Document:

exv10w2

 

Exhibit 10.2

CORPORATE INTEGRITY AGREEMENT

 between the 

Office of Inspector General

 of the 

Department of Health and Human Services

and

Zimmer, Inc.

I. Preamble

     Zimmer, Inc. and Zimmer Holding, Inc (collectively Zimmer) hereby enter into this CIA with the
Office of Inspector General (OIG) of the United States Department of Health and Human Services
(HHS) to promote compliance by its officers, directors, employees, contractors, and agents with the
statutes, regulations, and written directives of Medicare, Medicaid, and all other Federal health
care programs (as defined in 42 U.S.C. § 1320a-7b(f)) (Federal health care program requirements).
Contemporaneously with this CIA, Zimmer is entering into a Settlement Agreement and Deferred
Prosecution Agreement (DPA) with the United States. This CIA shall apply only to U.S. operations
of Zimmer that are subject to U.S. Federal health care program requirements.

     Zimmer represented to the OIG that, prior to the effective date of this CIA, Zimmer
established a voluntary compliance program, which includes a corporate compliance officer, a
corporate compliance committee, a Code of Business Conduct for all employees, written policies and
procedures, educational and training initiatives, review and disciplinary procedures, a
confidential disclosure program, an ineligible persons screening program, internal audit and review
procedures, an annual needs assessment, a process to pre-approve consultant services, an
arrangements database, and a fair market value analysis by an independent expert in valuation.
Zimmer agrees to continue the operation of its compliance program in accordance with the terms set
forth below for the term of this CIA.

II. Term and Scope of the CIA

     A. The period of the compliance obligations assumed by Zimmer under this CIA shall be 5 years
from the effective date of this CIA, unless otherwise specified. The effective date shall be the
date on which the final signatory of this CIA executes this CIA (Effective Date). Each one-year
period, beginning with the one-year period following the Effective Date, shall be referred to as
the “Reporting Period.”

 

 

     B. Sections VII, VIII, IX, X, and XI shall expire no later than 120 days after OIG’s receipt
of: (1) Zimmer’s final annual report; or (2) any additional materials submitted by Zimmer pursuant
to OIG’s request, whichever is later.

     C. The scope of this CIA shall be governed by the following definitions:

	 	1.	 	“Arrangements” shall mean every arrangement or transaction
entered into by Zimmer that (a) involves, directly or indirectly, the offer,
payment, solicitation, or receipt of anything of value; and (b) is between
Zimmer and any actual or potential source of health care business or referrals
of health care business to Zimmer or any actual or potential recipient of
health care business or referrals from Zimmer. The term “source” shall include
any physician, contractor, vendor, or agent; and the term “health care business
or referrals” shall be read to include referring, recommending, or arranging
for, ordering, leasing or purchasing of any good, facility, item, or service
for which payment may be made in whole or in part by a Federal health care
program.

a. “Contractual Arrangements” shall mean every Arrangement that is
contractual in nature and shall include all Arrangements related to the
provision of services to Zimmer, including but not limited to, training,
education, consulting, research, clinical studies, focus groups, physician
advisory boards as well as intellectual property, grants, and charitable
contributions.

b. “Non-Contractual Arrangements” shall mean all Arrangements that are not
Contractual Arrangements.

	 	2.	 	“Covered Persons” includes:

a. all officers, directors and employees of Zimmer, including but not
limited to, Zimmer’s CEO and President and all members of Zimmer’s
respective management inclusive of senior vice presidents, vice presidents,
directors, and managers;

b. all contractors, subcontractors, agents, and other persons who, on
behalf of Zimmer, perform functions related to the sale or marketing

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of
items or services reimbursable by Federal health care programs; and

c. all individuals that sell or market on behalf of Zimmer items or
services for which reimbursement may be made by the Federal health care
programs.

Notwithstanding the above, this term does not include part-time or per diem
employees, contractors, subcontractors, agents, and other persons who are not
reasonably expected to work more than 160 hours per year, except that any such
individuals shall become “Covered Persons” at the point when they work more than 160
hours during the calendar year.

3. “Arrangements Covered Persons” includes Covered Persons involved in the
development, approval, management, implementation, use, or review of any of Zimmer’s
Arrangements.

III. Corporate Integrity Obligations 

     Zimmer shall implement or maintain a compliance program that includes the following elements
during the term of the CIA:

     A. Compliance Officer and Committee.

          1. Compliance Officer. Zimmer represented to the OIG that, prior to the Effective
Date of this CIA, Zimmer appointed a Compliance Officer who is responsible for developing
and implementing policies, procedures, and practices designed to ensure compliance with
Federal health care program requirements. Zimmer shall maintain a Compliance Officer for
the term of the CIA and the Compliance Officer shall be responsible for developing and
implementing policies, procedures, and practices designed to ensure compliance with the
requirements set forth in this CIA. The Zimmer Compliance Officer shall be a member of
senior management, shall make periodic (at least quarterly) reports regarding compliance
matters directly to Zimmer’s Board of Directors and shall be authorized to report on
compliance matters to Zimmer’s Board of Directors at any time. The Compliance Officer shall not be or be subordinate to Zimmer’s General
Counsel or Chief Financial Officer. The Compliance Officer shall be

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responsible for monitoring the day-to-day compliance activities engaged in by Zimmer as well as for any
reporting obligations imposed upon Zimmer under this CIA.

          Zimmer shall report to OIG, in writing, any changes in the identity or position description of
the Compliance Officer, or any actions or changes that would affect the Compliance Officer’s
ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after
such a change.

          2. Compliance Committee. Within 90 days after the Effective Date, Zimmer shall appoint a
Compliance Committee. The Compliance Committee shall, at a minimum, include the Compliance
Officer and other members of senior management necessary to meet the requirements of this CIA
(e.g., senior executives of relevant departments, such as finance, human resources, legal, sales,
and operations). The Compliance Officer shall chair the Compliance Committee and the Compliance
Committee shall support the Compliance Officer in fulfilling his or her responsibilities (e.g.,
assist in the analysis of Zimmer’s risk areas and oversee monitoring of internal and external
audits and investigations).

     Zimmer shall report to OIG, in writing, any changes in the composition of the Compliance
Committee, or any actions or changes that would affect the Compliance Committee’s ability to
perform the duties necessary to meet the obligations in this CIA, within 15 days after such a
change.

     B. Written Standards.

          1. Code of Conduct. Zimmer represented to the OIG that, prior to the Effective Date of
this CIA, Zimmer developed a Code of Business Conduct (“the Code of Conduct”). Zimmer shall make
the promotion of, and adherence to, the Code of Business Conduct (“Code of Conduct”) an element
in evaluating the performance of all employees. To the extent not already addressed in the Code
of Conduct, within 90 days of the Effective Date, the Code of Conduct shall be revised to
include, at a minimum, the following elements:

a. Zimmer’s commitment to full compliance with all federal, state and

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local
laws and regulations (which includes Federal health care program requirements);

b. Zimmer’s requirement that all Covered Persons shall be expected to comply with
all Federal health care program requirements and with Zimmer’s own Policies and
Procedures as implemented pursuant to this Section III.B (including the
requirements of this CIA);

c. the requirement that all Covered Persons shall be expected to report to their
Compliance Officer, or other appropriate individuals designated by Zimmer,
suspected violations of any Federal health care program requirements or of Zimmer’s
own Policies and Procedures;

d. the possible consequences to Zimmer and Covered Persons of failure to comply
with all Federal health care program requirements and with Zimmer’s Policies and
Procedures and the failure to report such non-compliance; and

e. the right of all individuals to use the Disclosure Program described in
Section III.F, and Zimmer’s commitment to nonretaliation and to maintain, as
appropriate, confidentiality and anonymity with respect to such disclosures.

     Within 90 days after the Effective Date, Zimmer shall distribute the Code of Conduct
(revised as necessary to include the elements set forth above) to each Covered Person and each
Covered Person will certify, in writing or electronically, that he or she has received, read,
understood and shall abide by Zimmer’s Code of Conduct. Zimmer may distribute the Code of
Conduct and the required certification to each Covered Person either electronically or in
hard-copy form. New Covered Persons shall receive the Code of Conduct and shall complete the
required certification within 30 days after becoming a Covered Person or within 90 days after
the Effective Date, whichever is later.

     Zimmer shall periodically review the Code of Conduct to determine if revisions are appropriate
and shall make any necessary revisions based on such review. Any revised Code of Conduct shall be
distributed within 30 days after any revisions are finalized. Each Covered Person shall certify, in writing or electronically, that he or she

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has received, read, understood, and shall abide by the revised Code of Conduct within 30 days after
the distribution of the revised Code of Conduct.

          2. Policies and Procedures. Within 90 days after the Effective Date, Zimmer shall implement
written Policies and Procedures regarding the operation of Zimmer’s compliance program and its
compliance with Federal health care program requirements. At a minimum, the Policies and
Procedures shall address:

a. the subjects relating to the Code of Conduct identified in
Section III.B.1;

b. the expectation that all Covered Persons shall comply with the Code of
Conduct, the Policies and Procedures required under this Section, and this
CIA;

c. 42 U.S.C. § 1320a-7b(b) (Anti-Kickback Statute) and the regulations and
other guidance documents related to this statute, and business or financial
arrangements or contracts that may violate the Anti-Kickback Statute, and
the applicability of the Anti-Kickback Statute to Arrangements as that term
is defined in Section II.C.1; and

d. the requirements set forth in Section III.D (Compliance with the
Anti-Kickback Statute), including but not limited to the Arrangements
Database, the internal review and approval process, and the tracking of
remuneration to and from sources of health care business or referrals.

     Within 90 days after the Effective Date, the relevant portions of the Policies and Procedures
shall be distributed to all individuals whose job functions relate to those Policies and
Procedures. Distribution may include publishing such Policies and Procedures on Zimmer’s intranet
or other internal web sites available to all employees. If Zimmer uses such an electronic method of
distribution, it must notify the individuals receiving the Policies and Procedures that the
Policies and Procedures will be distributed in such a manner, and it must adopt tracking procedures
designed to track the distribution and reasonably ensure that all appropriate individuals received
the Policies and Procedures. Appropriate and knowledgeable staff shall be available to explain the Policies
and Procedures.

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     At least annually (and more frequently, if appropriate), Zimmer shall assess and update, as
necessary, the Policies and Procedures. Within 30 days after the effective date of any revisions,
the relevant portions of any such revised Policies and Procedures shall be distributed to all
Covered Persons whose job functions relate to those Policies and Procedures.

     C. Training and Education.

          1. General Training. Within 90 days after the Effective Date, Zimmer shall provide at least
two hours of General Training to each Covered Person. This training, at a minimum, shall explain
Zimmer’s:

a. CIA requirements; and

b. Compliance Program (including the Code of Conduct and the Policies and
Procedures as they pertain to general compliance issues).

     New Covered Persons shall receive the General Training described above within 30 days after
becoming a Covered Person or within 90 days after the Effective Date, whichever is later. After
receiving the initial General Training described above, each Covered Person shall receive at least
one hour of General Training in each subsequent Reporting Period.

          2. Arrangements Training. Within 90 days after the Effective Date, each Arrangements
Covered Person shall receive at least three hours of Arrangements Training, in addition to the
General Training required above. The Arrangements Training shall include a discussion of:

a. Arrangements that potentially implicate the Anti-Kickback Statute, as
well as the regulations and other guidance documents related to this
statute;

b. Zimmer’s policies, procedures, and other requirements relating to
Arrangements, including but not limited to the Arrangements Database, the
internal review and approval process, and the tracking of remuneration to
and from sources of health care business or referrals required by Section
III.D of the CIA;

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c. the personal obligation of each individual involved in the development,
approval, management, implementation, use, or review of Zimmer’s
Arrangements to know the applicable legal requirements and Zimmer’s policies
and procedures;

d. the legal sanctions under the Anti-Kickback Statute; and

e. examples of violations of the Anti-Kickback Statute.

     New Arrangements Covered Persons shall receive this training within 30 days after the
beginning of their employment or becoming Arrangements Covered Persons, or within 90 days after the
Effective Date, whichever is later. A Zimmer employee who has completed the Arrangements Training
shall review a new Arrangements Covered Person’s work until such time as the new Arrangements
Covered Person completes his or her Arrangements Training.

     After receiving the initial Arrangements Training described in this Section, each Arrangements
Covered Person shall receive at least two hours of Arrangements Training in each subsequent
Reporting Period.

          3. Certification. Each individual who is required to attend training pursuant to this
Section III.C shall, upon completion of the training, certify, in writing or in electronic form,
that he or she has received the required training. The certification shall specify the type of
training received and the date received. The Compliance Officer (or designee) shall retain the
certifications, along with all course materials. These shall be made available to OIG, upon
request.

          4. Qualifications of Trainer. Persons providing the training required by this Section III.C
shall be knowledgeable about the subject area.

          5. Update of Training. At least annually, Zimmer shall review the training programs
developed to satisfy the requirements of this Section III.C, and, where
appropriate, update the training to reflect changes in Federal health care program
requirements, any issues discovered during internal audits or the Arrangements Review, and any
other relevant information.

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          6. Training Methods. Zimmer may provide the training required under this CIA through
videotape, DVD, appropriate computer-based training approaches, or other comparable methods not
involving in-person training. If Zimmer chooses to provide training pursuant to any such method,
they shall also make available at reasonable times appropriately qualified and knowledgeable staff
or trainers to answer questions or provide additional information to the individuals receiving such
training.

          7. Independent Distributors. Where a Covered Persons or Arrangements Covered Persons is an
independent distributor, the General Training obligations under this CIA shall be met so long as
the training is provided to a member of management of the independent distributor. Zimmer shall
request, and with respect to all new distributor agreements entered into after the Effective Date,
require the independent distributor to take reasonable steps to apprise its employees and other
personnel regarding the content of the training. In addition, Zimmer shall require such entities
to do the following:

a. agree to abide by the Code of Conduct or adopt its own Code of Conduct
addressing substantially all of the requirements of Section III.B.1;

b. distribute the following materials to its employees and subcontractors working
on Zimmer matters: (1) Zimmer’s or its own Code of Conduct; (2) copies of relevant
Zimmer policies and procedures relating to the work of the independent distributor;
and (3) information about Zimmer’s Disclosure Program (including the hotline
number);

c. provide either directly or through Zimmer, Anti-Kickback Training (as described
in Section III.C.2) to its employees and subcontractors to the extent they are
involved with the development, approval, management, implementation, use, or review
of any of Zimmer’s Arrangements;

d. certify to Zimmer that all employees and subcontractors working on Zimmer
matters have: (1) been screened to exclude Ineligible Persons in accordance with
the requirements of Section III.G of the CIA; (2) received a copy of Zimmer’s Code
of Conduct or its own Code of Conduct, information about Zimmer’s Disclosure Program (including the hotline number); and
(3) to the extent applicable, received Anti-Kickback training.

     D. Compliance with the Anti-Kickback Statute.

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          1. Arrangements Procedures. Within 90 days after the Effective Date, Zimmer shall have
procedures reasonably designed to ensure that each existing and new or renewed Arrangement,
including Contractual Arrangements and Non-Contractual Arrangements, does not violate the
Anti-Kickback Statute (taking into account the regulations, directives, and guidance related to
this statute) (Arrangements Procedures). These procedures shall include the following:

a. creating and maintaining a database of all existing and new or renewed
Arrangements, including Contractual Arrangements and Non-Contractual
Arrangements, that shall contain the information specified in Appendix A
(Arrangements Database);

b. tracking remuneration to and from all parties to Arrangements;

c. tracking service and activity logs to ensure that parties to an
Arrangement are performing the services required under the applicable
Arrangement;

d. monitoring the use of leased space, medical supplies, medical devices,
equipment, or other patient care items to ensure that such use is consistent
with the terms of the Arrangement (if applicable);

e. establishing and implementing a written review and prior approval
process for all Contractual Arrangements, including but not limited to, a
legal review by counsel with expertise in the Anti-Kickback Statute and
appropriate documentation of all internal controls, the purpose of which is
to ensure that all existing and new or renewed Contractual Arrangements do
not violate the Anti-Kickback Statute;

f. establishing and implementing a written review and approval process for
all Non-Contractual Arrangements, including but not
limited to, an annual legal review by counsel with expertise in the
Anti-Kickback Statute and appropriate documentation of all internal
controls, the purpose of which is to ensure that all Non-Contractual
Arrangements do not violate the Anti-Kickback Statute;

g. requiring the Compliance Officer to review the Arrangements Database,
internal review and approval process, and other

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Arrangements Procedures on
at least a quarterly basis and to provide a report on the results of such
review to the Compliance Committee; and

h. implementing effective responses when suspected violations of the
Anti-Kickback Statute are discovered, including disclosing Reportable Events
pursuant to Section III.I (Reporting).

          2. New or Renewed Arrangements. With the exception of Non-Contractual Arrangements, prior to
entering into new Arrangements or renewing existing Arrangements, in addition to complying with the
Arrangements Procedures set forth above, Zimmer shall comply with the following requirements
(Arrangements Requirements):

a. Ensure that each Arrangement is set forth in writing and signed by
Zimmer and the other parties to the Arrangement;

b. Include in the written agreement a requirement that all individuals who
meet the definition of Covered Persons shall comply with Zimmer’s Compliance
Program, including the training related to the Anti-Kickback Statute.
Additionally, Zimmer shall provide each party to the Arrangement with a copy
of its Code of Conduct and Anti-Kickback Statute Policies and Procedures;
and

c. Include in the written agreement a certification by the parties to the
Arrangement that the parties shall not violate the Anti-Kickback Statute
with respect to the performance of the Arrangement.

          3. Records Retention and Access. Zimmer shall retain and make available to OIG, upon
request, the Arrangements Database and all supporting documentation of the
Arrangements subject to this Section and, to the extent available, all non-privileged
communications related to the Arrangements and the actual performance of the duties under the
Arrangements.

     E. Review Procedures.

          1. General Description.

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a. Engagement of Independent Review Organization. Within 120 days after
the Effective Date, Zimmer shall engage an individual or entity (or
entities), such as an auditing, law or consulting firm (hereinafter
“Independent Review Organization” or “IRO”), to perform a review to assist
Zimmer in assessing its compliance with the obligations pursuant to Section
III.D of this CIA (Arrangements Review). For the purposes of this Section
III.E, “Zimmer” shall not include Zimmer Dental, Inc.; Zimmer
Orthobiologics, Inc.; Zimmer Spine, Inc.; Endius Incorporated; ISTO
Technologies, Inc.; and Zimmer Orthopaedic Surgical Products, Inc.

The IRO shall assess, along with Zimmer, whether it can perform the IRO
review in a professionally independent and objective fashion, as appropriate
to the nature of the engagement, taking into account any other business
relationships or other engagements that may exist. The engagement of the IRO
for the Arrangements Review shall not be deemed to create an attorney-client
relationship between Zimmer and the IRO. The other applicable requirements
relating to the IRO(s) are outlined in Appendix B to this CIA, which is
incorporated by reference.

b. Frequency of Arrangements Review. The Arrangements Review shall be
performed annually and shall cover each of the Reporting Periods. The
IRO(s) shall perform all components of each annual Arrangements Review.

c. Retention of Records. The IRO and Zimmer shall retain and make
available to OIG, upon request, all work papers, supporting
documentation, correspondence, and draft reports (those exchanged between
the IRO and Zimmer) related to the reviews.

d. Responsibilities and Liabilities. Nothing in this Section III.E affects
Zimmer’s responsibilities or liabilities under any criminal, civil, or
administrative laws or regulations applicable to any Federal health care
program including, but not limited to, the Anti-Kickback Statute.

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          2. Arrangements Review. The IRO shall perform a review to assess whether Zimmer is complying
with the Arrangements Procedures and Arrangements Requirements required by Sections III.D.1 and
III.D.2 of this CIA. The IRO shall randomly select a sample of 75 Arrangements that were entered
into or renewed during the Reporting Period. The IRO shall assess whether Zimmer has implemented
the Arrangements Procedures and, for each selected Arrangement, the IRO shall assess whether Zimmer
has complied with the Arrangements Procedures and Arrangements Requirements specifically with
respect to that Arrangement. The IRO’s assessment shall include, but is not limited to: (a)
verifying that the Arrangement is listed in the Arrangements Database; (b) verifying that the
Arrangement was subject to the internal review and approval process (including both a legal and
business review) and obtained the necessary approvals and that such review and approval is
appropriately documented; (c) verifying that the remuneration related to the Arrangement is
properly tracked; (d) verifying that the activity logs are properly completed and reviewed;
(e) verifying (if applicable) that leased space, medical supplies, medical devices, and equipment,
and other patient care items are properly monitored; (f) verifying that the Compliance Officer is
reviewing the Arrangements Database, internal review and approval process, and other Arrangements
Procedures on a quarterly basis and reporting the results of such review to the Compliance
Committee; (f) verifying that effective responses are being implemented when potential violations
of the Anti-Kickback Statute are discovered; and (g) verifying that Zimmer has met the requirements
of Section III.D.2.

          3. Arrangements Review Report. The IRO shall prepare a report based upon the Arrangements
Review performed (Arrangements Review Report). The Arrangements Review Report shall include the
IRO’s findings with respect to: (a) whether Zimmer has generally implemented the
Arrangements Procedures described in Section III.D.1; and (b) specific findings as to whether
Zimmer has complied with the Arrangements Procedures and Arrangements Requirements with respect to
each of the randomly selected Arrangements reviewed by the IRO. In addition, the Arrangements Review
Report shall include observations, findings and recommendations, if any, on possible improvements
to Zimmer’s policies, procedures, and systems in place to ensure that all Arrangements do not
violate the Anti-Kickback Statute.

          4. Validation Review. In the event OIG has reason to believe that: (a) Zimmer’s
Arrangements Review fails to conform to the requirements of this CIA; or (b) the IRO’s findings or
Arrangements Review results are inaccurate, OIG may, at its sole discretion, conduct its own review
to determine whether the Arrangements Review complied with the requirements of the CIA and/or the
findings or Arrangements Review

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results are inaccurate (Validation Review). Zimmer shall pay for
the reasonable cost of any such review performed by OIG or any of its designated agents. Any
Validation Review of Reports submitted as part of Zimmer’s final Annual Report must be initiated no
later than one year after Zimmer’s final submission (as described in Section II) is received by
OIG.

          Prior to initiating a Validation Review, OIG shall notify Zimmer of its intent to do so and
provide a written explanation of why OIG believes such a review is necessary. To resolve any
concerns raised by OIG, Zimmer may request a meeting with OIG to: (a) discuss the results of any
Arrangements Review submissions or findings; (b) present any additional information to clarify the
results of the Arrangements Review or to correct the inaccuracy of the Arrangements Review; and/or
(c) propose alternatives to the proposed Validation Review. Zimmer agrees to provide any
additional information as may be requested by OIG under this Section in an expedited manner. OIG
will attempt in good faith to resolve any Arrangements Review issues with Zimmer prior to
conducting a Validation Review. However, the final determination as to whether or not to proceed
with a Validation Review shall be made at the sole discretion of OIG.

          5. Independence and Objectivity Certification. The IRO shall include in its report(s) to
Zimmer a certification or sworn affidavit that it has evaluated its professional independence and
objectivity, as appropriate to the nature of the engagement, with regard to the Arrangements Review
that it has concluded that it is, in fact, independent and objective.

          6. Suspension of Requirements of Section III.E. Section III.E requirements will be suspended
during the first 18 months of the CIA while the DPA is in effect, unless and until OIG provides
notice to Zimmer that the suspension is lifted. In the event that OIG provides notice to Zimmer that Section III.E requirements are no longer suspended, within
90 days Zimmer shall engage an IRO as set forth in Section III.E. Once Zimmer engages an IRO,
Zimmer shall provide the following information regarding the IRO:

          (a) identity, address, and phone number;

          (b) a copy of the engagement letter;

          (c) a summary and description of any and all current and prior engagements and agreements
between Zimmer and the IRO; and

          (d) the proposed start and completion dates of the Arrangements Review;

          (e) a certification from the IRO regarding its professional independence and objectivity with
respect to Zimmer;

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          Prior to lifting the suspension of Section III.E requirements, OIG shall notify Zimmer of its
intent to do so and provide a written explanation of why OIG believes lifting the suspension of
Section III.E requirements is necessary. To resolve any concerns raised by the OIG, Zimmer may
request a meeting with the OIG. Zimmer agrees to provide any additional information as may be
requested by OIG under this Section in an expedited manner. OIG will attempt in good faith to
resolve any concerns raised by the OIG with Zimmer prior to lifting the suspension of Section III.E
requirements. However, the final determination as to whether or nor to lift the suspension of
Section III.E requirements shall be made at the sole discretion of the OIG.

    F. Disclosure Program.

     Zimmer represented to the OIG that, prior to the Effective Date of this CIA, it established a
Disclosure Program. Zimmer shall maintain a Disclosure Program that includes a mechanism (e.g.,
toll-free compliance telephone line) to enable individuals to disclose, to the Compliance Officer
or some other person who is not in the disclosing individual’s chain of command, any identified
issues or questions associated with Zimmer’s policies, conduct, practices, or procedures with
respect to a Federal health care program believed by the individual to be a potential violation of
criminal, civil, or administrative law. Zimmer shall appropriately publicize the existence of the
disclosure mechanism (e.g., via periodic e-mails to employees or by posting the
information in prominent common areas).

     The Disclosure Program shall emphasize a nonretribution, nonretaliation policy and include a
reporting mechanism for anonymous communications for which
appropriate confidentiality is maintained. Upon receipt of a disclosure, the Compliance
Officer (or designee) shall gather all relevant information from the disclosing individual. The
Compliance Officer (or designee) shall make a preliminary, good faith inquiry into the allegations
set forth in every disclosure to ensure that he or she has obtained all of the information
necessary to determine whether a further review should be conducted. For any disclosure that is
sufficiently specific so that it reasonably: (1) permits a determination of the appropriateness of
the alleged improper practice and (2) provides an opportunity for taking corrective action, the
Compliance Officer (or designee) shall conduct an internal review of the allegations set forth in
that disclosure and ensure that proper follow-up is conducted.

     Zimmer’s Compliance Officer (or designee) shall maintain a disclosure log, which

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includes a record and summary of each disclosure received (whether anonymous or not), the status of the
respective internal reviews, and any corrective action taken in response to the internal reviews.
The disclosure log shall be made available to OIG, upon request.

    G. Ineligible Persons.

          1. Definitions. For purposes of this CIA:

a. an “Ineligible Person” shall include an individual or entity who:

i. is currently excluded, debarred, suspended, or otherwise
ineligible to participate in the Federal health care programs or in
Federal procurement or nonprocurement programs; or

ii. has been convicted of a criminal offense that falls within the
ambit of 42 U.S.C. § 1320a-7(a), but has not yet been excluded,
debarred, suspended, or otherwise declared ineligible.

b. “Exclusion Lists” include:

i. the HHS/OIG List of Excluded Individuals/Entities (available
through the Internet at http://oig.hhs.gov); and

ii. the General Services Administration’s List of Parties Excluded
from Federal Programs (available through the Internet at
http://epls.arnet.gov).

c. “Screened Persons” include all prospective and current owners (other
than shareholders who: (1) have an ownership interest of less than 5%; and
(2) acquired the ownership interest through public trading), officers,
directors, and employees of Zimmer, and all Covered Persons who perform
functions related to the sale or marketing of items or services reimbursable
by Federal health care programs.

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          2. Screening Requirements. Zimmer shall ensure that all Screened Persons are not Ineligible
Persons, by implementing the following screening requirements.

a. Zimmer shall screen all Screened Persons against the Exclusion Lists
prior to engaging their services and, as part of the hiring or contracting
process, shall require such Screened Persons to disclose whether they are an
Ineligible Person.

b. Zimmer shall screen all Screened Persons against the Exclusion Lists
within 90 days after the Effective Date and on an annual basis thereafter.

c. Zimmer shall implement a policy requiring all Screened Persons to
disclose immediately any debarment, exclusion, suspension, or other event
that makes that person an Ineligible Person.

          Nothing in this Section affects the responsibility of (or liability for) Zimmer to refrain
from billing Federal health care programs for items or services furnished, ordered, or prescribed
by an Ineligible Person. Zimmer understands that items or services furnished by excluded persons
are not payable by Federal health care programs and that Zimmer may be liable for overpayments
and/or criminal, civil, and administrative sanctions for employing or contracting with an excluded
person regardless of whether Zimmer meets the requirements of this section III.G.

          3. Removal Requirement. If Zimmer has actual notice that a Screened Person has become an
Ineligible Person, Zimmer shall remove such Screened Person from responsibility for, or involvement
with, Zimmer’s business operations related to the Federal health care programs and shall remove
such Screened Person from any position for which the Screened Person’s compensation or the items or
services furnished, ordered, or prescribed by the Screened Person are paid in whole or part,
directly or indirectly, by Federal health care programs or otherwise with Federal funds at least
until such time as the Screened Person is reinstated into participation in the Federal health care
programs.

          4. Pending Charges and Proposed Exclusions. If Zimmer has actual notice that a Screened
Person is charged with a criminal offense that falls within the ambit of 42 U.S.C. §§ 1320a-7(a),
1320a-7(b)(1)-(3), or is proposed for exclusion during his or her employment or contract term,
Zimmer shall take all appropriate actions to ensure that the responsibilities of that Screened
Person have not and shall not adversely affect the quality

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of care rendered to any beneficiary,
patient, or resident, or the accuracy of any claims submitted to any Federal health care program.

    H. Notification of Government Investigation or Legal Proceedings.

     Within 30 days after discovery, Zimmer shall notify OIG, in writing, of any ongoing
investigation or legal proceeding known to Zimmer, conducted or brought by a governmental entity or
its agents involving an allegation that Zimmer has committed a crime or has engaged in fraudulent
activities. This notification shall include a description of the allegation, the identity of the
investigating or prosecuting agency, and the status of such investigation or legal proceeding.
Zimmer shall also provide written notice to OIG within 30 days after the resolution of the matter,
and shall provide OIG with a description of the findings and/or results of the investigation or
proceedings, if any.

    I. Reporting.

          1. Reportable Events.

a. Definition of Reportable Event. For purposes of this CIA, a “Reportable
Event” means anything that involves

i. a matter that a reasonable person would consider a probable
violation of criminal, civil, or administrative laws applicable to
any Federal health care program for which penalties or exclusion may
be authorized; or

ii. the filing of a bankruptcy petition by Zimmer.

A Reportable Event may be the result of an isolated event or a series of
occurrences.

b. Reporting of Reportable Events. If Zimmer determines (after a
reasonable opportunity to conduct an appropriate review or investigation of
the allegations) through any means that there is a Reportable Event, Zimmer
shall notify OIG, in writing, within 30 days after making the determination
that the Reportable Event exists. The report to OIG shall include the following information:

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i. a complete description of the Reportable Event, including the
relevant facts, persons involved, and legal and Federal health care
program authorities implicated;

ii. a description of Zimmer’s actions taken to correct the Reportable
Event; and

iii. any further steps Zimmer plans to take to address the
Reportable Event and prevent it from recurring.

iv. if the Reportable Events involves the filing of a bankruptcy
petition, the report to the OIG shall include documentation of the
filing and a description of any Federal health care program
authorities implicated.

IV. New Business Units

     In the event that, after the Effective Date, Zimmer sells, closes, purchases, or establishes a
new business unit related to the delivery, sale, marketing, or furnishing of items or services that
may be reimbursed by Federal health care programs, Zimmer shall notify OIG of this fact as soon as
possible, but no later than within 30 days after the date of sale, closure, purchase, or
establishment. This notification shall include the address of the new business unit, phone number, fax number, any Medicare Provider number, provider
identification number and/or supplier number (if applicable), and the corresponding contractor’s
name and address that has issued any such Medicare number. Each new business unit shall be subject
to all of the requirements under this CIA.

V. Implementation and Annual Reports

     A. Implementation Report. Within 120 days after the Effective Date, Zimmer shall
submit a written report to OIG summarizing the status of its implementation of the requirements of
this CIA (Implementation Report). The Implementation Report shall, at a minimum, include:

          1. the name, address, phone number, and position description of the Compliance Officer
required by Section III.A, and a summary of other noncompliance job responsibilities the Compliance
Officer may have;

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          2. the names and positions of the members of the Compliance Committee required by Section
III.A;

          3. a copy of the Code of Conduct required by Section III.B.1;

          4. a copy of all Policies and Procedures required by Section III.B.2;

          5. the number of individuals required to complete the Code of Conduct certification required
by Section III.B.1, the percentage of individuals who have completed such certification, and an
explanation of any exceptions (the documentation supporting this information shall be available to
OIG, upon request);

          6. the following information regarding each type of training required by Section III.C:

a. a description of such training, including a summary of the topics
covered, the length of sessions and a schedule of training sessions; and

b. the number of individuals required to be trained, percentage of
individuals actually trained, and an explanation of any exceptions.

A copy of all training materials and the documentation supporting this information shall be
available to OIG, upon request.

          7. a description of the Arrangements Database required by Section III.D.1.a;

          8. a description of the internal review and approval process required by Section
III.D.1.e;

          9. a description of the tracking and monitoring procedures and other Arrangements
Procedures required by Section III.D.1;

          10. a description of the Disclosure Program required by Section III.F;

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          11. a description of the process by which Zimmer fulfills the requirements of Section III.G
regarding Ineligible Persons;

          12. the name, title, and responsibilities of any person who is determined to be an Ineligible
Person under Section III.G; the actions taken in response to the screening and removal obligations
set forth in Section III.G; and the actions taken to identify, quantify, and repay any overpayments
to Federal health care programs relating to items or services furnished, ordered or prescribed by
an Ineligible Person;

          13. a list of all of Zimmer’s locations (including locations and mailing addresses); the
corresponding name(s) under which each location is doing business; the corresponding phone numbers
and fax numbers; each location’s Medicare Provider number(s), provider identification number(s),
and/or supplier number(s);

          14. a description of Zimmer’s corporate structures, including identification of any parent
and sister companies, subsidiaries, and their respective lines of business; and

          15. the certifications required by Section V.C.

     B. Monitor Reports.

          1. Zimmer shall submit to OIG any report or written recommendations produced by the Monitor
pursuant to the DPA within 5 days of Zimmer receiving any report or written recommendations from
the Monitor.

          2. Zimmer shall submit to OIG any report Zimmer provides to the Monitor pursuant to the DPA
at the same time Zimmer provides such documentation to the Monitor.

          3. Any written documentation Zimmer provides to the Monitor pursuant to the DPA shall be made
available to the OIG upon request.

     C. Annual Reports. Zimmer shall submit to OIG annually a report with respect to the
status of, and findings regarding, Zimmer’s compliance activities for each of the five Reporting
Periods (Annual Report).

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Each Annual Report shall include, at a minimum:

          1. any change in the identity, position description, or other noncompliance job
responsibilities of the Compliance Officer and any change in the membership of the Compliance
Committee described in Section III.A;

          2. a summary of any significant changes or amendments to the Policies and Procedures required
by Section III.B and the reasons for such changes (e.g., change in contractor policy) and
copies of any compliance-related Policies and Procedures;

          3. the number of individuals required to complete the Code of Conduct certification required
by Section III.B.1, the percentage of individuals who have completed such certification, and an
explanation of any exceptions (the documentation supporting this information shall be available to
OIG, upon request);

          4. the following information regarding each type of training required by Section III.C:

a. a description of such training, including a summary of the topics
covered, the length of sessions and a schedule of training sessions;

b. the number of individuals required to be trained, percentage of
individuals actually trained, and an explanation of any exceptions.

A copy of all training materials and the documentation supporting this information shall be
available to OIG, upon request.

          5. a description of any changes to the Arrangements Database required by Section
III.D.1.a;

          6. a description of any changes to the internal review and approval process required by
Section III.D.1.e;

          7. a description of any changes to the tracking and monitoring procedures and other
Arrangements Procedures required by Section III.D.1;

          8. a complete copy of all reports prepared pursuant to Section III.E, along with a copy of
the IRO’s engagement letter (if applicable);

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          9. Zimmer’s response and corrective action plan(s) related to any issues raised by the
reports prepared pursuant to Section III.E;

          10. a summary and description of any and all current and prior engagements and agreements
between Zimmer and the IRO, if different from what was submitted as part of the Implementation
Report;

          11. a certification from the IRO regarding its professional independence and objectivity with
respect to Zimmer;

          12. a summary of Reportable Events (as defined in Section III.I) identified during the
Reporting Period and the status of any corrective and preventative action relating to all such
Reportable Events;

          13. a summary of the disclosures in the Disclosure log required by Section III.F that: (a)
relate to Federal health care programs; (b) allege abuse or neglect of patients; or (c) involve
allegations of conduct that may involve illegal remunerations or inappropriate referrals in
violation of the Anti-Kickback Statute;

          14. any changes to the process by which Zimmer fulfills the requirements of Section III.G
regarding Ineligible Persons;

          15. the name, title, and responsibilities of any person who is determined to be an Ineligible
Person under Section III.G; the actions taken by Zimmer in response to the screening and removal
obligations set forth in Section III.G; and the actions taken to identify, quantify, and repay any
overpayments to Federal health care programs relating to items or services relating to items or
services furnished, ordered or prescribed by an Ineligible Person;

          16. a summary describing any ongoing investigation or legal proceeding required to have been
reported pursuant to Section III.H. The summary shall include a description of the allegation, the
identity of the investigating or prosecuting agency, and the status of such investigation or legal
proceeding;

          17. a description of all changes to the most recently provided list of Zimmer’s locations
(including addresses) as required by Section V.A.15; the corresponding name(s) under which each
location is doing business; the corresponding

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phone numbers and fax numbers; and each location’s
Medicare Provider number(s), provider identification number(s), and/or supplier number(s)  (if
applicable); and

          18. the certifications required by Section V.C.

     The first Annual Report shall be received by OIG no later than 60 days after the end of the
first Reporting Period. Subsequent Annual Reports shall be received by OIG no later than the anniversary date of the due date of the first Annual Report.

     D. Certifications. The Implementation Report and Annual Reports shall
include a certification by the Compliance Officer and Division President that:

          1. to the best of his or her knowledge, except as otherwise described in the applicable
report, Zimmer is in compliance with all of the requirements of this CIA;

          2. to the best of his or her knowledge, Zimmer has implemented procedures reasonably designed
to ensure that all Arrangements do not violate the Anti-Kickback Statute, including the
Arrangements Procedures required in Section III.D of the CIA;

          3. to the best of his or her knowledge, Zimmer has fulfilled the requirements for New and
Renewed Arrangements under Section III.D.2 of the CIA; and

          4. he or she has reviewed the Report and has made reasonable inquiry regarding its content
and believes that the information in the Report is accurate and truthful.

     E. Designation of Information. Zimmer shall clearly identify any portions of their
submissions that they believe are trade secrets, or information that is commercial or financial and
privileged or confidential, and therefore potentially exempt from disclosure under the Freedom of
Information Act (FOIA), 5 U.S.C. § 552. Zimmer shall refrain from identifying any information as
exempt from disclosure if that information does not meet the criteria for exemption from disclosure
under FOIA.

VI. Notifications and Submission of Reports

     Unless otherwise stated in writing after the Effective Date, all notifications and reports
required under this CIA shall be submitted to the following entities:

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          OIG:

Administrative and Civil Remedies Branch

Office of Counsel to the Inspector General

Office of Inspector General

U.S. Department of Health and Human Services

Cohen Building, Room 5527

330 Independence Avenue, S.W.

Washington, DC 20201

Telephone: 202.619.2078

Facsimile: 202.205.0604

          Zimmer:

Laura C. O’Donnell

Chief Compliance Officer

Zimmer, Inc.

345 East Main Street

Warsaw, Indiana 46580

Telephone: 574.371.8637

Facsimile: 574.372.4440

Unless otherwise specified, all notifications and reports required by this CIA may be made by
certified mail, overnight mail, hand delivery, or other means, provided that there is proof that
such notification was received. For purposes of this requirement, internal facsimile confirmation
sheets do not constitute proof of receipt.

VII. OIG Inspection, Audit, and Review Rights

     In addition to any other rights OIG may have by statute, regulation, or contract, OIG or its
duly authorized representative(s) may examine or request copies of Zimmer’s books, records, and
other documents and supporting materials and/or conduct on-site reviews of any of Zimmer’s
locations for the purpose of verifying and evaluating: (a) Zimmer’s compliance with the terms of
this CIA; and (b) Zimmer’s compliance with the requirements of the Federal health care programs in
which they participate. The documentation described above shall be made available by Zimmer to OIG
or its duly authorized representative(s) at all reasonable times for inspection, audit, or
reproduction. Furthermore, for purposes of this provision, OIG or its duly authorized
representative(s) may interview any of Zimmer’s employees, contractors, or agents who consent to

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be interviewed at the individual’s place of business during normal business hours or at such other
place and time as may be mutually agreed upon between the individual and OIG. Zimmer shall assist
OIG or its duly authorized representative(s) in contacting and arranging interviews with such
individuals upon OIG’s request. Zimmer’s employees may elect to be interviewed with or without a
representative of Zimmer present.

VIII. Document and Record Retention

     Zimmer shall maintain for inspection all documents and records relating to reimbursement from
the Federal health care programs, or to compliance with this CIA, for six years (or longer if
otherwise required by law).

IX. Disclosures

     Consistent with HHS’s FOIA procedures, set forth in 45 C.F.R. Part 5, OIG shall make a
reasonable effort to notify Zimmer prior to any release by OIG of information
submitted by Zimmer pursuant to its obligations under this CIA and identified upon submission by
Zimmer as trade secrets, or information that is commercial or financial and privileged or
confidential, under the FOIA rules. With respect to such releases, Zimmer shall have the rights
set forth at 45 C.F.R. § 5.65(d).

  X. Breach and Default Provisions

     Zimmer is expected to fully and timely comply with all of its CIA obligations.

     A. Stipulated Penalties for Failure to Comply with Certain Obligations. As a
contractual remedy, Zimmer and OIG hereby agree that failure to comply with certain obligations as
set forth in this CIA may lead to the imposition of the following monetary penalties (hereinafter
referred to as “Stipulated Penalties”) in accordance with the following provisions.

          1. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the
obligation became due) for each day Zimmer fails to establish and implement any of the following
obligations as described in Section III:

a. a Compliance Officer

b. a Compliance Committee;

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c. a written Code of Conduct;

d. written Policies and Procedures;

e. the training of Covered Persons;

f. a Disclosure Program;

g. Ineligible Persons screening and removal requirements; and

h. Notification of Government investigations or legal proceedings.

          2. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the
obligation became due) for each day Zimmer fails to establish and implement the Arrangements
Procedures and/or Arrangements Requirements described in Sections III.D.1 and III.D.2

          3. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the
obligation became due) for each day Zimmer fails to engage an IRO, as required in Section III.E and
Appendix B.

          4. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the
obligation became due) for each day Zimmer fail to submit the Implementation Report, documentation
required under Section V.B, or the Annual Reports to OIG in accordance with the requirements of
Section V by the deadlines for submission.

          5. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the
obligation became due) for each day Zimmer fails to submit the annual Arrangements Review Report in
accordance with the requirements of Section III.E.

          6. A Stipulated Penalty of $1,500 for each day Zimmer fails to grant access to the
information or documentation as required in Section VII. (This Stipulated Penalty shall begin to
accrue on the date Zimmer fails to grant access.)

          7. A Stipulated Penalty of $5,000 for each false certification submitted by or on behalf of
Zimmer as part of its Implementation Report, Annual Reports, additional documentation to a report
(as requested by the OIG), or otherwise required by this CIA.

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          8. A Stipulated Penalty of $1,000 for each day Zimmer fails to comply fully and adequately
with any obligation of this CIA. OIG shall provide notice to Zimmer, stating the specific grounds
for its determination that Zimmer has failed to comply fully and adequately with the CIA
obligation(s) at issue and steps Zimmer shall take to comply with the CIA. (This Stipulated
Penalty shall begin to accrue 10 days after Zimmer receives this notice from OIG of the failure to
comply.) A Stipulated Penalty as described in this Subsection shall not be demanded for any
violation for which OIG has sought a Stipulated Penalty under Subsections 1-7 of this Section.

     B. Timely Written Requests for Extensions. Zimmer may, in advance of the due date,
submit a timely written request for an extension of time to perform any act or file any
notification or report required by this CIA. Notwithstanding any other provision in this Section,
if OIG grants the timely written request with respect to an act, notification, or report, Stipulated Penalties for failure to perform the act or file the notification or
report shall not begin to accrue until one day after Zimmer fails to meet the revised deadline set
by OIG. Notwithstanding any other provision in this Section, if OIG denies such a timely written
request, Stipulated Penalties for failure to perform the act or file the notification or report
shall not begin to accrue until three business days after Zimmer receives OIG’s written denial of
such request or the original due date, whichever is later. A “timely written request” is defined
as a request in writing received by OIG at least five business days prior to the date by which any
act is due to be performed or any notification or report is due to be filed.

     C. Payment of Stipulated Penalties.

          1. Demand Letter. Upon a finding that Zimmer has failed to comply with any of the
obligations described in Section X.A and after determining that Stipulated Penalties are
appropriate, OIG shall notify Zimmer of: (a) Zimmer’s failure to comply; and (b) OIG’s exercise of
its contractual right to demand payment of the Stipulated Penalties (this notification is referred
to as the “Demand Letter”). Such Demand Letter shall specifically state the conduct that the OIG
contends constitutes the basis for imposing the Stipulated Penalty.

          2. Response to Demand Letter. Within 10 days after the receipt of the Demand Letter, Zimmer
shall either: (a) cure the breach to OIG’s satisfaction and pay the applicable Stipulated
Penalties; or (b) request a hearing before an HHS administrative law judge (ALJ) to dispute OIG’s
determination of noncompliance, pursuant to the agreed

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upon provisions set forth below in Section
X.E. In the event Zimmer elects to request an ALJ hearing, the Stipulated Penalties shall continue
to accrue until Zimmer cures, to OIG’s satisfaction, the alleged breach in dispute. Failure to
respond to the Demand Letter in one of these two manners within the allowed time period shall be
considered a material breach of this CIA and shall be grounds for exclusion under Section X.D.

          3. Form of Payment. Payment of the Stipulated Penalties shall be made by certified or
cashier’s check, payable to: “Secretary of the Department of Health and Human Services,” and
submitted to OIG at the address set forth in Section VI.

          4. Independence from Material Breach Determination. Except as set forth in Section X.D.1.c,
these provisions for payment of Stipulated Penalties shall not affect or otherwise set a standard
for OIG’s decision that Zimmer has materially breached this CIA, which decision shall be made at OIG’s discretion and shall be governed by the provisions in
Section X.D, below.

    D. Exclusion for Material Breach of this CIA.

          1. Definition of Material Breach. A material breach of this CIA means:

a. a failure by Zimmer to report a Reportable Event, or take corrective
action, as required in Section III.I;

b. a repeated or flagrant violation of the obligations under this CIA,
including, but not limited to, the obligations addressed in Section X.A;

c. a failure to respond to a Demand Letter concerning the payment of
Stipulated Penalties in accordance with Section X.C; or

d. a failure to engage and use an IRO in accordance with Section III.E.

          2. Notice of Material Breach and Intent to Exclude. The parties agree that a material breach
of this CIA by Zimmer constitutes an independent basis for Zimmer’s exclusion from participation in
the Federal health care programs. Upon a determination by OIG that Zimmer has materially breached
this CIA and that exclusion is the appropriate remedy, OIG shall notify Zimmer of: (a) Zimmer’s
material breach; and

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(b) OIG’s intent to exercise its contractual right to impose exclusion (this
notification is hereinafter referred to as the “Notice of Material Breach and Intent to Exclude”).

          3. Opportunity to Cure. Zimmer shall have 30 days from the date of receipt of the Notice of
Material Breach and Intent to Exclude to demonstrate to OIG’s satisfaction that:

a. Zimmer is in compliance with the obligations of the CIA cited by OIG as
being the basis for the material breach;

b. the alleged material breach has been cured; or

c. the alleged material breach cannot be cured within the 30-day period,
but that: (i) Zimmer has begun to take action to cure the material breach;
(ii) Zimmer is pursuing such action with due diligence; and (iii) Zimmer has
provided to OIG a reasonable timetable for curing the material breach.

          4. Exclusion Letter. If, at the conclusion of the 30-day period, Zimmer fails to satisfy the
requirements of Section X.D.3, OIG may exclude Zimmer from participation in the Federal health care
programs. OIG shall notify Zimmer in writing of its determination to exclude Zimmer (this letter
shall be referred to hereinafter as the “Exclusion Letter”). Subject to the Dispute Resolution
provisions in Section X.E, below, the exclusion shall go into effect 30 days after the date of
Zimmer’s receipt of the Exclusion Letter. The exclusion shall have national effect and shall also
apply to all other Federal procurement and nonprocurement programs. Reinstatement to program
participation is not automatic. After the end of the period of exclusion, Zimmer may apply for
reinstatement by submitting a written request for reinstatement in accordance with the provisions
at 42 C.F.R. §§ 1001.3001-.3004.

     E. Dispute Resolution

          1. Review Rights. Upon OIG’s delivery to Zimmer of its Demand Letter or of its Exclusion
Letter, and as an agreed-upon contractual remedy for the resolution of disputes arising under this
CIA, Zimmer shall be afforded certain review rights comparable to the ones that are provided in 42
U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the Stipulated Penalties or
exclusion sought pursuant to this CIA. Specifically, OIG’s determination to demand payment of
Stipulated Penalties or to

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seek exclusion shall be subject to review by an HHS ALJ and, in the
event of an appeal, the HHS Departmental Appeals Board (DAB), in a manner consistent with the
provisions in 42 C.F.R. § 1005.2-1005.21. Notwithstanding the language in 42 C.F.R. § 1005.2(c),
the request for a hearing involving Stipulated Penalties shall be made within 10 days after receipt
of the Demand Letter and the request for a hearing involving exclusion shall be made within 25 days
after receipt of the Exclusion Letter.

          2. Stipulated Penalties Review. Notwithstanding any provision of Title 42 of the United
States Code or Title 42 of the Code of Federal Regulations, the only issues in a proceeding for
Stipulated Penalties under this CIA shall be: (a) whether Zimmer was in full and timely compliance
with the obligations of this CIA for which OIG demands payment; and (b) the period of noncompliance. Zimmer shall have the burden of proving its
full and timely compliance and the steps taken to cure the noncompliance, if any. OIG shall not
have the right to appeal to the DAB an adverse ALJ decision related to Stipulated Penalties. If
the ALJ agrees with OIG with regard to a finding of a breach of this CIA and orders Zimmer to pay
Stipulated Penalties, such Stipulated Penalties shall become due and payable 20 days after the ALJ
issues such a decision unless Zimmer requests review of the ALJ decision by the DAB. If the ALJ
decision is properly appealed to the DAB and the DAB upholds the determination of OIG, the
Stipulated Penalties shall become due and payable 20 days after the DAB issues its decision.

          3. Exclusion Review. Notwithstanding any provision of Title 42 of the United States Code or
Title 42 of the Code of Federal Regulations, the only issues in a proceeding for exclusion based on
a material breach of this CIA shall be:

a. whether Zimmer was in material breach of this CIA;

b. whether such breach was continuing on the date of the Exclusion Letter;
and

c. whether the alleged material breach could not have been cured within the
30-day period, but that: (i) Zimmer has begun to take action to cure the
material breach within that period; (ii) Zimmer has pursued and is pursuing
such action with due diligence; and (iii) Zimmer provided to OIG within that
period a reasonable timetable for curing the material breach and Zimmer has
followed the timetable.

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          For purposes of the exclusion herein, exclusion shall take effect only after an ALJ decision
favorable to OIG, or, if the ALJ rules for Zimmer, only after a DAB decision in favor of OIG.
Zimmer’s election of its contractual right to appeal to the DAB shall not abrogate OIG’s authority
to exclude Zimmer upon the issuance of an ALJ’s decision in favor of OIG. If the ALJ sustains the
determination of OIG and determines that exclusion is authorized, such exclusion shall take effect
20 days after the ALJ issues such a decision, notwithstanding that Zimmer may request review of the
ALJ decision by the DAB. If the DAB finds in favor of OIG after an ALJ decision adverse to OIG,
the exclusion shall take effect 20 days after the DAB decision. Zimmer shall waive its right to
any notice of such an exclusion if a decision upholding the exclusion is rendered by the ALJ or DAB. If the DAB finds in favor of Zimmer, Zimmer shall be reinstated effective on the
date of the original exclusion.

          4. Finality of Decision. The review by an ALJ or DAB provided for above shall not be
considered to be an appeal right arising under any statutes or regulations. Consequently, the
parties to this CIA agree that the DAB’s decision (or the ALJ’s decision if not appealed) shall be
considered final for all purposes under this CIA.

XI. Effective and Binding Agreement

     Zimmer and OIG agree as follows:

     A. This CIA shall be binding on the successors, assigns, and transferees of Zimmer;

     B. This CIA shall become final and binding on the date the final signature is obtained on the
CIA;

     C. This CIA constitutes the complete agreement between the parties and may not be amended
except by written consent of the parties to this CIA;

     D. OIG may agree to a suspension of Zimmer’s obligations under the CIA in the event of
Zimmer’s cessation of the delivery, sale, marketing, or furnishing of items or services reimbursed
by any Federal health care programs. If such cessation occurs and Zimmer is relieved of its CIA
obligations by OIG, Zimmer shall notify OIG at least 30 days in advance of the date on which Zimmer
intends to begin delivering, selling, marketing, or furnishing items or services reimbursed by any
Federal health care programs. Upon receipt of such notification, OIG shall evaluate whether the
CIA should

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

32

 

be reactivated or modified.

     E. The undersigned Zimmer signatories represent and warrant that they are authorized to
execute this CIA. The undersigned OIG signatory represents that he is signing this CIA in his
official capacity and that he is authorized to execute this CIA.

     F. This CIA may be executed in counterparts, each of which constitutes an original
and all of which constitute one and the same CIA. Facsimiles of signatures shall
constitute acceptable, binding signatures for purposes of this CIA.

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

33

 

On Behalf of Zimmer, Inc.

	 	 	 	 	 	 	 
	/s/ David C. Dvorak

	 	 	 	09/27/07	 	 
	 

David C. Dvorak

	 	 	 	 

DATE
	 	 
	Chief Executive Officer and President
	 	 	 	 	 	 
	Zimmer, Inc.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Laura C. O’ Donnell
 

LAURA C. O’ DONNELL

	 	 	 	09/27/07
 

DATE
	 	 
	Chief Compliance Officer
	 	 	 	 	 	 
	Zimmer, Inc.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Frederick Robinson

	 	 	 	09/27/07	 	 
	 

Frederick Robinson, Esq.

	 	 	 	 

DATE
	 	 
	Fulbright & Jaworski LLP
	 	 	 	 	 	 
	Counsel for Zimmer, Inc.
	 	 	 	 	 	 

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

34

 

On behalf of the Office of Inspector General

of the Department of Health and Human Services

	 	 	 	 	 	 	 
	/s/ Gregory E. Demske
 

	 	 	 	09/27/07
 

	 	 
	GREGORY E. DEMSKE

	 	 	 	DATE	 	 
	Assistant Inspector General for Legal Affairs
	 	 	 	 	 	 
	Office of Inspector General
	 	 	 	 	 	 
	Office of Counsel to the Inspector General
	 	 	 	 	 	 
	U. S. Department of Health and Human Services
	 	 	 	 	 	 

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

35

 

APPENDIX A

ARRANGEMENTS DATABASE

Zimmer shall create and maintain an Arrangements Database to track all new and existing
Arrangements, including Contractual Arrangements and Non-Contractual Arrangements, in order to
ensure that each Arrangement does not violate the Anti-Kickback Statute.

A. The Arrangements Database shall contain certain information to assist Zimmer in evaluating
whether each Contractual Arrangement violates the Anti-Kickback Statute, including but not limited
to the following:

1. Each party involved in the Arrangement;

2. The type of Arrangement (e.g., physician employment contract, medical
directorship, lease agreement);

3. The term of the Arrangement, including the effective and expiration dates and any
automatic renewal provisions;

4. The amount of compensation to be paid pursuant to the Arrangement and the means by which
compensation is paid;

5. The methodology for determining the compensation under the Arrangements, including the
methodology used to determine the fair market value of such compensation;

6. Whether the amount of compensation to be paid pursuant to the Arrangement is determined
based on the volume or value of referrals between the parties;

7. Whether each party has fulfilled the requirements of Section III.D.2; and

8. Whether the Arrangement satisfies the requirements of an Anti-Kickback Statute safe
harbor.

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

36

 

B. The Arrangements Database shall contain certain information to assist Zimmer in evaluating
whether each Non-Contractual Arrangement violates the Anti-Kickback Statute, including but not
limited to the following:

1. The name of the entity or individual receiving the Non-Contractual remuneration;

2. The type of Non-Contractual remuneration (listing in the aggregate multiple distributions
of the same type of Non-Contractual remuneration to each entity or individual);

3. The aggregate value of each type of Non-Contractual remuneration given to each entity or
individual during the Reporting Period;

4. Whether the Non-Contractual remuneration given pursuant to the Non-Contractual
Arrangement is determined based on the volume or value of referrals between the parties; and

5. Whether the Non-Contractual Arrangement satisfies the requirements of an Anti-Kickback
Statute safe harbor.

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

37

 

APPENDIX B

INDEPENDENT REVIEW ORGANIZATION

This Appendix contains the requirements relating to the Independent Review Organization (IRO)
required by Section III.E of the CIA.

	A.	 	IRO Engagement.

     Zimmer shall engage an IRO that possesses the qualifications set forth in Paragraph B, below,
to perform the responsibilities in Paragraph C, below. The IRO shall conduct the review in a
professionally independent and objective fashion, as set forth in Paragraph D. Within 30 days
after OIG receives written notice of the identity of the selected IRO, OIG will notify Zimmer if
the IRO is unacceptable. Absent notification from OIG that the IRO is unacceptable, Zimmer may
continue to engage the IRO.

     If Zimmer engages a new IRO during the term of the CIA, this IRO shall also meet the
requirements of this Appendix. If a new IRO is engaged, Zimmer shall submit the information
identified in Section V.A.11 to OIG within 30 days of engagement of the IRO. Within 30 days after
OIG receives written notice of the identity of the selected IRO, OIG will notify Zimmer if the IRO
is unacceptable. Absent notification from OIG that the IRO is unacceptable, Zimmer may continue to
engage the IRO.

	B.	 	IRO Qualifications.

The IRO shall:

     1. assign individuals qualified to conduct the Arrangements Review; and

     2. have sufficient staff and resources to conduct the reviews required by the CIA on a timely
basis.

     C. IRO Responsibilities.

      The IRO shall:

     1. perform each Arrangements Review in accordance with the specific requirements of the CIA;

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

38

 

     2. respond to all OIG inquires in a prompt, objective, and factual manner; and

     3. prepare timely, clear, well-written reports that include all the information required by
Section III.E.3 of the CIA.

	D.	 	IRO Independence and Objectivity.

The IRO must perform the Arrangements Review in a professionally independent and objective fashion,
as appropriate to the nature of the engagement, taking into account any other business
relationships or engagements that may exist between the IRO and Zimmer.

	E.	 	IRO Removal/Termination.

     1. Provider. If Zimmer terminates its IRO during the course of the engagement, Zimmer must
submit a notice explaining its reasons to OIG no later than 30 days after termination. Zimmer must
engage a new IRO in accordance with Paragraph A of this Appendix.

     2. OIG Removal of IRO. In the event OIG has reason to believe that the IRO does not possess
the qualifications described in Paragraph B, is not independent and/or objective as set forth in
Paragraph D, or has failed to carry out its responsibilities as described in Paragraph C, OIG may,
at its sole discretion, require Zimmer to engage a new IRO in accordance with Paragraph A of this
Appendix.

     Prior to requiring Zimmer to engage a new IRO, OIG shall notify Zimmer of its intent to do so
and provide a written explanation of why OIG believes such a step is necessary. To resolve any
concerns raised by OIG, Zimmer may request a meeting with OIG to discuss any aspect of the IRO’s
qualifications, independence or performance of its responsibilities and to present additional
information regarding these matters. Zimmer shall provide any additional information as may be
requested by OIG under this Paragraph in an expedited manner. OIG will attempt in good faith to
resolve any differences regarding the IRO with Zimmer prior to requiring Zimmer to terminate the
IRO. However, the final determination as to whether or not to require Zimmer to engage a new IRO
shall be made at the sole discretion of OIG.

Corporate Integrity Agreement between

OIG-HHS and Zimmer, Inc.

39exv10w3

 

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

1

 

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.

2

 

          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

3

 

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

4

 

	 	 	 	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;

5

 

	 	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

6

 

	 	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.

7

 

          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.

8

 

          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.

9

 

          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

10

 

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

11

 

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;

12

 

	 	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

13

 

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 

14

 

          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;

15

 

	 	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

16

 

	 	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

17

 

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

18

 

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	 	 

19

 

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	 	 

20

 

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
	 	 	 	 

21

 

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.

22

 

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

23

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