EX-10.2






 




    Exhibit 10.2



 




    CHANGE
    IN CONTROL SEVERANCE AGREEMENT



 



    THIS AGREEMENT, dated as of May 19, 2008, is made by and
    between ZIMMER HOLDINGS, INC., a Delaware corporation (the
    “Company”), and Mark C. Throdahl (the
    “Executive”). The capitalized words and terms used
    throughout this Agreement are defined in Article XIII.



 




    Recitals



 



    A. The Company considers it essential to the best interests
    of its shareholders to foster the continuous employment of key
    management personnel.



 



    B. The Board recognizes that, as is the case with many
    publicly held corporations, the possibility of a Change in
    Control exists and that such a possibility, and the uncertainty
    and questions that it may raise among management, may result in
    the departure or distraction of management personnel to the
    detriment of the Company and its shareholders.



 



    C. The Board has determined that appropriate steps should
    be taken to reinforce and encourage the continued attention and
    dedication of members of the Company’s management,
    including the Executive, to their assigned duties without
    distraction in the face of potentially disturbing circumstances
    arising from the possibility of a Change in Control.



 



    D. The parties intend that no amount or benefit will be
    payable under this Agreement unless a termination of the
    Executive’s employment with the Company occurs following a
    Change in Control, or is deemed to have occurred following a
    Change in Control, as provided in this Agreement.



 




    Agreement



 



    In consideration of the premises and the mutual covenants and
    agreements set forth below, the Company and the Executive agree
    as follows:



 




    ARTICLE I

    



 




    Term of
    Agreement



 



    This Agreement will commence on the date stated above and will
    continue in effect through December 31, 2009. Beginning on
    January 1, 2010, and each subsequent January 1, the
    term of this Agreement will automatically be extended for one
    additional year, unless either party gives the other party
    written notice not to extend this Agreement at least
    30 days before the extension would otherwise become
    effective or unless a Change in Control occurs. If a Change in
    Control occurs during the term of this Agreement, this Agreement
    will continue in effect for a period of 24 months from the
    end of the month in which the Change in Control occurs.
    Notwithstanding the foregoing provisions of this Article, this
    Agreement will terminate on the Executive’s Retirement Date.



 




    ARTICLE II

    



 




    Compensation
    other than Severance Payments



 



    Section 2.01.  Disability
    Benefits.  Following a Change in Control and
    during the term of this Agreement, during any period that the
    Executive fails to perform the Executive’s full-time duties
    with the Company as a result of Disability, the Executive will
    receive short-term and long-term disability benefits as provided
    under short-term and long-term disability plans having terms no
    less favorable than the terms of the Company’s short-term
    and long-term disability plans as in effect immediately prior to
    the Change in Control, together with all other compensation and
    benefits payable to the Executive pursuant to the terms of any
    compensation or benefit plan, program, or arrangement maintained
    by the Company during the period of Disability.













 





 



    Section 2.02.  Compensation
    Previously Earned.  If the Executive’s
    employment is terminated for any reason following a Change in
    Control and during the term of this Agreement, the Company will
    pay the Executive’s salary accrued through the Date of
    Termination, at the rate in effect at the time the Notice of
    Termination is given, together with all other compensation and
    benefits payable to the Executive through the Date of
    Termination under the terms of any compensation or benefit plan,
    program, or arrangement maintained by the Company during that
    period.



 



    Section 2.03.  Normal
    Post-Termination Compensation and
    Benefits.  Except as provided in
    Section 3.01, if the Executive’s employment is
    terminated for any reason following a Change in Control and
    during the term of this Agreement, the Company will pay the
    Executive the normal post-termination compensation and benefits
    payable to the Executive under the terms of the Company’s
    retirement, insurance, and other compensation or benefit plans,
    programs, and arrangements, as in effect immediately prior to
    the Change in Control. This provision does not restrict the
    Company’s right to amend, modify, or terminate any plan,
    program, or arrangement prior to a Change in Control.



 



    Section 2.04.  No
    Duplication.  Notwithstanding any other
    provision of this Agreement to the contrary, the Executive will
    not be entitled to duplicate benefits or compensation under this
    Agreement and the terms of any other plan, program, or
    arrangement maintained by the Company or any affiliate.



 




    ARTICLE III



 




    Severance
    Payments



 



    Section 3.01.  Payment
    Triggers.  (a) In lieu of any other
    severance compensation or benefits to which the Executive may
    otherwise be entitled under any plan, program, policy, or
    arrangement of the Company (and which the Executive hereby
    expressly waives), the Company will pay the Executive the
    Severance Payments described in Section 3.02 upon
    termination of the Executive’s employment following a
    Change in Control and during the term of this Agreement, in
    addition to the payments and benefits described in
    Article II, unless the termination is (1) by the
    Company for Cause, (2) by reason of the Executive’s
    death, or (3) by the Executive without Good Reason.



 



    (b) For purposes of this Section 3.01, the
    Executive’s employment will be deemed to have been
    terminated following a Change in Control by the Company without
    Cause or by the Executive with Good Reason if (1) the
    Executive’s employment is terminated without Cause prior to
    a Change in Control at the direction of a Person who has entered
    into an agreement with the Company, the consummation of which
    will constitute a Change in Control; or (2) the Executive
    terminates his employment with Good Reason prior to a Change in
    Control (determined by treating a Potential Change in Control as
    a Change in Control in applying the definition of Good Reason),
    if the circumstance or event that constitutes Good Reason occurs
    at the direction of such a Person.



 



    (c) The Severance Payments described in this
    Article III are subject to the conditions stated in
    Article VI.



 



    Section 3.02.  Severance
    Payments.  The following are the Severance
    Payments referenced in Section 3.01:



 



    (a) Lump Sum Severance Payment.  In
    lieu of any further salary payments to the Executive for periods
    after the Date of Termination, and in lieu of any severance
    benefits otherwise payable to the Executive, the Company will
    pay to the Executive, in accordance with Section 3.04, a
    lump sum severance payment, in cash, equal to two (or, if less,
    the number of years, including fractions, from the Date of
    Termination until the Executive reaches his Retirement Date),
    times the sum of (1) the higher of the Executive’s
    annual base salary in effect immediately prior to the event or
    circumstance upon which the Notice of Termination is based or in
    effect immediately prior to the Change in Control, and
    (2) if Severance Payments are triggered under
    Section 3.01(a), the amount of the Executive’s target
    annual bonus entitlement under the Incentive Plan (or any other
    bonus plan of the Company then in effect) as in effect
    immediately prior to the event or circumstance giving rise to
    the Notice of Termination, or, if Severance Payments are
    triggered under Section 3.01(b), the amount of the largest
    aggregate annual bonus paid to the Executive with respect to the
    three years immediately prior to the year in which the Notice of
    Termination was given. If the Board determines that it is not
    workable to determine the amount that the Executive’s
    target bonus would have been for the year in which the Notice of
    Termination was given, then, for purposes of this
    paragraph (a), the Executive’s target annual bonus




    

    2








 






    entitlement will be the amount of the largest aggregate annual
    bonus paid to the Executive with respect to the three years
    immediately prior to the year in which the Notice of Termination
    was given.



 



    (b) Incentive
    Compensation.  Notwithstanding any provision
    of the Incentive Plan or any other compensation or incentive
    plans of the Company, the Company will pay to the Executive, in
    accordance with Section 3.04, a lump sum amount, in cash,
    equal to the sum of (1) any incentive compensation that has
    been allocated or awarded to the Executive for a completed
    calendar year or other measuring period preceding the Date of
    Termination (to the extent not payable pursuant to
    Section 2.02), and (2) a pro rata portion (based on
    elapsed time) to the Date of Termination of the aggregate value
    of all contingent incentive compensation awards to the Executive
    for the current calendar year or other measuring period under
    the Incentive Plan, the Award Plan, or any other compensation or
    incentive plans of the Company, calculated as to each such plan
    using the Executive’s annual target percentage under that
    plan for that year or other measuring period and as if all
    conditions for receiving that target award had been met.



 



    (c) Options and Restricted
    Shares.  All outstanding Options will become
    immediately vested and exercisable (to the extent not yet vested
    and exercisable as of the Date of Termination). To the extent
    not otherwise provided under the written agreement evidencing
    the grant of any restricted Shares to the Executive, all
    outstanding Shares that have been granted to the Executive
    subject to restrictions that, as of the Date of Termination,
    have not yet lapsed will lapse automatically upon the Date of
    Termination, and the Executive will own those Shares free and
    clear of all such restrictions. Notwithstanding the foregoing,
    options and restricted Shares remain subject to any forfeiture
    or clawback claims under the applicable option plan or award
    agreement.



 



    (d) Welfare Benefits.  Except as
    otherwise provided in this Section 3.02(d), for a
    24-month
    period after the Date of Termination, the Company will arrange
    to provide the Executive with life insurance coverage
    substantially similar to that which the Executive is receiving
    from the Company immediately prior to the Notice of Termination
    (without giving effect to any reduction in that coverage
    subsequent to a Change in Control). Life insurance coverage
    otherwise receivable by the Executive pursuant to this
    Section 3.02(d) will be reduced to the extent comparable
    coverage is actually received by or made available to the
    Executive without greater cost to him than as provided by the
    Company during the
    24-month
    period following the Executive’s termination of employment
    (and the Executive will report to the Company any such coverage
    actually received by or made available to the Executive).



 



    If, as of the Date of Termination, the Company reasonably
    determines that the continued life insurance coverage required
    by this Section 3.02(d) is not available from the
    Company’s group insurance carrier, cannot be procured from
    another carrier, and cannot be provided on a self-insured basis
    without adverse tax consequences to the Executive or his death
    beneficiary, then, in lieu of continued life insurance coverage,
    the Company will pay the Executive, in accordance with
    Section 3.04, a lump sum payment, in cash, equal to 24
    times the full monthly premium payable to the Company’s
    group insurance carrier for comparable coverage for an executive
    employee under the Company’s group life insurance plan then
    in effect.



 



    The Company will offer the Executive and any eligible family
    members the opportunity to elect to continue medical and dental
    coverage pursuant to COBRA. The Executive will be responsible
    for paying the required monthly premium for that coverage, but
    the Company will pay the Executive, in accordance with
    Section 3.04, a lump sum cash stipend equal to 24 times the
    monthly COBRA premium then charged to qualified beneficiaries
    for the same level of health and dental coverage the Executive
    had in effect immediately prior to his termination, and the
    Executive may, but is not required to, choose to use the stipend
    for the payment of COBRA premiums for any COBRA coverage that
    the Executive or eligible family members may elect. The Company
    will pay the stipend to the Executive whether or not the
    Executive or any eligible family member elects COBRA coverage,
    whether or not the Executive continues COBRA coverage for the
    maximum period permitted by law, and whether or not the
    Executive receives medical or dental coverage from another
    employer while the Executive is receiving COBRA continuation
    coverage. Payment of the stipend will not in any way extend or
    modify the Executive’s continuation coverage rights under
    COBRA or any similar continuation coverage law.




    

    3








 





 



    (e) Matching and Fixed
    Contributions.  In addition to the vested
    amounts, if any, to which the Executive is entitled under the
    Savings Plan as of the Date of Termination, the Company will pay
    the Executive, in accordance with Section 3.04, a lump sum
    amount equal to the value of the unvested portion, if any, of
    the employer matching and fixed contributions (and attributable
    earnings) credited to the Executive under the Savings Plan.



 



    (f) Outplacement Services.  For a
    period not to exceed six (6) months following the Date of
    Termination, the Company will provide the Executive with
    reasonable outplacement services consistent with past practices
    of the Company prior to the Change in Control or, if no past
    practice has been established prior to the Change in Control,
    consistent with the prevailing practice in the medical device
    manufacturing industry.



 



    Section 3.03.  Gross-Up
    Payment.



 



    (a) In the event that any Severance Payments paid or
    payable to the Executive or for his benefit pursuant to the
    terms of this Agreement or otherwise in connection with a Change
    in Control (“Total Payments”) would be subject to any
    Excise Tax, then the Executive will be entitled to receive an
    additional payment (a
    “Gross-Up
    Payment”) in an amount such that after the Executive’s
    payment of all taxes (including any interest, penalties,
    additional tax, or similar items imposed with respect to the
    Gross-Up
    Payment and the Excise Tax), including any Excise Tax upon the
    Gross-Up
    Payment, the Executive retains an amount of the
    Gross-Up
    Payment equal to the Excise Tax imposed upon the Total Payments.



 



    (b) An initial determination as to whether a
    Gross-Up
    Payment is required pursuant to this Agreement and the amount of
    that
    Gross-Up
    Payment will be made at the Company’s expense by an
    Accounting Firm selected by the Executive and reasonably
    acceptable to the Company. The Accounting Firm will provide its
    determination, together with detailed supporting calculations
    and documentation, to the Company and the Executive within 10
    business days after the Date of Termination, or such other time
    as requested by the Company and the Executive. If the Accounting
    Firm determines that no Excise Tax is payable by the Executive
    with respect to the Payments, it will furnish the Executive with
    an opinion reasonably acceptable to the Executive that no Excise
    Tax will be imposed with respect to the Payments. Within 10
    business days after the Accounting Firm delivers its
    determination to the Executive, the Executive will have the
    right to dispute the determination. The
    Gross-Up
    Payment, if any, as determined by the Accounting Firm in
    accordance with the preceding provisions of this Section, will
    be paid by the Company to the Executive within 5 business days
    of the receipt of the Accounting Firm’s determination. The
    existence of a dispute will not in any way affect the
    Executive’s right to receive the
    Gross-Up
    Payment in accordance with the determination. If there is no
    dispute, the determination will be final, binding, and
    conclusive upon the Company and the Executive. If there is a
    dispute, then the Company and the Executive will together select
    a second Accounting Firm, which will review the determination
    and the Executive’s basis for the dispute and then render
    its own determination, which will be final, binding, and
    conclusive on the Company and the Executive. The Company will
    bear all costs associated with that determination, unless the
    determination is not greater than the initial determination, in
    which case all such costs will be borne by the Executive.



 



    (c) The value of any non-cash benefits or any deferred
    payment or benefit paid or payable to the Executive will be
    determined in accordance with the principles of Code
    section 280G(d)(3) and (4). For purposes of determining the
    amount of the
    Gross-Up
    Payment, the Executive will be deemed to pay federal income
    taxes at the highest marginal rate of federal income taxation in
    the calendar year in which the
    Gross-Up
    Payment is to be made and applicable state and local income
    taxes at the highest marginal rate of taxation in the state and
    locality of the Executive’s residence on the Date of
    Termination, net of the maximum reduction in federal income
    taxes that would be obtained from deduction of those state and
    local taxes.



 



    (d) Notwithstanding anything contained in this Agreement to
    the contrary, in the event that, according to the Accounting
    Firm’s determination, an Excise Tax will be imposed on the
    Total Payments, the Company will pay to the applicable
    government taxing authorities as Excise Tax withholding the
    amount of the Excise Tax that the Company has actually withheld
    from the Total Payments in accordance with applicable law.



 



    (e) Notwithstanding the preceding provisions of this
    Section 3.03, the Company will not have any obligation to
    make the
    Gross-Up
    Payment unless the value of the Total Payments exceeds 110% of
    the maximum amount of parachute payments that could be paid to
    the Executive without any imposition of golden parachute excise
    taxes




    

    4








 






    under Code sections 280G and 4999 (the “110%
    Amount”). In the event the value of the Total Payments does
    not exceed the 110% Amount, the value of the Total Payments will
    be reduced to the extent necessary so that, within the meaning
    of Code section 280G(b)(2)(A)(ii), the aggregate present
    value of the payments in the nature of compensation to (or for
    the benefit of) the Executive that are contingent on a Change in
    Control (with a Change in Control for this purpose being defined
    in terms of a “change” described in Code
    section 280G(b)(2)(A)(i) or (ii)), do not exceed 2.999
    multiplied by the Base Amount. For this purpose, cash Severance
    Payments will be reduced first (if necessary, to zero), and all
    other, non-cash Severance Payments will be reduced next (if
    necessary, to zero). For purposes of the limitation described in
    the preceding sentence, the following will not be taken into
    account: (1) any portion of the Total Payments the receipt
    or enjoyment of which the Executive effectively waived in
    writing prior to the Date of Termination, and (2) any
    portion of the Total Payments that, in the opinion of the
    Accounting Firm, does not constitute a “parachute
    payment” within the meaning of Code section 280G(b)(2).



 



    (f) For purposes of this Section 3.03, the value of
    any non-cash benefit or any deferred payment or benefit included
    in the Total Payments will be determined by the Accounting Firm
    in accordance with the principles of Code
    sections 280G(d)(3) and (4).



 



    (g) Notwithstanding the foregoing, any payment under this
    Section 3.03 shall be made by March 15 of the year
    following the Executive’s Date of Termination.



 



    Section 3.04.  Time
    of Payment.  Except as otherwise expressly
    provided in Section 3.02 or Section 3.03, payments
    provided for in those Sections will be made as follows:



 



    (a) Subject to Section 3.04(d), no later than the
    fifth business day following the Date of Termination, the
    Company will pay to the Executive an estimate, as determined by
    the Company in good faith, of 90% of the minimum amount of the
    payments under Sections 3.02 and 3.03 to which the
    Executive is clearly entitled.



 



    (b) Subject to Section 3.04(d), the Company will pay
    to the Executive the remainder of the payments due him under
    Sections 3.02 and 3.03 (together with interest at the rate
    provided in Code section 1274(b)(2)(B)) not later than the
    30th business day after the Date of Termination.



 



    (c) At the time that payment is made under
    Section 3.04(b), the Company will provide the Executive
    with a written statement setting forth the manner in which all
    of the payments to him under this Agreement were calculated and
    the basis for the calculations including, without limitation,
    any opinions or other advice the Company received from auditors
    or consultants (other than legal counsel) with respect to the
    calculations (and any such opinions or advice that are in
    writing will be attached to the statement).



 



    (d) Notwithstanding any of the foregoing, if, as of the
    date of the Executive’s separation from service, the
    Executive is a “specified employee” under the
    Section 409A Standards, any and all payments under this
    Agreement that constitute deferred compensation under the
    Section 409A Standards shall be suspended until, and will
    be payable on, the date that is six (6) months after the
    Executive’s separation from service (or, if earlier, the
    date the Executive dies after separation from service).



 



    Section 3.05.  Attorneys
    Fees and Expenses.  To the extent permissible
    under the Section 409A Standards, if the Executive finally
    prevails with respect to any bona fide, good faith dispute
    between the Executive and the Company regarding the
    interpretation, terms, validity or enforcement of this Agreement
    (including any dispute as to the amount of any payment due under
    this Agreement), the Company will pay or reimburse the Executive
    for all reasonable attorneys fees and expenses incurred by the
    Executive in connection with that dispute pursuant to the terms
    of this paragraph. Payment or reimbursement of those fees and
    expenses will be made within fifteen (15) business days
    after delivery of the Executive’s written request for
    payment, accompanied by such evidence of fees and expenses
    incurred as the Company reasonably may require, but the
    Executive may not submit such a request until the dispute has
    been finally resolved by a legally binding settlement or by an
    order or judgment that is not subject to appeal or with respect
    to which all appeals have been exhausted. Any payment pursuant
    to this paragraph will be made no later than the end of the
    calendar year following the calendar year in which the dispute
    is finally resolved by a legally binding settlement or
    nonappealable judgment or order.




    

    5








 





 



    In addition, the Company will pay the reasonable legal fees and
    expenses incurred by the Executive in connection with any tax
    audit or proceeding to the extent attributable to the
    application of Code section 4999 to any payment or benefit
    provided under this Agreement and including, but not limited to,
    auditors’ fees incurred in connection with the audit or
    proceeding. Payment pursuant to the preceding sentence shall be
    made within fifteen (15) business days after the delivery
    of the Executive’s written request for payment, accompanied
    by such evidence of fees and expenses incurred as the Company
    reasonably may require, but in no case later than the end of the
    calendar year following the calendar year in which the audit is
    completed or there is a final and nonappealable settlement or
    other resolution of the matter.



 




    ARTICLE IV

    



 




    Termination
    of Employment



 



    Section 4.01.  Notice
    of Termination.  After a Change in Control and
    during the term of this Agreement, any purported termination of
    the Executive’s employment (other than by reason of death)
    will be communicated by a written Notice of Termination from one
    party to the other party in accordance with Article VIII.
    The Notice of Termination will indicate the specific termination
    provision in this Agreement relied upon and will set forth in
    reasonable detail the facts and circumstances claimed to provide
    a basis for termination of the Executive’s employment under
    the cited provision.



 



    SECTION 4.02.  Date of
    Termination.  Except as otherwise provided in
    Section 4.01, with respect to any purported termination of
    the Executive’s employment after a Change in Control and
    during the term of this Agreement, the term “Date of
    Termination” will have the meaning set forth in this
    Section. If the Executive’s employment is terminated for
    Disability, Date of Termination means thirty (30) days
    after Notice of Termination is given, provided that the
    Executive does not return to the full-time performance of the
    Executive’s duties during that
    30-day
    period. If the Executive’s employment is terminated for any
    other reason, Date of Termination means the date specified in
    the Notice of Termination, which, in the case of a termination
    by the Company, cannot be less than 30 days (except in the
    case of a termination for Cause) and, in the case of a
    termination by the Executive, cannot be less than 15 days
    nor more than 60 days from the date on which the Notice of
    Termination is given.



 




    ARTICLE V

    



 




    No
    Mitigation



 



    The Company agrees that, if the Executive’s employment by
    the Company is terminated during the term of this Agreement, the
    Executive is not required to seek other employment or to attempt
    in any way to reduce any amounts payable to the Executive by the
    Company pursuant to Article III. Further, the amount of any
    payment or benefit provided for in Article III (other than
    Section 3.02(d)) will not be reduced by any compensation
    earned by the Executive as the result of employment by another
    employer, by retirement benefits, by offset against any amount
    claimed to be owed by the Executive to the Company, or otherwise.



 




    ARTICLE VI

    



 




    The
    Executive’s Covenants



 



    Section 6.01.  Noncompetition
    Agreement.  In consideration for this
    Agreement, the Executive will execute, concurrent with the
    execution of this Agreement, a noncompetition agreement with the
    Company; provided, however, that if the Executive has an
    existing noncompetition agreement with the Company, the Company,
    rather than entering into a new noncompetition agreement with
    the Executive, may instead, as a condition to entering into this
    agreement, require that the Executive acknowledge and affirm his
    continuing obligations under such existing noncompetition
    agreement and re-affirm his agreement to honor the obligations
    as set forth in that document.



 



    Section 6.02.  Potential
    Change in Control.  The Executive agrees that,
    subject to the terms and conditions of this Agreement, in the
    event of a Potential Change in Control during the term of this
    Agreement, the Executive will remain employed by the Company
    until the earliest of (a) a date that is six months from
    the date of the Potential Change of Control, (b) the date
    of a Change in Control, (c) the date on which the Executive
    terminates employment for Good Reason (determined by treating
    the Potential Change in Control as a Change in Control in
    applying the definition of Good Reason) or by reason of death,
    or (d) the date the Company terminates the Executive’s
    employment for any reason.




    

    6








 





 



    Section 6.03.  General
    Release.  The Executive agrees that,
    notwithstanding any other provision of this Agreement, the
    Executive will not be eligible for any Severance Payments under
    this Agreement unless the Executive timely signs, and does not
    timely revoke, a General Release in substantially the form
    attached to this Agreement as Exhibit A. The Executive will
    be given 21 days to consider the terms of the General
    Release. The General Release will not become effective until
    seven days following the date the General Release is executed.
    If the Executive does not return the executed General Release to
    the Company by the end of the 21 day period, that failure
    will be deemed a refusal to sign, and the Executive will not be
    entitled to receive any Severance Payments under this Agreement.
    In certain circumstances, the 21 day period to consider the
    General Release may be extended to a 45 day period. The
    Executive will be advised in writing if the 45 day period
    is applicable. In the absence of such notice, the 21 day
    period applies.



 




    ARTICLE VII

    



 




    Successors;
    Binding Agreement



 



    Section 7.01.  Obligation
    of Successors.



 



    (a) In addition to any obligations imposed by law upon any
    successor to the Company, the Company will require any successor
    (whether direct or indirect, by purchase, merger, consolidation,
    or otherwise) to all or substantially all of the business
    and/or
    assets of the Company to expressly assume and agree to perform
    this Agreement in the same manner and to the same extent that
    the Company would be required to perform it if no succession had
    occurred.



 



    (b) Subject to Section 7.01(c), failure of the Company
    to obtain such an assumption and agreement under
    Section 7.01(a) prior to the effectiveness of any such
    succession will be a breach of this Agreement and will entitle
    the Executive to compensation from the Company in the same
    amount as the Executive would be entitled to under this
    Agreement if the Executive were to terminate employment for Good
    Reason after a Change in Control, except that, for purposes of
    implementing the foregoing, the date on which the succession
    becomes effective will be deemed the Date of Termination.



 



    (c) Payment of benefits under Section 7.01(b) shall be
    made on the deemed Date of Termination if, and only if, the
    succession resulted from a transaction that satisfies the
    definition of change in control under Section 409A of the
    Code. If the transaction does not satisfy the definition of
    change in control under Section 409A, payment of benefits
    due under Section 7.01(b) shall be made within 30 days
    of the Executive’s actual date of termination of
    employment, subject to the provisions of Section 3.04(d).
    No interest or earnings shall be paid due to any delay in
    payment under this Section 7.01(c).



 



    Section 7.02.  Enforcement
    Rights of Others.  This Agreement will inure
    to the benefit of and be enforceable by the Executive’s
    personal or legal representatives, executors, administrators,
    successors, heirs, distributees, devisees, and legatees. If the
    Executive dies while any amount is still payable to the
    Executive under this Agreement, (other than amounts that, by
    their terms, terminate upon the Executive’s death), then,
    unless otherwise provided in this Agreement, all such amounts
    will be paid in accordance with the terms of this Agreement to
    the executors, personal representatives, or administrators of
    the Executive’s estate.




    

    7








 





 




    ARTICLE VIII

    



 




    Notices



 



    For the purpose of this Agreement, notices and all other
    communications provided for in the Agreement will be in writing
    and will be deemed to have been duly given when delivered or
    mailed by United States registered mail, return receipt
    requested, postage prepaid, addressed to the respective
    addresses set forth below, or to such other address as either
    party may furnish to the other in writing in accordance with
    this Article VIII, except that notice of change of address
    will be effective only upon actual receipt:



 



    To the Company:




 



    Zimmer Holdings, Inc.

    Attention: General Counsel

    345 East Main Street

    Post Office Box 708

    Warsaw, Indiana
    46581-0708



 



    To the Executive:



 



    Mark C. Throdahl

    38 Carteret Road

    Allendale, NJ 07401



 




    ARTICLE IX

    



 




    Miscellaneous



 



    This Agreement will not be construed as creating an express or
    implied contract of employment and, except as otherwise agreed
    in writing between the Executive and the Company, the Executive
    will not have any right to be retained in the employ of the
    Company. No provision of this Agreement may be modified, waived,
    or discharged unless the waiver, modification, or discharge is
    agreed to in writing and signed by the Executive and an officer
    of the Company specifically designated by the Board. No waiver
    by either party at any time of any breach by the other party of,
    or compliance with, any condition or provision of this Agreement
    to be performed by the other party will be deemed a waiver of
    similar or dissimilar provisions or conditions at the same or at
    any other time. Neither party has made any agreements or
    representations, oral or otherwise, express or implied, with
    respect to the subject matter of this Agreement that are not
    expressly set forth in this Agreement. Except as provided in the
    following two sentences, the validity, interpretation,
    construction, and performance of this Agreement will be governed
    by the laws of the State of Indiana, to the extent not preempted
    by federal law. This Agreement will at all times be effected,
    construed, interpreted, and applied in a manner consistent with
    the Section 409A Standards, and in resolving any
    uncertainty as to the meaning or intention of any provision of
    this Agreement, the interpretation that will prevail is the
    interpretation that causes the Agreement to comply with the
    Section 409A Standards. In addition, to the extent that any
    terms of this Agreement would subject the Executive to gross
    income inclusion, interest, or additional tax pursuant to Code
    Section 409A, those terms are to that extent superseded by
    the applicable Section 409A Standards. All references to
    sections of the Exchange Act or the Code will be deemed also to
    refer to any successor provisions to those sections. Any
    payments provided for under this Agreement will be paid net of
    any applicable withholding required under federal, state, or
    local law and any additional withholding to which the Executive
    has agreed. The obligations of the Company and the Executive
    under Articles III, IV, and VI will survive the expiration
    of the term of this Agreement.



 




    ARTICLE X

    



 




    Validity



 



    The invalidity or unenforceability of any provision or this
    Agreement will not affect the validity or enforceability of any
    other provision of this Agreement, which will remain in full
    force and effect.




    

    8








 





 




    ARTICLE XI

    



 




    Counterparts



 



    This Agreement may be executed in several counterparts, each of
    which will be deemed to be an original but all of which together
    will constitute one and the same instrument.



 




    ARTICLE XII

    



 




    Settlement
    of Disputes; Arbitration



 



    All claims by the Executive for benefits under this Agreement
    must be in writing and will be directed to and determined by the
    Board. Any denial by the Board of a claim for benefits under
    this Agreement will be delivered to the Executive in writing and
    will set forth the specific reasons for the denial and the
    specific provisions of this Agreement relied upon. The Board
    will afford a reasonable opportunity to the Executive for a
    review of the decision denying a claim and will further allow
    the Executive to appeal to the Board a decision of the Board
    within 60 days after notification by the Board that the
    Executive’s claim has been denied. Any further dispute or
    controversy arising under or in connection with this Agreement
    will be settled exclusively by arbitration in Warsaw, Indiana in
    accordance with the rules of the American Arbitration
    Association then in effect. Judgment may be entered on the
    arbitrator’s award in any court having jurisdiction. Each
    party will bear its own expenses in the arbitration for
    attorneys’ fees, for its witnesses, and for other expenses
    of presenting its case. Other arbitration costs, including
    arbitrators’ fees, administrative fees, and fees for
    records or transcripts, will be borne equally by the parties.
    Notwithstanding anything in this Article to the contrary, if the
    Executive prevails with respect to any dispute submitted to
    arbitration under this Article, the Company will reimburse or
    pay all reasonable legal fees and expenses that the Executive
    incurred in connection with that dispute as required by
    Section 3.05.



 




    ARTICLE XIII

    



 




    Definitions



 



    For purposes of this Agreement, the following terms will have
    the meanings indicated below:



 



    (a) “Accounting Firm” means an
    accounting firm, other than the Company’s independent
    auditors, that is designated as one of the four largest
    accounting firms in the United States.



 



    (b) “Award Plan” means any of the
    Zimmer Holdings, Inc. 2006 Stock Incentive Plan, the Zimmer
    Holdings, Inc. 2001 Stock Incentive Plan or the Zimmer Holdings,
    Inc. TeamShare Stock Option Plan.



 



    (c) “Base Amount” has the meaning
    stated in Code section 280G(b)(3).



 



    (d) “Beneficial Owner” has the
    meaning stated in
    Rule 13d-3
    under the Exchange Act.



 



    (e) [RESERVED]



 



    (f) “Board” means the Board of
    Directors of the Company.



 



    (g) “Cause” for termination by the
    Company of the Executive’s employment, after any Change in
    Control, means (1) the willful and continued failure by the
    Executive to substantially perform the Executive’s duties
    with the Company (other than any such failure resulting from the
    Executive’s incapacity due to physical or mental illness or
    any such actual or anticipated failure after the issuance of a
    Notice of Termination for Good Reason by the Executive pursuant
    to Section 4.01) for a period of at least 30 consecutive
    days after a written demand for substantial performance is
    delivered to the Executive by the Board, which demand
    specifically identifies the manner in which the Board believes
    that the Executive has not substantially performed the
    Executive’s duties; (2) the Executive willfully
    engages in conduct that is demonstrably and materially injurious
    to the Company or its subsidiaries, monetarily or otherwise; or
    (3) the Executive is convicted of, or has entered a plea of
    no contest to, a felony. For purposes of clauses (1) and
    (2) of this definition, no act, or failure to act, on the
    Executive’s part will be deemed “willful” unless
    it is done, or omitted to be done, by the Executive not in good
    faith and without reasonable belief that the Executive’s
    act, or failure to act, was in the best interest of the Company.




    

    9








 





 



    (h) A “Change in Control” will be
    deemed to have occurred if any of the following events occur:



 



    (1) any Person is or becomes the Beneficial Owner, directly
    or indirectly, of securities of the Company (not including in
    the securities beneficially owned by that Person any securities
    acquired directly from the Company or its affiliates)
    representing 20% or more of the combined voting power of the
    Company’s then outstanding securities; or



 



    (2) during any period of two consecutive years (not
    including any period prior to the execution of this Agreement),
    individuals who at the beginning of the period constitute the
    Board and any new director (other than a director designated by
    a Person who has entered into an agreement with the Company to
    effect a transaction described in clause (1), (3) or
    (4) of this paragraph whose election by the Board or
    nomination for election by the Company’s stockholders was
    approved by a vote of at least two-thirds (2/3) of the directors
    then still in office who either were directors at the beginning
    of the period or whose election or nomination for election was
    previously approved), cease for any reason to constitute a
    majority of the Board; or



 



    (3) the shareholders of the Company approve a merger or
    consolidation of the Company with any other corporation, other
    than (A) a merger or consolidation that would result in the
    voting securities of the Company outstanding immediately prior
    to the merger or consolidation continuing to represent (either
    by remaining outstanding or by being converted into voting
    securities of the surviving entity), in combination with the
    ownership of any trustee or other fiduciary holding securities
    under an employee benefit plan of the Company, at least 75% of
    the combined voting power of the voting securities of the
    Company or the surviving entity outstanding immediately after
    the merger or consolidation; or (B) a merger or
    consolidation effected to implement a recapitalization of the
    Company (or similar transaction) in which no Person acquires
    more than 50% of the combined voting power of the Company’s
    then outstanding securities; or



 



    (4) the shareholders of the Company approve a plan of
    complete liquidation of the Company or an agreement for the sale
    or disposition by the Company of all or substantially all the
    Company’s assets.



 



    Notwithstanding the foregoing, a Change in Control will not
    include any event, circumstance, or transaction occurring during
    the six-month period following a Potential Change in Control
    that results from the action of any entity or group that
    includes, is affiliated with, or is wholly or partly controlled
    by the Executive; provided, further, that such an
    action will not be taken into account for this purpose if it
    occurs within a six-month period following a Potential Change in
    Control resulting from the action of any entity or group that
    does not include the Executive.



 



    (i) “COBRA” means the continuation
    coverage provisions of the Consolidated Omnibus Budget
    Reconciliation Act of 1985, as amended.



 



    (j) “Code” means the Internal
    Revenue Code of 1986, as amended from time to time, and
    interpretative rules and regulations.



 



    (k) “Company” means Zimmer
    Holdings, Inc., a Delaware corporation, and any successor to its
    business
    and/or
    assets that assumes and agrees to perform this Agreement by
    operation of law, or otherwise (except in determining, under
    Section XIII(h), whether or not any Change in Control of
    the Company has occurred in connection with the succession).



 



    (l) “Company Shares” means shares
    of common stock of the Company or any equity securities into
    which those shares have been converted.



 



    (m) “Date of Termination” has the
    meaning stated in Section 4.02.



 



    (n) “Disability” has the meaning
    stated in the Company’s short-term or long-term disability
    plan, as applicable, as in effect immediately prior to a Change
    in Control.



 



    (o) “Exchange Act” means the
    Securities Exchange Act of 1934, as amended from time to time,
    and interpretive rules and regulations.



 



    (p) “Excise Tax” means any excise
    tax imposed under Code Section 4999.




    

    10








 





 



    (q) “Executive” means the
    individual named in the first paragraph of this Agreement.



 



    (r) “General Release” has the
    meaning stated in Section 6.03.



 



    (s) “Good Reason” for termination
    by the Executive of the Executive’s employment means the
    occurrence (without the Executive’s express written
    consent) of any one of the following acts by the Company, or
    failures by the Company to act, unless, in the case of any act
    or failure to act described in paragraph (1), (4), (5),
    (6), or (7) below, the act or failure to act is corrected
    prior to the Date of Termination specified in the
    Executive’s Notice of Termination:



 



    (1) the assignment to the Executive of any duties
    inconsistent with the Executive’s status as an executive
    officer of the Company or a substantial adverse alteration in
    the nature or status of the Executive’s responsibilities
    from those in effect immediately prior to a Change in Control;



 



    (2) a reduction by the Company in the Executive’s
    annual base salary as in effect on the date of this Agreement or
    as the same may be increased from time to time, or the level of
    the Executive’s entitlement under the Incentive Plan as in
    effect on the date of this Agreement or as the same may be
    increased from time to time;



 



    (3) the Company’s requiring the Executive to be based
    more than 50 miles from the Company’s offices at which
    the Executive is based immediately prior to a Change in Control
    (except for required travel on the Company’s business to an
    extent substantially consistent with the Executive’s
    business travel obligations immediately prior to the Change in
    Control), or, in the event the Executive consents to any such
    relocation of his offices, the Company’s failure to provide
    the Executive with all of the benefits of the Company’s
    relocation policy as in operation immediately prior to the
    Change in Control;



 



    (4) the Company’s failure, without the
    Executive’s consent, to pay to the Executive any portion of
    the Executive’s current compensation (which means, for
    purposes of this paragraph (4), the Executive’s annual
    base salary as in effect on the date of this Agreement, or as it
    may be increased from time to time, and the awards earned
    pursuant to the Incentive Plan) or to pay to the Executive any
    portion of an installment of deferred compensation under any
    deferred compensation program of the Company, within seven days
    of the date the compensation is due;



 



    (5) the Company’s failure to continue in effect any
    compensation plan in which the Executive participates
    immediately prior to a Change in Control, which plan is material
    to the Executive’s total compensation, including, but not
    limited to, the Incentive Plan and the Award Plan or any
    substitute plans adopted prior to the Change in Control, unless
    an equitable arrangement (embodied in an ongoing substitute or
    alternative plan) has been made with respect to that plan, or
    the Company’s failure to continue the Executive’s
    participation in such a plan (or in a substitute or alternative
    plan) on a basis not materially less favorable, both in terms of
    the amount of benefits provided and the level of the
    Executive’s participation relative to other participants,
    as existed at the time of the Change in Control;



 



    (6) the Company’s failure to continue to provide the
    Executive with benefits substantially similar to those enjoyed
    by the Executive under any of the Company’s pension
    (including, without limitation, to the extent applicable to the
    Executive, the Company’s Savings and Investment Program,
    including the Company’s Benefit Equalization Plan for the
    Savings and Investment Program), life insurance, medical, health
    and accident, or disability plans in which the Executive was
    participating at the time of the Change in Control; the taking
    of any action by the Company that would directly or indirectly
    materially reduce any of those benefits or deprive the Executive
    of any material fringe benefit enjoyed by the Executive at the
    time of a Change in Control; or the Company’s failure to
    provide the Executive with the number of paid vacation days to
    which the Executive is entitled on the basis of years of service
    with the Company in accordance with the Company’s normal
    vacation policy in effect at the time of the Change in
    Control; or



 



    (7) any purported termination of the Executive’s
    employment that is not effected pursuant to a Notice of
    Termination satisfying the requirements of Section 4.01;
    for purposes of this Agreement, no such purported termination
    will be effective.




    

    11








 





 



    The Executive’s right to terminate the Executive’s
    employment for Good Reason will not be affected by the
    Executive’s incapacity due to physical or mental illness.
    The Executive’s continued employment will not constitute
    consent to, or a waiver of rights with respect to, any act or
    failure to act that constitutes Good Reason.



 



    Notwithstanding the foregoing, the occurrence of an event that
    would otherwise constitute Good Reason will cease to be an event
    constituting Good Reason if the Executive does not timely
    provide a Notice of Termination to the Company within
    120 days of the date on which the Executive first becomes
    aware (or reasonably should have become aware) of the occurrence
    of that event.



 



    (t) “Incentive Plan” means the
    Company’s Executive Performance Incentive Plan.



 



    (u) “Notice of Termination” has the
    meaning stated in Section 4.01.



 



    (v) “Options” means options for
    Shares granted to the Executive under the Award Plan.



 



    (w) “Person” has the meaning stated
    in section 3(a)(9) of the Exchange Act, as modified and
    used in sections 13(d) and 14(d) of the Exchange Act;
    however, a Person will not include (1) the Company or any
    of its subsidiaries, (2) a trustee or other fiduciary
    holding securities under an employee benefit plan of the Company
    or any of its subsidiaries, (3) an underwriter temporarily
    holding securities pursuant to an offering of those securities,
    or (4) a corporation owned, directly or indirectly, by the
    stockholders of the Company in substantially the same
    proportions as their ownership of stock of the Company.



 



    (x) “Potential Change in Control”
    will be deemed to have occurred if any one of the following
    events occurs:



 



    (1) the Company enters into an agreement, the consummation
    of which would result in the occurrence of a Change in Control;



 



    (2) the Company or any Person publicly announces an
    intention to take or to consider taking actions that, if
    consummated, would constitute a Change in Control;



 



    (3) any Person who is or becomes the Beneficial Owner,
    directly or indirectly, of securities of the Company
    representing 10% or more of the combined voting power of the
    Company’s then outstanding securities, increases that
    Person’s beneficial ownership of those securities by 5% or
    more over the percentage so owned by that Person on the date of
    this Agreement; or



 



    (4) the Board adopts a resolution to the effect that, for
    purposes of this Agreement, a Potential Change in Control has
    occurred.



 



    (y) “Retirement Date” means the
    later of (1) age 65, or (2) another date for
    retirement by the Executive that has been approved by the Board
    at any time prior to a Change in Control.



 



    (z) [RESERVED]



 



    (aa) “Savings Plan” means the
    Zimmer Holdings, Inc. Savings and Investment Program, which, for
    purposes of this Agreement, will be deemed to include the
    Benefit Equalization Plan of Zimmer Holdings, Inc. and Its
    Subsidiary or Affiliated Corporations Participating in the
    Zimmer Holdings, Inc. Savings and Investment Program.




    

    12








 





 



    (bb) “Section 409A Standards”
    means the standards for nonqualified deferred compensation plans
    established by Code Section 409A.



 



    (cc) “Severance Payments” means the
    payments described in Section 3.02.



 



    (dd) “Shares” means shares of the
    common stock, $0.01 par value, of the Company.



 



    (ee) “Total Payments” has the
    meaning stated in Section 3.03(a).



 


	 	 	 	 	 
	

    EXECUTIVE


	
 
	
 
	
 
	
 

	
 
	
 
	
    ZIMMER HOLDINGS, INC.

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
    /s/  Mark
    C. Throdahl


    

	
 
	
    By:
	
 
	
    /s/  Chad
    F. Phipps


    


	
    Mark C. Throdahl

    Group President, Global Businesses

	
 
	
 
	
 
	
    Chad F. Phipps

    Senior Vice President, General Counsel and Secretary










    

    13