CAPITAL STOCK

In December 2011, 2010 and 2009, we announced that our Board of Directors had authorized us to purchase up to $500, $500 and $750, respectively, of our common stock. The manner, timing and amount of purchases is determined by management based on their evaluation of market conditions, stock price and other factors and is subject to regulatory considerations. Purchases are to be made from time to time in the open market, in privately negotiated transactions or otherwise.

We did not make any repurchases pursuant to the $500 repurchase program announced in 2011 during 2011. Under the $500 program announced in 2010, we repurchased 6.3 million shares at a cost of $297 during 2011. Under the $750 program announced in 2009, we repurchased 5.5 million shares at a total cost of $325 during 2011, which exhausted the authorization for repurchase under this program.

We have 0.5 million authorized shares of $1 par value preferred stock, none of which is outstanding.

Stock Options

We have employee stock award plans from which we grant stock options to certain key employees at an exercise price not less than the fair market value of the underlying common stock at the date of grant. The options are granted for periods of up to 10 years and become exercisable in varying installments. A summary of stock option activity follows:



	Shares (in millions)		Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2011	24.8		$	48.05
Granted	2.5		59.50
Exercised	(3.2	)	37.29
Cancelled	(1.3	)	56.95
Options outstanding at December 31, 2011	22.8		$	50.32	5.4	$	90.7
Exercisable at December 31, 2011	14.3		$	48.63	4.1	$	68.8
Options expected to vest	8.3		$	53.56	7.4	$	21.7

The aggregate intrinsic value, which represents the cumulative difference between the fair market value of the underlying common stock and the option exercise prices, of options exercised during the years ended December 31, 2011, 2010 and 2009 was $69, $73 and $38, respectively. Shares reserved for future compensation grants of Stryker common stock were 32 million at December 31, 2011 and 11 million at December 31, 2010. Exercise prices for options outstanding as of December 31, 2011 ranged from $26.40 to $67.80. At December 31, 2011, there was $88 of unrecognized compensation cost related to nonvested stock options granted under the long term incentive plans; that cost is expected to be recognized over the following 4.8 years (weighted-average period of 1.5 years).

Restricted Stock Units (RSUs) and Performance Stock Units (PSUs)

We grant RSUs to key employees under our employee stock award plans. The fair value of RSUs is determined based on the number of shares granted and the closing quoted price of our common stock on the day prior to the date of grant less anticipated dividends. RSUs generally vest in one-third increments over a three-year period and are settled in stock. In 2011, we implemented a performance stock program and granted PSUs under our 2006 Long-Term Incentive Plan to senior level executives. Under this program, PSU's are earned over a three-year performance cycle and vest in March of the year following the end of that performance cycle. The number of PSUs that will ultimately be earned is based on our performance relative to pre-established goals during that three year performance cycle. The fair value of PSUs is determined based on the closing quoted price of our common stock on the day prior to the date of grant. A summary of RSU and PSU activity follows:



	Shares (in millions)			Weighted Average Grant date Fair value
	RSUs		PSUs	RSUs		PSUs
Nonvested at January 1, 2011	0.8		—	$	49.89	$	—
Granted	0.9		0.1	56.49		59.70
Vested	(0.3	)	—	49.67		—
Cancelled	(0.2	)	—	53.54		59.70
Nonvested at December 31, 2011	1.2		0.1	$	54.17	$	59.70

As of December 31, 2011, there was $43 of unrecognized compensation cost related to nonvested RSUs; that cost is expected to be recognized as expense over the following 3.7 years (weighted-average period of 1.0 years). The weighted average grant date fair value per share of RSUs granted in 2011 and 2010 was $56.49 and $51.06, respectively. The fair value of RSUs vested in 2011 was $13. As of December 31, 2011, there was $5 of unrecognized compensation cost related to nonvested PSUs; that cost is expected to be recognized as expense over the following 2.0 years (weighted-average period of 1.0 years).

Employee Stock Purchase Plans (ESPP)

Full time and part time employees may participate in our ESPP provided they meet certain eligibility requirements. The purchase price for our common stock under the terms of the ESPP is defined as 95% of the closing stock price on the last trading day of a purchase period. During 2011 and 2010, we issued 185,529 and 179,634 shares, respectively, under the ESPP.