<PAGE>
 
                                                                    EXHIBIT 10.1
                                                                       May, 1998

                      GUIDANT CORPORATION 1998 STOCK PLAN
                                        

     The Guidant Corporation 1998 Stock Plan ("1998 Plan") authorizes the
Management Development and Compensation Committee ("Committee") of the Board of
Directors of Guidant Corporation to provide employees and consultants of Guidant
Corporation and its subsidiaries with certain rights to acquire shares of
Guidant Corporation common stock ("Guidant Stock"). The Company believes that
this incentive program will benefit the Company's shareholders by allowing the
Company to attract, motivate, and retain employees and consultants and by
causing employees and consultants, through stock-based incentives, to contribute
materially to the growth and success of the Company. For purposes of the 1998
Plan, the term "Company" shall mean Guidant Corporation and its subsidiaries,
unless the context requires otherwise.


1.   ADMINISTRATION.

     The 1998 Plan shall be administered and interpreted by the Committee
consisting of not less than three persons appointed by the Board of Directors of
the Company from among its members. A person may serve on the Committee only if
he or she (i) is a nonemployee director as defined in Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii)
satisfies the requirements of an "outside director" for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Committee shall determine the fair market value of Guidant Stock for purposes of
the 1998 Plan. The Committee may, subject to the provisions of the 1998 Plan,
from time to time establish such rules and regulations as it deems appropriate
for the proper administration of the Plan. The Committee's decisions shall be
final, conclusive, and binding with respect to the interpretation and
administration of the 1998 Plan and any Grant made under it. Except to the
extent expressly prohibited by the 1998 Plan or applicable law, the Committee
may delegate to one or more of its members, or to one or more agents, such
responsibility or duties as it deems desirable.


2.   GRANTS.

     Incentives under the 1998 Plan shall consist of incentive stock options,
nonqualified stock options, performance awards, and restricted stock grants
(collectively, "Grants"). All Grants shall be subject to the terms and
conditions set out herein and to such other terms and conditions which are not
<PAGE>
 
inconsistent with the 1998 Plan as the Committee deems appropriate. The
Committee shall approve the form and provisions of each Grant. Grants under a
particular section of the 1998 Plan need not be uniform and Grants under two or
more sections may be combined in one instrument.


3.   ELIGIBILITY FOR GRANTS.

     Grants may be made to any employee (including any officer) or consultant of
the Company ("Eligible Person"). The Committee shall select the persons to
receive Grants ("Grantees") from among the Eligible Persons and determine the
number of shares subject to any particular Grant.

4.   SHARES AVAILABLE FOR GRANT.

     (a)  Shares Subject to Issuance or Transfer. Subject to adjustment as
provided in Section 4(b), the aggregate number of shares of Guidant Stock that
may be issued or transferred under the 1998 Plan is 22,500,000; provided,
however, that the aggregate number of such shares that may be issued or
transferred as Restricted Stock Grants under the 1998 Plan is 5,000,000. The
shares may be authorized but unissued shares or treasury shares. The number of
shares available for Grants at any given time shall be 22,500,000 (5,000,000 in
the case of Restricted Stock Grants), reduced by the aggregate of all shares
previously issued or transferred and of shares which may become subject to
issuance or transfer under then-outstanding Grants. Payment in cash in lieu of
shares shall be deemed to be an issuance of the shares for purposes of
determining the number of shares available for Grants under the 1998 Plan as a
whole or to any individual Grantee.

     (b)  Adjustment Provisions. If any subdivision or combination of shares of
Guidant Stock or any stock dividend, reorganization, recapitalization, or
consolidation or merger with Guidant Corporation as the surviving corporation
occurs, or if additional shares or new or different shares or other securities
of the Company or any other issuer are distributed with respect to the shares of
Guidant Stock through a spin-off, exchange offer, or other extraordinary
distribution, the Committee shall make such adjustments as it determines
appropriate in the number of shares of Guidant Stock that may be issued or
transferred in the future under Sections 4(a), 5(f) and 6(f). The Committee
shall also adjust as it determines appropriate the number of shares and Option
Price in outstanding Grants made before the event.

                                       2
<PAGE>
 
5.   STOCK OPTIONS.

     The Committee may grant options qualifying as incentive stock options under
the Code ("Incentive Stock Options"), and nonqualified options (collectively,
"Stock Options"). The following provisions are applicable to Stock Options:

     (a)  Option Price. The Committee shall determine the price at which Guidant
Stock may be purchased by the Grantee under a Stock Option ("Option Price")
which, except in the case of substitute grants as described in Section 11(b),
shall be not less than the fair market value of Guidant Stock on the date the
Stock Option is granted (the "Grant Date"). In the Committee's discretion, the
Grant Date of a Stock Option may be established as the date on which Committee
action approving the Stock Option is taken or any later date specified by the
Committee.

     (b)  Option Exercise Period. The Committee shall determine the option
exercise period of each Stock Option. The period shall not exceed ten years from
the Grant Date.

     (c)  Exercise of Option. A Grantee may exercise a Stock Option by
delivering a notice of exercise to the Company or its representative as
designated by the Committee, either with or without accompanying payment of the
Option Price. The notice of exercise, once delivered, shall be irrevocable.

     (d)  Satisfaction of Option Price. The Grantee shall pay or cause to be
paid the Option Price in cash, or with the Committee's permission, by delivering
shares of Guidant Stock already owned by the Grantee and having a fair market
value on the date of exercise equal to the Option Price, or a combination of
cash and shares. In addition, the Committee may permit the exercise of an option
by delivery of written notice, subject to the Company's receipt of a third-party
payment in full in cash for the Option Price prior to the issuance of shares of
Guidant Stock, in the manner and subject to the procedures as may be established
by the Committee. Unless the Committee establishes a shorter period which is set
forth in the Stock Option, the Grantee shall pay the Option Price not later than
30 days after the date of a statement from the Company following exercise
setting forth the Option Price, fair market value of Guidant Stock on the
exercise date, the number of shares of Guidant Stock that may be delivered in
payment of the Option Price, and the amount of withholding tax due, if any. If
the Grantee fails to pay the Option Price within the specified period, the
Committee shall have the right to take whatever action it deems appropriate,
including voiding the option exercise. The Company shall not issue or transfer
shares of Guidant Stock upon 

                                       3
<PAGE>
 
exercise of a Stock Option until the Option Price and any required withholding
tax are fully paid.

     (e)  Share Withholding. With respect to any nonqualified option, the
Committee may, in its discretion and subject to such rules as the Committee may
adopt, permit or require the Grantee to satisfy, in whole or in part, any
withholding tax obligation which may arise in connection with the exercise of
the nonqualified option by having the Company withhold shares of Guidant Stock
having a fair market value equal to the amount of the withholding tax.

     (f)  Limits on Individual Grants. No individual Grantee may be granted
Stock Options under the 1998 Plan for more than 700,000 shares of Guidant Stock
during any one calendar year.

     (g)  Limits on Incentive Stock Options. The aggregate fair market value of
the stock covered by Incentive Stock Options granted under the 1998 Plan or any
other stock option plan of the Company or any subsidiary or parent of the
Company that become exercisable for the first time by any employee in any
calendar year shall not exceed $100,000. The aggregate fair market value will be
determined at the Grant Date. An Incentive Stock Option shall not be granted to
any Eligible Person who, on the Grant Date, owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
subsidiary or parent of the Company.


6.   PERFORMANCE AWARDS.

     The Committee may grant Performance Awards which shall be denominated at
the time of grant either in shares of Guidant Stock ("Stock Performance Awards")
or in dollar amounts ("Dollar Performance Awards"). Payment under a Stock
Performance Award or a Dollar Performance Award shall be made, at the discretion
of the Committee, in shares of Guidant Stock ("Performance Shares"), or in cash
or in any combination thereof, if the financial performance of the Company or
any subsidiary, division, or other unit of the Company ("Business Unit")
selected by the Committee meets certain financial goals established by the
Committee for the Award Period (as defined below). Performance Awards may be
granted by the Committee in a manner designed to qualify for exemption under
Section 162(m) of the Code ("Section 162(m) Awards") or in a manner that is not
intended to so qualify. The following provisions are applicable to Performance
Awards:

                                       4
<PAGE>
 
     (a)  Award Period. The Committee shall determine and include in the Grant
the period of time (which shall be four or more consecutive fiscal quarters) for
which a Performance Award is made ("Award Period"). Grants of Performance Awards
need not be uniform with respect to the length of the Award Period. Award
Periods for different Grants may overlap. A Performance Award may not be granted
for a given Award Period after one half (1/2) or more of such period has
elapsed, except as provided in Section 6(g).

     (b)  Performance Criteria and Payment. Before a Grant is made, the
Committee shall establish objectives with respect to designated business
performance criteria ("Performance Criteria") that must be met by the Business
Unit during the Award Period as a condition to payment being made under the
Performance Award. The Performance Criteria and the applicable goals with
respect to such criteria shall be set out in the Grant. In the case of Section
162(m) Awards, the Performance Criteria shall be limited to earnings per share,
return on assets, return on shareholders' equity, divisional income, net income,
total shareholder return, stock price goals, cash flow, operating earnings,
return on capital, or economic value added, in each case as may be applied on an
absolute or relative to peer group basis. In the case of non-Section 162(m)
Awards, the Performance Criteria may include any of the foregoing or any other
financial measurement established by the Committee. The Committee shall also set
forth in the Grant the number of Performance Shares or the amount of payment to
be made under a Performance Award if the Performance Criteria are met or
exceeded, including the fixing of a maximum payment, subject to Section 6(f).

     (c)  Computation of Payment. After an Award Period, the financial
performance of the Business Unit during the period shall be measured against the
Performance Criteria. If the Performance Criteria are not met, no payment shall
be made under a Performance Award. If the Performance Criteria are met or
exceeded, the Committee shall certify that fact in writing prior to payment of
the Performance Award and shall determine the number of Performance Shares or
the amount of payment to be made under a Performance Award in accordance with
the Grant for each Grantee. The Committee, in its sole discretion, may elect to
pay part or all of the Performance Award in cash in lieu of issuing or
transferring Performance Shares. The cash payment shall be based on the fair
market value of Guidant Stock on the date of payment. The Company shall promptly
notify each Grantee of the number of Performance Shares and the amount of cash,
if any, he or she is to receive.

                                       5
<PAGE>
 
     (d)  Revisions for Significant Events. At any time before payment is made,
the Committee may revise the Performance Criteria and the computation of payment
if unforeseen events occur during an Award Period which have a substantial
effect on the Performance Criteria and which in the sole discretion of the
Committee make the application of the Performance Criteria unfair unless a
revision is made; provided, however, that any such revision that would result in
an increase in the amount payable under Section 162(m) Awards shall be made only
on a non-discretionary basis upon the occurrence of objective events specified
in the Grant.

     (e)  Requirement of Employment. To be entitled to receive payment under a
Performance Award, a Grantee who is an employee of the Company must remain in
the employment of the Company through the date of the award payment, except that
the Committee may provide for partial or complete exceptions to this requirement
as it deems equitable in its sole discretion.

     (f)  Maximum Payment. In case of a Performance Award that is designated as
a Section 162(m) Award, no individual may receive Performance Award payments in
respect of Stock Performance Awards in excess of 30,000 shares of Guidant Stock
in any calendar year or payments in respect of Dollar Performance Awards in
excess of $2,000,000 in any calendar year. For purposes of determining the
maximum payment under this subsection, payment in cash of all or part of a Stock
Performance Award will be deemed an issuance of the number of shares with
respect to which such cash payment is made. No individual may receive both a
Stock Performance Award and a Dollar Performance Award for the same Award
Period.

     (g)  Section 162(m) Requirements. In the case of a Performance Award that
is designated as a Section 162(m) Award, the Committee shall make all
determinations necessary to establish the Performance Award within 90 days of
the beginning of the Award Period, including, without limitation, the
designation of the Participants to whom Performance Awards are made, the
Performance Criteria applicable to the Grant and the performance goals that
relate to such criteria, and the dollar amounts or number of shares of Guidant
Stock payable upon achieving the applicable performance goals. As and to the
extent required by Section 162(m) of the Code, the terms of a Section 162(m)
Award must state, in terms of an objective formula or standard, the method of
computing the amount of compensation payable under the Performance Award and
must preclude discretion to increase the amount of compensation payable under
the Performance Award.

                                       6
<PAGE>
 
7.   RESTRICTED STOCK GRANTS.

     The Committee may issue or transfer shares of Guidant Stock to a Grantee
under a Restricted Stock Grant. Upon the issuance or transfer, the Grantee shall
be entitled to vote the shares and to receive any dividends paid. The following
provisions are applicable to Restricted Stock Grants:

     (a)  Requirement of Employment. If the employment of a Grantee who is an
employee of the Company terminates during the period designated in the Grant as
the "Restriction Period," the Restricted Stock Grant terminates and the shares
of Guidant Stock must be returned immediately to the Company. However, the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable.

     (b)  Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge, or
otherwise dispose of the shares of Guidant Stock except to a Successor Grantee
under Section 11(a). Each certificate for shares issued or transferred under a
Restricted Stock Grant shall contain a restricted legend or be held in escrow by
the Company until the expiration of the Restriction Period.

     (c)  Lapse of Restrictions. All restrictions imposed under the Restricted
Stock Grant shall lapse (i) upon the expiration of the Restriction Period if all
conditions, including those stated in Sections 7(a) and (b) have been met or
(ii) as provided under Section 9(a)(ii). The Grantee shall then be entitled to
delivery of the certificate.

     (d)  Restriction Period. The Restriction Period shall be at least three
years, except that if the Restricted Stock Grant is performance-based, the
Restriction Period only needs to be at least one year.


8.   AMENDMENT AND TERMINATION OF THE 1998 PLAN.

     (a)  Amendment. The Board may at any time and from time to time and in any
respect, amend or modify the Plan; provided, however, that no amendment or
                                   --------  -------                      
modification of the 1998 Plan shall be effective without the consent of the
Company's shareholders that would: (i) change the class of Eligible Persons
under the 1998 Plan, (ii) increase the number of shares of Guidant Stock
available for Grants or for Restricted Stock Grants, as provided in Section
4(a), (iii) allow the grant of Stock Options at an exercise price below fair
market value, or (iv) allow the re-pricing of Stock Options. In addition, the

                                       7
<PAGE>
 
Board may seek the approval of any amendment or modification by the Company's
shareholders to the extent it deems necessary or advisable in its sole
discretion for purposes of compliance with Section 162(m) or Section 422 of the
Code, the listing requirements of the New York Stock Exchange or for any other
purpose. No amendment or modification of the 1998 Plan shall in any manner
affect any outstanding Grant without the consent of the Grantee or the permitted
transferee of the Grant.

     (b)    Termination of 1998 Plan. The 1998 Plan shall terminate on May 31,
2003, unless terminated earlier by the Board or unless extended by the Board.

     (c)    Termination and Amendment of Outstanding Grants. A termination or
amendment of the 1998 Plan that occurs after a Grant is made shall not result in
the termination or amendment of the Grant unless the Grantee consents or unless
the Committee acts under Section 11(e). The termination of the 1998 Plan shall
not impair the power and authority of the Committee with respect to outstanding
Grants. Whether or not the 1998 Plan has terminated, an outstanding Grant may be
terminated or amended under Section 11(e) or may be amended (i) by agreement of
the Company and the Grantee consistent with the 1998 Plan or (ii) by action of
the Committee provided that the amendment is consistent with the 1998 Plan and
is found by the Committee not to materially impair the rights of the Grantee
under the Grant.


9.   CHANGE OF CONTROL.

     (a)    Effect on Grants. Unless the Committee shall otherwise expressly
provide in the agreement relating to a Grant, upon the occurrence of a Change of
Control (as defined below):

     (i)    In the case of Stock Options, each outstanding Stock Option that is
not then fully exercisable shall automatically become fully exercisable;

     (ii)   The Restriction Period on all outstanding Restricted Stock Grants
shall automatically expire and all restrictions imposed under such Restricted
Stock Grants shall immediately lapse; and

     (iii)  Each Grantee of a Performance Award for an Award Period that has not
been completed at the time of the Change of Control shall be deemed to have
earned a Performance Award equal to such Grantee's maximum award opportunity
during such Award Period for such Performance Award.

                                       8
<PAGE>
 
     (b)    Change of Control. For purposes of the 1998 Plan, a Change of
Control shall mean the happening of any of the following events:

     (i)    The acquisition by any "person," as that term is used in Sections
13(d) and 14(d) of the Exchange Act (other than (A) the Company, (B) any
subsidiary of the Company, (C) any employee or directors' benefit plan or stock
plan of the Company or a subsidiary of the Company, or any trustee or fiduciary
with respect to any such plan when acting in that capacity, or (D) any person
who acquires such shares pursuant to a transaction or series of transactions
approved prior to such transaction(s) by the Board of Directors of the Company)
of "beneficial ownership" as defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of 20% or more of the shares of the Company's capital
stock the holders of which have general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors of the
Company (or which would have such voting power but for the application of the
Indiana Control Share Statute) ("Voting Stock");

     (ii)   the first day on which less than two-thirds of the total membership
of the Board of Directors of the Company shall be Continuing Directors (as that
term is defined in Article 6(f) of the Company's Articles of Incorporation;

     (iii)  approval by the shareholders of the Company of a merger, share
exchange, or consolidation of the Company (a "Transaction"), other than a
Transaction which would result in the Voting Stock of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the Voting Stock of the Company or such surviving
entity immediately after such Transaction; or

     (iv)   approval by the shareholders of the Company of a complete
liquidation of the Company or a sale or disposition of all or substantially all
the assets of the Company.


10.  ELIGIBLE PERSONS RESIDENT OUTSIDE THE UNITED STATES.

     The following provisions shall apply to each Eligible Person who is
resident outside the United States:

     (a)    Determination of Eligible Locations. The Committee shall determine
whether it is feasible or desirable under local law, custom and practice to make
Grants at each location outside the United States. In making this determination
as of any Grant 

                                       9
<PAGE>
 
Date, the Committee may differentiate among classes of individuals (including
expatriates, third country nationals or international assignees) and locations
within a particular country.

     (b)  Special Terms Applicable to Grants. In order to facilitate the making
of Grants under this Section 10, the Committee may provide for such special
terms for Grants to Grantees who are foreign nationals or who are employed
outside the United States as the Committee may consider necessary or desirable
to accommodate differences in local law, policy or custom, or to take advantage
of special tax or social insurance regimes applicable in a particular
jurisdiction. The Committee may approve such supplements, restatements or
alternate versions of the Plan as it may consider necessary or desirable for
such purposes, without thereby affecting the terms of the Plan as in effect for
any other purpose. Without limiting the generality of the foregoing, the
Committee may adopt special sub-plans applicable to individuals in particular
jurisdictions (e.g., French or U.K. qualified plans), may provide for
accelerated vesting with restrictions on the shares received under a Grant, and
may condition Grants on acknowledgments or agreements by Grantees tailored to
local law.

     (c)  No Acquired Rights. Nothing in the 1998 Plan or in this Section 10
shall confer upon any individual in any country the right to receive (or to
continue to receive) any Grant, any form of Grant or to receive any benefit in
lieu of a Grant hereunder, nor to have any special tax treatment apply to any
Grant.

11.  GENERAL PROVISIONS.


     (a)  Transfer of Grants. Only a Grantee or his or her authorized legal
representative or valid transferee may exercise rights under a Grant. Such
persons may not transfer those rights. Except as set forth below, the rights
under a Grant may not be disposed of by transfer, alienation, pledge,
encumbrance, assignment, or any other means, whether voluntary, involuntary, or
by operation of law, and any such attempted disposition shall be void.
Notwithstanding the foregoing and solely to the extent permitted by the
Committee in an agreement relating to a Grant, rights under a Grant (other than
pursuant to an Incentive Stock Option) may be transferred to members of a
Grantee's immediate family, charitable institutions, or trusts or partnerships
whose beneficiaries are any of the foregoing, or to such other persons or
entities as may be approved by the Committee, in each case subject to the
condition that the Committee be satisfied that 

                                       10
<PAGE>
 
such transfer is being made for estate or tax planning purposes or for donative
purposes without consideration being received therefor. In addition, when a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee may exercise the rights. A successor to the rights
under a Grant pursuant to the foregoing ("Successor Grantee") must furnish proof
satisfactory to the Company of his or her right to receive the Grant, whether as
a result of a transfer from the Grantee, under the Grantee's will or under the
applicable laws of descent and distribution.

     (b)  Substitute Grants. The Committee may make a Grant to an employee of
another corporation who becomes an Eligible Person by reason of a corporate
merger, consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company in substitution for a stock option,
performance award, or restricted stock grant granted by such other corporation
("Substituted Stock Incentive"). The terms and conditions of the substitute
Grant may vary from the terms and conditions required by the 1998 Plan and from
those of the Substituted Stock Incentives. The Committee shall prescribe the
exact provisions of the substitute Grants, preserving to the extent the
Committee deems practical the provisions of the Substituted Stock Incentives.
The Committee shall also determine the number of shares of Guidant Stock to be
taken into account under Section 4.

     (c)  Subsidiaries. The term "subsidiary" means a corporation of which
Guidant owns directly or indirectly 50% or more of the voting power.

     (d)  Fractional Shares. Fractional shares shall not be issued or
transferred under a Grant, but the Committee may pay cash in lieu of a fraction
or round the fraction.

     (e)  Compliance with Law. The 1998 Plan, the exercise of Grants, and the
obligations of the Company to issue or transfer shares of Guidant Stock under
Grants shall be subject to all applicable laws and regulations and to approvals
by any governmental or regulatory agency as may be required. The Committee may
revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory law or governmental regulation. The
Committee may also adopt rules regarding the withholding of taxes on payment to
Grantees.

     (f)  Ownership of Stock.  A Grantee or Successor Grantee shall have no
rights as a stockholder of the Company with respect to any shares of Guidant
Stock covered by a Grant until 

                                       11
<PAGE>
 
the shares are issued or transferred to the Grantee or Successor Grantee on the
Company's books.

     (g)  No Right to Employment. The 1998 Plan and the Grants under it shall
not confer upon any Grantee the right to continue in the employment of the
Company or affect in any way the right of the Company to terminate the
employment of a Grantee at any time, with or without notice or cause.

     (h)  Foreign Jurisdictions. The Committee may adopt, amend, and terminate
such arrangements, not inconsistent with the intent of the 1998 Plan, as it may
deem necessary or desirable to make available tax or other benefits of the laws
of foreign jurisdictions to Grantees who are subject to such laws.

     (i)  Governing Law. The 1998 Plan and all Grants made under it shall be
governed by and interpreted in accordance with the laws of the State of Indiana,
regardless of the laws that might otherwise govern under applicable Indiana
conflict-of-laws principles. 

     (j)  Effective Date of the 1998 Plan. The 1998 Plan shall become effective
upon approval by the Company's shareholders.

                                       12