Document:

EXHIBIT 10.95

                     SUPPLEMENTAL INDENTURE TO BE DELIVERED
                          BY GUARANTEEING SUBSIDIARIES

         Supplemental Indenture (this "Supplemental Indenture"), dated as of
August 6, 2003, among L-3 Communications Aeromet, Inc., an Oregon corporation,
AMI Instruments, Inc., an Oklahoma corporation, Apcom, Inc., a Maryland
corporation, Broadcast Sports Inc., a Delaware corporation, Celerity Systems
Incorporated, a California corporation, EER Systems, Inc., a Virginia
corporation, Electrodynamics, Inc., an Arizona corporation, L-3 Communications
Aerospace Component Overhaul & Repair, Inc., a Delaware corporation, L-3
Communications Avionics Systems, Inc., a Delaware corporation, L-3
Communications FlightSystems Corporation, an Ohio corporation, Henschel Inc., a
Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware
corporation, Interstate Electronics Corporation, a California corporation, KDI
Precision Products, Inc., a Delaware corporation, L-3 Communications AIS GP
Corporation, a Delaware corporation, L-3 Communications Analytics Corporation, a
California corporation, L-3 Communications Atlantic Science and Technology
Corporation, a New Jersey corporation, L-3 Communications Aydin Corporation, a
Delaware corporation, L-3 Communications ESSCO, Inc., a Delaware corporation,
L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3
Communications IMC Corporation, a Connecticut corporation, L-3 Communications
Integrated Systems L.P., a Delaware limited partnership, L-3 Communications
Investments, Inc., a Delaware corporation, L-3 Communications Security and
Detection Systems Corporation Delaware, a Delaware corporation, L-3
Communications Security and Detection Systems Corporation California, a
California corporation, L-3 Communications SPD Technologies, Inc., a Delaware
corporation, L-3 Communications Storm Control Systems, Inc., a California
corporation, L-3 Communications TMA Corporation, a Virginia corporation, L-3
Communications Westwood Corporation, a Nevada corporation, MCTI Acquisition
Corporation, a Maryland Corporation, Microdyne Communications Technologies
Incorporated, a Maryland corporation, Microdyne Corporation, a Maryland
corporation, Microdyne Outsourcing Incorporated, a Maryland corporation, MPRI,
Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power
Paragon, Inc., a Delaware corporation, Ship Analytics, Inc., a Connecticut
corporation, Ship Analytics International, Inc., a Delaware corporation, Ship
Analytics USA, Inc., a Connecticut corporation, Southern California Microwave,
Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware
corporation, SPD Holdings, Inc., a Delaware corporation, SPD Switchgear Inc., a
Delaware corporation, SYColeman Corporation, a Florida corporation, Telos
Corporation, a California corporation, Troll Technology Corporation, a
California corporation, Wescam Air Ops Inc., a Delaware corporation, Wescam Air
Ops LLC, a Delaware limited liability company, Wescam Holdings (US) Inc., a
Delaware corporation, Wescam Incorporated, a Florida corporation, Wescam LLC, a
Delaware limited liability company, Wescam Sonoma Inc., a California corporation
and Wolf Coach, Inc., a Massachusetts corporation (each, a "Guaranteeing
Subsidiary", and collectively, the "Guaranteeing Subsidiaries"), each a
subsidiary of L-3 Communications Corporation (or its permitted successor), a
Delaware corporation (the "Company"), the Company and The Bank of New York, as
trustee under the indenture referred to below (the "Trustee").

                               W I T N E S S E T H

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 21, 2003 providing for
the issuance of an aggregate principal amount of up to $400,000,000 of 6 1/8%
Senior Subordinated Notes due 2013 (the "Notes");

         WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantee"); and

         WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

         NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

         1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

         2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees
as follows:

          (a)  Such Guaranteeing Subsidiary, jointly and severally with all
               other current and future guarantors of the Notes (collectively,
               the "Guarantors" and each, a "Guarantor"), unconditionally
               guarantees to each Holder of a Note authenticated and delivered
               by the Trustee and to the Trustee and its successors and assigns,
               regardless of the validity and enforceability of the Indenture,
               the Notes or the Obligations of the Company under the Indenture
               or the Notes, that:

               (i)  the principal of, premium, interest and Additional Amounts,
                    if any, on the Notes will be promptly paid in full when due,
                    whether at maturity, by acceleration, redemption or
                    otherwise, and interest on the overdue principal of,
                    premium, interest and Additional Amounts, if any, on the
                    Notes, to the extent lawful, and all other Obligations of
                    the Company to the Holders or the Trustee thereunder or
                    under the Indenture will be promptly paid in full, all in
                    accordance with the terms thereof; and

               (ii) in case of any extension of time for payment or renewal of
                    any Notes or any of such other Obligations, that the same
                    will be promptly paid in full when due in accordance with
                    the terms of the extension or renewal, whether at stated
                    maturity, by acceleration or otherwise.

          (b)  Notwithstanding the foregoing, in the event that this Subsidiary
               Guarantee would constitute or result in a violation of any
               applicable fraudulent conveyance or similar law of any relevant
               jurisdiction, the liability of such Guaranteeing Subsidiary under
               this Supplemental Indenture and its Subsidiary Guarantee shall be
               reduced to the maximum amount permissible under such fraudulent
               conveyance or similar law.

         3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.

          (a)  To evidence its Subsidiary Guarantee set forth in this
               Supplemental Indenture, such Guaranteeing Subsidiary hereby
               agrees that a notation of such Subsidiary Guarantee substantially
               in the form of Exhibit F to the Indenture shall be endorsed by an
               officer of such Guaranteeing Subsidiary on each Note
               authenticated and delivered by the Trustee after the date hereof.

          (b)  Notwithstanding the foregoing, such Guaranteeing Subsidiary
               hereby agrees that its Subsidiary Guarantee set forth herein
               shall remain in full force and effect notwithstanding any failure
               to endorse on each Note a notation of such Subsidiary Guarantee.

          (c)  If an Officer whose signature is on this Supplemental Indenture
               or on the Subsidiary Guarantee no longer holds that office at the
               time the Trustee authenticates the Note on which a Subsidiary
               Guarantee is endorsed, the Subsidiary Guarantee shall be valid
               nevertheless.

          (d)  The delivery of any Note by the Trustee, after the authentication
               thereof under the Indenture, shall constitute due delivery of the

               Subsidiary Guarantee set forth in this Supplemental Indenture on
               behalf of each Guaranteeing Subsidiary.

          (e)  Each Guaranteeing Subsidiary hereby agrees that its obligations
               hereunder shall be unconditional, regardless of the validity,
               regularity or enforceability of the Notes or the Indenture, the
               absence of any action to enforce the same, any waiver or consent
               by any Holder of the Notes with respect to any provisions hereof
               or thereof, the recovery of any judgment against the Company, any
               action to enforce the same or any other circumstance which might
               otherwise constitute a legal or equitable discharge or defense of
               a guarantor.

          (f)  Each Guaranteeing Subsidiary hereby waives diligence,
               presentment, demand of payment, filing of claims with a court in
               the event of insolvency or bankruptcy of the Company, any right
               to require a proceeding first against the Company, protest,
               notice and all demands whatsoever and covenants that its
               Subsidiary Guarantee made pursuant to this Supplemental Indenture
               will not be discharged except by complete performance of the
               Obligations contained in the Notes and the Indenture.

          (g)  If any Holder or the Trustee is required by any court or
               otherwise to return to the Company or any Guaranteeing
               Subsidiary, or any custodian, Trustee, liquidator or other
               similar official acting in relation to either the Company or such
               Guaranteeing Subsidiary, any amount paid by either to the Trustee
               or such Holder, the Subsidiary Guarantee made pursuant to this
               Supplemental Indenture, to the extent theretofore discharged,
               shall be reinstated in full force and effect.

          (h)  Each Guaranteeing Subsidiary agrees that it shall not be entitled
               to any right of subrogation in relation to the Holders in respect
               of any Obligations guaranteed hereby until payment in full of all
               Obligations guaranteed hereby. Each Guaranteeing Subsidiary
               further agrees that, as between such Guaranteeing Subsidiary, on
               the one hand, and the Holders and the Trustee, on the other hand:

               (i)  the maturity of the Obligations guaranteed hereby may be
                    accelerated as provided in Article 6 of the Indenture for
                    the purposes of the Subsidiary Guarantee made pursuant to
                    this Supplemental Indenture, notwithstanding any stay,
                    injunction or other prohibition preventing such acceleration
                    in respect of the obligations guaranteed hereby; and

               (ii) in the event of any declaration of acceleration of such
                    obligations as provided in Article 6 of the Indenture, such

                    obligations (whether or not due and payable) shall forthwith
                    become due and payable by such Guaranteeing Subsidiary for
                    the purpose of the Subsidiary Guarantee made pursuant to
                    this Supplemental Indenture.

          (i)  Each Guaranteeing Subsidiary shall have the right to seek
               contribution from any other non-paying Guaranteeing Subsidiary so
               long as the exercise of such right does not impair the rights of
               the Holders or the Trustee under the Subsidiary Guarantee made
               pursuant to this Supplemental Indenture.

         4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

          (a)  Except as set forth in Articles 4 and 5 of the Indenture, nothing
               contained in the Indenture, this Supplemental Indenture or in the
               Notes shall prevent any consolidation or merger of any
               Guaranteeing Subsidiary with or into the Company or any other
               Guarantor or shall prevent any transfer, sale or conveyance of
               the property of any Guaranteeing Subsidiary as an entirety or
               substantially as an entirety, to the Company or any other
               Guarantor.

          (b)  Except as set forth in Articles 4 and 5 of the Indenture, nothing
               contained in the Indenture, this Supplemental Indenture or in the
               Notes shall prevent any consolidation or merger of any
               Guaranteeing Subsidiary with or into a corporation or
               corporations other than the Company or any other Guarantor (in
               each case, whether or not affiliated with the Guaranteeing
               Subsidiary), or successive consolidations or mergers in which a
               Guaranteeing Subsidiary or its successor or successors shall be a
               party or parties, or shall prevent any sale or conveyance of the
               property of any Guaranteeing Subsidiary as an entirety or
               substantially as an entirety, to a corporation other than the
               Company or any other Guarantor (in each case, whether or not
               affiliated with the Guaranteeing Subsidiary) authorized to
               acquire and operate the same; provided, however, that each
               Guaranteeing Subsidiary hereby covenants and agrees that (i)
               subject to the Indenture, upon any such consolidation, merger,
               sale or conveyance, the due and punctual performance and
               observance of all of the covenants and conditions of the
               Indenture and this Supplemental Indenture to be performed by such
               Guaranteeing Subsidiaries, shall be expressly assumed (in the
               event that such Guaranteeing Subsidiary is not the surviving
               corporation in the merger), by supplemental indenture
               satisfactory in form to the Trustee, executed and delivered to
               the Trustee, by the corporation formed by such consolidation, or
               into

               which such Guaranteeing Subsidiary shall have been merged, or by
               the corporation which shall have acquired such property and (ii)
               immediately after giving effect to such consolidation, merger,
               sale or conveyance no Default or Event of Default exists.

          (c)  In case of any such consolidation, merger, sale or conveyance and
               upon the assumption by the successor corporation, by supplemental
               indenture, executed and delivered to the Trustee and satisfactory
               in form to the Trustee, of the Subsidiary Guarantee made pursuant
               to this Supplemental Indenture and the due and punctual
               performance of all of the covenants and conditions of the
               Indenture and this Supplemental Indenture to be performed by such
               Guaranteeing Subsidiary, such successor corporation shall succeed
               to and be substituted for such Guaranteeing Subsidiary with the
               same effect as if it had been named herein as the Guaranteeing
               Subsidiary. Such successor corporation thereupon may cause to be
               signed any or all of the Subsidiary Guarantees to be endorsed
               upon the Notes issuable under the Indenture which theretofore
               shall not have been signed by the Company and delivered to the
               Trustee. All the Subsidiary Guarantees so issued shall in all
               respects have the same legal rank and benefit under the Indenture
               and this Supplemental Indenture as the Subsidiary Guarantees
               theretofore and thereafter issued in accordance with the terms of
               the Indenture and this Supplemental Indenture as though all of
               such Subsidiary Guarantees had been issued at the date of the
               execution hereof.

         5. RELEASES.

          (a)  Concurrently with any sale of assets (including, if applicable,
               all of the Capital Stock of a Guaranteeing Subsidiary), all
               Liens, if any, in favor of the Trustee in the assets sold thereby
               shall be released; provided that in the event of an Asset Sale,
               the Net Proceeds from such sale or other disposition are treated
               in accordance with the provisions of Section 4.10 of the
               Indenture. If the assets sold in such sale or other disposition
               include all or substantially all of the assets of a Guaranteeing
               Subsidiary or all of the Capital Stock of a Guaranteeing
               Subsidiary, then the Guaranteeing Subsidiary (in the event of a
               sale or other disposition of all of the Capital Stock of such
               Guaranteeing Subsidiary) or the Person acquiring the property (in
               the event of a sale or other disposition of all or substantially
               all of the assets of such Guaranteeing Subsidiary) shall be
               released from and relieved of its Obligations under this
               Supplemental Indenture and its Subsidiary Guarantee made pursuant
               hereto; provided that in the event of an Asset Sale, the Net
               Proceeds from such sale or other disposition are treated in
               accordance with the

               provisions of Section 4.10 of the Indenture. Upon delivery by the
               Company to the Trustee of an Officers' Certificate to the effect
               that such sale or other disposition was made by the Company or
               the Guaranteeing Subsidiary, as the case may be, in accordance
               with the provisions of the Indenture and this Supplemental
               Indenture, including without limitation, Section 4.10 of the
               Indenture, the Trustee shall execute any documents reasonably
               required in order to evidence the release of the Guaranteeing
               Subsidiary from its Obligations under this Supplemental Indenture
               and its Subsidiary Guarantee made pursuant hereto. If the
               Guaranteeing Subsidiary is not released from its obligations
               under its Subsidiary Guarantee, it shall remain liable for the
               full amount of principal of and interest on the Notes and for the
               other obligations of such Guaranteeing Subsidiary under the
               Indenture as provided in this Supplemental Indenture.

          (b)  Upon the designation of a Guaranteeing Subsidiary as an
               Unrestricted Subsidiary in accordance with the terms of the
               Indenture, such Guaranteeing Subsidiary shall be released and
               relieved of its obligations under its Subsidiary Guarantee and
               this Supplemental Indenture. Upon delivery by the Company to the
               Trustee of an Officers' Certificate and an Opinion of Counsel to
               the effect that such designation of such Guaranteeing Subsidiary
               as an Unrestricted Subsidiary was made by the Company in
               accordance with the provisions of the Indenture, including
               without limitation Section 4.07 of the Indenture, the Trustee
               shall execute any documents reasonably required in order to
               evidence the release of such Guaranteeing Subsidiary from its
               obligations under its Subsidiary Guarantee. Any Guaranteeing
               Subsidiary not released from its Obligations under its Subsidiary
               Guarantee shall remain liable for the full amount of principal of
               and interest on the Notes and for the other Obligations of any
               Guaranteeing Subsidiary under the Indenture as provided herein.

          (c)  Each Guaranteeing Subsidiary shall be released and relieved of
               its obligations under this Supplemental Indenture in accordance
               with, and subject to, Section 4.18 of the Indenture.

         6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of any Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not

be effective to waive liabilities under the federal securities laws and it is
the view of the SEC that such a waiver is against public policy.

         7. SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING. No
Guaranteeing Subsidiary shall incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of a Guaranteeing Subsidiary and senior in
any respect in right of payment to any of the Subsidiary Guarantees.
Notwithstanding the foregoing sentence, the Subsidiary Guarantee of each
Guaranteeing Subsidiary shall be subordinated to the prior payment in full of
all Senior Debt of that Guaranteeing Subsidiary (in the same manner and to the
same extent that the Notes are subordinated to Senior Debt), which shall include
all guarantees of Senior Debt.

         8. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         9. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

         10. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.

         11. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiaries and the Company.

         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.

Dated: August 6, 2003               L-3 COMMUNICATIONS CORPORATION

                                    By: /s/ Christopher C. Cambria
                                        ---------------------------------
                                        Name:
                                        Title:

Dated: August 6, 2003            L-3 COMMUNICATIONS AEROMET, INC.
                                 AMI INSTRUMENTS, INC.
                                 APCOM, INC.
                                 BROADCAST SPORTS INC.
                                 CELERITY SYSTEMS INCORPORATED
                                 EER SYSTEMS, INC.
                                 ELECTRODYNAMICS, INC.
                                 L-3 COMMUNICATIONS AEROSPACE COMPONENT
                                          OVERHAUL & REPAIR, INC.
                                 L-3 COMMUNICATIONS AVIONICS SYSTEMS, INC.
                                 L-3 COMMUNICATIONS FLIGHTSYSTEMS CORPORATION
                                 HENSCHEL INC.
                                 HYGIENETICS ENVIRONMENTAL SERVICES, INC.
                                 INTERSTATE ELECTRONICS CORPORATION
                                 KDI PRECISION PRODUCTS, INC.
                                 L-3 COMMUNICATIONS AIS GP CORPORATION
                                 L-3 COMMUNICATIONS ANALYTICS
                                          CORPORATION
                                 L-3 COMMUNICATIONS ATLANTIC SCIENCE AND
                                          TECHNOLOGY CORPORATION
                                 L-3 COMMUNICATIONS AYDIN CORPORATION
                                 L-3 COMMUNICATIONS ESSCO, INC.
                                 L-3 COMMUNICATIONS ILEX SYSTEMS, INC.
                                 L-3 COMMUNICATIONS IMC CORPORATION
                                 L-3 COMMUNICATIONS INTEGRATED
                                          SYSTEMS L.P.
                                 L-3 COMMUNICATIONS INVESTMENTS, INC.
                                 L-3 COMMUNICATIONS SECURITY AND
                                          DETECTION SYSTEMS CORPORATION
                                          DELAWARE
                                 L-3 COMMUNICATIONS SECURITY AND
                                          DETECTION SYSTEMS CORPORATION
                                          CALIFORNIA
                                 L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC.
                                 L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC.
                                 L-3 COMMUNICATIONS TMA CORPORATION
                                 L-3 COMMUNICATIONS WESTWOOD CORPORATION
                                 MCTI ACQUISITION CORPORATION
                                 MICRODYNE COMMUNICATIONS TECHNOLOGIES
                                          INCORPORATED
                                 MICRODYNE CORPORATION
                                 MICRODYNE OUTSOURCING INCORPORATED
                                 MPRI, INC.
                                 PAC ORD INC.

                                 POWER PARAGON, INC.
                                 SHIP ANALYTICS, INC.
                                 SHIP ANALYTICS INTERNATIONAL, INC.
                                 SHIP ANALYTICS USA, INC.
                                 SOUTHERN CALIFORNIA MICROWAVE, INC.
                                 SPD ELECTRICAL SYSTEMS, INC.
                                 SPD HOLDINGS, INC.
                                 SPD SWITCHGEAR INC.
                                 SYCOLEMAN CORPORATION
                                 TELOS CORPORATION
                                 TROLL TECHNOLOGY CORPORATION
                                 WESCAM AIR OPS INC.
                                 WESCAM AIR OPS LLC
                                 WESCAM INCORPORATED
                                 WESCAM LLC
                                 WESCAM SONOMA INC.
                                 WESCAM HOLDINGS (US) INC.
                                 WOLF COACH, INC.
                                          As Guaranteeing Subsidiaries

                                 By: /s/ Christopher C. Cambria
                                     --------------------------------
                                     Name:
                                     Title:

Dated:  August 6, 2003           THE BANK OF NEW YORK,
                                 as Trustee

                                 By: /s/ James E. Logan
                                     -------------------------------
                                     Name:
                                     Title:Change in Control Severance Agreement

 

Exhibit 10.2

CHANGE IN CONTROL SEVERANCE AGREEMENT

     THIS AGREEMENT, dated as of July 29, 2003 is made by and between ZIMMER
HOLDINGS, INC., a Delaware corporation (the “Company”), and Sheryl Conley (the
“Executive”). The capitalized words and terms used throughout this Agreement
are defined in Article XIII.

Recitals

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

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

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

     D.     The Company and the Executive previously entered into a change in
control agreement in the form applicable to Tier III executives of the Company
(the “Prior Agreement”), but the Executive has since become a Tier II
executive, making this Agreement more appropriate. This Agreement replaces and
supersedes the Prior Agreement.

     E.     The parties intend that no amount or benefit will be payable under this
Agreement unless a termination of the Executive’s employment with the Company
occurs

 

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following a Change in Control or is deemed to have occurred following a
Change in Control as provided in this Agreement.

Agreement

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

ARTICLE I

Term of Agreement

     This Agreement will commence on the date stated above and will continue in
effect through December 31, 2004. Beginning on January 1, 2005, and each
subsequent January 1, the term of this Agreement will automatically be extended
for one additional year, unless either party gives the other party written
notice not to extend this Agreement at least 30 days before the extension would
otherwise become effective or unless a Change in Control occurs. If a Change
in Control occurs during the term of this Agreement, this Agreement will
continue in effect for a period of 24 months from the end of the month in which
the Change in Control occurs. Notwithstanding the foregoing provisions of this
Article, this Agreement will terminate on the Executive’s Retirement Date.

ARTICLE II

Compensation other than Severance Payments

     SECTION 2.01. Disability Benefits. Following a Change in Control and
during the term of this Agreement, during any period that the Executive fails
to perform the Executive’s full-time duties with the Company as a result of
Disability, the Executive will receive short-term and long-term disability
benefits no less favorable than those provided under the terms of the Company’s
short-term and long-term disability plans as in effect immediately prior to the
Change

 

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in Control, together with all other compensation and benefits payable to
the Executive pursuant to the terms of any compensation or benefit plan,
program, or arrangement maintained by the Company during the period of
Disability.

     SECTION 2.02. Compensation Previously Earned. If the Executive’s
employment is terminated for any reason following a Change in Control and
during the term of this Agreement, the Company will pay the Executive’s salary
accrued through the Date of Termination, at the rate in effect at the time the
Notice of Termination is given, together with all other compensation and
benefits payable to the Executive through the Date of Termination (including,
without limitation, any incentive compensation amounts owed the Executive for a
completed calendar year to the extent not yet paid) under the terms of any
compensation or benefit plan, program, or arrangement maintained by the Company
during that period.

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

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

 

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ARTICLE III

Severance Payments

     SECTION 3.01. Payment Triggers.

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

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

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

 

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

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

     (b)  Incentive Compensation. Notwithstanding any provision of the
Incentive Plan or any other compensation or incentive plans of the Company, the
Company will pay to the Executive a lump sum amount, in cash, equal to the sum
of (1) any incentive compensation that has been allocated or awarded to the
Executive for a completed calendar year or other measuring period preceding the
Date of Termination ( to the extent not payable pursuant to Section 2.02), and
(2) a pro rata portion (based on elapsed time) to the Date of Termination of
the aggregate

 

6

value of all contingent incentive compensation awards to the
Executive for the current calendar year or other measuring period under the
Incentive Plan, the Award Plan, or any other compensation or incentive plans of
the Company, calculated as to each such plan using the Executive’s annual
target percentage under that plan for that year or other measuring period and
as if all conditions for receiving that target award had been met.

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

     (d)  Additional Pension Benefit. In addition to the retirement benefits
to which the Executive is entitled under the Retirement Plan and BEP, or any
successors to those plans, the Company will pay the Executive an additional
amount under the BEP (or a successor plan) equal to the excess of (1) over (2),
where (1) is the retirement pension (determined as a straight life annuity
commencing on the Executive’s Retirement Date) that the Executive would have
accrued under the terms of the Retirement Plan and BEP (without regard to any
amendment to the Retirement Plan or BEP that is made subsequent to a Change in
Control and on or prior to the Date of Termination and that adversely affects
in any manner the computation of the Executive’s retirement benefits),
determined as if the Executive (a) were fully vested under the Retirement Plan
and the BEP, and (b) had accumulated (after the Date of Termination) 24
additional months of age and service credit under the Retirement Plan and the
BEP at the higher of (i) the

 

7

Executive’s highest annual rate of compensation
(as compensation is defined for purposes of the BEP) in effect during the three
years immediately preceding the Date of Termination, or (ii) the sum of the
Executive’s annual salary and target annual bonus in effect immediately prior
to the Change in Control (but in no event will the Executive be deemed to have
accumulated additional service credit in excess of the maximum permitted
pursuant to the Retirement Plan and BEP); and (2) is the retirement pension
(determined as a straight life annuity commencing on the Executive’s Retirement
Date) that the Executive had then accrued pursuant to the respective provisions
of the Retirement Plan and BEP. This additional amount will be paid in the
form and at the time or times that the relevant benefits are payable to the
Executive under the BEP or any successor plan; provided, however, that if the
transaction constituting the Change in Control has not been approved by the
Board prior to its consummation, the actuarial equivalent of the additional
benefits under this Section 3.02(d) will be paid in a cash lump sum. The
Executive understands and acknowledges that the additional retirement benefit
described in this Section 3.02(d) is payable entirely under the BEP, a
nonqualified plan, and will not be subject to any special tax treatment
applicable to benefits under the Retirement Plan and other tax-qualified plans.

     (e)  Welfare Benefits. Except as otherwise provided in this Section
3.02(e), for a 24-month period after the Date of Termination, the Company will
arrange to provide the Executive with life and health (including medical and
dental) insurance benefits and perquisites substantially similar to those that
the Executive is receiving immediately prior to the Notice of Termination
(without giving effect to any reduction in those benefits subsequent to a
Change in Control). Benefits and perquisites otherwise receivable by the
Executive pursuant to this Section 3.02(e) will be reduced to the extent
comparable benefits are actually received by or 

 

8

made available to the Executive
without greater cost to him than as provided by the Company during the 24-month
period following the Executive’s termination of employment (and the Executive
will report to the Company any such benefits actually received by or made
available to the Executive).

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

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

 

9

     (g)  Outplacement Services. The Company will provide the Executive with
reasonable outplacement services consistent with past practices of the Company
prior to the Change in Control or, if no past practice has been established
prior to the Change in Control, consistent with the prevailing practice in the
medical device manufacturing industry.

     SECTION 3.03. Gross-Up Payment.

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

     (b)  An initial determination as to whether a Gross-Up Payment is required
pursuant to this Agreement and the amount of that Gross-Up Payment will be made
at the Company’s expense by an Accounting Firm selected by the Executive and
reasonably acceptable to the Company. The Accounting Firm will provide its
determination, together with detailed supporting calculations and
documentation, to the Company and the Executive within 10 business days after
the Date of Termination, or such other time as requested by the Company and the
Executive. If the Accounting Firm determines that no Excise Tax is payable by
the Executive with respect to the Payments, it will furnish the Executive with
an opinion reasonably acceptable to the Executive that no Excise Tax will be
imposed with respect to the Payments. Within 10 business days after the
Accounting Firm delivers its determination to the Executive,

 

10

the Executive will
have the right to dispute the determination. The Gross-Up Payment, if any, as
determined by the Accounting Firm in accordance with the preceding provisions
of this Section, will be paid by the Company to the Executive within 5 business
days of the receipt of the Accounting Firm’s determination. The existence of a
dispute will not in any way affect the Executive’s right to receive the
Gross-Up Payment in accordance with the determination. If there is no dispute,
the determination will be final, binding, and conclusive upon the Company and
the Executive. If there is a dispute, then the Company and the Executive will
together select a second Accounting Firm, which will review the determination
and the Executive’s basis for the dispute and then render its own
determination, which will be final, binding, and conclusive on the Company and
the Executive. The Company will bear all costs associated with that
determination, unless the determination is not greater than the initial
determination, in which case all such costs will be borne by the Executive.

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

     (d)  Notwithstanding anything contained in this Agreement to the contrary,
in the event that, according to the Accounting Firm’s determination, an Excise
Tax will be imposed on the Total Payments, the Company will pay to the
applicable government taxing authorities as

 

11

Excise Tax withholding the amount
of the Excise Tax that the Company has actually withheld from the Total
Payments in accordance with applicable law.

     (e)  Notwithstanding the preceding provisions of this Section 3.03, the
Company will not have any obligation to make the Gross-Up Payment unless the
value of the Total Payments exceeds 110% of the maximum amount of parachute
payments that could be paid to the Executive without any imposition of golden
parachute excise taxes under Code sections 280G and 4999 (the “110% Amount”).
In that case, the value of the Total Payments will be reduced to the extent
necessary so that, within the meaning of Code section 280G(b)(2)(A)(ii), the
aggregate present value of the payments in the nature of compensation to (or
for the benefit of) the Executive that are contingent on a Change in Control
(with a Change in Control for this purpose being defined in terms of a “change”
described in Code section 280G(b)(2)(A)(i) or (ii)), do not exceed 2.999
multiplied by the Base Amount. For this purpose, cash Severance Payments will
be reduced first (if necessary, to zero), and all other, non-cash Severance
Payments will be reduced next (if necessary, to zero). For purposes of the
limitation described in the preceding sentence, the following will not be taken
into account: (1) any portion of the Total Payments the receipt or enjoyment
of which the Executive effectively waived in writing prior to the Date of
Termination, and (2) any portion of the Total Payments that, in the opinion of
the Accounting Firm, does not constitute a “parachute payment” within the
meaning of Code section 280G(b)(2).

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

 

12

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

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

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

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

     SECTION 3.05. Attorneys Fees and Expenses. If the Executive finally
prevails with respect to any good faith dispute between the Executive and the
Company regarding the interpretation, terms, validity or enforcement of this
Agreement (including any dispute as to the amount of any payment due under this
Agreement), the Company will pay or reimburse the Executive for all reasonable
attorneys fees and expenses incurred by the Executive in connection with that
dispute. In addition, the Company will pay the reasonable legal fees and
expenses incurred by the Executive in connection with any tax audit or
proceeding to the extent attributable to the application of Code section 4999
to any payment or benefit provided under

 

13

this Agreement and including, but not
limited to, auditors’ fees incurred in connection with the audit or proceeding.
Payment of fees and expenses due under this Section will be made to the
Executive within 15 business days after delivery of the Executive’s written
request for payment, accompanied by such evidence of fees and expenses incurred
as the Company reasonably may require. With respect to fees and expenses
incurred in connection with a good faith dispute, the Executive may not submit
a request for payment or reimbursement until the dispute has been finally
resolved (either by agreement or by an order or judgment that is not subject to
appeal or with respect to which all appeals have been exhausted or waived).

ARTICLE IV

Termination of Employment

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

     SECTION 4.02. Date of Termination. Except as otherwise provided in
Section 4.01, with respect to any purported termination of the Executive’s
employment after a Change in Control and during the term of this Agreement, the
term “Date of Termination” will have the meaning set forth in this Section. If
the Executive’s employment is terminated for Disability, Date of Termination
means thirty (30) days after Notice of Termination is given, provided that the
Executive does not return to the full-time performance of the Executive’s
duties

 

14

during that 30 day period. If the Executive’s employment is terminated
for any other reason, Date of Termination means the date specified in the
Notice of Termination, which, in the case of a termination by the Company,
cannot be less than 30 days (except in the case of a termination for Cause)
and, in the case of a termination by the Executive, cannot be less than 15 days
nor more than 60 days from the date on which the Notice of Termination is
given.

ARTICLE V

No Mitigation

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

ARTICLE VI

The Executive’s Covenants

     SECTION 6.01. Noncompetition Agreement. In consideration for this
Agreement, the Executive will execute, concurrent with the execution of this
Agreement, a noncompetition agreement in the form attached to this Agreement as
Exhibit A.

     SECTION 6.02. Potential Change in Control. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the term of this Agreement, the Executive
will remain employed by the Company until the earliest of (a) a date that is
six months from the date of the Potential Change of Control,

 

15

(b)  the date of a
Change in Control, (c) the date on which the Executive terminates employment
for Good Reason (determined by treating the Potential Change in Control as a
Change in Control in applying the definition of Good Reason) or by reason of
death, or (d) the date the Company terminates the Executive’s employment for
any reason.

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

ARTICLE VII

Successors; Binding Agreement

     SECTION 7.01. Obligation of Successors. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be

 

16

required to perform it
if no succession had occurred. Failure of the Company to obtain such an
assumption and agreement prior to the effectiveness of any such succession will
be a breach of this Agreement and will entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive
would be entitled to under this Agreement if the Executive were to terminate
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which the succession becomes
effective will be deemed the Date of Termination.

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

 

17

ARTICLE VIII

Notices

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

	 
	To the Company:
	 
	Zimmer Holdings, Inc.

345 East Main Street

Post Office Box 708

Warsaw, Indiana 46581-0708
	 
	 
	To the Executive:
	 
	Sheryl Conley

807 Chapman Lake Drive

Warsaw, IN 46580

ARTICLE IX

Miscellaneous

     This Agreement will not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in writing between the
Executive and the Company, the Executive will not have any right to be retained
in the employ of the Company. No provision of this Agreement may be modified,
waived, or discharged unless the waiver, modification, or discharge is agreed
to in writing and signed by the Executive and an officer of the Company
specifically designated by the Board. No waiver by either party at any time of
any breach by the other party of, or compliance with, any condition or
provision of this Agreement to

 

18

be performed by the other party will be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any
other time. Neither party has made any agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter of this
Agreement that are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement will be
governed by the laws of the State of Indiana. All references to sections of
the Exchange Act or the Code will be deemed also to refer to any successor
provisions to those sections. Any payments provided for under this Agreement
will be paid net of any applicable withholding required under federal, state,
or local law and any additional withholding to which the Executive has agreed.
The obligations of the Company and the Executive under Articles III, IV, and VI
will survive the expiration of the term of this Agreement.

ARTICLE X

Validity

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

ARTICLE XI

Counterparts

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

 

19

ARTICLE XII

Settlement of Disputes; Arbitration

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

ARTICLE XIII

Definitions

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

 

20

     (a)  “Accounting Firm” means an accounting firm that is designated as one
of the five largest accounting firms in the United States (which may include
the Company’s independent auditors).

     (b)  “Award Plan” means the Zimmer Holdings, Inc. Stock Incentive Plan.

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

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

     (e)  “BEP” means the Benefit Equalization Plan of Zimmer Holdings, Inc.
and Its Subsidiary or Affiliated Corporations Participating in the Zimmer
Holdings, Inc. Retirement Income Plan or the Zimmer Puerto Rico Retirement
Income Plan.

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

     (g)  “Cause” for termination by the Company of the Executive’s employment,
after any Change in Control, means (1) the willful and continued failure by the
Executive to substantially perform the Executive’s duties with the Company
(other than any such failure resulting from the Executive’s incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive pursuant
to Section 4.01) for a period of at least 30 consecutive days after a written
demand for substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive’s duties; (2)
the Executive willfully engages in conduct that is demonstrably and materially
injurious to the Company or its subsidiaries, monetarily or otherwise; or (3)
the Executive is convicted of, or has entered a plea of no contest to, a
felony. For purposes of clauses (1) and (2) of this definition, no act, or
failure to act, on the Executive’s

 

21

part will be deemed “willful” unless it is
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive’s act, or failure to act, was in the best
interest of the Company.

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

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

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

     (3)  the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a
merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior to the merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in combination
with the

 

22

ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, at least 75% of the
combined voting power of the voting securities of the Company or the
surviving entity outstanding immediately after the merger or
consolidation; or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person acquires more than 50% of the combined voting power of the
Company’s then outstanding securities; or

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

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

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

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

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

 

23

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

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

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

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

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

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

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

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

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

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

 

24

the Executive’s entitlement
under the Incentive Plan as in effect on the date of this Agreement or as
the same may be increased from time to time;

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

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

     (5) the Company’s failure to continue in effect any compensation
plan in which the Executive participates immediately prior to a Change in
Control, which plan is material to the Executive’s total compensation,
including, but not limited to, the Incentive Plan and the Award Plan or
any substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to that plan, or the Company’s failure
to continue the Executive’s participation in such a plan (or in a
substitute or alternative plan) on a basis 

 

25

not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive’s participation relative to other participants, as existed at
the time of the Change in Control;

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

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

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

 

26

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

     (t)  “Gross-Up Payment” has the meaning stated in Section 3.03.

     (u)  “Incentive Plan” means the Company’s Executive Performance Incentive
Plan.

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

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

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

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

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

 

27

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

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

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

     (z)  “Retirement Date” means the later of (1) the Executive’s normal
retirement date under the Retirement Plan and (2) another date for retirement
by the Executive that has been approved by the Board at any time prior to a
Change in Control.

     (aa)  “Retirement Plan” means the Zimmer Holdings, Inc. Retirement Income
Plan.

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

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

     (dd)  “Shares” means shares of the common stock, $0.10 par value, of the
Company.

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

 

28

	 	 	 	 	 
	EXECUTIVE	 	 	ZIMMER HOLDINGS, INC.
	 
	/s/ Sheryl Conley

	 	 	
By:
	/s/ David C. Dvorak

	Sheryl Conley	 	 	 	David C. Dvorak
	 	 	 	 
	 	 	 	 	SVP, Corporate
Affairs/General Counsel/
	 	 	 	 	Corporate Secretary

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