Exhibit 10.3
Deferred Prosecution Agreement
          1. Zimmer, Inc. (the “Company”), by its undersigned attorneys,
pursuant to authority granted by the Board of Directors of its parent company,
Zimmer Holdings, Inc. (referred to herein as the “Board” or “Board of
Directors”), and the United States Attorney’s Office for the District of New
Jersey (the “Office”), enter into this Deferred Prosecution Agreement (the
“DPA”). Except as specifically provided below, the DPA shall be in effect for a
period of eighteen (18) months from the date it is fully executed (the
“Effective Date”).
          2. The Office has informed the Company that it will file, on or
shortly after the Effective Date of this DPA, a criminal complaint in the United
States District Court for the District of New Jersey charging the Company with
conspiracy to commit violations of the Federal Anti-Kickback Statute, contrary
to Title 42, United States Code, Sections 1320a - 7b, in violation of Title 18,
United States Code, Section 371, during the years 2002 through 2006 (the
“Criminal Complaint”). This Office acknowledges that neither this DPA nor the
Criminal Complaint alleges the Company’s conduct adversely affected patient
health or patient care.
          3. The Company and the Office agree that, upon filing of the Criminal
Complaint in accordance with the preceding paragraph, this DPA shall be publicly
filed in the United States District Court for the District of New Jersey, and
the Company agrees to post the DPA prominently on the Company website for the
duration of the DPA.
          4. In light of the Company’s remedial actions to date and its
willingness to (a) undertake additional remediation as necessary;
(b) acknowledge responsibility for its behavior; (c) continue its cooperation
with the Office and other government agencies; and (d) demonstrate its good
faith and commitment to full compliance with federal health care laws, the
Office shall recommend to the Court that prosecution of the Company on the
Criminal Complaint be deferred for a period of eighteen (18) months from the
filing date of such Criminal Complaint. If the Court declines to defer
prosecution for any reason, this DPA shall be null and void, and the parties
will revert to their pre-DPA positions.
          5. Zimmer has provided substantial assistance to the Office’s
investigation of the Company, including, but not limited to fully complying with
requests for information by the Office; voluntarily providing significant and
comprehensive information regarding the Company’s practices and procedures in a
timely and organized manner; and making numerous oral and written presentations
helpful to the Office’s investigation of the Company. Zimmer also took the
initiative to institute numerous and comprehensive compliance enhancements,
including but not limited to the following: (a) establishing an enhanced
Corporate Compliance Program; (b) appointing a Chief Compliance Officer who is a
member of the Executive Committee of the Company, who has direct reporting to
the President and CEO, and the Board of Directors, and who is not subordinate to
the chief legal officer, the chief financial officer, or any sales or marketing
officers; (c) assigning a significant, dedicated and qualified compliance staff
to the Chief Compliance Officer; (d) creating executive-level oversight to
evaluate and approve the

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Company’s business and development Needs Assessments, and to evaluate and
approve requests for Consulting Agreements and other service relationships with
Consultants; (e) conducting Needs Assessments to determine Zimmer’s bona fide,
commercially reasonable services needs, including detailed written protocols
implementing the Needs Assessment; (f) implementing and maintaining an
electronic tracking system for Consulting Services that ties to the Need
Assessments; and (g) establishing internal compliance audit processes and
procedures. A number of compliance enhancements were developed prior to the
Company being notified of the Office’s investigation at significant cost and
expense to the Company, and the existence and effectiveness of these
enhancements played a significant role in the terms of this resolution.
General Commitment to Compliance and Remedial Actions
          6. The Company commits itself to exemplary corporate citizenship, best
practices of effective corporate governance, the highest principles of honesty
and professionalism, the integrity of the operation of federal health care
programs including Medicare and Medicaid, the sanctity of the doctor-patient
relationship, and a culture of openness, accountability, and compliance
throughout the Company. The Company also commits not to attempt to influence
medical practitioners and institutions to use the Company’s products through the
use of unlawful inducements. To advance and underscore this commitment, the
Company agrees to take, or has acknowledged that it has taken, the remedial and
compliance measures set forth herein.
          7. In matters relating to federal health care laws, the Company will
cooperate fully with all federal law enforcement and regulatory agencies,
including but not limited to: the Criminal and Civil Divisions of the Office;
the United States Department of Justice, Criminal and Civil Divisions; the
United States Department of Health and Human Services, Office of Inspector
General (“HHS-OIG); the Federal Bureau of Investigation (“FBI”); and the United
States Postal Inspection Service (“USPIS”); provided, however, that such
cooperation shall not require the Company’s waiver of attorney-client and work
product protections or any other applicable legal privileges. Nothing in this
DPA shall be construed as a waiver of any applicable attorney-client or work
product privileges (hereafter “privilege”).
          8. The Company shall communicate to its employees and distributors
that Company personnel and agents are required to report to the Company any
suspected violations of any federal laws, regulations, federal health care
program requirements, or internal policies and procedures.
          9. The Company shall implement or continue its operation of an
effective corporate compliance program and function to ensure that internal
controls are in place to prevent recurrence of the activities that resulted in
this DPA. The Company shall also develop and implement policies, procedures, and
practices designed to ensure compliance with federal health care program
requirements, including the Anti-Kickback Statute, with respect to all its
dealings with Consultants, as defined herein, and others who cause the purchase
of Company orthopedic products in the United States.

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          10. The Company shall adhere to the AdvaMed Code of Ethics on
Interactions with Health Care Professionals. The AdvaMed Code can be found at
www.advamed.org. The principles set forth in the AdvaMed Code are expressly
incorporated as compliance requirements under this DPA.
          11. The Company agrees that its President and CEO, General Counsel,
Compliance Officer, and appropriate Company executives will meet quarterly with
the Office and the Monitor, in conjunction with the Monitor’s quarterly reports
described in paragraph 19 herein.
Definitions
          12. “Consultant” is defined as any United States-based orthopedic
surgeon, PhD, health care professional, non-physician practitioner, medical
fellow, resident or student, or any employee or agent of any educational or
health care organization the Company retains for any personal or professional
services or compensates or remunerates in any way, directly or indirectly, for
or in anticipation of personal or professional services relating to hip and knee
reconstruction and replacement. The term Consultant shall not include
accountants, auditors, attorneys, fair market value specialists, CME providers,
reimbursement specialists, any non-physician engineering or marketing
consultants, or any other types of non-physician professionals or entities
excluded from this definition by the Monitor upon recommendation by the Company.
          13. “Consulting Agreement” includes all contracts with Consultants for
services to be performed on behalf of the Company. This includes, but is not
limited to, agreements for compensation, payments, remuneration, honoraria,
fellowships, professional meetings, speaking engagements, teaching,
publications, clinical studies, fee-for-service consulting, product development
and license agreements, research, and professional services agreements. The term
“Consulting Agreement” also includes agreements to provide grants, donations,
sponsorships and other forms of payment to medical educational organizations,
medical societies and training institutions.
          14. “Consulting Services” or “Services” include any and all
professional services provided by a Consultant to or on behalf of the Company.
          15. “Payment” shall include any and all compensation or remuneration
paid to or for the benefit of Consultants, including but not limited to payments
and reimbursements for personal or professional services, any type of
securities, registered or unregistered, meals, entertainment, travel, gifts,
grants, honoraria, charitable contributions, donations, sponsorships, research
grants, clinical studies, professional meetings, product training, medical
education, research funding, product development services, in-kind services
(e.g., use of aircraft), advertising, promotion, and marketing expenses or
support, and royalties or other payments for transfer of documented intellectual
property. Unless otherwise approved by the Monitor, the Company shall only
compensate or remunerate Consultants through direct Payments made pursuant to a
Consulting Agreement. The Company shall not knowingly make any Payments to

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Consultants indirectly, such as through distributors.
Retention and Obligations of a Monitor
          16. The Company agrees that until the expiration of this DPA, it will
retain an outside, independent individual (the “Monitor”) selected by the
Office, after consultation with the Company, to evaluate and monitor the
Company’s compliance with the DPA. Among the conditions of the Monitor’s
retention are that the Monitor is independent of the Company, the Monitor works
exclusively for and at the direction of the Office, and no attorney-client
relationship shall be formed between the Monitor and the Company.
          17. The Monitor shall have access to all non-privileged Company
documents and information the Monitor determines are reasonably necessary to
assist in the execution of his or her duties. The Monitor shall have the
authority to meet with any officer, employee, or agent of the Company. The
Company shall use its best efforts to have its independent distributors for hip
and knee reconstruction and replacement products and their employees and agents
fully cooperate and meet with the Monitor as requested. For all distributor
agreements for hip and knee reconstruction and replacement products and renewals
executed after the Effective Date, the Company shall require provisions allowing
the Monitor access to non-privileged relevant documents and information relating
to Consulting Agreements and Services, and compliance with all applicable
provisions of the DPA.
          18. The Monitor shall conduct a review and evaluation of all Company
policies, practices, and procedures relating to compliance with the DPA and the
following subjects, and report and make written recommendations as necessary
(“Recommendations”) to the Company and the Office concerning same:

  a.   The corporate structure and governance of the Company relative to
selecting, engaging, and paying Consultants;     b.   The effectiveness of the
procedures and practices at the Company to select, engage, and pay Consultants
in exchange for the provision of Services to the Company, as well as the related
legal, compliance, research and development, marketing, sales, internal
controls, and finance functions;     c.   The effectiveness of the training and
education programs in the following areas: federal health care laws concerning
relationships between the Company and Consultants; Medicare, Medicaid and other
health care benefit programs; ethics; and compliance and corporate governance
issues relating to federal health care laws;     d.   The structure and content
of agreements memorializing arrangements to engage and pay Consultants in
exchange for the provision of Services to

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      the Company, and the Company’s payments to Consultants made thereunder.
The Monitor shall have access to and may review all previously entered
agreements to the extent he or she reasonably deems necessary; and     e.   The
influence, actual or potential, over Consultants’ selection of Company products
as a result of the financial relationships between the Company and those
Consultants.

19. The Monitor shall, inter alia:

  a.   Monitor and review the Company’s compliance with this DPA and all
applicable federal health care laws, statutes, regulations, and programs,
including the Anti-Kickback Statute, relating to the sale and marketing of hip
and knee reconstruction and replacement products;     b.   As requested by the
Office, cooperate with the Criminal and Civil Divisions of the Office, the
United States Department of Justice, Criminal and Civil Divisions, HHS-OIG, the
FBI and the USPIS, and, as requested by the Office, provide information about
the Company’s compliance with the terms of this DPA;     c.   Provide written
reports to the Office, on at least a quarterly basis, concerning the Company’s
compliance with this DPA. In these reports or at other times the Monitor deems
appropriate, the Monitor shall make Recommendations to the Company to take any
steps he or she reasonably believes are necessary for the Company to comply with
the terms of this DPA and enhance future compliance with federal health care
laws as related to the sale and marketing of hip and knee reconstruction and
replacement products; and, as agreed by the Company or mandated by the Office
pursuant to paragraph 47, require the Company to take such steps when it is
agreed that such steps are reasonable and necessary for compliance with the DPA.
The first report to the Office shall be due three months after the Effective
Date, and subsequent reports shall be made quarterly thereafter;     d.   After
consultation with the Company and the Office, and allowing reasonable time for
the Company or the Office to object, the Monitor may retain, at the Company’s
expense, consultants, accountants or other professionals the Monitor reasonably
deems necessary to assist the Monitor in the execution of the Monitor’s duties.
Before retention, these consultants, accountants or other professionals shall
provide to the Monitor and the Company a proposed budget. If the Company
believes the costs to be unreasonable, the Company may bring the matter to the
Office’s attention for dispute resolution by the Office;

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  e.   Monitor the preparation of and approve the Needs Assessment and any
Modifications thereto described in paragraphs 27-29 herein;     f.   Review and
approve all new or renewed Consulting Agreements executed between the Effective
Date and the date the Needs Assessment is approved;     g.   Review in his or
her discretion any requests for Consulting Services made between the Effective
Date and the date the Needs Assessment is approved;     h.   Review in his or
her discretion any Payments made to Consultants between the Effective Date and
the date the Needs Assessment is approved;     i.   Review and approve in his or
her discretion all Consulting Agreements with new Consultants executed after the
Needs Assessment is approved;     j.   Review in his or her discretion any
Consulting Agreement renewals executed after the Needs Assessment is approved;  
  k.   Review in his or her discretion any requests for Consulting Services made
after the Needs Assessment is approved;     l.   Review in his or her discretion
any Payments made to Consultants after the Needs Assessment is approved;     m.
  Review in his or her discretion any payments made to CME providers,
reimbursement specialists, any non-physician engineering or marketing
consultants, or other excluded consultants as described in paragraph 12;     n.
  Review in his or her discretion any payments made to Consultants as honoraria,
fellowships, gifts, donations, charitable contributions and other non-Service
payments as described in paragraph 27;     o.   Review and approve any new or
substitute Consultants as described in paragraphs 33 and 34 herein;     p.  
Approve any changes to the Hourly Rate or any Payments made at a rate other than
the Hourly Rate, as described in paragraphs 35-37 herein;     q.   Monitor the
Consultant disclosure obligations as described in paragraphs 40-41 herein; and

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  r.   Monitor the information received by the confidential hotline and e-mail
address as described in paragraph 43 herein.

          In the event the Monitor opposes any Consulting Agreement, request for
Consulting Services, or request for Payment, the Monitor will promptly meet with
the Company to discuss his or her concerns. The Consulting Agreement shall not
be executed, the Consulting Services shall not be rendered, or the Payment shall
not be made unless and until the Monitor’s objections are remedied. All actions
of the Monitor in this regard shall be subject to review by the Office and shall
not require the Company to breach any existing contractual requirements so long
as they comply with all applicable laws. The Office will act promptly to resolve
any issues on a good faith and reasonable basis.
          20. The Company shall promptly notify the Monitor and the Office in
writing of any credible evidence of criminal corporate conduct as well as of any
known criminal investigations of any type of the corporation or any of its
officers or directors that becomes known to the Company after the Effective
Date. In addition, the Company shall promptly notify the Monitor and the Office
in writing of any credible evidence of criminal conduct or serious wrongdoing
relating to federal health care laws by the Company, its officers, employees and
agents. The Company shall provide the Monitor and the Office with all relevant
non-privileged documents and information concerning such allegations, including
but not limited to internal audit reports, letters threatening litigation,
“whistleblower” complaints, civil complaints, and documents produced in civil
litigation. In addition, the Company shall report to the Monitor and the Office
concerning its planned investigative measures and any resulting remedial
measures, internal and external. The Monitor in his or her discretion may
conduct an investigation into any such matters; and nothing in this paragraph
shall be construed as limiting the ability of the Monitor to investigate and
report to the Company and the Office concerning such matters.
Remedial Measures
          Responsibilities of Compliance Office
          21. The Compliance Office (“Compliance Office”) and Chief Compliance
Officer (“Compliance Officer”) shall be responsible for monitoring the
day-to-day compliance activities of the Company. The Compliance Officer shall be
a member of the Operating Committee of the Company who reports directly to the
President and CEO and shall not be a subordinate to the chief legal officer, the
chief financial officer, or any sales or marketing officers. The Compliance
Officer shall make periodic (at least quarterly) reports regarding compliance
matters to the Company Board of Directors and is authorized to report on such
matters directly to the Company Board of Directors at any time.
          22. The Compliance Officer shall have the authority to meet with, and
require reports and certifications on any subject from, any officer or employee
of the Company.

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          23. The Compliance Office shall be responsible for oversight,
evaluation, and approval of the Company’s Needs Assessments (described more
fully at paragraphs 27-29), and shall evaluate and approve requests for
Consulting Agreements, Services, and Payments, subject to review and approval by
the Monitor as set forth in paragraph 19.
          24. The Compliance Office shall be responsible for approving the
Consulting Services budget. All requests for Consulting Services and Payments
must be made to and approved by the Compliance Office. Any Payments to or for
the benefit of a Consultant must be approved by the Compliance Office, subject
to review of the Monitor as set forth in paragraph 19.
          25. Consulting Agreements shall be managed by Company employees who
have no sales responsibilities and who report to the Compliance Office on
Consulting issues. These employees shall interface directly with the Consultants
on the terms of their Consulting Agreements and on issues relating to Payments.
          26. From the Effective Date until the Needs Assessment is approved,
all requests for Consulting Services and Payments shall be pre-approved by the
Compliance Office. In considering these requests, the Compliance Office and any
other Company personnel with knowledge of the request shall evaluate the bona
fides of the activity for which the Services or Payments are requested, subject
to review of the Monitor. No Consulting Services may be approved unless the
Compliance Office verifies that the Company has a bona fide commercial need for
such services. No Payments may be made without appropriate documentation and
verification of services rendered on a standard form to be developed by the
Compliance Office and approved by the Monitor.
Needs Assessment
          27. The Company shall complete a Needs Assessment no later than
December 31, 2007, and annually thereafter. The Needs Assessment may be modified
if bona fide, commercially reasonable, unexpected business needs arise
(“Modification”). The Needs Assessment must reflect the Company’s expected,
commercially reasonable needs for all Consulting Services to fulfill its
medical, clinical, training, educational, and research and development needs.
The Needs Assessment shall also contain a budget for the total amount of
honoraria, fellowships, gifts, donations, charitable contributions, and any
other payments contemplated to be made to Consultants for which no Consulting
Services are provided. The Needs Assessment and any Modifications as defined
herein shall be prepared in consultation with those areas of the Company that
have bona fide needs for the services to be performed. The Needs Assessment and
any Modifications must be approved by the Compliance Officer and the Monitor
before they are finalized. As of January 1, 2008, the Needs Assessment and any
Modifications shall be used as a basis for Consultant selection and all
Consulting Agreements, Services and Payments. The Compliance Officer shall
attest to the best of his or her knowledge, after conducting reasonable due
diligence, that the Needs Assessment and any Modifications reflect the bona
fide, commercially reasonable consulting needs of the Company.

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          28. The Needs Assessment shall establish or incorporate by reference
detailed protocols or procedures that must be followed before a Consulting
Agreement will be authorized. The Needs Assessment must identify and quantify
the services needed within each discrete service category (e.g., operating room
training, speaking engagements, clinical studies, product development groups),
and provide written support for the needs. The Needs Assessment must set forth
the nature of the services needed, the range of hours or other quantitative
measure needed to complete the services, the number of Consultants needed, and
the maximum fair market value compensation to be paid for each consulting
service. The Needs Assessment shall also identify the qualifications and
expertise required to perform the services. The Needs Assessment shall ensure
that Services are distributed appropriately to all regions of the country.
          29. The Needs Assessment and any approved Modifications shall be used
to define and limit all Consulting Services performed for the Company for the
ensuing year. All Consulting Agreements entered into by the Company shall be for
services specified and enumerated by the Needs Assessment and any approved
Modifications. No Consulting Agreement shall be entered into with any Consultant
for services outside those specified in the Needs Assessment and any approved
Modifications, or for services exceeding the number of services specified in the
Needs Assessment and any approved Modifications. For example, if the Needs
Assessment specifies that the Company will require Consultants to conduct 50
speaking engagements on a particular topic, once the total number of
contracted-for speaking engagements reaches 50, the Company may not engage any
additional Consultants for such speaking engagements unless it obtains an
approved Modification.
          30. The Company shall maintain a record of all Consulting Services
provided under the Needs Assessment and any Modification. Monthly reports will
be issued by the Compliance Office to the Monitor and to senior executives in
the areas in which services are provided summarizing the Consulting Services
provided or submitted for Payment, by Consultant, by region, and by total, with
a list of services left to be provided during the calendar year in fulfillment
of the Needs Assessment.
          Consulting Agreements
          31. All Consulting Agreements shall be in writing and executed by the
Compliance Officer, the President, the General Counsel, the Director of Research
& Development for product development and research agreements, and the Director
of Clinical for clinical services agreements (including clinical trials,
clinical studies, follow-up visits). On an annual basis, the Compliance Officer,
the Director of Research & Development for product development and research
agreements, and the Director of Clinical for clinical services agreements shall
attest and certify in writing that, based on their reasonable inquiry and
knowledge, all Consulting Agreements and all Consulting Services performed
thereunder were bona fide, commercially reasonable, and compliant with all
federal health care programs. The Company shall not enter into Consulting
Agreements with Consultants through any third parties, including distributors.

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          32. All Consulting Agreements for Consulting Services to be rendered
in 2008 and thereafter shall be for a term of the calendar year, with the
exception of product development agreements that could result in the payment of
royalties, clinical agreements, and external research agreements, which may be
for a length appropriate to the type of Service being rendered, upon approval of
the Monitor. All Consulting Agreements shall identify the specific Services to
be provided as defined by the Needs Assessment and any Modification thereto, and
specify the rate to be paid for each Service. The Company may not enter into
Consulting Agreements for Services exceeding the total number of Services set
forth in the Needs Assessment and any Modification thereto. Consultants shall be
paid only for the actual time expended in providing Consulting Services, in
hourly billing increments or other reasonable quantitative measure as identified
in the Needs Assessment, without regard to the total amount of consulting
services permissible under their Consulting Agreements.
          New and Substitute Consultants
          33. The Compliance Office, in consultation with the Monitor and
appropriate Company employees, shall conduct an evaluation of each new
Consultant to be considered for a Consulting Agreement. This evaluation shall
ensure the proposed Consultant’s qualifications and experience are commensurate
with those required by the Needs Assessment and any Modification thereto, and
that any new relationship meets an unfilled bona fide commercial need of the
Company.
          34. In the event a Consultant is unable to provide service to the
Company under a Consulting Agreement in any given year, the Company may
substitute another Consultant or retain a new Consultant to perform the
specified yet unfulfilled Consulting Services of the Consulting Agreement. The
substitute Consultant must be authorized by the Compliance Officer and approved
by the Monitor after conducting a substantive review of the Consultant’s
qualifications and expertise.
          Payments to Consultants
          35. A Company employee or representative must be present for every
Consulting Service, except that the Monitor, upon application by the Compliance
Office, may exempt certain Services from this requirement (such as collection of
clinical study data, travel or preparation time). Upon completion of the
Consulting Service, both the Company employee (or representative) in attendance
and the Consultant must independently verify in writing that the Service took
place, identify the participants present and length of service, and summarize
the Service provided. These verifications must be certified, made under penalty
of perjury, and submitted to the Compliance Office within ninety (90) calendar
days of the date of the Service and as a condition precedent to any Payments
being issued under a Consulting Agreement.
          36. For all Consulting Agreements entered into after the Effective
Date of this DPA, the Company agrees to make Payments to Consultants at a fair
market value hourly rate (“Hourly

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Rate”) of no more than $500 per hour for time actually expended by a Consultant
performing Consulting Services. In the event the Company wishes to make Payments
to a Consultant at a higher Hourly Rate or at a different rate because of the
Consultant’s special expertise or the nature of the service (such as a per
patient rate for clinical studies), the Company must obtain or have obtained a
fair market value analysis conducted by an independent organization with
expertise in valuation as approved or accepted by the Monitor. Any changes to
the Hourly Rate or Payments other than at the Hourly Rate must be approved by
the Monitor.
          37. With respect to product development agreements and renewals
entered into after the Effective Date and for all Services to be rendered after
January 1, 2008, the Company shall pay a Consultant on a product development
team for the actual time spent providing Services to the Company, at no more
than the Hourly Rate. In addition to the Hourly Rate payments, the Company may
pay each member of a product development team royalties on any product the team
may develop. The number of Consultants serving on a product development team
must not exceed the number reasonably necessary to achieve the identified design
and development needs of the project. The aggregate royalties paid per project
to all Consultants shall not exceed fair market value expressed as a certain
percentage of all domestic and international product sales of the product or
products that are the subject of the product development agreement as proposed
by the Company and approved by the Monitor. These royalty payments and Hourly
Rate payments shall be the only compensation a Consultant may receive for
participation on a product design team; that is, the Company shall not make any
flat rate payments or minimum guaranteed payments in lieu of or in addition to
Hourly Rate payments and royalty payments. The Company may offset royalty
payments to a Consultant with Hourly Rate payments for Services the Consultant
appropriately performed. The Company may pay royalties to a Consultant only for
Intellectual Property received by the Company for products that have actually
been sold. (Products may be considered to have been sold when the products are
transferred to an unrelated third-party or to a Company affiliate located
outside the United States.) If the Intellectual Property has been patented in
the United States, royalty payments may not extend beyond the life of the U.S.
patent. If the Intellectual Property has not been patented, royalties may not
extend beyond a reasonable period (in light of factors such as the life cycle
and commercial advantages of the products and Intellectual Property and the
burden of administering the royalty arrangement). As used herein, “Intellectual
Property” includes patents, trade secrets and know-how received by the Company
from the Consultant or product development team under a product development
agreement. The Company shall establish processes for reviewing individual
Consultant contributions to determine whether Intellectual Property has been
provided to the Company, such processes shall be approved by the Monitor. The
persons responsible for deciding whether Intellectual Property has been provided
shall not be involved in sales functions, and their decision is subject to
Monitor approval. The identity of royalty-bearing products must be reasonable
(in light of factors such as the scope of Intellectual Property transferred, the
relationship of the Intellectual Property to the products and the burden of
administering the royalty arrangement) and is subject to Monitor approval.
Royalties must not be paid in advance or in anticipation of product development
that might result in a royalty. No royalty may be paid to a Consultant that is
earned by virtue of the use of the product in question by the Consultant or

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by any member of a practice group of which the Consultant is a member. In lieu
of royalties, a fixed amount may be paid for Intellectual Property provided to
the Company, provided the amount is commercially reasonable and subject to
Monitor approval. For patents and patent applications that are not assigned or
licensed to the Company under a product development agreement, royalties, patent
fees, patent costs, and/or a fixed amount may be paid for the acquisition or
licensing of such patents and patent applications, subject to Monitor approval.
          38. All Consultants on product design teams shall submit invoices, at
least quarterly, and supporting documentation for services rendered to the
Company’s design team project manager for approval, prior to any Payments being
made. A Company employee shall be present at all meetings of product development
teams. That employee shall report the date, the participants, and a summary of
the meeting to the project manager. The project manager must certify in writing
that the invoices reflect bona fide services provided by the Consultant. These
invoices, supporting documentation, and certification must be submitted to the
Compliance Office for Payment.
          39. In addition, the following practices have been or shall be
implemented no later than sixty (60) calendar days after the Effective Date:

  a.   The Company may not make Payments to Consultants for collection of
clinical data unless there is a written agreement defining the required
procedures and protocol and the amount of clinical data to be collected by the
Consultant, pre-approved by the Director of Clinical.     b.   The Company may
not make Payments to Consultants for research unless there is a written
agreement defining the required procedures and protocol, pre-approved by the
Director of Research and Development. The Company may not provide unrestricted
grants to Consultants.     c.   The Company may not fund any fellowships for
fellows who work with any Consultant, with the exception of fellowship funding
to legitimate medical education foundations or institutions so long as that
funding is approved in advance by the Compliance Office and the Monitor;     d.
  The Company may not make charitable contributions to 501(c)(3) organizations
that are, to the best of the Company’s knowledge after reasonable due diligence
is conducted, controlled by a Consultant or an immediate family member of a
Consultant, or at which an immediate family member of a Consultant is employed.
All charitable contributions must be approved in advance by the Compliance
Office in consultation with the Monitor. The Monitor has the discretion to make
exceptions to the above standard;

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  e.   Other than Consulting Agreements, the sale of products and associated
equipment and instruments and the purchase of Intellectual Property, the Company
may have no commercial dealings with any Consultant or any entity or
organization that the Company has reason to believe, after reasonable due
diligence is conducted, is controlled by the Consultant or an immediate family
member of the Consultant. The Monitor has the discretion to make exceptions to
the above standard;     f.   The Company shall not hire or engage as an agent or
distributor anyone in order to induce a Consultant to use or purchase Company
products; and     g.   The Compliance Office shall notify the Monitor of any
employees or independent distributors who are known to bear an immediate family
relationship to any Consultant. In such cases, the Monitor may recommend changes
in assignment or case coverage to avoid actual or perceived conflict of
interest.

Disclosure
          40. All new Consulting Agreements and renewals shall require
Consultants to disclose their financial engagement with the Company to their
patients, as well as affiliated hospitals.
          41. Within thirty (30) calendar days of the Effective Date of this
DPA, the Company shall prominently feature on its web site the name, city, and
state of residence for each of the Company’s Consultants who were retained at
any time in 2007, who provided Consulting Services to the Company at any time in
2007, or who received any Payments from the Company in 2007. The Company shall
also there disclose the Payments made to each Consultant to date in 2007 within
$25,000 increments, and, within sixty (60) calendar days of the Effective Date,
all other Payments made in other than dollar form. Within ten (10) calendar days
after a new Consulting Agreement or renewal is executed, the Company shall post
the name of the Consultant on its web site. If the Company has or does enter
into a Consulting Agreement with an entity rather than an individual, the
Company shall post both the name of the entity and the individual providing
Services to the Company under the Consulting Agreement. Payment information
shall be updated quarterly during the term of this DPA to reflect the total
Payments made to each Consultant within $25,000 increments, and all other
Payments made in other than dollar form. The Company must also disclose this
information to the Consultant’s affiliated hospitals.
Compliance, Training, Hotline
          42. The Company agrees to enhance, support, and maintain its existing
training and education programs, including any programs recommended by the
Monitor pursuant to paragraph 18, above. The programs, which shall be reviewed
and approved by the Company President and

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CEO, Board of Directors, General Counsel, Compliance Officer, and the Monitor,
shall be designed to advance and underscore the Company’s commitment to
exemplary corporate citizenship, to best practices of effective corporate
governance and the highest principles of integrity and professionalism, and to
fostering a culture of openness, accountability and compliance with federal
health care laws throughout the Company. Completion of such training shall be
mandatory for all Company officers, executives, and employees who are involved
in Sales, Marketing, Legal, Compliance, and other senior executives at the
Company as proposed by the Company and approved by the Monitor (collectively the
“Mandatory Participants”). Such training and education shall cover, at a
minimum, all relevant federal health care laws and regulations, internal
controls in place concerning Consultants and their Consulting Agreements with
the Company, and the obligations assumed by, and responses expected of, the
Mandatory Participants upon learning of improper, illegal, or potentially
illegal acts relating to the Company’s sales and marketing of hip and knee
reconstruction and replacement products. The Company President and CEO, Board of
Directors, General Counsel and Compliance Officer shall communicate to the
Mandatory Participants, in writing or by video, their review and endorsement of
the training and education programs. The Company shall commence providing this
training within ninety (90) calendar days after the Effective Date of this DPA.
          43. The Company agrees to establish and/or maintain a confidential
hotline and e-mail address, of which Company employees, agents, and customers
are informed and can use to notify the Company of any concerns about unlawful
conduct, other wrongdoing, or evidence that Company practices do not conform to
the requirements of this Agreement. This hotline and e-mail address shall be
reviewed by the Monitor. The Company shall post information about this hotline
on its website and shall inform all those who avail themselves of the hotline of
the Company’s commitment to non-retaliation and to maintain confidentiality and
anonymity with respect to such reports.
          44. [this paragraph left blank intentionally]
Disclosure of Monitor Reports
          45. The Company agrees that the Monitor may disclose his or her
written reports, as directed by the Office, to any other federal law enforcement
or regulatory agency in furtherance of an investigation of any other matters
discovered by, or brought to the attention of, the Office in connection with the
Office’s investigation of the Company or the implementation of this DPA. The
Company may identify any trade secret or proprietary information contained in
any report, and request that the Monitor redact such information prior to
disclosure.
Replacement of Monitor

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          46. The Company agrees that if the Monitor resigns or is unable to
serve the balance of his or her term, a successor shall be selected by the
Office, in consultation with the Company, within forty-five (45) calendar days.
The Company agrees that all provisions in this DPA that apply to the Monitor
shall apply to any successor Monitor. The Company shall be given the opportunity
to meet the successor Monitor before he or she is retained and to submit any
objections to the Office.
Adopting Recommendations of Monitor
          47. The Company shall adopt all Recommendations contained in each
report submitted by the Monitor to the Office, unless the Company objects to the
Recommendation and the Office agrees that adoption of the Recommendation should
not be required. The Monitor’s reports to the Office shall not be received or
reviewed by the Company prior to submission to the Office; such reports will be
preliminary until the Company is given the opportunity, within ten (10) calendar
days after the submission of the report to the Office, to comment to the Monitor
and the Office in writing upon such reports, and the Monitor has reviewed and
provided to the Office responses to such comments, upon which such reports shall
be considered final. In the event the Company disagrees with any Recommendation
of the Monitor, the Company and the Monitor may present the issue to the United
States Attorney for his consideration and final decision, which is
non-appealable.
Meeting with the U.S. Attorney
          48. Within thirty (30) calendar days of the Effective Date of this
DPA, the Company agrees to call a meeting, on a date mutually agreed upon by the
Company and the Office, of Company senior compliance, sales, and marketing
executives, and any other Company employees who the Company desires to attend,
such meeting to be attended by the United States Attorney and other
representatives of the Office for the purpose of communicating the goals and
expected effect of this DPA.
Cooperation
          49. The Company agrees that its continuing cooperation during the term
of this DPA shall include, but shall not be limited to, the following:

  a.   Not engaging in or attempting to engage in any criminal conduct;     b.  
Completely, truthfully and promptly disclosing all non-privileged information
concerning all matters about which the Office and other government agencies
designated by the Office may inquire with respect to the Company’s compliance
with health care laws, and continuing to provide the Office, upon request, all
non-privileged documents and other materials relating to such inquiries;

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  c.   Consenting to any order sought by the Office permitting disclosure to the
Civil Division of the United States Department of Justice of any materials
relating to compliance with federal health care laws that constitute “matters
occurring before the grand jury” within the meaning of Rule 6(e) of the Federal
Rules of Criminal Procedure. If the Company asserts that any such any material
contains trade secrets or other proprietary information, the Company shall
propose redactions to the Office prior to disclosure to any other governmental
entity, or the material shall be accompanied by a prominent warning notifying
the agency of the protected status of the material;     d.   Making available
current Company officers and employees and using its best efforts to make
available former Company officers and employees to provide information and/or
testimony at all reasonable times as requested by the Office, including sworn
testimony before a federal grand jury or in federal trials, as well as
interviews with federal law enforcement authorities as may relate to matters
involving compliance with health care laws. The Company is not required to
request of its current or former officers and employees that they forego seeking
the advice of an attorney nor that they act contrary to that advice. Cooperation
under this paragraph shall include, upon request, identification of witnesses
who, to the Company’s knowledge, may have material non-privileged information
regarding the matters under investigation;     e.   Providing testimony,
certifications, and other non-privileged information deemed necessary by the
Office or a court to identify or establish the original location, authenticity,
or other evidentiary foundation necessary to admit into evidence documents in
any criminal or other proceeding relating to compliance with health care laws as
requested by the Office;     f.   The Company acknowledges and understands that
its future cooperation is an important factor in the decision of the Office to
enter into this DPA, and the Company agrees to continue to cooperate fully with
the Office, and with any other government agency designated by the Office,
regarding any issue about which the Company has knowledge or information with
respect to compliance with health care laws;     g.   This agreement to
cooperate does not apply to any information provided by the Company to legal
counsel in connection with the provision of legal advice and the legal advice
itself, or to information or documents prepared in anticipation of litigation,
and nothing in this DPA shall be construed to require the Company to provide any
such information or advice to the Office or any other government agency; and

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  h.   The cooperation provisions in this paragraph shall not apply in the event
that the Office pursues a criminal prosecution against the Company.

Breach of Agreement
          50. Should the Office determine, in good faith and in its sole
discretion, during the term of this DPA that the Company has committed any
criminal conduct relating to compliance with health care laws subsequent to the
Effective Date of this DPA, the Company shall, in the discretion of the Office,
thereafter be subject to prosecution for any federal crimes of which the Office
has knowledge.
          51. Should the Office determine in good faith and in its sole
discretion that the Company has knowingly and willfully breached any material
provision of this DPA, the Office shall provide written notice to the Company of
the alleged breach and provide the Company with a two-week period from receipt
of such notice in which to make a presentation to the Office to demonstrate that
no breach occurred, or, to the extent applicable, that the breach was not
material or knowingly and willfully committed or has been cured. The parties
understand and agree that should the Company fail to make a presentation to the
Office within the two-week period after receiving written notice of an alleged
breach, it shall be conclusively presumed that the Company is in breach of this
DPA. In the event the Office determines, in good faith and in its sole
discretion, that a second material breach has occurred, or that the first
material breach has not been adequately cured, the Office shall provide written
notice to the Company of the breach, and the breach may result, in the sole
discretion of the Office, in the prosecution of the Company relating to the
allegations set forth in the criminal complaint described in paragraph 2 above.
In the event of any breach of this DPA that results in a prosecution of the
Company, such prosecution may be premised upon any information provided by or on
behalf of the Company to the Office at any time, unless otherwise agreed when
the information was provided. The parties further understand and agree that the
determination whether the Company has breached this DPA rests solely in the
discretion of the Office, and the exercise of discretion by the Office under
this paragraph is not subject to review in any court or tribunal outside the
Department of Justice.
          52. In the event of breach of this DPA as defined in paragraph 50 or
51 above, the Company may be subject to exclusion by OIG-HHS from participation
in all federal health care programs. Such exclusion shall have national effect
and shall also apply to all other federal procurement and non-procurement
programs. Federal health care programs shall not pay anyone for services or
items manufactured, furnished, or distributed by the Company in any capacity
while the Company is excluded. This payment prohibition applies to the Company
and all other individuals and entities (including, for example, anyone who
employs or contracts with the Company, and any hospital or other provider where
the Company provides services). The exclusion applies regardless of who submits
the claim or other request for payment. The Company shall not submit or cause to
be submitted to any federal health care program any claim or request for payment
for services or items manufactured, furnished, or distributed by the Company
during the exclusion. Violation of the conditions of the exclusion may result in
criminal prosecution, the imposition of civil monetary penalties and
assessments, and an

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additional period of exclusion. The Company further agrees to hold the federal
health care programs, and all federal beneficiaries and/or sponsors, harmless
from any financial responsibility for services or items manufactured, furnished
or distributed to such providers, beneficiaries or sponsors after the effective
date of the exclusion. The Company waives any further notice of the exclusion
under 42 U.S.C. § 1320a-7(b)(7), and agrees not to contest such exclusion either
administratively or in any state or federal court. Reinstatement to program
participation is not automatic. If at the end of the period of exclusion the
Company wishes to apply for reinstatement, the Company must submit a written
request for reinstatement to the OIG in accordance with the provisions of 42
C.F.R. §§ 1001.3001-.3005. The Company will not be reinstated unless and until
the OIG approves such request for reinstatement.
Waivers and Limitations
          53. The Company shall expressly waive all rights to a speedy trial
pursuant to the Sixth Amendment of the United States Constitution, Title 18,
United States Code, Section 3161, Federal Rule of Criminal Procedure 48(b), and
any applicable Local Rules of the United States District Court for the District
of New Jersey, for the period that this DPA is in effect for any prosecution of
the Company relating to the allegations set forth in the criminal complaint
described in paragraph 2 above.
          54. In case of a knowing and willful material breach of this DPA, any
prosecution of the Company relating to the allegations set forth in the criminal
complaint described in paragraph 2 above that is not time-barred by the
applicable statute of limitations as of the Effective Date of this DPA may be
commenced against the Company notwithstanding the expiration of any applicable
statute of limitations during the term of the DPA. The Company agrees to waive
any claims of improper venue with respect to any prosecution of the Company
relating to the allegations set forth in the criminal complaint described in
paragraph 2 above. This waiver is knowing and voluntary and in express reliance
on the advice of counsel. Any such waiver shall terminate upon final expiration
of this DPA.
          55. The Company agrees that, if after the Effective Date, it sells all
or substantially all of the Company’s business operations as they exist as of
the Effective Date to a single purchaser or group of affiliated purchasers
during the term of this DPA, or merges with a third party in a transaction in
which the Company is not the surviving entity, the Company shall include in any
contract for such sale or merger a provision binding the purchaser, successor,
or surviving entity to the obligations contained in this DPA.
          56. The Company is simultaneously entering into an agreement with the
Office’s Civil Division (the “Civil Settlement Agreement’) regarding the payment
of money to settle certain civil claims. The Company is also simultaneously
entering into a Corporate Integrity Agreement (“CIA”) with HHS-OIG to implement
certain specified compliance measures. Failure by the Company to comply fully
with those material terms of the Civil Settlement Agreement called to occur
during the Effective Period of this DPA may constitute a breach of this DPA;
provided, however, that a breach of the CIA referenced in the Civil Settlement
Agreement does not

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constitute a breach of this DPA. Any disputes arising under the CIA shall be
resolved exclusively through the dispute resolution provisions of the CIA.
          57. Nothing in this DPA restricts in any way the ability of the Office
to investigate and prosecute any current or former Company officer, employee,
agent or attorney.
          58. It is understood that this DPA is limited to the Company and the
Office, and it cannot bind other federal, state or local authorities. However,
the Office will bring this DPA, the Department of Justice Petite Policy, and the
cooperation of the Company and its compliance with its other obligations under
this DPA to the attention of other prosecuting offices, if requested to do so.
Dismissal of Complaint
          59. The Office agrees that if the Company is in full compliance with
all of its obligations under this DPA, the Office, within ten (10) calendar days
of the expiration of the term of this DPA, will seek dismissal with prejudice of
the criminal complaint described in paragraph 2 above. Except as otherwise
provided herein, during and upon the conclusion of the term of this DPA, the
Office agrees that it will not prosecute the Company further for the matters
that have been the subject of the Office’s investigation relating to this DPA,
including but not limited to Payments that the Company made to Consultants
between 2002 and 2006.
The Full Agreement
          60. This DPA constitutes the full and complete agreement between the
Company and the Office and supersedes any previous agreement between them. No
additional promises, agreements, or conditions have been entered into other than
those set forth in this DPA, and none will be entered into unless in writing and
signed by the Office, Company counsel, and a duly authorized representative of
the Company. It is understood that the Office may permit exceptions to or excuse
particular requirements set forth in this DPA at the written request of the
Company or the Monitor, but any such permission shall be in writing.
AGREED TO:

         
/s/ David C. Dvorak
  /s/ Christopher J. Christie    
 
       
David C. Dvorak
  Christopher J. Christie    
Chief Executive Officer and President
  United States Attorney    
Zimmer Holdings, Inc.
  District of New Jersey    
 
       
9/27/07
  9/27/07    
 
       
Date
  Date    

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DIRECTOR’S CERTIFICATE
          I have read this agreement and carefully reviewed every part of it
with counsel for the Company. I understand the terms of this Deferred
Prosecution Agreement and voluntarily agree, on behalf of Zimmer Holdings, Inc.
and Zimmer Inc., to each of the terms. Before signing this Deferred Prosecution
Agreement, I consulted with the attorney for the Company. The attorney fully
advised me of the Company’s rights, of possible defenses, of the Sentencing
Guidelines’ provisions, and of the consequences of entering into this Deferred
Prosecution Agreement. No promises or inducements have been made other than
those contained in this Deferred Prosecution Agreement. Furthermore, no one has
threatened or forced me, or to my knowledge any person authorizing this Deferred
Prosecution Agreement on behalf of the Company, in any way to enter into this
Deferred Prosecution Agreement. I am also satisfied with the attorney’s
representation in this matter. I certify that I am a director of Zimmer
Holdings, Inc., and that I have been duly authorized by the Board of Directors
of Zimmer Holdings, Inc. to execute this certificate on behalf of the Company.

            /s/ David C. Dvorak
 
      9/27/07
 
   
Zimmer Holdings, Inc.
  Date    

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CERTIFICATE OF COUNSEL
          I am counsel for the Company. In connection with such representation,
I have examined relevant Company documents, and have discussed this Deferred
Prosecution Agreement with the authorized representative of the Company. Based
on my review of the foregoing materials and discussions, I am of the opinion
that:
          1. The undersigned counsel is duly authorized to enter into this
Deferred Prosecution Agreement on behalf of the Company; and
          2. This Deferred Prosecution Agreement has been duly and validly
authorized, executed and delivered on behalf of the Company, and is a valid and
binding obligation of the Company.
          Further, I have carefully reviewed every part of this Deferred
Prosecution Agreement with directors of the Company. I have fully advised these
directors of the Company’s rights, of possible defenses, of the Sentencing
Guidelines’ provisions, and of the consequences of entering into this Agreement.
To my knowledge, the Company’s decision to enter into this Agreement is an
informed and voluntary one.

          /s/ Frederick Robinson
 
      9/27/07
 
   
Fulbright & Jaworski, L.L.P.
  Date    
Attorneys for the Company
       

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CERTIFIED COPY OF RESOLUTION
          Upon motion duly made, seconded, and unanimously carried by the
affirmative vote of all the Directors present, the following resolutions were
adopted:
          WHEREAS, Zimmer, Inc. has been engaged in discussions with the United
States Attorney’s Office for the District of New Jersey (the “Office”) in
connection with an investigation being conducted by the Office;
          WHEREAS, the Board of Directors of Zimmer Holdings, Inc. consents to
resolution of these discussions by entering into a deferred prosecution
agreement that the Zimmer Holdings, Inc. Board of Directors has reviewed with
outside counsel representing Zimmer, relating to a criminal complaint to be
filed in the U.S. District Court for the District of New Jersey charging Zimmer,
Inc. with conspiracy to commit violations of the federal anti-kickback statute;
          NOW THEREFORE, BE IT RESOLVED that outside counsel representing Zimmer
Holdings, Inc. and Zimmer, Inc. from Fulbright & Jaworski L.L.P. be, and they
hereby are authorized to execute the Deferred Prosecution Agreement on behalf of
Zimmer substantially in the same form as reviewed by the Company Board of
Directors at this meeting and as attached hereto as Exhibit A, and that a
Director of Zimmer Holdings Inc. is authorized to execute the Director’s
Certificate attached thereto.

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SECRETARY’S CERTIFICATION
          I, Chad F. Phipps, the duly elected Secretary of Zimmer Holdings, Inc.
(the parent company of Zimmer, Inc., which is referred to in the accompanying
Deferred Prosecution Agreement as the “Company”) a corporation duly organized
under the laws of the State of Delaware, hereby certify that the following is a
true and exact copy of a resolution approved by the Board of Directors of the
Company at a meeting held at the [location] on the [date];
          WHEREAS, Zimmer, Inc. has been engaged in discussions with the United
States Attorney’s Office for the District of New Jersey (the “Office”) in
connection with an investigation being conducted by the Office into activities
of Zimmer, Inc. relating to certain payments to Consultants who have selected
orthopaedic hip and knee replacement products manufactured by the Company in
surgeries performed by them;
          WHEREAS, the Board of Directors of the Company consents to resolution
of these discussions on behalf of Zimmer, Inc. by entering into a deferred
prosecution agreement that the Board of Directors has reviewed with outside
counsel representing Zimmer, relating to a criminal complaint to be filed in the
U.S. District Court for the District of New Jersey charging Zimmer, Inc. with
conspiracy to commit violations of the federal anti-kickback statute;
          NOW THEREFORE, BE IT RESOLVED that outside counsel representing Zimmer
from Fulbright & Jaworski, L.L.P. be, and they hereby are authorized to execute
the Deferred Prosecution Agreement on behalf of Zimmer substantially in the same
form as reviewed by the Board of Directors at this meeting and as attached
hereto as Exhibit A, and that a Director of the Company is authorized to execute
the Director’s Certificate attached thereto.
          IN WITNESS WHEREOF, I have hereunto signed my name as Secretary and
affixed the Seal of said Corporation this 27th day of September, 2007.

         
 
  /s/ Chad F. Phipps    
 
       
 
  Chad F. Phipps, Secretary    
 
  Zimmer Holdings, Inc.    

SEAL

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