this provision, so that the operation of this provision, intended to comply with Section 409A, will not disadvantage the Participant. The Company’s determination hereunder will be made initially within 30 days after the Disability and each March and December thereafter.

(vii)

Scope and Application of this Provision. For purposes of this Section 11(k), references to a term or event (including any authority or right of the Company or a Participant) being “permitted” under Section 409A mean that the term or event will not cause the Participant to be deemed to be in constructive receipt of compensation relating to the 409A Award prior to the distribution of cash, shares or other property or to be liable for payment of interest or a tax penalty under Section 409A.

(l) Governing Law . The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award document shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable provisions of federal law.

(m) Awards to Participants Outside the United States . Other provisions of the Plan to the contrary notwithstanding, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws and customary business practices in other countries in which the Company and its subsidiaries and affiliates operate or have employees, the Committee shall have the power and authority to (i) determine which Participants employed outside the United States or subject to non-United States tax laws are eligible to participate in the Plan, (ii) modify the terms and conditions of Awards granted to or held by such Participants, (iii) establish subplans, modify exercise procedures and other terms and procedures relating to Awards granted or held by such Participants to the extent such actions may be necessary or advisable, and (iv) take such other actions as the Committee may deem necessary or appropriate so that the value and other benefits of an Award to such a Participant, as affected by foreign tax laws and other applicable restrictions, shall be comparable to the value of such an Award to a Participant who is resident or employed in the United States. An Award may be modified under this Section 11(m) in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) for the Participant whose Award is modified.

(n) Limitation on Rights Conferred under Plan . Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or a subsidiary or affiliate, (ii) interfering in any way with the right of the Company or a subsidiary or affiliate to terminate any Eligible Person’s or Participant’s employment or service at any time (subject to the terms and provisions of any separate written agreements), (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award or an Option or SAR is duly exercised. Except as expressly provided in the Plan and an Award document, neither the Plan nor any Award document shall confer on any person other than the Company and the Participant any rights or remedies thereunder. Any Award shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any subsidiary or affiliate and shall not affect any benefits under any other benefit plan under which the availability or amount of benefits is related to the level of compensation (unless required by any such other plan or arrangement with specific reference to Awards under this Plan).

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(o) Severability; Entire Agreement . If any of the provisions of this Plan or any Award document is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award documents contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof. No rule of strict construction shall be applied against the Company, the Committee, or any other person in the interpretation of any terms of the Plan, Award, or agreement or other document relating thereto.

(p) Plan Effective Date and Termination . The Plan will become effective if, and at such time as, the stockholders of the Company have approved it by the affirmative votes of the holders of a majority of the voting securities of the Company present, or represented, and entitled to vote on the subject matter at a duly held meeting of stockholders, provided that the total vote cast on the proposal represents over fifty percent (50%) in interest of all securities entitled to vote on the proposal. The date of such stockholder approval will be the Effective Date. Upon such approval of the Plan by the stockholders of the Company, no further awards will be granted under the 2002 Stock Incentive Plan, but any outstanding awards under that plan will continue in accordance with their terms. Unless earlier terminated by action of the Board of Directors, the authority of the Committee to make grants under the Plan will terminate on the date that is ten years after the latest date upon which stockholders of the Company have approved the Plan (except that, for Awards under Section 7(b), such authority will terminate earlier at the date five years after the latest stockholder approval of the business criteria for such Awards under Section 7(b)(ii)), and the Plan will remain in effect until such time as the Company has no further rights or obligations with respect to outstanding Awards or otherwise under the Plan.

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Exhibit A

Deferral Election Rules

If a participant in a plan, program or other compensatory arrangement (a “plan”) of Bristol-Myers Squibb Company (the “Company”) is permitted to elect to defer awards or other compensation, any such election relating to compensation deferred under the applicable plan must be received by the Company prior to the date specified by or at the direction of the administrator of such plan (the “Administrator,” which in most instances will be Human Resources). For purposes of compliance with Section 409A of the Internal Revenue Code (the “Code”), any such election to defer shall be subject to the rules set forth below, subject to any additional restrictions as may be specified by the Administrator. Under no circumstances may a participant elect to defer compensation to which he or she has attained, at the time of deferral, a legally enforceable right to current receipt of such compensation.

(1)

Initial Deferral Elections . Any initial election to defer compensation (including the election as to the type and amount of compensation to be deferred and the time and manner of settlement of the deferral) must be made (and shall be irrevocable) no later than December 31 of the year before the participant’s services are performed which will result in the earning of the compensation, except as follows:

•

Initial deferral elections with respect to compensation that, absent the election, constitutes a short-term deferral may be made in accordance with Treasury Regulation § 1.409A-2(a)(4) and (b);

•

Initial deferral elections with respect to compensation that remains subject to a requirement that the participant provide services for at least 12 months (a “forfeitable right” under Treasury Regulation § 1.409A-2(a)(5)) may be made on or before the 30 ^th day after the participant obtains the legally binding right to the compensation, provided that the election is made at least 12 months before the earliest date at which the forfeiture condition could lapse and otherwise in compliance with Treasury Regulation § 1.409A-2(a)(5);

•

Initial deferral elections by a participant in his or her first year of eligibility may be made within 30 days after the date the participant becomes eligible to participate in the applicable plan, with respect to compensation paid for services to be performed after the election and in compliance with Treasury Regulation § 1.409A-2(a)((7);

•

Initial deferral elections by a participant with respect to performance-based compensation (as defined under Treasury Regulation § 1.409A-1(e)) may be made on or before the date that is six months before the end of the performance period, provided that (i) the participant was employed continuously from either the beginning of the performance period or the later date on which the performance goal was established, (ii) the election to defer is made before such compensation has become readily ascertainable (i.e., substantially certain to be paid), (iii) the performance period is at least 12 months in length and the performance goal was established no later than 90 days after the commencement of the service period to which the performance goal relates, (iv) the performance-based compensation is not payable in the absence of performance except due to death, disability, a 409A Ownership/Control Change (as defined in Section 11(k) of the 2007 Stock Award and Incentive Plan) or as otherwise permitted under Treasury Regulation § 1.409A-1(e), and (v) this initial deferral election must in any event comply with Treasury Regulation § 1.409A-2(a)(8);

•

Initial deferral elections resulting in Company matching contributions may be made in compliance with Treasury Regulation § 1.409A-2(a)(9);

•

Initial deferral elections may be made to the fullest permitted under other applicable provisions of Treasury Regulation § 1.409A-2(a); and

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(2)

Further Deferral Elections. The foregoing notwithstanding, for any election to further defer an amount that is deemed to be a deferral of compensation subject to Code Section 409A (to the extent permitted under Company plans, programs and arrangements), any further deferral election made under the plan shall be subject to the following, provided that deferral elections in 2007 and 2008 may be made under applicable transition rules under Section 409A:

•

The further deferral election will not take effect until at least 12 months after the date on which the election is made;

•

If the election relates to a distribution event other than a Disability (as defined in Treasury Regulation § 1.409A-3(i)(4)), death, or Unforeseeable Emergency (as defined in Treasury Regulation § 1.409A-3(i)(3)), the payment with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been paid (or in the case of a life annuity or installment payments treated as a single payment, five years from the date the first amount was scheduled to be paid), to the extent required under Treasury Regulation § 1.409A-2(b);

•

The requirement that the further deferral election be made at least 12 months before the original deferral amount would be first payable may not be waived by the Administrator, and shall apply to a payment at a specified time or pursuant to a fixed schedule (and in the case of a life annuity or installment payments treated as a single payment, 12 months before the date that the first amount was scheduled to be paid);

•

The further deferral election shall be irrevocable when filed with the Company; and

•

The further deferral election otherwise shall comply with the applicable requirements of Treasury Regulation § 1.409A-2(b).

(3)

Transition Rules. Initial deferral elections and elections to change any existing deferred date for distribution of compensation in any transition period designated under Department of the Treasury and IRS regulations may be permitted by the Company to the fullest extent authorized under transition rules and other applicable guidance under Section 409A (including transition rules in effect in the period 2005 – 2008).

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Exhibit 10.3

BRISTOL-MYERS SQUIBB COMPANY

2003 EXECUTIVE PERFORMANCE INCENTIVE PLAN

(As Amended and Restated effective June 10, 2008)

1. PURPOSE: The purpose of the Executive Performance Incentive Plan (the ‘Plan’) is to promote the interests of the Bristol-Myers Squibb Company (the ‘Company’) and its stockholders by providing additional compensation as incentive to certain key executives of the Company and its Subsidiaries and Affiliates who contribute materially to the success of the Company and such Subsidiaries and Affiliates.

2. DEFINITIONS: The following terms when used in the Plan shall, for the purposes of the Plan, have the following meanings:

(a) ‘Affiliate’ shall mean any entity in which the Company has an ownership interest of at least 20%.

(b) ‘Code’ shall mean the Internal Revenue Code of 1986, as amended.

(d) ‘Exchange Act’ shall mean the Securities Exchange Act of 1934, as amended.

(e) ‘Retirement’ shall mean termination of the employment of an employee with the Company or a Subsidiary or Affiliate on or after

(i) the employee’s 65th birthday

(ii) the employee’s 55th birthday having completed 10 years of service with the Company.

(f) ‘Subsidiary’ shall mean any corporation which at the time qualifies as a subsidiary of the Company under the definition of ‘subsidiary corporation’ in Section 424 of the Code.

3. ADMINISTRATION: The Plan shall be administered under the supervision of the Board of Directors of the Company (the ‘Board’) which shall exercise its powers, to the extent herein provided, through the agency of a Compensation and Management Development Committee (the ‘Committee’) which shall be appointed by the Board. The Committee shall consist of not less than three (3) members of the Board who meet the definition of ‘outside director’ under the provisions of Section 162(m) of the Code and the definition of ‘non-employee director’ under the provisions of the Exchange Act or the regulations or rules promulgated thereunder.

The Committee, from time to time, may adopt rules and regulations (‘Regulations’) for carrying out the provisions and purposes of the Plan and make such determinations, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate. The Committee may alter, amend or revoke any Regulation adopted. The interpretation and construction of any provision of the Plan by the Committee shall, unless otherwise determined by the Board, be final and conclusive.

The Committee may delegate its responsibilities for administering the Plan to a committee of key executives as the Committee deems necessary. Any awards under the Plan to members of this committee and to such other of the Participants as may be determined from time to time by the Board or the Committee shall be referred to the Committee or Board for approval. However, the Committee may not delegate its responsibilities under the Plan relating to any executive who is subject to the provisions of Section 162(m) of the Code or in regard to the issuance of any stock under Paragraph 6(c).

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4. PARTICIPATION: ‘Participants’ in the Plan shall be such key executives of the Company as may be designated by the Committee to participate in the Plan with respect to each fiscal year.

5. PERFORMANCE INCENTIVE AWARDS:

(a) For each fiscal year of the Company, the Committee shall determine the following:

(i) The Company, Subsidiaries and/or Affiliates to participate in the Plan for such fiscal year.

(ii) The executives who will participate in the Plan for such fiscal year.

(iii) The basis(es) for determining the maximum amount of the Awards to such Participants will be dependent upon the attainment by the Company or any Subsidiary or Affiliate or subdivision thereof of any specified performance goal or objective. Performance measures established by the Committee may relate to the Total Company or a business unit. Performance measures may be set at a specific level or may be expressed as relative to the comparable measures at comparison companies or a defined index. Performance criteria for Awards under the Plan may include one or more of the following operating performance measures:

a. Earnings

b. Revenue

c. Operating or net cash flows

d. Research and development milestones

e. Financial return ratios

f. Total shareholder return

g. Market share

h. Product commercialization milestones

(iv) For Participants subject to 162(m) of the Code, the Committee shall establish one or more objectively determinable performance measures based on the criteria described above no later than 90 days after the beginning of the fiscal year and at a time when the achievement of such measure (or measures) is substantially uncertain. No award shall be paid to a Participant unless the Committee determines that the performance measures applicable to that Participant have been achieved.

(v) For any Participant not subject to Section 162(m) of the Code, other performance measures or objectives, whether quantitative or qualitative, may be established. The Committee shall establish the specific targets for the selected measures. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index.

The Committee may, in its discretion, reduce the award payable to any Participant below the amount determined by the objective performance measures established for that Participant. The Committee’s discretion may not be exercised to increase the award payable to any Participant subject to Section 162(m) of the Code above the amount determined by the applicable performance measure. In addition, the exercise of the Committee’s discretion to reduce the award payable to any Participant may not increase the award payable to any other executive subject to Section 162(m) of the Code.

(vi) The Committee may require or a Participant may request the Committee to approve deferred payment of a percentage (not less than 25%) of an Award (the ‘Deferred Portion’). Any Award or portion of Award which the Committee does not require deferral of or the Participant does not request deferral of shall be paid subject to the provisions of Paragraph 6 (the ‘Current Portion’). Any Award which includes a Deferred Portion shall be subject to the terms and conditions stated in Paragraph 9 and in any Regulations established by the Committee.

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(b) At any time after the commencement of a fiscal year for which Awards have been determined, but prior to the close thereof, the Committee may, in its discretion, eliminate or add Participants, or increase or decrease the Award of any Participant; but the Committee may not alter any election made relative to establishing a Deferred Portion of an Award or which would cause any Award to lose deductibility under Section 162(m) of the Code. Any changes or additions with respect to Awards of members of any committee established to oversee the Plan shall be referred to the Board or Committee, as appropriate, for approval.

6. PAYMENT OF CURRENT PORTION OF PERFORMANCE INCENTIVE AWARDS:

(a) Subject to such forfeitures of Awards and other conditions as are provided in the Plan, the Awards made to Participants shall be paid to them or their beneficiaries as follows:

(i) As soon as practicable after the end of the fiscal year, the Committee shall determine the extent to which Awards have been earned on the basis of the actual performance in relation to the established performance objectives as established for that fiscal year. Such Awards are only payable to the extent that the Participant has performed their duties to the satisfaction of the Committee.

(ii) While no Participant has an enforceable right to receive a Current Portion until the end of the fiscal year as outlined in (i) above, payments on account of the Current Portion may be provisionally made in accordance with the Regulations, based on tentative estimates of the amount of the Award. A Participant shall be required to refund any portion or all of such payments in order that the total payments may not exceed the Current Portion as finally determined, or if the Participant shall forfeit their Award for any reason during the fiscal year. However, any Participant subject to Section 162(m) of the Code may not receive such provisional payments.

(b) There shall be deducted from all payments of Awards any taxes required to be withheld by any government entity and paid over to any such government in respect of any such payment. Unless otherwise elected by the Participant, such deductions shall be at the established Withholding Tax Rate. Participants may elect to have the deduction of taxes cover the amount of any Applicable Tax (the amount of Withholding Tax plus the incremental amount determined on the basis of the highest marginal tax rate applicable to such Participant).

(c) Form of Payment. The Committee shall determine whether payment with respect to the Current Portion of an Award, or to the payment of a Deferred Portion made under the provisions of Paragraph 9, shall be made entirely in cash, entirely in Common Stock of the Company, or partially in cash and partially in Common Stock. Further, if the Committee determines that payment should be made in the form of Restricted Shares of Common Stock of the Company, the Committee shall designate the restrictions which will be placed upon the Common Stock and the duration of those restrictions. For any fiscal year, the Committee may not cause Awards to be made under this provision which would result in the issuance, either on a current or restricted basis, of more than two-tenths of one percent of the number of shares of Common Stock of the Company issued and outstanding as of January 1 of the fiscal year relating to the payment.

7. MAXIMUM PAYMENTS UNDER THE PLAN: Payments under the Plan shall be subject to the following maximum levels.

(a) Total Payments. The total amount of Awards paid under the Plan relating to fiscal year may not exceed two percent of the operating pretax earnings for the Company in that fiscal year.

(b) Maximum Individual Award. The maximum amount which any individual Participant may receive relating to any fiscal year may not exceed 0.15 percent of the operating pretax earnings for the Company in that fiscal year.

8. CONDITIONS IMPOSED ON PAYMENT OF AWARDS: Payment of each Award to a Participant or to the Participant’s beneficiary shall be subject to the following provisions and conditions:

(a) Rights to Awards. No Participant or any person claiming under or through the Participant shall have any right or interest, whether vested or otherwise, in the Plan or in any Award thereunder, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Regulations that affect such Participant or such other person shall have been complied with. Nothing contained in the Plan or in the Regulations shall require the Company to segregate or earmark any cash, shares or stock or other property. Neither the adoption of the Plan nor its operation shall in any way affect the rights and power of the Company or of any Subsidiary or Affiliate to dismiss and/or discharge any employee at any time.

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(b) Assignment or Pledge of Rights of Participant. No rights under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature except that a Participant may designate a beneficiary for the Deferred Portion of an Award pursuant to the provisions of Paragraph 10.

(c) Rights to Payments. No absolute right to any Award shall be considered as having accrued to any Participant prior to the close of the fiscal year with respect to which an Award is made and then such right shall be absolute only with respect to any Current Portion thereof; the Deferred Portion will continue to be forfeitable and subject to all of the conditions of the Plan. No Participant shall have any enforceable right to receive any Award made with respect to a fiscal year or to retain any payment made with respect thereto if for any reason (death included) the Participant, during such entire fiscal year, has not performed their duties to the satisfaction of the Company.

9. DEFERRAL OF PAYMENTS: Any portion of an Award deemed the Deferred Portion under Paragraph 5(a)(vi) shall be subject to the following:

(a) The Committee will, in its sole discretion, determine whether or not a Deferred Portion may be elected by the Participant under an Award or if a Deferred Portion shall be required. If a Deferred Portion election is permitted for an Award, the Committee will establish guidelines regarding the date by which such deferral election by the Participant must be made in order to be effective.

(b) Concurrent with the establishment of a Deferred Portion for any Award, the Participant shall determine, subject to the approval of the Committee, the portion of any Participant’s Deferred Portion that is to be valued by reference to the Performance Incentive Fixed Income Fund (hereinafter referred to as the ‘Fixed Income Fund’), the portion that is to be valued by reference to the Performance Incentive Equity Fund (hereinafter referred to as the ‘Equity Fund’), the portion that is to be valued by reference to the Performance Incentive Company Stock Fund (hereinafter referred to as the ‘Stock Fund’) and the portion that shall be valued by reference to any other fund(s) which may be established by the Committee for this purpose.

(c) Prior to the beginning of each fiscal year, the Committee shall determine if the Fund(s) used to value the account of any Participant may be changed from the Fund currently used to any other Fund established for use under this Plan. Any such determination relating to a member of the Committee shall be referred to the Board (or such Committee of the Board as may be designated by the Board) for approval.

(d) Payment of the total amount of a Participant’s Deferred Portions shall be made to the Participant, or, in case of the death of the Participant prior to the commencement of payments on account of such total amount, to the Participant’s beneficiary, in installments commencing as soon as practical after the Participant shall cease, by reason of death or otherwise, to be an employee of the Company. In case of the death of any Participant after the commencement of payments on account of the total of the Deferred Portions, the then remaining unpaid balance thereof shall continue to be paid in installments, at such times and in such manner as if such Participant were living, to the beneficiary(ies) of the Participant. However, the Committee shall possess absolute discretion to accelerate the time of payment of any remaining unpaid balance of the Deferred Portions to any extent that it shall deem equitable and desirable under circumstances where the Participant at the time of payment shall no longer be an employee of the Company or shall have died, subject to Section 9(j).

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(e) Conduct of Participant Following Termination of Employment. If, following the date on which a Participant shall cease to be an employee of the Company, the Participant shall at any time either disclose to unauthorized persons confidential information relative to the business of any of the Company or otherwise act or conduct themselves in a manner which the Committee shall determine is inimical or contrary to the best interest of the Company, the Company’s obligation to make any further payment on account of the Deferred Portions of such Participant shall forthwith terminate.

(f) Assignment of Rights by Participant or Beneficiary. If any Participant or beneficiary of a Participant shall attempt to assign their rights under the Plan in violation of the provisions thereof, the Company’s obligation to make any further payments to such Participant or beneficiary shall forthwith terminate.

(g) Determination of Breach of Conditions. The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination or reduction of the Company’s obligation in accordance with the foregoing provisions of this Paragraph 9 shall be conclusive.

(h) Fund Composition and Valuation. Deferred Portions of Awards under the Plan shall be valued and maintained as follows:

(i) In accordance with the provisions, and subject to the conditions, of the Plan and the Regulations, the Deferred Portion as established by the Committee shall be valued in reference to the Participants’ account(s) in the Equity Fund, in the Fixed Income Fund, in the Company Stock Fund, and in any other Fund established under this Plan. Account balances shall be maintained as dollar values, units or share equivalents as appropriate based upon the nature of the fund. For unit or share-based funds, the number of units or shares credited shall be based upon the established unit or share value as of the last day of the quarter preceding the crediting of the Deferred Portion.

(ii) Investment income credited to Participants’ accounts under the Fixed Income Fund shall be determined by the Committee based upon the prevailing rates of return experienced by the Company. The investment income credited to participants under the Equity Fund shall be established based upon the performance of a specific basket of equity investments. The Company shall advise Participants of the specific measures used and the current valuations of these Funds as appropriate to facilitate deferral decisions, investment choices and to communicate payout levels. The Company Stock Fund shall consist of units valued as one share of Common Stock of the Company (par value $.10).

(iii) Nothing contained in the Fund definitions in Paragraphs 9(h)(i) and 9(h)(ii) shall require the Company to segregate or earmark any cash, shares, stock or other property to determine Fund values or maintain Participant account levels.

(iv) Alternative Funds. The establishment of the ‘Fixed Income Fund’, the ‘Equity Fund’ and the ‘Stock Fund’ as detailed in Paragraphs 9(h)(i) and 9(h)(ii) shall not preclude the right of the Committee to direct the establishment of additional investment funds (‘Funds’).

In establishing such Funds, the Committee shall determine the criteria to be used for determining the value of such Funds.

(i) Accelerated Distributions. The Committee may, at its sole discretion, allow for the early payment of a Participant’s Deferred Portion(s) in the event of an ‘unforeseeable emergency’. An ‘unforeseeable emergency’ is defined as an unanticipated emergency caused by an event beyond the control of the Participant that would result in severe financial hardship if the distribution were not permitted. Such distributions shall be limited to the amount necessary to sufficiently address the financial hardship. Any distributions under this provision shall be consistent with all rules and regulations established under the Code.

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(j) Certain Provisions to Ensure Compliance with Section 409A . Other provisions of the Plan notwithstanding, the terms of any Deferred Portion (which term includes earnings thereon) which resulted from the 2004 performance year or a later performance year (a “409A Deferral”, subject to additional terms below), including any authority of the Company and rights of the Participant with respect to the 409A Deferral, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A but only to the extent that such modification or limitation is permitted under Section 409A and the regulations and guidance issued thereunder. The 409A Deferrals for each performance year, and installments payable as distributions, shall each be deemed a separate payment under Section 409A. In addition, other provisions of the Plan notwithstanding, the following rules will apply:

(i)

Elections to further defer any portion of a 409A Deferral, if permitted at all, will be permitted only at times in compliance with Section 409A, in accordance with the rules set forth on Exhibit A to the Company’s 2007 Stock Award and Incentive Plan, as amended, which Exhibit is hereby incorporated into and made a part of this Plan;

(ii)

Distribution. Except as provided in Section 9(j)(iii) hereof, no 409A Deferral shall be distributable to a Participant (or his or her beneficiary) except upon the occurrence of one of the following (or a date related to the occurrence of one of the following), which must be specified in a written document governing such 409A Deferral and otherwise meet the requirements of Treasury Regulation § 1.409A-3:

(A)

Specified Time. A specified time or a fixed schedule.

(B)

Separation from Service. The Participant’s separation from service (within the meaning of Treasury Regulation § 1.409A-1(h) and other applicable rules under Section 409A); provided, however, that if the Participant is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof) and any of the Company’s stock is publicly traded on an established securities market or otherwise, settlement under this Section 9(j)(ii)(B) shall instead occur at the expiration of the six-month period under Section 409A(a)(2)(B)(i). In the case of installments, this delay shall not affect the timing of any installment otherwise payable after the six-month delay period;

(C)

(D)

Disability. The date the Participant has experienced a 409A Disability (as defined below).

(E)

409A Ownership/Control Change. The occurrence of a 409A Ownership/Control Change (as defined below).

(iii)

No Acceleration. The distribution of a 409A Deferral may not be accelerated prior to the time specified in accordance with Section 9(j)(iii) hereof, except in the case of one of the following events:

(A)

Unforeseeable Emergency. The occurrence of an Unforeseeable Emergency, as defined below, but only if the net amount payable upon such settlement does not exceed the amounts necessary to relieve such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the settlement, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation from insurance or otherwise or by liquidation of the Participant’s other assets (to the extent such liquidation would not itself cause severe financial hardship), or by cessation of deferrals under the Plan. Upon a finding that an Unforeseeable Emergency has occurred with respect to a Participant, any election of the Participant to defer compensation that will be earned in whole or part by services in the year in which the emergency occurred or is found to continue will be immediately cancelled.

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(B)

Domestic Relations Order. The 409A Deferral may permit the acceleration of the exercise or distribution time or schedule to an individual other than the Participant as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).

(C)

(D)

Change. The Committee may exercise the discretionary right to accelerate the vesting of any unvested compensation deemed to be a 409A Deferral upon a 409A Ownership/Control Change or to terminate the Plan upon or within 12 months after a 409A Ownership/Control Change, or otherwise to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(ix), or accelerate settlement of such 409A Deferral in any other circumstance permitted under Treasury Regulation § 1.409A-3(j)(4).

(iv)

Definitions. For purposes of this Section 9(j), the following terms shall be defined as set forth below:

(A)

(B)

“409A Disability” means an event which results in the Participant being (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its subsidiaries.

(C)

“Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)) of the Participant, loss of the Participant’s property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, and otherwise meeting the definition set forth in Treasury Regulation § 1.409A-3(i)(3).

(v)

Time of Distribution. In the case of any distribution of a 409A Deferral, if the timing of such distribution is not otherwise specified in the Plan or an applicable agreement or other governing document, the distribution shall be made within 60 days after the date at which the settlement of the 409A Deferral is specified to occur. The Participant shall have no influence on any determination as to the tax year in which the distribution will be made.

(vi)

Determination of “Key Employee.” For purposes of a distribution under Section 9(j)(ii)(B), status of a Participant as a “key employee” shall be determined annually under the Company’s administrative procedure for such determination for purposes of all plans subject to Section 409A.

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(vii)

Non-Transferability. Other provisions of the Plan notwithstanding, no 409A Deferral or other right of a Participant under the Plan shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiary.

(viii)

Distribution Changes. The Committee may, in its discretion, require or permit on an elective basis a change in the distribution terms applicable to a 409A Deferral in accordance with, and to the fullest extent permitted by, applicable guidance of the Internal Revenue Service (including Proposed Treasury Regulation § 1.409A, Preamble § XI.C and IRS Notice 2005-1), and otherwise in accordance with Section 409A and regulations thereunder. The Senior Vice President-Human Resources of the Company is authorized to permit election of different deferral periods provided that any such modifications may not otherwise increase the benefits to Participants or the costs of a 409A Deferral to the Company (other than through changes in value of the notional investment). Other provisions of this Plan notwithstanding, changes to distribution timing resulting from amendments to this Plan in 2008 shall not have the affect of accelerating distributions into 2008 or causing distributions that otherwise would have occurred in 2008 to be deferred until a year after 2008.

(ix)

Scope and Application of this Provision. For purposes of this provision, references to a term or event (including any authority or right of the Company or a Participant) being “permitted” under Section 409A mean that the term or event will not cause the Participant to be deemed to be in constructive receipt of compensation relating to the 409A Deferral prior to the distribution of cash, shares or other property or to be liable for payment of interest or a tax penalty under Section 409A.

(x)

Special Disability Provision. In case of a Disability of a Participant, for any 409A Deferral the Company shall determine whether there has occurred a “separation from service” as defined under Treasury Regulation § 1.409A-1(h) based on the Participant’s circumstances, in which case such Disability will be treated as a separation from service for purposes of determining the time of payment of such Deferred Portion. The Company’s determination hereunder will be made initially within 30 days after the Disability and each March and December thereafter.

(xi)

Grandfathered Deferrals . Any Deferred Portion that resulted from a performance year earlier than 2004 (a “Non-409A Deferred Portion”) is intended to be “grandfathered” under Section 409A. No amendment or change to the Plan or other change (including an exercise of discretion) with respect to such grandfathered Non-409A Deferred Portion after October 3, 2004, shall be effective if such change would constitute a “material modification” within the meaning of applicable guidance or regulations under Section 409A, except in the case of a Deferred Portion that is, following such modification, compliant as a 409A Deferral or compliant with an exemption under Section 409A (in which case such Deferred Portion shall be deemed to be a 409A Deferral).

10. DESIGNATION OF BENEFICIARY FOR DEFERRED PORTION: A Participant may name a beneficiary to receive any Deferred Portion under Paragraph 5(a)(vi) to which the Participant may be entitled under the Plan in the event of their death, on a form to be provided by the Committee. A Participant may change their beneficiary from time to time in the same manner.

If no designated beneficiary is living on the date on which any Deferred Portion becomes payable to a Participant’s beneficiary, such payment will be payable to the person or persons in the first of the following classes of successive preference:

(a) Widow or Widower, if then living

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(b) Surviving children, equally

(d) Surviving brothers and sisters, equally

(e) Executors or administrators

and the term ‘beneficiary’ as used in the Plan shall include such person or persons.

11. MISCELLANEOUS:

(a) By accepting any benefits under the Plan, each Participant and each person claiming under or through him shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or made to be taken or made under the Plan by the Company, the Board, the Committee or any other committee appointed by the Board.

(b) Any action taken or decision made by the Company, the Board, the Committee, or any other committee appointed by the Board arising out of or in connection with the construction, administration, interpretation or effect of the Plan or of the Regulations shall lie within its absolute discretion, as the case may be, and shall be conclusive and binding upon all Participants and all persons claiming under or through any Participation.

(c) No member of the Board, the Committee, or any other committee appointed by the Board shall be liable for any act or failure to act of any other member, or of any officer, agent or employee of such Board or Committee, as the case may be, or for any act or failure to act, except on account of their own acts done in bad faith. The fact that a member of the Board shall then be, shall theretofore have been or thereafter may be a Participant in the Plan shall not disqualify them from voting at any time as a director with regard to any matter concerning the Awards, or in favor of or against any amendment or alteration of the Plan, provided that such amendment or alteration shall provide no benefit for directors as such and provided that such amendment or alteration shall be of general application.

(d) The Board, the Committee, or any other committee appointed by the Board may rely upon any information supplied to them by any officer of the Company or any Subsidiary and may rely upon the advice of counsel in connection with the administration of the Plan and shall be fully protected in relying upon information or advice.

(e) Notwithstanding anything to the contrary in the Plan, neither the Board nor the Committee shall have any authority to take any action under the Plan where such action would affect the Company’s ability to account for any business combination as a ‘pooling of interests.’

12. AMENDMENT OR DISCONTINUANCE: The Board may alter, amend, suspend or discontinue the Plan, but may not, without approval of the holders of a majority of the Company’s Common Stock ($0.10 par value) and $2.00 Convertible Preferred Stock ($1 par value) make any alteration or amendment thereof which would permit the total payments under the Plan for any year to exceed the limitations provided in paragraph 7 hereof or to allow for the issuance of Company Common Stock in excess of the limitation provided in Paragraph 6(c).

13. EFFECTIVE DATE: The Plan will be effective for all fiscal years beginning with 2003 by action of the Board of Directors conditioned on and subject to approval of the Plan, by a vote of the holders of a majority of the shares of Common Stock and $2.00 Convertible Preferred Stock of the Company present in person or by proxy at a duly held stockholders meeting at which a quorum representing a majority of all outstanding voting stock is present. The Committee may exercise its discretion to make no award payments to Participants subject to Section 162(m) of the Code in respect of the 2007 fiscal year or any later fiscal year (other than awards properly deferred from earlier fiscal years) if the Plan has not been reapproved by the Company’s stockholders at the first meeting of stockholders during 2007, if necessary for compliance with Section 162(m) of the Code.

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Exhibit 10.4

BRISTOL-MYERS SQUIBB COMPANY

2007 SENIOR EXECUTIVE PERFORMANCE INCENTIVE PLAN

(As Amended and Restated effective June 10, 2008)

1. Purpose . The purpose of this 2007 Senior Executive Performance Incentive Plan (the “Plan”) is to aid Bristol-Myers Squibb Company, a Delaware corporation (together with its successors and assigns, the “Company”), in attracting, retaining, motivating and rewarding executive employees of the Company or its subsidiaries or affiliates by providing for awards that will serve as an incentive to annual performance by executive employees who contribute materially to the success of the Company and its subsidiaries and affiliates. The Plan authorizes annual incentive awards that are intended to qualify as “performance-based compensation” that is tax deductible without limitation under Section 162(m) of the Internal Revenue Code.

(a) “Award” means the amount of a Participant’s Award Opportunity in respect of a given Performance Year determined by the Committee to have been earned and to be payable or potentially payable to the Participant, subject to any conditions as may be imposed by the Committee.

(b) “Award Opportunity” means a specified percentage of the Award Pool that a Participant potentially may earn in a specified Performance Year, subject to such additional requirements as the Committee may impose. An Award Opportunity constitutes a conditional right to receive an Award.

(c) “Award Pool” means a hypothetical cash amount equal to two percent of the Pretax Earnings for a specified Performance Year. Pretax Earnings for this purpose may not include Pretax Earnings from any period not included in the designated Performance Year and, if Performance Years overlap, the Committee must specify counting rules so that the aggregate of Award Pools for such Performance Years does not exceed the limit of two percent of the Pretax Earnings during the relevant periods.

(d) “Beneficiary” means the person, persons, trust or trusts designated as being entitled to receive the benefits under a Participant’s Award Opportunity or Award upon and following a Participant’s death. Unless otherwise determined by the Committee, a Participant may designate a person, persons, trust or trusts as his or her Beneficiary, and in the absence of a designated Beneficiary the Participant’s Beneficiary shall be as specified in Section 8(a). Unless otherwise determined by the Committee, any designation of a Beneficiary other than a Participant’s spouse shall be subject to the written consent of such spouse.

(e) “Board” means the Company’s Board of Directors.

(f) “Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation thereunder include any successor provisions and regulations, and reference to regulations includes any applicable guidance or pronouncement of the Department of the Treasury and Internal Revenue Service.

(g) “Committee” means the Compensation and Management Development Committee of the Board, the composition and governance of which is established in the Committee’s Charter as approved from time to time by the Board and subject to other corporate governance documents of the Company. No action of the Committee shall be void or deemed to be without authority due to the failure of any member, at the time the action was taken, to meet any qualification standard set forth in the Committee Charter or this Plan. The Committee may specify that any of its actions shall be subject to the approval of the Board.

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(h) “Covered Employee” means a person designated by the Committee as likely, with respect to a given fiscal year of the Company, to be the Chief Executive Officer or one of the other persons who will be named executive officers whose compensation potentially will be subject to the limitations on tax deductibility under Code Section 162(m) for that year (or a later year in which an Award may be settled). This designation generally is required at the time an Award Opportunity is granted.

(i) “Pretax Earnings” means the Company’s earnings from continuing operations on a consolidated basis before deduction of income taxes as reported (or to be reported) in the Company’s financial statements, less pretax minority interest expenses, and excluding discontinued operations, extraordinary items and other non-recurring items, in each case as determined in accordance with generally accepted accounting principles or identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or other filings with the U.S. Securities and Exchange Commission.

(j) “Participant” means a person who has been granted an Award Opportunity or Award under the Plan which remains outstanding.

(k) “Performance Year” means the fiscal year or portion thereof specified by the Committee as the period over which Pretax Earnings are to be measured as a basis for determining the level of funding of the Award Pool.

(l) “Retirement” means a Participant’s Termination of Employment with the Company or a subsidiary or affiliate in the following circumstances:

(i)

At or after the Participant’s 65th birthday; or

(ii)

At or after the Participant’s 55th birthday having completed 10 years of service with the Company and/or its subsidiaries and affiliates; or

(iii)

Such termination is by the Company or a subsidiary or affiliate not for cause and is not voluntary on the part of the Participant, at or after the Participant has attained age plus years of service (rounded up to the next higher whole number) which equals at least 70 and the Participant has completed 10 years of service with the Company and/or its subsidiaries and affiliates, and the Participant has executed a general release and has agreed to be subject to covenants relating to noncompetition, nonsolicitation and other commitments for the protection of the Company’s business as then may be required by the Committee (subject to Section 7(e)(ix)).

(m) “Termination of Employment” means the termination of a Participant’s employment with the Company or a subsidiary or affiliate for any reason, immediately after which the Participant is not employed by the Company or any subsidiary or affiliate; provided, however, that with respect to any distribution of a Deferred Portion (as defined in Section 6(a)), Termination of Employment shall mean a Participant’s “separation from service” within the meaning of Treasury Regulation § 1.409A-1(h).

3. Administration .

(a) Authority of the Committee . The Plan shall be administered by the Committee, which shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select eligible employees of the Company and its subsidiaries to become Participants; to grant Award Opportunities; to prescribe documents setting terms of Award Opportunities and Awards (such

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Award documents need not be identical for each Participant or each Award), amendments thereto, and rules and regulations for the administration of the Plan and amendments thereto (“Regulations”); to construe and interpret the Plan and Award documents and correct defects, supply omissions or reconcile inconsistencies therein; and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. Decisions of the Committee with respect to the administration and interpretation of the Plan shall be final, conclusive, and binding upon all persons interested in the Plan, including Participants, Beneficiaries, and other persons claiming rights from or through a Participant, and stockholders (except as may be otherwise determined by the Board). The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee.

(b) Manner of Exercise of Committee Authority . The Committee may act through subcommittees, including for purposes of qualifying Award Opportunities and Awards under Code Section 162(m) as performance-based compensation, in which case the subcommittee shall be subject to any limitations under the Committee Charter, and the acts of the subcommittee shall be deemed to be acts of the Committee hereunder. The Committee may delegate to one or more officers or managers of the Company or any subsidiary or affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine, to the extent that such delegation (i) will not cause Award Opportunities and Awards intended to qualify as performance-based compensation under Code Section 162(m) to fail to so qualify, and (ii) will not result in a related-party transaction with an executive officer required to be disclosed under Item 404(a) of Regulation S-K (in accordance with Instruction 5.a.ii thereunder) under the Exchange Act.

(c) Limitation of Liability . The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Company or a subsidiary or affiliate, the Company’s independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or a subsidiary or affiliate acting at the direction or on behalf of the Committee or a delegee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.

4. Eligibility and Per-Person Limits . Employees of the Company or any subsidiary or affiliate who are or may become executive officers of the Company may be selected by the Committee to participate in this Plan in a specified Performance Year. The maximum Award Opportunity of any individual Participant who is the Chief Executive Officer during any part of a Performance Year shall be 20% of the Award Pool for that Performance Year and for any other individual Participant shall be 15% of the Award Pool for that Performance Year, provided that the aggregate of all Award Opportunities under this Plan for that Performance Year may not exceed 100% of the Award Pool.

5. Designation and Earning of Award Opportunities .

(a) Designation of Award Opportunities . The Committee shall select employees to participate in the Plan and designate the Performance Year of such participation. The Committee shall designate, for each such Participant, the Award Opportunity such Participant may earn for such Performance Year and any conditions to the earning of such Award Opportunity or portions thereof (in addition to the requirement that Pretax Earnings be achieved in order to fund the Award Pool). Award Opportunities will be denominated in cash and Awards will be payable in cash, except that the Committee may denominate an Award Opportunity in shares of Common Stock or equity awards based on Common Stock or provide for payment of a cash-denominated Award Opportunity in the form of such shares or equity awards if and to the extent that the shares or equity awards are available under the 2007 Stock Award and Incentive Plan (or a successor thereto) and authorized for use hereunder in accordance with applicable requirements of such other plan. Except for shares drawn from such other plan, no shares of Common Stock are specifically reserved for issuance under this Plan.

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(b) Award Opportunities of Covered Employees. If the Committee determines that an Award Opportunity to be granted to an eligible person who is designated a Covered Employee by the Committee should qualify as performance-based compensation for purposes of Code Section 162(m), the Committee will specify the Performance Year and the Participant’s Award Opportunity by the date which is the earlier of (i) 90 days after the beginning of the applicable Performance Year or (ii) the time 25% of such Performance Year has elapsed. Any settlement or other event which would change the form of payment from that originally specified shall be implemented in a manner such that the Award does not, solely for that reason, fail to qualify as performance-based compensation for purposes of Code Section 162(m).

(c) Additional Participants and Award Opportunity Designations During a Performance Year . At any time during a Performance Year, the Committee may select a new employee or a newly promoted employee to participate in the Plan for that Performance Year and/or designate, for any such Participant, an Award Opportunity (or additional Award Opportunity) for such Performance Year or a different Performance Year. In determining the amount of the Award Opportunity for such Participant under this Section 5(c), the Committee may take into account the portion of the Performance Year already elapsed, the performance achieved during such elapsed portion of the Performance Year, and such other considerations as the Committee may deem relevant.

(d) Determination of Award . During the year following the Performance Year, within a reasonable time after the end of each Performance Year and financial results for the Performance Year have become available (but not later than March 15 for any portion of an Award for which the substantial risk of forfeiture lapsed during the Performance Year), the Committee will determine the extent to which the Award Pool is funded and Award Opportunities for the Performance Year have been earned, and the Award for each Participant for such Performance Year. The Committee may not adjust the amount of an Award under Section 5(b) upward so that the Award exceeds the level of earning of the related Award Opportunity actually achieved based on Pretax Earnings performance. Unless otherwise determined by the Committee (or otherwise provided under a separate agreement, plan or policy conferring rights on the Participant), the Award shall be deemed earned and vested only at the time the Committee makes the determination pursuant to this Section 5(d) with respect to a Participant who remains employed by the Company or a subsidiary or affiliate at the time of the determination, and no Participant has a legal right to receive an Award until such determination has been made.

(e) Written Determinations. Determinations by the Committee under this Section 5, including Award Opportunities, the level of Pretax Earnings for the Performance Year and the resulting funding of the Award Pool, and the amount of any Award earned shall be recorded in writing. With regard to Awards intended to qualify under Section 162(m), the Committee will certify, in a manner conforming to applicable regulations under Section 162(m), prior to settlement of each such Award granted to a Covered Employee, that the Award (and any related Award Opportunity) has been earned and other material terms upon which earning of the Award was conditioned have been satisfied.

(f) Other Terms of Award Opportunities and Awards . Subject to the terms of this Plan, the Committee may specify the circumstances in which Award Opportunities and Awards shall be paid or forfeited in the event of a change in control, Termination of Employment or other event prior to the end of a Performance Year or settlement of an Award. With respect to Award Opportunities and Awards under Section 5(b), any payments resulting from a change in control or Termination of Employment need not qualify as performance-based compensation under Section 162(m) if authorizing such non-qualifying payments would not disqualify the Award Opportunity or Award from Section 162(m) qualification in cases in which no change in control or Termination of Employment in fact has occurred.

(g) Adjustments . The Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Award Opportunities in recognition of unusual or nonrecurring events, including acquisitions and dispositions of businesses and assets, affecting the Company and its subsidiaries or other business unit, or the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or

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business conditions or in view of the Committee’s assessment of the business strategy of the Company, any subsidiary or affiliate or business unit thereof, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided, however, that no such adjustment shall be authorized or made if and to the extent that the existence or exercise of such authority (i) would affect the definition of “Pretax Earnings” so as to increase the amount thereof; (ii) would cause an Award Opportunity or Award under Section 5(b) intended to qualify as performance-based compensation under Code Section 162(m) and regulations thereunder to fail to so qualify, or (iii) would cause the Committee to be deemed to have authority to change the targets, within the meaning of Treasury Regulation § 1.162-27(e)(4)(vi), with respect to Award Opportunities under Section 5(b) intended to qualify as performance-based compensation under Code Section 162(m) and regulations thereunder.

6. Settlement of Awards .

(a) Current and Deferred Portions . The Committee may require or may permit a Participant to elect deferred payment of a percentage (not less than 25%) of an Award (the “Deferred Portion”). Any Award or portion of an Award which the Committee does not require and the Participant does not validly request to be deferred shall be paid in accordance with Section 6(b) (the “Current Portion”). Any Deferred Portion, and any rights of a Participant to elect deferral, shall be subject to the terms and conditions stated in Section 7(e) and in any Regulations. A Participant may elect deferral of settlement of an Award only by filing a valid deferral election, on such form as the Committee may require, with the Company not later than December 31 of the year preceding the Performance Year or at such other election date as the Committee may specify in accordance with Code Section 409A (as required by Section 7(e)). The Current Portion and the Deferred Portion for each performance year, and installments payable as the Deferred Portion, each shall be deemed a separate payment for purposes of Code Section 409A.

(b) Settlement of Award . Any Current Portion of an Award shall be paid and settled by the Company promptly after the date of determination by the Committee under Section 5(d) hereof. The Current Portion of any Award shall be paid no later than March 15 of the year following the end of the Performance Year to which the Award relates, or, in the case of any award or portion thereof subject to a substantial risk of forfeiture extending into that following year, the Current Portion may be paid at any time during such following year.

(c) Tax Withholding . The Company and its subsidiaries and affiliates shall deduct from any payment in settlement of a Participant’s Award or from any other payment to the Participant, including wages, any Federal, state, or local withholding or other tax or charge which is then required to be deducted under applicable law with respect to the Award. If any Award is to be settled by delivery of Common Stock, the Company may at its election withhold shares to cover such withholding taxes. Participants may elect to have the deduction of taxes cover the amount of any applicable tax payable by the Participant in excess of the mandatory withholding tax, with such incremental tax determined on the basis of the highest marginal tax rate applicable to such Participant, except that if shares of Common Stock are to be withheld, such shares may be withheld only to the extent of the mandatory withholding taxes.

(d) Non-Transferability . In addition to the restrictions under Section 7(e)(vi), an Award Opportunity, any resulting Award, including any Deferred Portion, and any other right hereunder shall be non-assignable and non-transferable, and shall not be pledged, encumbered, or hypothecated to or in favor of any party or subject to any lien, obligation, or liability of the Participant to any party other than the Company or a subsidiary or affiliate, except that a Participant may designate a Beneficiary pursuant to the provisions of Section 8.

7. Deferral of Payments . Any Deferred Portion of an Award shall be subject to the following (certain provisions of Section 7(e) apply also to the Current Portion of an Award):

(a) Notional Investment Funds. At such time as may be specified by the Committee, the Participant shall determine, subject to the approval of the Committee, the portion of his or her Deferred Portion that is to be valued by reference to the Performance Incentive Fixed Income Fund (the “Fixed

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Income Fund”), the portion that is to be valued by reference to the Performance Incentive Company Stock Fund (the “Stock Fund”) and the portion that shall be valued by reference to any other fund(s) (collectively, the “Funds”) which may be established by the Committee for this purpose. The Committee may from time to time determine whether the Fund(s) used to value the account of any Participant may be changed from the Fund(s) currently used to any other Fund established for use under this Plan, subject to Section 7(e).

(b) Payments in Settlement of Deferred Portions . Unless otherwise determined by the Committee and subject to Section 7(e), payments of a Participant’s Deferred Portions shall be made as follows: Payment of the total amount of a Participant’s Deferred Portions shall be made to the Participant or, in case of the death of the Participant prior to the commencement of payments of Deferred Portions, to the Participant’s Beneficiary, in lump sum or in installments (as permitted by the Committee and elected by the Participant) commencing within 30 days after the Participant shall cease, by reason of death or otherwise, to be an employee of the Company; provided that the only distribution dates that may be permitted hereunder will be dates complying with requirements under Code Section 409A, which among other things may require a six-month delay in a distribution to a “key employee” following separation from service (in accordance with Section 7(e)(ii)(B)). Certain provisions governing the timing of payment in the event of death are specified in Section 8(a) below. In case of the death of any Participant after the commencement of installment payments, the then remaining unpaid balance of Deferred Portions shall continue to be paid in installments, at such times and in such manner as if such Participant were living, to the Beneficiary(ies) of the Participant.

(c) Conduct of Participant Following Termination of Employment. If, following the date on which a Participant shall cease to be an employee of the Company, the Participant shall at any time either disclose to unauthorized persons confidential information relative to the business of the Company or otherwise act or conduct themselves in a manner which the Committee shall determine is inimical or contrary to the best interest of the Company, the Company’s obligation to make any further payment on account of the Participant’s Deferred Portions that resulted from mandatory deferrals shall forthwith terminate. The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination or reduction of the Company’s obligation in accordance with the provisions of this Section 7 shall be conclusive.

(d) Fund Composition and Valuation. Deferred Portions of Awards under the Plan shall be valued and maintained as follows:

(i)

In accordance with the provisions, and subject to the conditions, of the Plan and the Regulations, the Deferred Portion as established by the Committee shall be valued in reference to the Participants’ account(s) in the Fixed Income Fund, in the Company Stock Fund, and in any other Fund(s) established under this Plan. Account balances shall be maintained as dollar values, units or share equivalents as appropriate based upon the nature of the Fund. Unless otherwise determined by the Committee, for unit or share-based Funds, the number of units or shares credited shall be based upon the established unit or share value as of the last day of the quarter preceding the crediting of the Deferred Portion.

(ii)

Investment income credited to Participants’ accounts under the Fixed Income Fund shall be determined by the Committee based upon the prevailing rates of return experienced by the Company. The Company shall advise Participants of the current valuations of the Fixed Income Fund as appropriate to facilitate deferral decisions, investment choices and to communicate payout levels. The Company Stock Fund shall consist of units each valued as one share of Common Stock of the Company (par value $.10).

(iii)

Nothing contained in the Fund definitions in Sections 7(d)(i) and (ii) shall require the Company to segregate or earmark any cash, shares, or other property to determine Fund values, maintain Participant account levels or for any other purpose.

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(iv)

The establishment of the Fixed Income Fund and the Stock Fund as detailed in Sections 7(d)(i) and (ii) shall not preclude the right of the Committee to direct the establishment of additional investment Funds or to discontinue those Funds. In establishing such Funds, the Committee shall determine the criteria to be used for determining the value of such Funds.

(e) Certain Provisions to Ensure Compliance with Section 409A. Other provisions of the Plan notwithstanding, the terms of any Deferred Portion (which term includes earnings thereon), including any authority of the Company and rights of the Participant with respect to the Deferred Portion, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A but only to the extent that such modification or limitation is permitted under Code Section 409A and the regulations and guidance issued thereunder. In addition, other provisions of the Plan notwithstanding, the following rules will apply:

(i)

Elections to defer any portion of an Award will be permitted only at times in compliance with Section 409A in accordance with the rules set forth on Exhibit A to the Company’s 2007 Stock Award and Incentive Plan, as amended, which Exhibit is hereby incorporated into and made a part of this Plan;

(ii)

Distribution. Except as provided in Section 7(e)(iii) hereof, no Deferred Portion shall be distributable to a Participant (or his or her beneficiary) except upon the occurrence of one of the following (or a date related to the occurrence of one of the following), which must be specified in a written document governing such Deferred Portion and otherwise meet the requirements of Treasury Regulation § 1.409A-3:

(A)

Specified Time. A specified time or a fixed schedule.

(B)

(C)

Death. The death of the Participant.

(D)

Disability. The date the Participant has experienced a 409A Disability (as defined below).

(E)

409A Ownership/Control Change. The occurrence of a 409A Ownership/Control Change (as defined below).

(iii)

No Acceleration. The distribution of a Deferred Portion may not be accelerated prior to the time specified in accordance with Section 7(e)(iii) hereof, except in the case of one of the following events:

(A)

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necessary to pay taxes reasonably anticipated as a result of the settlement, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation from insurance or otherwise or by liquidation of the Participant’s other assets (to the extent such liquidation would not itself cause severe financial hardship), or by cessation of deferrals under the Plan. Upon a finding that an Unforeseeable Emergency has occurred with respect to a Participant, any election of the Participant to defer compensation that will be earned in whole or part by services in the year in which the emergency occurred or is found to continue will be immediately cancelled.

(B)

Domestic Relations Order. The Deferred Portion may permit the acceleration of the exercise or distribution time or schedule to an individual other than the Participant as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).

(C)

Conflicts of Interest. Such Deferred Portion may permit the acceleration of the settlement time or schedule as may be necessary to comply with an ethics agreement with the Federal government or to comply with a Federal, state, local or foreign ethics law or conflict of interest law in compliance with Treasury Regulation § 1.409A-3(j)(4)(iii).

(D)

Change. The Committee may exercise the discretionary right to accelerate the vesting of any unvested compensation deemed to be a Deferred Portion upon a 409A Ownership/Control Change or to terminate the Plan upon or within 12 months after a 409A Ownership/Control Change, or otherwise to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(ix), or accelerate settlement of such Deferred Portion in any other circumstance permitted under Treasury Regulation § 1.409A-3(j)(4).

(iv)

Definitions. For purposes of this Section 7(e), the following terms shall be defined as set forth below:

(A)

(B)

(C)

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circumstances arising as a result of events beyond the control of the Participant, and otherwise meeting the definition set forth in Treasury Regulation § 1.409A-3(i)(3).

(iv)

Time of Distribution. In the case of any distribution of a Deferred Portion, if the timing of such distribution is not otherwise specified in the Plan or an applicable agreement or other governing document, the distribution shall be made within 60 days after the date at which the settlement of the Deferred Portion is specified to occur. In the case of both the Current Portion and the Deferred Portion, the Participant shall have no influence on any determination as to the tax year in which the distribution will be made;

(v)

Determination of “Key Employee.” For purposes of a distribution under Section 7(e)(ii)(B), status of a Participant as a “key employee” shall be determined annually under the Company’s administrative procedure for such determination for purposes of all plans subject to Code Section 409A.

(vi)

Non-Transferability. Other provisions of the Plan notwithstanding, no Current Portion, Deferred Portion or other right of a Participant under the Plan shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiary.

(vii)

Distribution Changes. The Committee may, in its discretion, require or permit on an elective basis a change in the distribution terms applicable to a Deferred Portion in accordance with, and to the fullest extent permitted by, applicable guidance of the Internal Revenue Service (including Proposed Treasury Regulation § 1.409A, Preamble § XI.C and IRS Notice 2005-1), and otherwise in accordance with Section 409A and regulations thereunder. The Senior Vice President — Human Resources of the Company is authorized to permit election of different deferral periods provided that any such modifications may not otherwise increase the benefits to Participants or the costs of a Deferred Portion to the Company (other than through changes in value of the notional investment). Other provisions of this Plan notwithstanding, changes to distribution timing resulting from amendments to this Plan in 2008 shall not have the affect of accelerating distributions into 2008 or causing distributions that otherwise would have occurred in 2008 to be deferred until a year after 2008.

(viii)

Scope and Application of this Provision. For purposes of this provision, references to a term or event (including any authority or right of the Company or a Participant) being “permitted” under Section 409A mean that the term or event will not cause the Participant to be deemed to be in constructive receipt of compensation relating to the Deferred Portion prior to the distribution of cash, shares or other property or to be liable for payment of interest or a tax penalty under Section 409A.

(ix)

Release or Other Termination Agreement. If the Company requires a Participant to execute a release, non-competition, or other agreement as a condition to receipt of a payment upon or following a Termination of Employment, the Company will supply to the Participant a form of such release or other document not later than the date of the Participant’s Termination of Employment, which must be returned within the time period required by law and must not be revoked by the Participant within the applicable time period in order for Participant to satisfy any such condition. If any amount payable during a fixed period following Termination of Employment is subject to such a requirement and the fixed period would begin in one year and end in the next, the Company, in determining the time of payment of any such amount, will not be influenced by the timing of any action of the Participant including execution of such a release or

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other document and expiration of any revocation period. In particular, the Company will be entitled in its discretion to deposit any such payment in escrow during either year comprising such fixed period, so that such deposited amount is constructively received and taxable income to the Participant upon deposit but with distribution from such escrow remaining subject to the Participant’s execution and non-revocation of such release or other document.

(x)

Limitation on Setoffs. No setoff by the Company to satisfy any obligation of the participant to the Company is permitted against a 409A Deferral except at the time of distribution of such 409A Deferral.

(xi)

Special Disability Provision. In case of a Disability of a Participant, for any Deferred Portion the Company shall determine whether there has occurred a “separation from service” as defined under Treasury Regulation § 1.409A-1(h) based on Participant’s circumstances, in which case such Disability will be treated as a separation from service for purposes of determining the time of payment of such Deferred Portion. The Company’s determination hereunder will be made initially within 30 days after the Disability and each March and December thereafter.

8. Designation of and Payments to Beneficiaries .

(a) Distributions in the Event of Death. If a Participant has died and then or thereafter a Current or Deferred Portion becomes distributable to the Participant, such payment will be distributed to the Participant’s Beneficiary; provided, however, that a person or trust will be deemed a Beneficiary only if he or it is surviving on the date of death of the Participant and if the Participant has designated such person or trust as a Beneficiary in his or her most recent written and duly filed Beneficiary designation (i.e., any new Beneficiary designation under the Plan cancels a previously filed Beneficiary designation). If no Beneficiary is living at the time of Participant’s death, any subsequent payment will be distributable to the person or persons in the first of the following classes of successive preference:

(i)

Widow or Widower, if then living;

(ii)

Surviving children, equally;

(iii)

Surviving parents, equally;

(iv)

Surviving brothers and sisters, equally; and

(v)

Executors or administrators;

and the term “Beneficiary” as used in the Plan shall include such person or persons. In case of the death, any Current or Deferred Portion (as to which installment payments have not commenced; if payable in installments, this timing rule applies to commencement of installments) will become payable to the estate 30 days after the death of the employee. The representatives of the Participant’s estate shall be obligated to provide to the Company such documentation as the Committee may reasonably require, but in any event distribution hereunder may not be delayed beyond the end of the year in which the specified payment date falls (and the Current Portion must be paid within the short-term deferral period under Section 409A). If the Participant dies after the commencement of installment payments, the then remaining unpaid balance of Deferred Portions shall continue to be paid in installments, at such times and in such manner as if such Participant were living, to the Beneficiary(ies).

(b) Terms and Conditions Applicable to a Beneficiary. A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award document applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

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9. Additional Forfeiture Provisions Applicable to Awards . Awards shall be subject to the Company’s policy providing that the Company will, to the extent permitted by governing law, require reimbursement of any bonus paid to executive officers and certain other officers where: (i) the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) in the Board’s view the Participant engaged in misconduct that caused or partially caused the need for the restatement, and (iii) a lower payment would have been made to the Participant based upon the restated financial results. In each such instance, the Company will seek to recover the Participant’s entire Award for the relevant period, plus a reasonable rate of interest. Any successor or additional policy in effect at the date an Award is determined shall apply to such Award.

10. General Provisions .

(a) Changes to this Plan . The Committee may at any time amend, alter, suspend, discontinue, or terminate this Plan, and such action shall not be subject to the approval of the Company’s stockholders or Participants; provided, however, that any amendment to the Plan beyond the scope of the Committee’s authority shall be subject to the approval of the Board of Directors; provided further, that any amendment to the Plan shall be subject to stockholder approval if and to the extent required so that Award Opportunities and Awards under Section 5(b) can continue to qualify under Code Section 162(m), and provided further, that, without the consent of the Participant, no such action shall materially impair the rights of a Participant with respect to an Award as to which the Committee no longer retains a right to exercise negative discretion to eliminate the payment in settlement of the Award.

(b) Participant Acceptance of Plan and Award Terms. By accepting any Award or other benefit under the Plan, a Participant and each person claiming under or through him or her shall be conclusively deemed to have accepted, ratified and consented to any action taken or made under the Plan by the Company, the Board, the Committee or any other committee appointed by the Board, and to have agreed to all terms and conditions under the Plan and otherwise specified in connection with such Award.

(c) Section 162(m) of the Code . Unless otherwise determined by the Committee, the provisions of this Plan shall be administered and interpreted in accordance with Section 162(m) of the Code to ensure the deductibility by the Company of payment in settlement of Awards to Covered Employees.

(d) Unfunded Status of Participant Rights . Award Opportunities, Awards, accounts, deferred amounts, and related rights of a Participant under the Plan represent unfunded deferred compensation obligations of the Company for ERISA and federal income tax purposes and, with respect thereto, the Participant shall have rights no greater than those of an unsecured general creditor of the Company.

(e) Nonexclusivity of the Plan . The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant or non-participating employee, including authorization of annual incentives under other plans and arrangements.

(f) No Right to Continued Employment. Neither the Plan, its adoption, its operation, nor any action taken under the plan shall be construed as giving any employee the right to be retained or continued in the employ of the Company or any of its subsidiaries or affiliates, nor shall it interfere in any way with the right and power of the Company or any of its subsidiaries or affiliates to dismiss or discharge any employee or take any action that has the effect of terminating any employee’s employment at any time.

(g) Severability. The invalidity of any provision of the Plan or a document hereunder shall not be deemed to render the remainder of this Plan or such document invalid.

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(h) Successors . The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise, and whether or not the corporate existence of the Company continues) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company’s obligations under the Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place; provided, however, that such successor may replace the Plan with a Plan substantially equivalent in opportunity and achievability, as determined by a nationally recognized compensation consulting firm, and covering the persons who were Participants at the time of such succession. Any successor and the ultimate parent company of such successor shall in any event be subject to the requirements of this Section 10(h) to the same extent as the Company. Subject to the foregoing, the Company may transfer and assign its rights and obligations hereunder.

(i) Governing Law . The validity, construction, and effect of the Plan and any rules and regulations or document hereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be determined in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws.

(j) Effective Date of Plan; Stockholder Approval; Termination of Plan . This Plan shall be effective January 1, 2008, providing that it has previously been approved by vote of a majority of stockholders present in person or represented by proxy and entitled to vote on the matter at the Company’s 2007 Annual Meeting of Stockholders. The Plan will terminate at such time as may be determined by the Board of Directors. This amendment and restatement of the Plan was adopted June 10, 2008.

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Exhibit 10.5

LOGO

PERFORMANCE SHARES AGREEMENT

Under the Bristol-Myers Squibb Company

2002 Stock Incentive Plan

2007-2009 Performance Cycle

This Performance Shares Agreement (the “Agreement”) confirms the authorization of a grant of a Performance Award, by BRISTOL-MYERS SQUIBB COMPANY, a Delaware corporation (the “Company”), to the Participant named below (“you”), under Section 7 of the 2002 Stock Incentive Plan (the “Plan”), such Performance Award to be designated as “Performance Shares,” on the terms and conditions specified in this Agreement, as follows:

Award Date: March 6, 2007

Performance Cycle Start Date: January 1, 2007

Target Number of Performance Shares authorized for 2007-2009 performance cycle:

2007 Performance Shares (07-09 Cycle):

2008 Performance Shares (07-09 Cycle):

2009 Performance Shares (07-09 Cycle):

Total Performance Shares (07-09 Cycle):

The year referenced for each of these three “tranches” is the “Performance Year” for that tranche.

Range at which Performance Shares may be earned for varying performance:

Threshold: 45% of Target

Target: 100% of Target

Maximum: 220% of Target

Performance Goal and Earning Date: A separate Performance Goal will be set for each tranche by March 30 of the Performance Year, specifying the number of Performance Shares that may be earned for specified levels of performance. The Earning Date will be December 31 of the Performance Year. The Performance Goal for the 2007 Performance Shares is attached as Exhibit A hereto.

Vesting: Earned Performance Shares will vest at the date between January 1, 2010 and March 15, 2010, at which the Committee determines and certifies the extent to which the Performance Goals for the 2009 Performance Shares have been met, subject to earlier vesting at the times indicated in Sections 6 and 8.

Settlement: Earned and vested Performance Shares will be settled by delivery of one share of the Company’s Common Stock, $0.10 par value per share (“Shares”), for each Performance Share being settled. No dividend equivalents will accrue or be payable in connection with Performance Shares. Settlement shall occur at the time specified in Section 4 hereof.

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1.	PERFORMANCE SHARE AWARD

The Compensation and Management Development Committee of the Board of Directors of Bristol-Myers Squibb Company (the “Committee”) has granted to you the opportunity to earn the 2007 Performance Shares as designated herein subject to the terms, conditions and restrictions set forth in this Agreement. In addition, the Committee hereby indicates its intention to grant to you the opportunity to earn the 2008 Performance Shares and the 2009 Performance Shares for the 2007-2009 performance cycle and subject to this Agreement; such grants shall become effective only at such time as the Committee has specified the Performance Goal for those Performance Shares (by March 30 of the relevant Performance Year). The target number of each tranche of Performance Shares and the kind of shares deliverable in settlement, the calculation of earnings per share as a Performance Goal, and other terms and conditions of the Performance Shares are subject to adjustment in accordance with Section 11 hereof and Section 10 of the Plan. The beginning of each Performance Year shall be deemed the commencement of a separate “award period” for purposes of Plan Sections 7(a) and (b)(3), (5), (6), (8), and (10). The Performance Shares are granted independently and not in conjunction with any stock option. The award period shall be deemed to extend for the period in which the Performance Shares are subject to a risk of forfeiture in order to give effect to the vesting requirements of this Award, but the period during which performance is measured shall be the Performance Year relating to particular Performance Shares.

2.	CONSIDERATION

As consideration for grant of 2007 Performance Shares, you shall remain in the continuous employ of the Company and/or its Subsidiaries or Affiliates for at least one year from the Performance Cycle Start Date or such lesser period as the Committee shall determine in its sole discretion, and no Performance Shares shall be payable until after the completion of such one year or lesser period of employment by you. No 2008 Performance Shares or 2009 Performance Shares shall be granted hereunder unless you have met the one-year continuous employment requirement specified in this Section 2, measured from the Performance Cycle Start Date.

3.	PERFORMANCE GOALS

The Performance Goals for the 2007 Performance Shares are specified on the cover page of this Agreement and Exhibit A hereto, and for the 2008 Performance Shares and 2009 Performance Shares shall be specified in writing in such manner as the Committee may determine.

4.	DETERMINATION OF PERFORMANCE SHARES EARNED AND VESTED; FORFEITURES; SETTLEMENT

By March 15 of the year following each Performance Year, the Committee shall determine the extent to which Performance Shares have been earned on the basis of the Company’s actual performance in relation to the established Performance Goals for the Performance Shares relating to that Performance Year, and shall certify these results in writing in accordance with Plan Section 7(b)(6), subject to any limitation under Section 7 hereof (if you are Disabled during the Performance Year in excess of 26 weeks). Any Performance Shares that are not earned by performance in a Performance Year (or deemed to be earned in connection with a termination of employment under Sections 6 and 8 below), including Performance Shares that had been potentially earnable by performance in excess of the actual performance levels achieved, shall be canceled and forfeited.

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Performance Shares are subject to vesting based on your service for periods which extend past the applicable Performance Year. The stated vesting date is set forth on the cover page hereof. If, before the stated vesting date, there occurs an event immediately after which you are not an employee of the Company, its subsidiaries or an affiliate of the Company, you will become vested in Performance Shares only to the extent provided in Section 6 or 8, and any Performance Shares that have not been earned and vested at or before such event and cannot thereafter be earned and vested under Sections 6 or 8 shall be canceled and forfeited.

In certain termination events as specified below and in connection with a long-term Disability (as defined in Section 7), you will be entitled to vesting of a “Pro Rata Portion” of the Performance Shares earned or deemed earned hereunder. For purposes of this Agreement, in the case of a termination of employment, the Pro Rata Portion is calculated as the number of Performance Shares relating to a given Performance Year multiplied by a fraction the numerator of which is the number of months you were employed from the commencement of that Performance Year through the end of the month in which your termination of employment occurred (but not more than 12) and the denominator of which is 12; provided, however, that the number of months you were employed shall be reduced by the number of months during such Performance Year in which you were Disabled in excess of 26 weeks since the commencement of the Disability. For purposes of this Agreement, in the case of a Disability extending longer than 26 weeks, the Pro Rata Portion is calculated as the number of Performance Shares relating to a given Performance Year multiplied by a fraction the numerator of which is 12 minus the number of months you were Disabled in excess of 26 weeks since the commencement of the Disability, and the denominator of which is 12. For purposes of calculations under this paragraph: (a) one or more days worked in a given month is counted as a full month of employment; and (b) one or more days on Disability in a given month in which the duration of Disability has not yet exceeded 26 weeks is also counted as a full month of employment.

The number of Performance Shares earned or vested shall be rounded to the nearest whole Performance Share, unless otherwise determined by the Company officers responsible for day-to-day administration of the Plan.

Performance Shares that become vested while you remain employed by the Company or a subsidiary or affiliate shall be settled promptly upon vesting by delivery of one Share for each Performance Share being settled, unless validly deferred in accordance with deferral terms then authorized by the Committee (subject to Plan Section 13). Performance Shares that become vested under Sections 6(a), 6(b), or 8 shall be settled at the times specified therein; provided, however, that settlement of Performance Shares under Section 6(a) or (b) shall be subject to the applicable provisions of Plan Section 13(a). ( Note: Section 13 could apply if settlement is triggered by a Change in Control or a termination following a Change in Control ). Until Shares are delivered to you in settlement of Performance Shares, you shall have none of the rights of a stockholder of the Company with respect to the Shares issuable in settlement of the Performance Shares, including the right to vote the shares and receive dividends and other distributions. Shares of stock issuable in settlement of Performance Shares shall be delivered to you upon settlement in certificated form or in such other manner as the Company may reasonably determine.

5.	NONTRANSFERABILITY OF PERFORMANCE SHARES AND DESIGNATION OF BENEFICIARY

Performance Shares shall not be transferable other than by will or by the laws of descent and distribution, except that you may designate a beneficiary pursuant to the provisions hereof on a Designation of Beneficiary form.

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If you and/or your beneficiary shall attempt to assign your rights under this Agreement in violation of the provisions herein, the Company’s obligation to settle Performance Shares or otherwise make payments shall terminate.

If no designated beneficiary is living on the date on which shares are deliverable in settlement or other amount becomes payable to you, or if no beneficiary has been specified, such settlement or payment will be payable to the person or persons in the first of the following classes of successive preference:

(i)

Widow or widower, if then living,

(ii)

Surviving children, equally,

(iii)

Surviving parents, equally,

(iv)

Surviving brothers and sisters, equally,

(v)

Executors or administrators

and the term “beneficiary” as used in this Agreement shall include such person or persons.

6.	RETIREMENT AND OTHER TERMINATIONS (EXCLUDING DEATH)

(a) In the event of your Retirement (as defined in the Plan) prior to settlement of Performance Shares and after you have satisfied the one-year employment requirement of Section 2, you will be deemed vested (i) in any Performance Shares that relate to a Performance Year completed before your Retirement and which have been determined or thereafter are determined by the Committee to have been earned under Section 4, and (ii), with respect to Performance Shares relating to a Performance Year in progress at the date of your Retirement, in a Pro Rata Portion of the Performance Shares you would have actually earned for that Performance Year if you had continued to be employed through the date the Committee determines the earning of the Performance Shares for that Performance Year under Section 4. Any Performance Shares earned and vested under this Section 6(a) shall be settled at the earlier of (i) the date such Performance Shares would have vested if you had continued to be employed by the Company or a subsidiary or affiliate, (ii), in the event of a Change in Control, as to previously earned Performance Shares promptly upon the Change in Control (subject to Section 6(d)) and, in the case of any unearned Performance Shares, promptly following the date at which the Committee determines the extent to which such Performance Shares have been earned (in each case subject to Section 13 of the Plan) or (iii), in the event of your death, in the year following the Performance Year in which your Retirement occurred (following the Committee’s determination of the extent to which any remaining unearned Performance Shares have been earned) or, if your death occurred after that year, as promptly as practicable following your death. Following your Retirement, any Performance Shares that have not been earned and vested and thereafter will not be deemed earned and vested under this Section 6(a) will be canceled and forfeited.

(b) In the event that you have a Qualifying Termination (i.e., a termination for a “qualifying reason”) as defined in Plan Section 6(b)(14)(B) during the three- (3) year period following a Change in Control (as defined in the Plan), you will be deemed vested (i) in any Performance Shares that relate to a Performance Year completed before such termination and which have been determined or thereafter are determined by the Committee to have been earned under Section 4, and (ii), with respect to Performance Shares relating to a Performance Year in progress at the date of your Qualifying Termination (including Performance Shares otherwise not meeting the one-year requirement of Section 2), in a Pro Rata Portion of the target number of Performance Shares that could have been earned in the Performance Year. Any Performance Shares earned and vested under this Section 6(b) shall be settled within ten business days, subject to Section 6(d) and Section 13 of the Plan; provided, however, any additional forfeiture conditions in the nature of a “clawback” contained

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in Section 10 of this Agreement shall continue to apply to any payment. Upon your Qualifying Termination, any Performance Shares that have not been deemed earned and vested under this Section 6(b) will be canceled and forfeited.

(c) If you cease to be an employee of the Company and its subsidiaries and affiliates for any reason other than Retirement, death or a Qualifying Termination within three (3) years following a Change in Control, Performance Shares granted herein that have not become both earned and vested shall be canceled and forfeited and you shall have no right to settlement of any portion of the Performance Shares.

(d) Certain of the Performance Shares may constitute a “deferral of compensation” (a “409A Deferral”) under Section 409A of the Internal Revenue Code (the “Code”), based on regulations and guidance under Section 409A. As a result, the timing of settlement of your Performance Shares will be subject to applicable limitations under Section 409A. Specifically, each tranche of Performance Shares will be deemed to be a separate payment for purposes of Section 409A, and each will be subject to Section 13 of the Plan, including the following restrictions on settlement:

(i)

In the case of Performance Shares which constitute a 409A Deferral, settlement under Section 6(b) upon a Qualifying Termination will be subject to the requirement that the termination constitute a “separation from service” under Treasury Regulation § 1.409A-1(h), and subject to the six-month delay rule under Plan Section 13(a)(iii)(B) if at the time of separation from service you are a “key employee.”

(ii)

In the case of Performance Shares which constitute a 409A Deferral, settlement under Section 6(a) triggered by the Change in Control (i.e., previously earned Performance Shares) will occur only if an event relating to the Change in Control constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Treasury Regulation § 1.409A-3(i)(5).

7.	DISABILITY OF PARTICIPANT

For purposes of this Agreement, “Disability” or “Disabled” shall mean qualifying for and receiving payments under a disability plan of the Company or any subsidiary or affiliate either in the United States or in a jurisdiction outside of the United States, and in jurisdictions outside of the United States shall also include qualifying for and receiving payments under a mandatory or universal disability plan or program managed or maintained by the government. If you become Disabled, you will not be deemed to have terminated employment for the period during which, under the applicable Disability pay plan of the Company or a subsidiary or affiliate, you are deemed to be employed and continue to receive Disability payments. Upon the cessation of payments under such Disability pay plan, (i) if you return to employment status with the Company or a subsidiary or affiliate, you will not be deemed to have terminated employment, and (ii), if you do not return to such employment status, you will be deemed to have terminated employment at the date of cessation of such Disability payments, with such termination treated for purposes of the Performance Shares as a Retirement, death, or voluntary termination based on your circumstances at the time of such termination. If you have been Disabled for a period in excess of 26 weeks in the aggregate during one or more Performance Years, for each affected Performance Year you will earn only a Pro Rata Portion of the Performance Shares you otherwise would have earned in respect of such a Performance Year.

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8.	DEATH OF PARTICIPANT

In the event of your death while employed by the Company or a subsidiary and prior to settlement of Performance Shares but after you have satisfied the one-year employment requirement of Section 2, you will be deemed vested (i) in any Performance Shares that relate to a Performance Year completed before your death and which have been determined or thereafter are determined by the Committee to have been earned under Section 4, and (ii), with respect to Performance Shares relating to a Performance Year in progress at the date of your death, in a Pro Rata Portion of the Performance Shares you would have actually earned for that Performance Year if you had continued to be employed through the date the Committee determines the earning of the Performance Shares for that Performance Year under Section 4. In this case, your beneficiary shall be entitled to settlement of any of your earned and vested Performance Shares in the year following your year of death as promptly as practicable following the determination of the number of Performance Shares earned under clause (ii) above. In the case of your death, any Performance Shares that have not been earned and vested and thereafter will not be deemed earned and vested under this Section 8 will be canceled and forfeited.

TAXES

At such time as the Company or any subsidiary or affiliate is required to withhold taxes with respect to the Performance Shares, or at an earlier date as determined by the Company, you shall make remittance to the Company or to your employer of an amount sufficient to cover such taxes or make such other arrangement regarding payments of such taxes as are satisfactory to the Committee. The Company and its Subsidiaries and affiliates shall, to the extent permitted by law, have the right to deduct such amount from any payment of any kind otherwise due to you, including by means of mandatory withholding of shares deliverable in settlement of your Performance Shares, to satisfy the mandatory tax withholding requirements.

10.	FORFEITURE IN THE EVENT OF COMPETITION AND/OR SOLICITATION OR OTHER DETRIMENTAL ACTS

You acknowledge that your continued employment with the Company and its subsidiaries and affiliates and this grant of Performance Shares are sufficient consideration for this Agreement, including, without limitation, the restrictions imposed upon you by Section 10.

By accepting the Performance Shares granted hereby , you expressly agree and covenant that during the Restricted Period (as defined below), you shall not, without the prior consent of the Company, directly or indirectly:

own or have any financial interest in a Competitive Business (as defined below), except that nothing in this clause shall prevent you from owning one percent or less of the outstanding securities of any entity whose securities are traded on a U.S. national securities exchange (including NASDAQ) or an equivalent foreign exchange;

ii)

be actively connected with a Competitive Business by managing, operating, controlling, being an employee or consultant (or accepting an offer to be an employee or consultant) or otherwise advising or assisting a Competitive Business in such a way that such connection might result in an increase in value or worth of any product, technology or service, that competes with any product, technology or service upon which you worked or about which you became familiar as a result of your employment with the Company. You may, however, be actively connected with a Competitive Business after your employment with the Company terminates for any reason, so long

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as your connection to the business does not involve any product, technology or service, that competes with any product, technology or service upon which you worked or about which you became familiar as a result of your employment with the Company and the Company is provided written assurances of this fact from the Competing Company prior to your beginning such connection;

iii)

take any action that might divert any opportunity from the Company or any of its affiliates, successors or assigns (the “Related Parties”) that is within the scope of the present or future operations or business of any Related Parties;

iv)

employ, solicit for employment, advise or recommend to any other person that they employ or solicit for employment or form an association with any person who is employed by the Company or who has been employed by the Company within one year of the date your employment with the Company ceased for any reason whatsoever;

contact, call upon or solicit any customer of the Company, or attempt to divert or take away from the Company the business of any of its customers;

vi)

contact, call upon or solicit any prospective customer of the Company that you became aware of or were introduced to in the course of your duties for the Company, or otherwise divert or take away from the Company the business of any prospective customer of the Company; or

vii)

engage in any activity that is harmful to the interests of the Company, including, without limitation, any conduct during the term of your employment that violates the Company’s Standards of Business Conduct and Ethics, securities trading policy and other policies.

Forfeiture . You agree and covenant that, if the Company determines that you have violated any provisions of Section 10(a) above during the Restricted Period, then:

any portion of the Performance Shares that have not been settled or paid to you as of the date of such determination shall be immediately canceled and forfeited;

ii)

you shall automatically forfeit any rights you may have with respect to the Performance Shares as of the date of such determination;

iii)

if any Performance Shares have become vested within the twelve-month period immediately preceding a violation of Section 10(a) above (or following the date of any such violation), upon the Company’s demand, you shall immediately deliver to it a certificate or certificates for Shares equal to the number of Shares delivered to you in settlement of such vested Performance Shares if such delivery was made in Shares or you shall pay cash equal to the value cash paid to you in settlement of such vested Performance Shares if such payment was made in cash; and

iv)

the foregoing remedies set forth in Section 10(b) shall not be the Company’s exclusive remedies. The Company reserves all other rights and remedies available to it at law or in equity.

Definitions . For purposes of this Section 10, the following definitions shall apply:

The Company directly advertises and solicits business from customers wherever they may be found and its business is thus worldwide in scope. Therefore, “ Competitive Business ” means any person or entity that engages in any business activity that competes with the Company’s business in any way, in any geographic area in which the Company engages in business, including, without limitation, any state in the United States in which the Company sells or offers to sell its products from time to time.

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ii)

“ Restricted Period ” means the period during which you are employed by the Company or its subsidiaries and affiliates and twelve months following the date that you no longer are employed by the Company or any of its subsidiaries or affiliates for any reason whatsoever.

Severability . You acknowledge and agree that the period, scope and geographic areas of restriction imposed upon you by the provisions of Section 10 are fair and reasonable and are reasonably required for the protection of the Company. In the event that any part of this Agreement, including, without limitation, Section 10, is held to be unenforceable or invalid, the remaining parts of this Agreement and Section 10 shall nevertheless continue to be valid and enforceable as though the invalid portions were not a part of this Agreement. If any one of the provisions in Section 10 is held to be excessively broad as to period, scope and geographic areas, any such provision shall be construed by limiting it to the extent necessary to be enforceable under applicable law.

Additional Remedies . You acknowledge that breach by you of this Agreement would cause irreparable harm to the Company and that in the event of such breach, the Company shall have, in addition to monetary damages and other remedies at law, the right to an injunction, specific performance and other equitable relief to prevent violations of your obligations hereunder.

11.	ADJUSTMENTS

The target number of Performance Shares, the kind of securities deliverable in settlement of Performance Shares, and any performance measure based on per share results shall be appropriately adjusted in order to prevent dilution or enlargement of your rights with respect to the Performance Shares upon the occurrence of an event referred to in Section 10 of the Plan. In furtherance of the foregoing, in the event of an equity restructuring, as defined in FAS 123R, which affects the Shares, you shall have a legal right to an adjustment to your Performance Shares which shall preserve without enlarging the value of the Performance Shares, with the manner of such adjustment to be determined by the Committee in its discretion. However, no adjustments shall be made hereunder for any ordinary cash dividends paid on Common Stock. Any Performance Shares or related rights which directly or indirectly result from an adjustment to a Performance Share hereunder shall be subject to the same risk of forfeiture and other conditions as apply to the granted Performance Share and will be settled at the same time as the granted Performance Share.

12.	EFFECT ON OTHER BENEFITS

In no event shall the value, at any time, of the Performance Shares or any other payment or right to payment under this Agreement be included as compensation or earnings for purposes of any other compensation, retirement, or benefit plan offered to employees of the Company or its subsidiaries or affiliates unless otherwise specifically provided for in such plan.

13.	RIGHT TO CONTINUED EMPLOYMENT

Nothing in the Plan or this Agreement shall confer on you any right to continue in the employ of the Company or any subsidiary or affiliate or any specific position or level of employment with the Company or any subsidiary or affiliate or affect in any way the right of the Company or any subsidiary or affiliate to terminate your employment without prior notice at any time for any reason or no reason.

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14.	ADMINISTRATION

The Committee shall have full authority and discretion, subject only to the express terms of the Plan, to decide all matters relating to the administration and interpretation of the Plan and this Agreement, and all such Committee determinations shall be final, conclusive, and binding upon the Company, any subsidiary or affiliate, you, and all interested parties. Any provision for distribution in settlement of your Performance Shares and other obligations hereunder shall be by means of bookkeeping entries on the books of the Company and shall not create in you or any beneficiary any right to, or claim against any, specific assets of the Company, nor result in the creation of any trust or escrow account for you or any beneficiary. You and any of your beneficiaries entitled to any settlement or other payment hereunder shall be a general creditor of the Company.

15.

AMENDMENT

This Agreement shall be subject to the terms of the Plan, as amended from time to time, except that Performance Shares which are the subject of this Agreement may not be materially adversely affected by any amendment or termination of the Plan approved after the Award Date without your written consent.

16.	SEVERABILITY AND VALIDITY

The various provisions of this Agreement are severable and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

17.	GOVERNING LAW

This Agreement shall be governed by the substantive laws (but not the choice of law rules) of the State of New York.

18.	SUCCESSORS

This Agreement shall be binding upon and inure to the benefit of the successors, assigns, and heirs of the respective parties.

19.	DATA PRIVACY

By entering into this agreement, you (i) authorize the Company, and any agent of the Company administering the Plan or providing Plan recordkeeping services, to disclose to the Company or any of its subsidiaries such information and data as the Company or any such subsidiary shall request in order to facilitate the grant of Performance Shares and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize the Company to store and transmit such information in electronic form.

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20.	ENTIRE AGREEMENT AND NO ORAL MODIFICATION OR WAIVER

This Agreement contains the entire understanding of the parties. This Agreement shall not be modified or amended except in writing duly signed by the parties except that the Company may adopt a modification or amendment to the Agreement that is not materially adverse to you in writing signed only by the Company. Any waiver of any right or failure to perform under this Agreement shall be in writing signed by the party granting the waiver and shall not be deemed a waiver of any subsequent failure to perform.

I have read this agreement in its entirety. My signature below indicates my agreement to all the terms, restrictions and conditions set forth in the agreement.


For the Company

Bristol-Myers Squibb Company

By:

Date:		March 7, 2007



Participant

Sign Here :

Date :

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Exhibit A

BRISTOL-MYERS SQUIBB COMPANY

2002 Stock Incentive Plan

2007 Performance Shares (07-09 Cycle) — Performance Goals

The number of 2007 Performance Shares earned by Participant shall be determined as of December 31, 2007 (the “Earning Date”), based on the Company’s 2007 Sales Performance as defined below and 2007 EPS Performance as defined below, determined based on the following grid


	Threshold		Target		Maximum
2007 Sales Performance	$	17,721	$	19,262	$	21,188
2007 EPS Performance	$	1.15	$	1.25	$	1.38

Participant shall earn 45% of the target number of 2007 Performance Shares for “Threshold Performance,” 100% of the target number of 2007 Performance Shares for “Target Performance,” and 220% of the target number of 2007 Performance shares for “Maximum Performance.” For this purpose, 2007 Sales Performance and 2007 EPS Performance are equally weighted, so level of earning of 2007 Performance Shares shall be determined as a percentage for each performance measure and the two percentages averaged. To derive a percentage of 2007 Performance Shares earned for either performance measure, the percentage earned between Threshold and Target or between Target and Maximum shall be based on straight-line interpolation.

Determinations of the Committee regarding 2007 Sales Performance and 2007 EPS Performance, the resulting 2007 Performance Shares earned and related matters will be final and binding on Participant.

2007 Sales Performance shall mean Net Sales for 2007. 2007 EPS Performance shall mean fully diluted Earnings Per Share excluding specified items, for 2007, subject to adjustment in the event of an equity restructuring as defined under FAS 123R and affecting the Shares; any such adjustment shall preserve without enlarging the Participant’s award opportunity hereunder. Except for adjustments in the event of an extraordinary dividend or dividend payable in Shares, no dividends or dividend equivalents will accrue with respect to Performance Shares in respect of any record date that precedes settlement of the Performance Shares.

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Exhibit 10.6

Bristol-Myers Squibb Company

Senior Executive Severance Plan

and

Summary Plan Description

Senior Executive Severance Plan, as amended effective June 10, 2008

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Purpose		1

Section 1 – Eligibility to Participate		1

Section 2 – Eligibility for Severance Payments and Benefits		1

Section 3 – Severance Payments And Benefits		3

Section 4 – Amendment and Plan Termination		9

Section 5 – Miscellaneous		9

Section 6 – Administrative Information About Your Plan		12

Section 7 – Your Rights and Privileges Under ERISA		14

Section 8 – Other Administrative Facts		16

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Purpose

The Compensation and Management Development Committee of the Board of Directors of Bristol-Myers Squibb Company (“BMS” or the “Company”) has adopted the Bristol-Myers Squibb Company Senior Executive Severance Plan (the “Plan”) for eligible senior executives of the Company and its participating subsidiaries and affiliates (“Participating Employer”). The purpose of the Plan is to provide equitable treatment for terminated senior executives consistent with the values and culture of the Company, provide financial support for senior executives seeking new employment, recognize senior executives contributions to the Company, and to avoid or mitigate the Company’s potential exposure to litigation. The Company further believes that the Plan will aid the Company in attracting and retaining highly qualified senior executives who are essential to its success.

Section 1 – Eligibility to Participate

You are eligible to participate in the Plan if you are a senior executive at the E9 grade level or above of the Company or a Participating Employer (excluding the chairperson of the Board of Directors of the Company).

Notwithstanding anything contained herein, you are not eligible to participate in the Plan and will be excluded from coverage under the Plan if you are a party to an individual arrangement or a written employment agreement providing severance payments other than pursuant to the Plan or you are covered by a local practice outside the U.S. and Puerto Rico that provides for severance payments and/or benefits in connection with a voluntary or involuntary termination of employment that is greater than the severance payments and/or benefits set forth herein. For further information, see “Offset for Executives in Puerto Rico and U.S. Expatriates” and “Pay in Lieu of Notice Periods and Offsets for Executives Employed Outside the U.S. and Puerto Rico Who Are Not U.S. Expatriates” on page 4.

Section 2 – Eligibility for Severance Payments and Benefits

Right to Severance Payments and Benefits

You shall be eligible to receive from the Company severance payments and benefits as set forth in Section 3 if your employment by the Company or a Participating Employer is terminated for any one or more of the following reasons:

(a)

Your employment is terminated involuntarily, other than for Cause (as defined below).

(b)

You voluntarily terminate your employment for Good Reason (as defined below).

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To qualify for severance payments and benefits under the Plan upon voluntary termination for Good Reason, you must notify the Company in writing of termination for Good Reason specifying the event constituting Good Reason within fifteen (15) calendar days of the event. Failure for any reason to give written notice of termination of employment for Good Reason shall be deemed a waiver of the right to voluntarily terminate employment for such Good Reason. The Company shall have a period of thirty (30) days in which to cure the Good Reason. If the Good Reason is cured within this period, you will not be entitled to severance payments and benefits hereunder. If the Company waives its right to cure or does not, within the thirty (30) day period, cure the Good Reason, you shall be entitled to severance payments and benefits and your actual termination date shall be determined in the sole discretion of the Company but in no event later than thirty (30) calendar days from the date the Company waives its right to cure or the end of the period in which to cure the Good Reason, whichever is earlier.

Ineligibility for Severance Payments and Benefits

Notwithstanding any provision of the Plan, you shall not be eligible for separation payments and benefits under Section 3 if your termination of employment occurs by reason of any of the following:

•

voluntary termination other than for reasons specified above;

•

mandatory retirement from employment in accordance with Company policy or statutory requirements;

•

disability (as defined in the Company’s long-term disability plan);

•

for Cause;

•

refusal to accept a transfer to a position with the Company or a Participating Employer, as applicable, (for which you are qualified as determined by the Company by reason of knowledge, training, and experience) provided the transfer would not constitute Good Reason for a voluntary termination;

•

the sale of all or part of the Company or Participating Employer’s business assets if you are offered employment by the acquirer of such assets regardless of the terms and conditions of employment offered by the acquirer;

•

upon the formation of a joint venture or other business entity in which the Company or a Participating Employer, as applicable, directly or indirectly will own some outstanding voting or other ownership interest if you are offered employment by the joint venture entity or other business entity regardless of the terms and conditions of employment offered by the joint venture entity or other business entity; or

•

you are reporting to a different person.

Cause

“Cause” shall mean:

(i)

failure or refusal by you to substantially perform your duties with the Company or a Participating Employer (except where the failure results from incapacity due to disability); or

(ii)

severe misconduct or activity deemed detrimental to the interests of the Company or a Participating Employer. This may include, but is not limited to, the following: acts involving dishonesty, violation of Company or a Participating Employer written policies (such as those related to alcohol or drugs, etc.), violation of safety rules, disorderly

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conduct, discriminatory harassment, unauthorized disclosure of Company or a Participating Employer confidential information, or the entry of a plea of nolo contendere to, or the conviction of, a crime.

“Cause” shall be interpreted by the Company in its sole discretion and such interpretation shall be conclusive and binding on all parties.

Good Reason

“Good Reason” shall mean the occurrence of any one or more of the following events:

(i) A material reduction in your Base Pay (as defined on page 12).

(ii) A material reduction in your executive grade level (e.g., the Company changes your job level from an E10 to an E9) resulting in a material diminution of your authority, duties, or responsibilities.

(iii) A change in the location of your job or office, so that you will be based at a location which is more than 50 miles further (determined in accordance with the Company’s relocation policy) from your primary residence than your work location immediately prior to the proposed change in job or office.

Section 3 – Severance Payments And Benefits

Under the Plan, you are eligible to receive Basic Severance and Supplemental Severance, provided you meet the eligibility criteria for severance payments and benefits in Section 2.

Basic Severance

As Basic Severance, you shall receive severance payments equal to four (4) times your Base Pay (as defined below, see page 12). You are not required to sign a General Release to receive Basic Severance.

Supplemental Severance

In addition to Basic Severance, if you are eligible, you may receive Supplemental Severance as follows:


Grade Level		Supplemental Severance
E9		74 times your Base Pay (as defined below)
E10 and above		100 times your Base Pay (as defined below)

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Nothing in this Section 3, the Plan, a change in control letter agreement, an offer letter from the Company or a Participating Employer, a prevailing practice of the Company or a Participating Employer, or any oral statement made by or on behalf of the Company or a Participating Employer shall entitle you to receive duplicate benefits in connection with a voluntary or involuntary termination of employment. For example, you are not eligible for payments and benefits under both this Plan and a change in control letter agreement between you and the Company. The obligation of the Company, to make payments hereunder shall be expressly conditioned upon you not receiving duplicate payments.

Pay in Lieu of Notice Periods for U.S. and Puerto Rico Executives and U.S. Expatriate Executives

The Basic Severance and Supplemental Severance payments under the Plan shall not be reduced by any cash payments to which you may be entitled under any federal, state or local plant-closing or mass layoff law (or similar or analogous) law, including, without limitation, pursuant to the U.S. Worker Adjustment and Retraining Notification Act or any state or local “pay in lieu of notice” law or regulation (“WARN Act”); provided , however , the payment for time not worked during a WARN Act notice period up to a maximum of four weeks’ base pay will be offset from the Basic Severance payments under the Plan.

Offset for Executives in Puerto Rico and U.S. Expatriates

The Basic Severance and Supplemental Severance payments under the Plan shall be reduced (but not below zero) for executives in Puerto Rico by any payments under Puerto Rico Act 80, as amended on October 7, 2005. The Basic Severance and Supplemental Severance payments under the Plan shall be reduced (but not below zero) for U.S. expatriates with respect to any statutory payments of severance in any country other than the U.S. and the payments and benefits hereunder are conditioned upon statutory payments, if any, being offset.

Pay in Lieu of Notice Periods and Offsets for Executives Employed Outside the U.S. and Puerto Rico Who Are Not U.S. Expatriates

The Basic Severance and Supplemental Severance payments under the Plan shall be reduced (but not below zero) by any cash payments to which you may be entitled under or in respect of any of the following: (i) “pay in lieu of notice” or “notice” laws, (ii) any pay in lieu of notice under your contract of employment, (iii) any damages for breach of your employment contract calculated by reference to any period of notice required to be given to terminate your contract which was not given in full, (iv) any compensation required to be paid by any law of any jurisdiction in respect of the termination of your employment, (v) any law of any jurisdiction with respect to the payment of severance, termination indemnities or other similar payments, or (vi) any contract, agreement, plan, program, practice or arrangement which are payable due to your termination of employment with the Company or an affiliate or subsidiary of the Company (but excluding, for the avoidance of doubt, any payments made on retirement from a retirement savings plan, pension plan or provident fund).

No Mitigation

You shall not be required to mitigate the amount of any payment provided for in the Plan by seeking other employment and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to you in any subsequent employment.

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Debt Owed to the Company or a Participating Employer

If you owe the Company or a Participating Employer money for any reason, the Company or Participating Employer may offset the amount of the debt from your severance payments to the extent permitted by law.

General Release and Restrictive Covenants

The obligation of the Company to pay you Supplemental Severance and provide you with the opportunity to continue up to 56 weeks of subsidized medical, dental (not applicable for Puerto Rico executives) and life insurance coverage shall be expressly conditioned upon you timely executing a separation agreement in a form that is satisfactory to the Company and such separation agreement shall include a general release of claims against the Company, its affiliates and their respective officers, directors, employees and agents, and shall contain certain restrictive covenants and obligations of you including, but not limited to, non-competition and non-solicitation covenants for a period of one-year following your separation date, an agreement by you not to make use of confidential or proprietary information of the Company or its affiliates, an agreement not to disparage or encourage or induce others to disparage the Company, its affiliates or their respective products for a period no more than the period you are receiving payments hereunder, an agreement to return Company property, and an agreement to cooperate with legal matters of the Company in which you might have knowledge. To be eligible to receive Supplemental Severance, Company-subsidized medical, life and dental benefits and to the extent applicable other benefits as set forth below, you must execute and return a separation agreement during the requisite time period.

How Your Benefit Is Paid

Basic Severance payments will be made at regular payroll intervals according to your pay schedule prior to the termination. Supplemental Severance payments will not begin until at least eight days after you return a signed General Release to the Company. Thereafter, Supplemental Severance payments will be made at regular payroll intervals according to your pay schedule prior to your termination (unless otherwise required under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), see section entitled “Specified Employees”, page 10 of the Plan).

Severance Pay Period is defined as the number of weeks’ base pay for which you are eligible under the Plan. For example, if you qualify for 78 weeks of severance pay, your Severance Pay Period is 78 weeks.

Continuation of Employee Benefits For U.S. and Puerto Rico and U.S. expatriate Executives E9 and Above Only

During the Severance Pay Period, you are not considered an employee of the Company or a Participating Employer for any purpose — including eligibility under any employee benefit plan. The following benefits, however, will continue to be available as outlined below:

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Health Care Plans

If you and your dependents were enrolled in the Company’s health plan on your termination date, this coverage will continue until the end of the month in which you are no longer employed with the Company or a Participating Employer, as applicable. At termination of employment, you and your enrolled eligible dependents will be offered the opportunity to elect to continue your current plan coverage beyond the end of the month in which you are no longer employed with the Company under either of two options:

Under Option I, if you sign and return the General Release in the requisite time period, your eligibility for Company subsidized health plan benefits shall continue for you and your family until the earlier of (i) fifty-six weeks measured from the date you separated employment with the Company or (ii) the date you begin new employment. Please remember that your eligible dependents will be able to continue Option I coverage only if you also elect to continue coverage under this option.

Option II provides for the continuation of health plan coverage as required under Federal law (COBRA). Under COBRA you are required to pay the full cost of coverage for you and your covered dependents plus a 2% administrative fee. The COBRA continuation period begins as of the first day following the month in which your termination date occurs. Any health care coverage that continues during your Severance Pay Period is also applied toward the maximum continuation period.

After your Option I coverage ends, you can continue COBRA coverage; provided , however , any health care coverage that continues during your Severance Pay Period is also applied toward the maximum continuation period under COBRA.

Detailed information about the two benefit continuation options described above will be mailed to your home at the time of termination.

Life Insurance

Your current level of basic life insurance coverage will continue until the end of the month in which your termination occurs. Thereafter, Company-provided life insurance coverage equal to one times (two times if you are an executive employed in Puerto Rico and retiree eligible ( i.e ., age 55 or older with at least ten years of service)) your base pay at termination date will be continued until the earlier of (i) fifty-six weeks measured from the date you separated employment with the Company or (ii) the date you begin new employment.

When you are terminated, if you are participating in the Survivor Income Plan (not applicable for executives in Puerto Rico), Dependent Life Insurance Plan(s), or the Voluntary Life Insurance Plan(s), coverage will end on the last day of the month in which your termination occurs. When your employment terminates, you may have the opportunity to elect to convert all or part of any terminating life insurance coverage to an individual policy with the insurer.

Long Term Care Plan (not applicable for executives in Puerto Rico)

If you are participating in the Long Term Care Plan, you may be able to continue coverage directly through the Long Term Care Plan’s insurer, Aetna.

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Employee Assistance Program (EAP)

You may continue to participate in the Employee Assistance Program during the benefits continuation period, as long as you remain eligible for benefits under the Company’s Medical Plan. If you elect COBRA continuation coverage, you may continue to participate in the EAP. You will receive additional information regarding participation at the time of your termination.

Outplacement

You will be eligible for outplacement services in accordance with the Company’s outplacement services that are in effect for executives at your level as of the date your employment ends with the Company, provided you timely sign and return a separation agreement (as set forth above).

Company Perquisites

Effective December 31, 2007, the Company eliminated the executive perquisite program. As such, no perquisites will be made available to you after your separation from the Company.

Other Benefits

Accrued and unused vacation days (including banked vacation), long-term performance awards, vesting and exercising of stock options, vesting of restricted stock and restricted stock units, deferred distributions under the Performance Incentive Plan (PIP) and bonus payments will be determined in accordance with the applicable Company plans, programs and/or policies.

All other benefit coverages, and eligibility to participate in the Company’s plans, will end as of your termination date. These benefits include, but are not limited to:

•

contributions to the Dependent Care Reimbursement Account (not applicable for executives in Puerto Rico);

•

contributions to the Company’s Savings and Investment Program;

•

earning additional service for vesting and benefit accrual purposes under the Company’s Retirement Income Plan; and

•

participation in the Company’s disability plans.

Rule of 70 (for U.S. and Puerto Rico and U.S. expatriate executives E9 and above only)

If you are eligible for severance benefits but not eligible to retire ¹ , you may qualify for the “Rule of 70” benefits when you are terminated if:

•

you sign and return the General Release during the requisite time period;

•

on termination, your age plus years of service equals at least 70 (rounded to the next higher whole number); and

•

you have a minimum of 10 years of service ² .

¹	To be eligible to retire, you must be at least age 55 with 10 years of service or age 65.

²	Years of service for the “Rule of 70” eligibility purposes, means total years of employment from date of hire to date of termination.

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Medical Plan

The Rule of 70 benefits give you the opportunity to extend Medical Plan coverage beyond the end of the Severance Pay Period as long as you are Rule of 70 eligible, have no other group medical coverage available to you and no other group medical coverage becomes available.

Between the time that medical coverage under the Plan would normally end and until the date you reach age 55, you can continue medical coverage by paying the full cost of medical coverage, plus a 2% administrative fee. After the date you reach age 55, you can continue coverage under the Medical Plan as if you were a retired employee by paying the retiree medical coverage contribution rate in effect at that time.

Extension of Benefits Under Rule of 70

If you become eligible for an extension of medical benefits as a result of your qualification for “Rule of 70” benefits under the Plan, your cost-sharing for medical coverage will be based on your service as of your actual date of termination of employment pursuant to the terms of the Company’s medical plans.

Under the Retiree Medical Plan, if you are eligible to enroll in Medicare coverage, Medicare will be your primary coverage and the Company plan will be secondary whether or not you actually enroll in Medicare. The Company reserves the right to amend, suspend or terminate its Retiree Medical Plan (and your rights with regard thereto), in whole or in part, any time in its sole and absolute discretion.

For more detailed information about retiree medical coverage and the cost-sharing formula, refer to “Retirement Coverage” in the Medical Plan section of Your Benefits booklet.

Retirement Income Plan

The Rule of 70 gives you the opportunity to receive benefits under the Company’s Retirement Income Plan. If you are Rule of 70 eligible, retirement benefits payable before age 65 are calculated using the same factors as those used for employees who retire at their Early Retirement Date (as defined by the Retirement Income Plan). The Rule of 70 benefits make it possible for eligible participants to receive benefit payments before age 55 with additional reduction factors applied to account for payment over a longer period of time; provided , however , this may not be applicable under the BEP-Retirement Income Plan for your pre 2005 vested and accrued benefit if you have not made a timely election.

For more information about the payment of retirement benefits, refer to the Retirement Income Plan section of Describing Your Benefits booklet.

Although eligible for retiree medical coverage, a Rule of 70 participant is not a Bristol-Myers Squibb Company retiree, regardless of when the participant ultimately chooses benefit payments to begin. Your Human Resources representative will determine whether you qualify for Rule of 70 and advise you at the time of termination.

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Section 4 – Amendment and Plan Termination

Bristol-Myers Squibb Company reserves the right to terminate or amend, in whole or in part, the Plan at any time in its sole discretion by resolution adopted by the Compensation and Management Development Committee of the Board of Directors of the Company. The Company reserves the right to implement changes even if they have not been reprinted or substituted in this document.

Section 5 – Miscellaneous

Employment Status

The Plan does not constitute a contract of employment and nothing in the Plan provides or may be construed to provide that participation in the Plan is a guarantee of continued employment with the Company, a Participating Employer or any of their respective affiliates.

Withholding of Taxes

The Company shall withhold from any amounts payable under the Plan all federal, state, local or other taxes that are legally required to be withheld.

No Effect on Other Benefits

Neither the provisions of this Plan nor the severance payments and benefits provided for hereunder shall reduce any amounts otherwise payable to you under any incentive, retirement, stock option, stock bonus, stock ownership, group insurance or other benefit plan.

Validity and Severability

The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Unfunded Obligation

All severance payments and benefits under the Plan shall constitute unfunded obligations of the Company. Severance payments shall be made, as due, from the general funds of the Company. The Plan shall constitute solely an unsecured promise by the Company to provide such benefits to you to the extent provided herein. For avoidance of doubt, any health benefits to which you may be entitled under the Plan shall be provided under other applicable employee benefit plans of the Company.

Governing Law

This Plan is intended to constitute an unfunded “employee welfare benefit plan” maintained for the purpose of providing severance benefits to a select group of management or highly compensated employees, and the Plan shall be administered in a manner consistent with such intent. The Plan is

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intended to be excepted from the definitions of “employee pension benefit plan” and “pension plan” set forth under Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan and all rights thereunder shall be governed and construed in accordance with ERISA and, to the extent not preempted by Federal law, with the laws of the state of New York.

Section 409A

Exemption

It is intended that payments under the Plan shall be exempt from Code Section 409A to the extent payments (i) do not exceed two times the lesser of (1) the employee’s total annual compensation based on the employee’s annual rate of pay for the prior taxable year (adjusted for any increases that was expected to continue indefinitely) or (2) the limitation under Code Section 401(a)(17) for the year in which the employee has a separation from service within the meaning of Code Section 409A and Treas. Reg. Section 1.409A-1(h) ($230,000 in 2008 (2x = $460,000)) (such amount being referred to as the “2x Limitation”), and (ii) are paid in full no later than December 31 of the second year following a separation from service.

Specified Employees

In general, Code Section 409A prohibits certain payments to “Specified Employees” (defined as an officer of the Company who is one of the top 50 highest paid employees as determined by the Company) within six months following the Specified Employee’s Separation from Service. An exception to this general rule allows payments to Specified Employees during the six-month period following Separation from Service up to, but not exceeding, the 2x Limitation . Thus, Specified Employees shall receive severance payments under the Plan up to the 2x Limitation without regard to a six-month delay in accordance with the Specified Employee’s regular payroll intervals. Any amount that would have been paid during this six month period but for the 2x Limitation will be paid the first business day of the seventh month following the Separation from Service, or, if earlier, the date of the Specified Employee’s death (the “Delayed Payment Date”).

Statement of Intent

To the fullest extent possible, amounts and other benefits payable under the Plan are intended to be exempt from the definition of “nonqualified deferred compensation” under Code Section 409A in accordance with one or more exemptions available under the final Treasury regulations promulgated under Code Section 409A. To the extent that any such amount or benefit is or becomes subject to Code Section 409A, this Plan is intended to comply with the applicable requirements of Code Section 409A with respect to such amounts or benefits so as to avoid the imposition of taxes and penalties. This Plan shall be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent.

If you notify the Company (with specificity as to the reason therefore) that you believe that any provision of this Plan or of any payment to be made or benefit granted under this Plan would cause you to incur any additional tax, penalty or interest under Code Section 409A and the Company concurs, or if the Company (without any obligation whatsoever to do so) independently makes such determination, the Company shall, after consulting with you, reform such provision to try to comply with Code Section 409A or to be exempt from Code Section 409A to the extent possible without thereby creating other liability. The Company in its sole discretion may modify the timing of payments and benefits hereunder for the sole purpose of exempting said payments and benefits from Code

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Section 409A. To the extent that any payment or benefit hereunder is modified in order to comply with Code Section 409A or is exempted from Code Section 409A, such modification or exemption shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to you and the Company of the applicable payment or benefit without violating the provisions of Code Section 409A.

Notwithstanding anything in this Plan or elsewhere to the contrary, if you are a Specified Employee on the date of your Separation from Service from the Company or Participating Employer and the Company or Participating Employer determines that any amount or other benefit payable under the Plan due to your Separation from Service constitutes nonqualified deferred compensation that will subject you to “additional tax” under Code Section 409A(a)(1)(B) (together with any interest or penalties imposed with respect to, or in connection with, such tax, a “409A Tax”) with respect to the payment of such amount or the provision of such benefit if paid, then the payment or provision thereof shall be postponed to the Delayed Payment Date. You and the Company may agree to take other actions to avoid the imposition of a 409A Tax at such time and in such manner as permitted under Code Section 409A. In the event that this paragraph requires a delay of any payment, such payment shall be accumulated and paid in a single lump sum on the Delayed Payment Date.

In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on you by Code Section 409A or any damages for failing to comply with Code Section 409A.

Payment Capped

If at any time, it shall be determined by the Company’s independent auditors that any payment or benefit to you pursuant to this Plan (“Potential Parachute Payment”) is or will become subject to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law (“Excise Taxes), then the Potential Parachute Payment payable to you shall be reduced to the largest amount which would both (a) not cause any Excise Tax to be payable by you and (b) not cause any Potential Parachute Payments to become nondeductible by the Company by reason of Section 280G of the Code (or any successor provision).

Assignment

The Plan shall inure to the benefit of and shall be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount is still payable to you under the Plan had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Plan to your estate in a single lump-sum within 90 days of your death. Your rights under the Plan shall not otherwise be transferable or subject to lien or attachment.

Other Benefits

Nothing in this document is intended to guarantee that benefit levels or costs will remain unchanged in the future in any other plan, program or arrangement of the Company. The Company and its affiliates and subsidiaries reserve the right to terminate, amend, modify, suspend, or discontinue any other plan, program or arrangement of the Company or its subsidiaries or affiliates in accordance with such, plan, program and arrangement and applicable law.

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Oral Statements

The payments and benefits hereunder shall supercede any oral statements made by any employee, officer or Board member of the Company regarding severance payments and benefits.

Successors and Assigns

This Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns and shall be binding upon and inure to the benefit of you and your legal representatives, heirs and legatees.

Definition

Base Pay means your weekly base pay rate in effect as of the effective date of your Separation from Service including any salary reductions under Code sections 132(f), 125, 137, or 401(k), and excluding overtime, commissions, bonuses, income from stock options, stock grants, dividend equivalents, benefits-in-kind, allowances (including, but not limited to, car values, vacation bonuses, food coupons) or other incentives, and any other forms of extra compensation. No foreign service or expatriate allowances shall be included in determining Base Pay or the amount of severance payments payable under the Plan.

Section 6 – Administrative Information About Your Plan

Employer Identification Number

Bristol-Myers Squibb Company’s employer identification number is #22-0790350.

Claim for Benefits

If you believe you are entitled to payments and benefits under the Plan, then contact the Plan Administrator in writing.

Claims Review Procedures

You will be notified in writing by the Company if you are denied payments and benefits under the Plan.

If a claim for benefits under the Plan is denied in full or in part, you* may appeal the decision to the Plan Administrator. To appeal a decision, you* must submit a written document through the U.S. Postal Service or other courier service appealing the denial of the claim within 60 days after your termination of employment or you will no longer be eligible to receive benefits under the Plan. You* may also include information or other documentation in support of your claim. You* will be notified of a decision within 90 days (which may be extended to 180 days, if required) of the date your appeal is received. This notice will include the reasons for the denial and the specific provision(s) on which the denial is based, a description of any additional information needed to resubmit the claim, and an explanation of the claims review procedure. If an extension of time is required by the plan, you* will receive notice of the reason for the extension within the initial 90-day period and a date by which you can expect a decision.

*	or your duly authorized representative

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If the original denial is upheld on first appeal, you* may request a review of this decision. You* may submit a written request for reconsideration to the Plan Administrator (as listed on the last page of this section) within 60 days after receiving the denial.

You* can review all plan documents in preparing your appeal and you* may have a qualified person represent you* during the appeal process. Any documents or records that support your position must be submitted with your appeal letter.

The case will be reviewed, and you* will receive written notice of the decision within 60 days (which may be extended to 120 days, if required) including the specific reasons for the decision and specific reference to the plan provision(s) on which the decision is based.

Any decision on final appeal shall be final, conclusive and binding upon all parties. If the final appeal is denied, however, you will be advised of your right to file a claim in court. It is the intent of the Company that the standard of review applied by a court of law or a professional arbitrator to any challenge to a denial of benefits on final appeal under these procedures shall be an arbitrary and capricious standard and not a de novo review.

Legal Action

You may not bring a lawsuit to recover benefits under the Plan until you have exhausted the internal administrative process described above. No legal action may be commenced at all unless commenced no later than one (1) year following the issuance of a final decision on the claim for benefits, or the expiration of the appeal decision period if no decision is issued. This one-year statute of limitations on suits for all benefits shall apply in any forum where you may initiate such a suit.

Participating Employers

A complete list of Bristol-Myers Squibb Company, affiliates, subsidiaries or divisions that participate in the Plan may be obtained from the Plan Administrator by written request. (See the chart at the end of this section for the name and address of the Plan Administrator.)

Plan Administrator

The administration of the Plan is the responsibility of the Plan Administrator. The Plan Administrator has the discretionary authority and responsibility for, among other things, determining eligibility for benefits and construing and interpreting the terms of the Plan. In addition, the Plan Administrator has the authority, at its discretion, to delegate its responsibility to others. The chart at the end of this section contains the name and address of the Plan Administrator.

*	or your duly authorized representative

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Section 7 – Your Rights and Privileges Under ERISA

As a participant in the Plan, you are entitled to certain rights and protection under ERISA. ERISA provides that you shall be entitled to:

Receive Information About Your Plan and Benefits

Examine, without charge, at the Plan Administrator’s office and at other specified locations all documents governing the plan filed by the plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.

Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the plan and updated summary plan description. The administrator may make a reasonable charge for the copies.

Prudent Actions by Plan Fiduciaries

In addition to creating certain rights for you, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your plan, called “fiduciaries” of the plan, have a duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one, including your employer, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your rights under ERISA.

Enforce Your Rights

If your claim for a welfare benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or the latest annual report from the plan and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator.

If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the plan’s decision or lack thereof concerning the qualified status of a medical child support order, you may file suit in a Federal court.

If it should happen that plan fiduciaries misuse the plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

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Assistance With Your Questions

If you have any questions about your plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration at 1-866-444-EBSA (3272) or accessing their website at http://www.dol.gov/ebsa.

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Section 8 – Other Administrative Facts


		Senior Executive Severance Plan
Name of Plan		Bristol-Myers Squibb Company Senior Executive Severance Plan

Type of Plan		“Welfare” plan

Plan Records		Kept on a calendar-year basis

Plan Year		January 1 – December 31

Plan Funding		Company and participating employers provide severance benefits from general revenues.

Plan Sponsor		Bristol-Myers Squibb Company

Plan Number		554

Plan Administrator and Named Fiduciary		Bristol-Myers Squibb Company c/o Senior Vice President, Human Resources 345 Park Avenue New York, NY 10154 Telephone: (212) 546-4000

Agent for Service of Legal Process on the Plan		Bristol-Myers Squibb Company c/o Senior Vice President and General Counsel 345 Park Avenue New York, NY 10154 Telephone: (212) 546-4000 Bristol-Myers Squibb Company c/o Senior Vice President, Human Resources 345 Park Avenue New York, NY 10154 Telephone: (212) 546-4000

Trustee		Not applicable

Insurance Company		Not applicable

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EXHIBIT 31a.

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, James M. Cornelius, certify that:

1.	I have reviewed Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008;

Based on my knowledge, this quarterly 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 quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

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 by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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 quarterly report is being prepared;

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

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;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	all significant deficiencies and material weaknesses in the design or operation of internal controls, 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 controls.

Date: October 23, 2008

/s/ James M. Cornelius

James M. Cornelius

Chief Executive Officer

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EXHIBIT 31b.

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Jean-Marc Huet, certify that:

1.	I have reviewed Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

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

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	all significant deficiencies and material weaknesses in the design or operation of internal controls, 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 controls.

Date:

October 23, 2008

/s/ Jean-Marc Huet

Jean-Marc Huet

Chief Financial Officer

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EXHIBIT 32a.

Certification by the Chief Executive Officer Pursuant to 18 U. S. C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, I, James M. Cornelius, hereby certify that, to the best of my knowledge, Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (the “Report”), as filed with the Securities and Exchange Commission on October 23, 2008, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Bristol-Myers Squibb Company.

/s/ James M. Cornelius

James M. Cornelius

Chief Executive Officer

October 23, 2008

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EXHIBIT 32b.

Certification by the Chief Financial Officer Pursuant to 18 U. S. C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, I, Jean-Marc Huet, hereby certify that, to the best of my knowledge, Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (the “Report”), as filed with the Securities and Exchange Commission on October 23, 2008, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Bristol-Myers Squibb Company.

/s/ Jean-Marc Huet

Jean-Marc Huet

Chief Financial Officer

October 23, 2008

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