ZIMMER BIOMET HOLDINGS, INC. (Form: 10-Q, Received: 11/09/2015 18:21:36)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015

Commission File Number 001-16407

ZIMMER BIOMET HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

13-4151777

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

345 East Main Street, Warsaw, IN 46580

(Address of principal executive offices)

Telephone: (574) 267-6131

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 27, 2015, 203,779,925 shares of the registrant’s $.01 par value common stock were outstanding.

ZIMMER BIOMET HOLDINGS, INC.

INDEX TO FORM 10-Q

September 30, 2015


	Page
Part I—Financial Information

Item 1.
Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2015 and 2014		3
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014		4
Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014		5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014		6
Notes to Interim Condensed Consolidated Financial Statements		7

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations		33

Item 3.
Quantitative and Qualitative Disclosures About Market Risk		47

Item 4.
Controls and Procedures		47

Part II—Other Information

Item 1.
Legal Proceedings		48

Item 1A.
Risk Factors		48

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds		48

Item 3.
Defaults Upon Senior Securities		48

Item 4.
Mine Safety Disclosures		48

Item 5.
Other Information		48

Item 6.
Exhibits		49

Signatures		50

Part I—Financial Information

Item 1.

Financial Statements

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts, unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net Sales	$	1,762.2		$	1,106.0		$	4,064.2		$	3,450.4
Cost of products sold, excluding intangible asset amortization		552.1			295.9			1,131.3			929.0
Intangible asset amortization		122.6			20.6			176.0			72.0
Research and development		83.3			45.9			182.9			141.1
Selling, general and administrative		692.3			422.8			1,560.6			1,311.5
Certain claims (Note 17)		—			(0.3	)		7.7			21.5
Special items (Note 3)		195.9			65.9			751.9			164.3

Operating expenses		1,646.2			850.8			3,810.4			2,639.4

Operating Profit		116.0			255.2			253.8			811.0
Other income (expense), net		4.3			(12.1	)		(44.6	)		(25.4	)
Interest income		2.3			3.0			7.4			8.4
Interest expense		(90.8	)		(16.3	)		(196.6	)		(47.1	)

Earnings before income taxes		31.8			229.8			20.0			746.9
Provision for income taxes		9.6			56.9			0.5			181.4

Net Earnings		22.2			172.9			19.5			565.5
Less: Net loss attributable to noncontrolling interest		—			(0.2	)		(0.5	)		(1.0	)

Net Earnings of Zimmer Biomet Holdings, Inc.	$	22.2		$	173.1		$	20.0		$	566.5


Earnings Per Common Share
Basic	$	0.11		$	1.02		$	0.11		$	3.36
Diluted	$	0.11		$	1.01		$	0.11		$	3.30

Weighted Average Common Shares Outstanding
Basic		203.5			169.0			182.1			168.8
Diluted		205.7			171.7			184.7			171.5

Cash Dividends Declared Per Common Share	$	0.22		$	0.22		$	0.66		$	0.66

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net earnings	$	22.2		$	172.9		$	19.5		$	565.5
Other Comprehensive Income:
Foreign currency cumulative translation adjustments		(137.0	)		(132.4	)		(276.6	)		(128.8	)
Unrealized cash flow hedge gains/(losses), net of tax		4.1			49.9			43.4			38.5
Reclassification adjustments on foreign currency hedges, net of tax		(23.0	)		(5.0	)		(69.7	)		(9.7	)
Unrealized gains on securities, net of tax		—			—			0.5			0.2
Reclassification adjustments on securities, net of tax		—			—			—			(0.4	)
Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax		5.8			2.1			11.2			3.8

Total Other Comprehensive (Loss)		(150.1	)		(85.4	)		(291.2	)		(96.4	)

Comprehensive (Loss) Income		(127.9	)		87.5			(271.7	)		469.1
Comprehensive gain attributable to the noncontrolling interest		(0.1	)		(0.1	)		(0.1	)		(0.9	)

Comprehensive (Loss) Income attributable to Zimmer Biomet Holdings, Inc.	$	(127.8	)	$	87.6		$	(271.6	)	$	470.0

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, unaudited)


	September 30, 2015			December 31, 2014
ASSETS
Current Assets:
Cash and cash equivalents	$	1,466.9		$	1,083.3
Short-term investments		343.3			612.5
Accounts receivable, less allowance for doubtful accounts		1,385.1			912.1
Inventories		2,357.8			1,193.3
Prepaid expenses and other current assets		475.8			193.7
Deferred income taxes		365.8			318.4

Total Current Assets		6,394.7			4,313.3
Property, plant and equipment, net		1,989.0			1,285.3
Goodwill		7,679.5			2,514.2
Intangible assets, net		9,823.7			603.5
Other assets		802.2			941.7

Total Assets	$	26,689.1		$	9,658.0


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	223.6		$	145.2
Income taxes payable		208.3			80.3
Current portion of long-term debt		225.0			—
Other current liabilities		1,129.6			798.5

Total Current Liabilities		1,786.5			1,024.0
Long-term income tax payable		370.5			189.9
Deferred income taxes		2,348.9			45.9
Other long-term liabilities		500.3			421.0
Long-term debt		11,689.6			1,425.5

Total Liabilities		16,695.8			3,106.3


Commitments and Contingencies (Note 17)

Stockholders’ Equity:
Zimmer Biomet Holdings, Inc. Stockholders’ Equity:
Common stock, $0.01 par value, one billion shares authorized, 302.3 million shares issued in 2015 (268.4 million in 2014)		3.0			2.7
Paid-in capital		8,156.5			4,330.7
Retained earnings		8,264.8			8,362.1
Accumulated other comprehensive (loss) income		(253.1	)		38.1
Treasury stock, 98.6 million shares in 2015 (98.7 million shares in 2014)		(6,179.6	)		(6,183.7	)

Total Zimmer Biomet Holdings, Inc. stockholders’ equity		9,991.6			6,549.9
Noncontrolling interest		1.7			1.8

Total Stockholders’ Equity		9,993.3			6,551.7

Total Liabilities and Stockholders’ Equity	$	26,689.1		$	9,658.0

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)


	For the Nine Months Ended September 30,
	2015			2014
Cash flows provided by (used in) operating activities:
Net earnings	$	19.5		$	565.5
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization		428.1			283.2
Share-based compensation		34.7			37.0
Non-cash Biomet merger consideration compensation expense		164.1			—
Income tax benefit from stock option exercises		77.7			32.7
Excess income tax benefit from stock option exercises		(10.3	)		(9.7	)
Inventory step-up		137.1			5.0
Gain on divestiture of assets		(8.9	)		—
Changes in operating assets and liabilities, net of effect of acquisitions:
Income taxes		29.9			(140.2	)
Receivables		29.4			(42.3	)
Inventories		(196.5	)		(132.7	)
Accounts payable and accrued expenses		(251.5	)		(2.9	)
Other assets and liabilities		(23.7	)		103.0

Net cash provided by operating activities		429.6			698.6


Cash flows provided by (used in) investing activities:
Additions to instruments		(186.0	)		(162.9	)
Additions to other property, plant and equipment		(118.6	)		(95.7	)
Purchases of investments		(179.0	)		(1,150.1	)
Sales of investments		578.8			919.4
Proceeds from divestiture of assets		57.9			—
Biomet acquisition, net of acquired cash		(7,812.9	)		—
Investments in other assets		(19.6	)		(8.8	)

Net cash used in investing activities		(7,679.4	)		(498.1	)


Cash flows provided by (used in) financing activities:
Proceeds from senior notes		7,628.2			—
Proceeds from term loan		3,000.0			—
Redemption of senior notes		(2,740.0	)		—
Payments on term loan		(150.0	)		—
Net proceeds under revolving credit facilities		0.8			1.4
Dividends paid to stockholders		(112.3	)		(108.0	)
Proceeds from employee stock compensation plans		77.0			254.5
Excess income tax benefit from stock option exercises		10.3			9.7
Debt issuance costs		(58.4	)		(64.1	)
Repurchase of common stock		—			(400.5	)

Net cash provided by (used in) financing activities		7,655.6			(307.0	)

Effect of exchange rates on cash and cash equivalents		(22.2	)		(6.8	)

Increase (decrease) in cash and cash equivalents		383.6			(113.3	)
Cash and cash equivalents, beginning of year		1,083.3			1,080.6

Cash and cash equivalents, end of period	$	1,466.9		$	967.3

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The financial data presented herein is unaudited and should be read in conjunction with the consolidated financial statements and accompanying notes included in the 2014 Annual Report on Form 10-K filed by Zimmer Biomet Holdings, Inc. Beginning January 1, 2015, we changed our quarter-end closing convention for the majority of our international subsidiaries, which, in the case of the three and nine month periods ended September 30, 2015, resulted in a change of that quarter-end close from September 25 to September 30. As a consequence, our results of operations for the nine month period ended September 30, 2015 include up to four more billing days for such international subsidiaries than were included in our results of operations for the nine month period ended September 30, 2014. This change did not result in a significant change in the number of billing days for the three month period ended September 30, 2015. We have not restated the presentation of the 2014 financial statements to conform to this change of closing convention because the impact of the change is not material to the consolidated results of operations or to the comparisons between the 2015 and 2014 periods.

In our opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The December 31, 2014 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). Results for interim periods should not be considered indicative of results for the full year. Certain amounts in the 2014 condensed consolidated financial statements have been reclassified to conform to the 2015 presentation.

On June 24, 2015 (the “Closing Date”), pursuant to an agreement and plan of merger dated April 24, 2014, we acquired LVB Acquisition, Inc. (“LVB”), the parent company of Biomet, Inc. (“Biomet”), and LVB and Biomet became our wholly-owned subsidiaries (sometimes hereinafter referred to as the “Biomet merger” or the “merger”). For more information on the merger, see Note 4. In connection with the merger, we changed our name from Zimmer Holdings, Inc. to Zimmer Biomet Holdings, Inc.

The words “we,” “us,” “our” and similar words and “Zimmer Biomet” refer to Zimmer Biomet Holdings, Inc. and its subsidiaries. “Zimmer Biomet Holdings” refers to the parent company only. “Zimmer” used alone refers to the business or information of us and our subsidiaries on a stand-alone basis without inclusion of the business or information of LVB or any of its subsidiaries. Unless the context indicates or requires otherwise, references to “LVB” and “Biomet” refer to LVB and its subsidiaries.

2. Revision of Prior Period Financial Statements

In the three month period ended September 30, 2015, we discovered two errors related to our financial statements for prior periods. One error related to accounts payable accruals. For certain received goods and services, we did not completely relieve the related accrual in a timely manner. As a result, our accounts payable balance was overstated. This error had been accumulating since 2012. The second error related to the accounting for the divestiture of certain Biomet product lines and rights in the three month period ended June 30, 2015. We calculated a gain on the divestiture based upon the pre-merger net book value of the assets. However, the gain should have been calculated based upon the fair value of such assets post-merger. We evaluated the impact of these errors on our prior period quarterly and annual financial statements, assessing materiality both quantitatively and qualitatively, and concluded the errors were not material to any of our previously issued financial statements. However, we concluded the cumulative corrections of these errors would be material to our financial statements for the three month period ended September 30, 2015 and, therefore, it is not appropriate to recognize the cumulative corrections in this period. Consequently, we have revised previous periods’ financial statements to correct these errors as well as other unrelated, immaterial out of period adjustments that had been previously recorded. Following is a summary of the financial statement line items impacted by these revisions for the periods presented in this Form 10-Q (in millions, except per share amounts).

Revisions to the Condensed Consolidated Statements of Earnings and Comprehensive (Loss) Income


	Three Months Ended March 31, 2015									Three Months Ended June 30, 2015									Six Months Ended June 30, 2015
	As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised
Cost of products sold, excluding intangible asset amortization	$	278.7		$	6.2		$	284.9		$	290.5		$	3.8		$	294.3		$	569.2		$	10.0		$	579.2
Research and development		48.4			(0.1	)		48.3			51.4			(0.1	)		51.3			99.8			(0.2	)		99.6
Selling, general and administrative		425.0			(0.9	)		424.1			445.1			(0.9	)		444.2			870.1			(1.8	)		868.3
Special items		87.0			(0.2	)		86.8			469.4			(0.2	)		469.2			556.4			(0.4	)		556.0
Operating expenses		859.5			5.0			864.5			1,297.1			2.6			1,299.7			2,156.6			7.6			2,164.2
Other (expense), net		(22.6	)		—			(22.6	)		(4.0	)		(22.3	)		(26.3	)		(26.6	)		(22.3	)		(48.9	)
Earnings (loss) before income taxes		231.8			(5.0	)		226.8			(213.7	)		(24.9	)		(238.6	)		18.1			(29.9	)		(11.8	)
Provision (benefit) for income taxes		55.0			0.7			55.7			(55.5	)		(9.3	)		(64.8	)		(0.5	)		(8.6	)		(9.1	)
Net earnings (loss)		176.8			(5.7	)		171.1			(158.2	)		(15.6	)		(173.8	)		18.6			(21.3	)		(2.7	)
Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.		177.1			(5.7	)		171.4			(158.0	)		(15.6	)		(173.6	)		19.1			(21.3	)		(2.2	)

Weighted Average Common Shares Outstanding—Diluted																				174.2			(2.7	)		171.5
Earnings (Loss) Per Common Share—Basic	$	1.04		$	(0.03	)	$	1.01		$	(0.91	)	$	(0.09	)	$	(1.00	)	$	0.11		$	(0.12	)	$	(0.01	)
Earnings (Loss) Per Common Share—Diluted	$	1.02		$	(0.03	)	$	0.99		$	(0.91	)	$	(0.09	)	$	(1.00	)	$	0.11		$	(0.12	)	$	(0.01	)

Foreign currency cumulative translation adjustments	$	(152.7	)	$	2.8		$	(149.9	)	$	27.8		$	(17.5	)	$	10.3		$	(124.9	)	$	(14.7	)	$	(139.6	)
Total other comprehensive loss		(117.4	)		2.8			(114.6	)		(9.0	)		(17.5	)		(26.5	)		(126.4	)		(14.7	)		(141.1	)
Comprehensive Income (Loss)		59.4			(2.9	)		56.5			(167.2	)		(33.1	)		(200.3	)		(107.8	)		(36.0	)		(143.8	)
Comprehensive Income (Loss) attributable to Zimmer Biomet Holdings, Inc.		59.2			(2.9	)		56.3			(167.0	)		(33.1	)		(200.1	)		(107.8	)		(36.0	)		(143.8	)


	Three Months Ended September 30, 2014									Nine Months Ended September 30, 2014
	As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised
Cost of products sold, excluding intangible asset amortization	$	296.7		$	(0.8	)	$	295.9		$	932.0		$	(3.0	)	$	929.0
Research and development		46.0			(0.1	)		45.9			141.4			(0.3	)		141.1
Selling, general and administrative		423.8			(1.0	)		422.8			1,304.4			7.1			1,311.5
Special items		66.4			(0.5	)		65.9			165.3			(1.0	)		164.3
Operating expenses		853.2			(2.4	)		850.8			2,636.6			2.8			2,639.4
Earnings before income taxes		227.4			2.4			229.8			749.7			(2.8	)		746.9
Provision for income taxes		62.1			(5.2	)		56.9			187.2			(5.8	)		181.4
Net earnings		165.3			7.6			172.9			562.5			3.0			565.5
Net Earnings of Zimmer Biomet Holdings, Inc.		165.5			7.6			173.1			563.5			3.0			566.5

Earnings Per Common Share—Basic	$	0.98		$	0.04		$	1.02		$	3.34		$	0.02		$	3.36
Earnings Per Common Share—Diluted	$	0.96		$	0.05		$	1.01		$	3.29		$	0.01		$	3.30

Foreign currency cumulative translation adjustments	$	(134.6	)	$	2.2		$	(132.4	)	$	(131.0	)	$	2.2		$	(128.8	)
Total other comprehensive loss		(87.6	)		2.2			(85.4	)		(98.6	)		2.2			(96.4	)
Comprehensive Income		77.7			9.8			87.5			463.9			5.2			469.1
Comprehensive Income attributable to Zimmer Biomet Holdings, Inc.		77.8			9.8			87.6			464.8			5.2			470.0

Revisions to the Condensed Consolidated Balance Sheets


	December 31, 2014							March 31, 2015									June 30, 2015
	As Reported		Adjustment			As Revised		As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised
Inventories	$	1,169.0	$	24.3		$	1,193.3	$	1,217.0		$	20.0		$	1,237.0		$	2,441.4		$	(2.3	)	$	2,439.1
Total Current Assets		4,289.0		24.3			4,313.3		11,917.2			20.0			11,937.2			6,751.5			(2.3	)		6,749.2
Property, plant and equipment, net		1,288.8		(3.5	)		1,285.3		1,300.7			(3.3	)		1,297.4			1,998.6			(3.0	)		1,995.6
Goodwill		2,514.2		—			2,514.2		2,417.0			—			2,417.0			7,730.7			(22.3	)		7,708.4
Other assets		939.2		2.5			941.7		976.9			2.4			979.3			781.7			2.4			784.1
Total Assets		9,634.7		23.3			9,658.0		17,190.1			19.1			17,209.2			27,204.0			(25.2	)		27,178.8
Accounts payable		167.1		(21.9	)		145.2		174.9			(23.8	)		151.1			268.2			(25.7	)		242.5
Income taxes payable		72.4		7.9			80.3		57.5			8.6			66.1			134.0			7.7			141.7
Total Current Liabilities		1,038.0		(14.0	)		1,024.0		908.7			(15.2	)		893.5			2,163.1			(18.0	)		2,145.1
Long-term income tax payable		181.7		8.2			189.9		181.9			8.2			190.1			358.8			8.2			367.0
Deferred income taxes		45.9		—			45.9		51.9			—			51.9			2,363.2			(8.3	)		2,354.9
Total Liabilities		3,112.1		(5.8	)		3,106.3		10,607.1			(7.0	)		10,600.1			17,078.1			(18.1	)		17,060.0
Retained earnings		8,285.2		76.9			8,362.1		8,426.8			71.1			8,497.9			8,232.3			55.4			8,287.7
Accumulated other comprehensive income		85.9		(47.8	)		38.1		(31.5	)		(45.0	)		(76.5	)		(40.5	)		(62.5	)		(103.0	)
Total Zimmer Biomet Holdings, Inc. stockholders’ equity		6,520.8		29.1			6,549.9		6,581.0			26.1			6,607.1			10,124.1			(7.1	)		10,117.0
Total Stockholders Equity		6,522.6		29.1			6,551.7		6,583.0			26.1			6,609.1			10,125.9			(7.1	)		10,118.8

Revisions to the Condensed Consolidated Statements of Cash Flows


	Three Months Ended March 31, 2015									Six Months Ended June 30, 2015
	As Reported			Adjustments			As Revised			As Reported			Adjustments			As Revised
Net earnings	$	176.8		$	(5.7	)	$	171.1		$	18.6		$	(21.3	)	$	(2.7	)
(Gain) loss on divestiture of assets		—			—			—			(18.9	)		22.3			3.4
Changes in operating assets and liabilities, net of effect of acquisitions:
Income taxes		(13.3	)		0.7			(12.6	)		30.5			(8.6	)		21.9
Inventories		(62.2	)		4.3			(57.9	)		(149.9	)		9.1			(140.8	)
Accounts payable and accrued expenses		(149.5	)		(1.9	)		(151.4	)		95.8			(3.8	)		92.0
Other assets and liabilities		22.2			2.6			24.8			(87.8	)		2.3			(85.5	)


	Nine Months Ended September 30, 2014
	As Reported			Adjustments			As Revised
Net earnings	$	562.5		$	3.0		$	565.5
Changes in operating assets and liabilities, net of effect of acquisitions:
Income taxes		(134.3	)		(5.9	)		(140.2	)
Inventories		(134.2	)		1.5			(132.7	)
Accounts payable and accrued expenses		6.5			(9.4	)		(2.9	)
Other assets and liabilities		92.2			10.8			103.0

3. Significant Accounting Policies

Special Items —We recognize expenses resulting directly from our business combinations, employee termination benefits, certain R&D agreements, certain contract terminations, consulting and professional fees and asset impairment or loss on disposal charges connected with global restructuring, quality and operational excellence initiatives, and other items as “Special items” in our condensed consolidated statement of earnings. “Special items” included (in millions):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2015		2014			2015		2014
Biomet-related
Merger consideration compensation expense	$	—	$	—		$	164.1	$	—
Retention plans		—		—			73.0		—
Consulting and professional fees		28.0		27.2			114.6		40.9
Employee termination benefits		14.2		—			79.1		—
Dedicated project personnel		36.8		0.3			45.9		0.3
Relocated facilities		1.6		—			2.5		—
Contract terminations		59.2		—			75.1		—
Information technology integration		1.1		—			1.1		—
Other		5.7		—			7.6		—

Other
Consulting and professional fees		30.2		21.8			109.5		63.8
Employee termination benefits		1.1		—			1.9		0.9
Dedicated project personnel		6.4		13.9			28.9		35.7
Impairment/loss on disposal of assets		—		—			2.3		5.9
Certain R&D agreements		—		—			—		4.5
Relocated facilities		—		—			—		0.7
Distributor acquisitions		—		0.1			—		0.5
Certain litigation matters		—		—			20.3		—
Contract terminations		—		0.3			—		1.5
Information technology integration		1.8		—			1.8		—
Contingent consideration adjustments		0.1		(0.2	)		2.4		0.2
Accelerated software amortization		—		1.5			1.5		4.5
Other		9.7		1.0			20.3		4.9

Special items	$	195.9	$	65.9		$	751.9	$	164.3

Pursuant to the Biomet merger agreement, all outstanding LVB stock options and LVB stock-based awards vested immediately prior to the effective time of the merger, and holders of these options and awards received a portion of the aggregate merger consideration. Some of these options and awards were already vested under the terms of LVB’s equity incentive plans. We accounted for the fair value of the consideration we paid in exchange for previously vested options and awards as consideration to complete the merger. As part of the merger agreement terms, all previously unvested options and awards vested immediately prior to the effective time of the merger. Under LVB’s equity incentive plans, unvested options and awards would have otherwise been forfeited. We have concluded that the discretionary accelerated vesting of these unvested options and awards was for the economic benefit of the combined company, and, therefore, we classified the fair value of the merger consideration we paid to holders of such unvested options and awards of $164.1 million as compensation expense.

Pursuant to the LVB merger agreement, retention plans were established for certain Biomet employees and third-party sales agents. Retention payments were earned by employees and third-party sales agents who remained with Biomet through the Closing Date. We recognized $73.0 million of expense resulting from these retention plans.

After the Closing Date, we started to implement our integration plans to drive operational synergies. Part of these integration plans included termination of employees and certain contracts. Expenses attributable to the initial phase of these integration plans that were recognized in the three and nine month periods ended September 30, 2015 as part of “Special items” related to employee termination benefits and contract termination expense associated with agreements with independent agents, distributors, suppliers and lessors. Our integration plans are expected to last through 2018 and we expect to incur a total of $170 million for employee termination benefits and $130 million for contract termination expense in that time period. The following table summarizes the liabilities related to these integration plans (in millions):


	Employee Termination Benefits			Contract Terminations			Total
Balance, Closing Date	$	—		$	—		$	—
Additions		79.1			75.1			154.2
Cash payments		(28.4	)		(5.9	)		(34.3	)
Foreign currency exchange rate changes		(0.1	)		(0.2	)		(0.3	)

Balance, September 30, 2015	$	50.6		$	69.0		$	119.6

Recent Accounting Pronouncements— In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09— Revenue from Contracts with Customers (Topic 606) . This ASU provides a five-step model for revenue recognition that all industries will apply to recognize revenue when a customer obtains control of a good or service. The ASU will be effective for us beginning January 1, 2018. We are in the initial phases of our adoption plans and, accordingly, we are unable to estimate any effect this may have on our revenue recognition practices.

In April 2015, the FASB issued ASU 2015-03— Simplifying the Presentation of Debt Issuance Costs . This ASU requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. This ASU does not affect the measurement and recognition of debt issuance costs in our statement of earnings. As of September 30, 2015, this change would result in a reclassification of $8.4 million of other current assets and $62.5 million of other assets to debt. The ASU will be effective for us beginning January 1, 2016.

There are no other recently issued accounting pronouncements that we have not yet adopted that are expected to have a material effect on our financial position, results of operations or cash flows.

4. Biomet Merger

On the Closing Date, we completed our merger with LVB, the parent company of Biomet. We paid $12,030.3 million in cash and stock and assumed Biomet’s senior notes. The fair value of the principal amount of the senior notes was $2,740.0 million, which we repaid in full prior to June 30, 2015.

The merger positions us as a leader in the nearly $50 billion musculoskeletal industry. Our product portfolio now includes Biomet’s legacy product lines, including knee and hip reconstructive products; sports medicine, extremities and trauma products; spine, bone healing, craniomaxillofacial and thoracic products; dental reconstructive products; and cement, biologics and other products. Our larger scale provides for increased competitiveness in our core and emerging franchises and a stronger presence in our geographic markets. The merger positions us to accelerate revenue growth through cross-selling opportunities between our legacy product

portfolios and sales force specialization. The combination of our research and development (“R&D”) functions will allow us to allocate a greater portion of the combined R&D spending towards innovations designed to address unmet clinical needs and create new-market adjacencies. We also expect to realize operational synergies to enhance value for stockholders.

In order to consummate the merger under applicable antitrust laws and regulations in certain countries, we had to divest certain product line rights and assets. As a result, we recognized a net gain of $12.3 million and $8.9 million in non-operating other expense, net in the three and nine month periods ended September 30, 2015, respectively.

We funded the cash portion of the merger consideration with available cash on hand, as well as proceeds from a $3.0 billion senior unsecured term loan and $7.65 billion in senior unsecured notes issued in March 2015. See Note 9 for further information regarding these debt instruments.

The aggregate merger consideration paid was $12,030.3 million, consisting of $8,307.6 million of cash and 32.7 million shares of our common stock valued at $3,722.7 million. The value of our common stock was based upon a stock price of $113.83 per share using the average of the high and low trading prices on the Closing Date. As discussed in Note 3, $164.1 million of the cash and common stock consideration was allocated to compensation expense due to the acceleration of the vesting of unvested LVB stock options and LVB stock-based awards in connection with the merger. Therefore, the amount of merger consideration utilized for the purchase method of accounting was $11,866.2 million.

The merger was accounted for under the purchase method of accounting. Accordingly, LVB’s results of operations have been included in our consolidated results of operations subsequent to the Closing Date, and LVB’s assets and liabilities were recorded at their estimated fair values in our consolidated statement of financial position as of the Closing Date, with the excess of the purchase price over the estimated fair values being allocated to goodwill. During the three and nine month periods ended September 30, 2015, Biomet contributed net sales of $742.8 million and $802.7 million, respectively. During the three and nine month periods ended September 30, 2015, Biomet contributed net operating losses of $28.3 million and $316.5 million, respectively, to our consolidated results, driven by $164.1 million of merger consideration compensation expense for unvested LVB stock options and LVB stock-based awards, $73.0 million of retention plan expense, severance expense, inventory step-up expense and intangible asset amortization.

The purchase price allocation as of September 30, 2015 is preliminary. The preliminary purchase price allocation is based on publicly available financial information of LVB, our informed insights into the industries in which LVB competed, and discussions with LVB’s management. The estimation of fair values requires a complex series of judgments about future events and uncertainties which will take us some time to compile. Additionally, we have engaged external experts to assist us in the estimation of fair value for certain assets. For these reasons, among others, there may be differences between these preliminary estimates of fair value and the final acquisition accounting, which differences could be material. The final estimates of fair value are expected to be completed as soon as possible, but no later than one year from the Closing Date.

The following table summarizes our estimate of the preliminary fair values of the assets acquired and liabilities assumed at the Closing Date (in millions):


	Closing Date (as revised)		Adjustments			Closing Date (as adjusted)
Cash	$	494.8	$	—		$	494.8
Accounts receivable, net		544.7		10.3			555.0
Inventory		1,161.7		6.2			1,167.9
Other current assets		202.3		(35.3	)		167.0
Property, plant and equipment		699.4		(1.0	)		698.4
Intangible assets not subject to amortization:				—			—
Trademarks and trade names		515.0		—			515.0
Intangible assets subject to amortization:				—			—
Technology		3,075.3		15.8			3,091.1
Customer relationships		5,829.0		—			5,829.0
Other assets		29.5		(9.4	)		20.1
Goodwill		5,270.2		(16.3	)		5,253.9

Total assets acquired		17,821.9		(29.7	)		17,792.2

Current liabilities		588.9		10.7			599.6
Long-term debt		2,740.0		—			2,740.0
Deferred taxes		2,568.6		(41.1	)		2,527.5
Other long-term liabilities		58.2		0.7			58.9

Total liabilities assumed		5,955.7		(29.7	)		5,926.0

Net assets acquired	$	11,866.2	$	—		$	11,866.2

Adjustments to the preliminary fair values of the assets acquired and liabilities assumed during the three month period ended September 30, 2015 related to refinement of deferred tax balances, adjustments to contingent liabilities and contingent gains based upon additional evidence obtained, and a change in the fair value of certain intangible assets acquired. There may be additional adjustments to these preliminary estimates of fair value which could be material.

The weighted-average amortization period selected for technology and customer relationship intangible assets was 20 years and 24 years, respectively. The weighted-average amortization period may change in the future based upon our final estimates of fair value.

The goodwill is generated from the operational synergies we expect to achieve from our combined operations. Based upon the preliminary nature of the fair value estimates, we have not been able to compile the necessary information to allocate the goodwill to our operating segments. None of the goodwill is expected to be deductible for tax purposes.

The following table summarizes the changes in the carrying amount of our goodwill (in millions):


	Americas			EMEA			Asia Pacific			Unallocated		Total
Balance at December 31, 2014
Goodwill	$	1,666.2		$	1,067.7		$	153.3		$	—	$	2,887.2
Accumulated impairment losses		(373.0	)		—			—			—		(373.0	)

		1,293.2			1,067.7			153.3			—		2,514.2
Biomet merger		—			—			—			5,253.9		5,253.9
Currency translation		(8.9	)		(72.2	)		(7.5	)		—		(88.6	)

Balance at September 30, 2015
Goodwill		1,657.3			995.5			145.8			5,253.9		8,052.5
Accumulated impairment losses		(373.0	)		—			—			—		(373.0	)

	$	1,284.3		$	995.5		$	145.8		$	5,253.9	$	7,679.5

The following sets forth unaudited pro forma financial information derived from (i) the unaudited financial statements of Zimmer for the three and nine month periods ended September 30, 2015 and 2014; and (ii) the unaudited financial statements of LVB for the periods January 1, 2015 to June 23, 2015 and for the three and nine month periods ended September 30, 2014. The pro forma financial information has been adjusted to give effect to the merger as if it had occurred on January 1, 2014.

Pro Forma Financial Information

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Net Sales	$	1,762.2	$	1,888.4	$	5,584.1	$	5,906.2
Net Earnings	$	22.2	$	106.6	$	267.3	$	221.5

These unaudited pro forma results have been prepared for comparative purposes only and include adjustments such as inventory step-up, amortization of acquired intangible assets and interest expense on debt incurred to finance the merger. Material, nonrecurring pro forma adjustments directly attributable to the Biomet merger include:

•

The $164.1 million of merger consideration compensation expense for unvested LVB stock options and LVB stock-based awards was removed from net earnings for the nine month period ended September 30, 2015 and recognized as an expense in the nine month period ended September 30, 2014.

•

The $73.0 million of retention plan expense was removed from net earnings for the nine month period ended September 30, 2015 and recognized as an expense in the nine month period ended September 30, 2014.

•

Transaction costs of $17.7 million was removed from net earnings for the nine month period ended September 30, 2015 and recognized as an expense in the nine month period ended September 30, 2014.

5. Inventories


	September 30, 2015		December 31, 2014
	(in millions)
Finished goods	$	1,915.0	$	924.2
Work in progress		141.4		87.8
Raw materials		301.4		181.3

Inventories	$	2,357.8	$	1,193.3

Finished goods inventory as of September 30, 2015 includes $368.3 million to step-up the acquired Biomet inventory to fair value.

6. Property, Plant and Equipment


	September 30, 2015			December 31, 2014
	(in millions)
Land	$	40.9		$	20.4
Buildings and equipment		1,639.4			1,283.4
Capitalized software costs		304.8			294.7
Instruments		2,152.9			1,692.8
Construction in progress		150.9			115.8

		4,288.9			3,407.1
Accumulated depreciation		(2,299.9	)		(2,121.8	)

Property, plant and equipment, net	$	1,989.0		$	1,285.3

7. Investments

We invest in short and long-term investments classified as available-for-sale securities. Information regarding our investments is as follows (in millions):


	Amortized Cost		Gross Unrealized					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
As of September 30, 2015
Corporate debt securities	$	372.1	$	0.3	$	(0.2	)	$	372.2
U.S. government and agency debt securities		66.9		—		—			66.9
Commercial paper		11.5		—		—			11.5
Certificates of deposit		15.9		—		—			15.9

Total short and long-term investments	$	466.4	$	0.3	$	(0.2	)	$	466.5

As of December 31, 2014
Corporate debt securities	$	516.9	$	0.1	$	(0.5	)	$	516.5
U.S. government and agency debt securities		194.3		—		—			194.3
Commercial paper		57.8		—		—			57.8
Certificates of deposit		100.3		—		—			100.3

Total short and long-term investments	$	869.3	$	0.1	$	(0.5	)	$	868.9

The unrealized losses on our investments in corporate debt securities were caused by increases in interest yields in the global credit markets. We believe the unrealized losses associated with these securities as of September 30, 2015 are temporary because we do not intend to sell these investments, and we do not believe we will be required to sell them before recovery of their amortized cost basis.

The amortized cost and fair value of our available-for-sale fixed-maturity securities by contractual maturity are as follows (in millions):


	September 30, 2015
	Amortized Cost		Fair Value
Due in one year or less	$	343.2	$	343.3
Due after one year through two years		123.2		123.2

Total	$	466.4	$	466.5

8. Other Current Liabilities


	September 30, 2015		December 31, 2014
	(in millions)
Other current liabilities:
Salaries, wages and benefits	$	276.3	$	167.7
License and service agreements		167.0		100.2
Accrued interest		113.8		4.0
Forward starting interest rate swaps		—		59.3
Litigation settlement accrual (Note 17)		—		70.0
Accrued liabilities		572.5		397.3

Total other current liabilities	$	1,129.6	$	798.5

9. Debt

Our debt consisted of the following (in millions):


	September 30, 2015			December 31, 2014
Current portion of long-term debt
U.S. Term Loan	$	225.0		$	—

Long-term debt
1.450% Senior Notes due 2017	$	500.0		$	—
2.000% Senior Notes due 2018		1,150.0			—
4.625% Senior Notes due 2019		500.0			500.0
2.700% Senior Notes due 2020		1,500.0			—
3.375% Senior Notes due 2021		300.0			300.0
3.150% Senior Notes due 2022		750.0			—
3.550% Senior Notes due 2025		2,000.0			—
4.250% Senior Notes due 2035		500.0			—
5.750% Senior Notes due 2039		500.0			500.0
4.450% Senior Notes due 2045		1,250.0			—
U.S. Term Loan		2,625.0			—
Japan Term Loan		97.6			98.0
Other long-term debt		5.3			4.9
Debt discount		(22.3	)		(1.4	)
Adjustment related to interest rate swaps		34.0			24.0

Total long-term debt	$	11,689.6		$	1,425.5

At September 30, 2015, our total debt consisted of $8.95 billion aggregate principal amount of our senior notes, a $2.85 billion U.S. term loan (“U.S. Term Loan”), an 11.7 billion Japanese Yen term loan agreement (“Japan Term Loan”) that will mature on May 31, 2018, and other debt totaling $17.0 million.

The U.S. term loan is part of our $4.35 billion senior credit facility (the “Senior Credit Facility”) that contains: (i) a 5-year unsecured term loan facility in the principal amount of $3.0 billion (the “U.S. Term Loan Facility”), and (ii) a 5-year unsecured multicurrency revolving facility in the principal amount of $1.35 billion (the “Multicurrency Revolving Facility”). The Senior Credit Facility contains customary affirmative and negative covenants and events of default for an unsecured financing arrangement, including, among other things, limitations on consolidations, mergers and sales of assets. Financial covenants include a consolidated indebtedness to consolidated EBITDA ratio of no greater than 5.0 to 1.0 through June 24, 2016 and no greater than 4.5 to 1.0 thereafter. If our credit rating falls below investment grade, additional restrictions would result, including restrictions on investments and payment of dividends. We were in compliance with all covenants under the Senior Credit Facility as of September 30, 2015.

On June 24, 2015, we borrowed $3.0 billion under the U.S. Term Loan Facility to fund a portion of the Biomet merger. Under the terms of the U.S. Term Loan Facility, starting September 30, 2015, principal payments are due as follows: $75.0 million on a quarterly basis during the first three years, $112.5 million on a quarterly basis during the fourth year, and $412.5 million on a quarterly basis during the fifth year. In the three month period ended September 30, 2015, we paid $150.0 million in principal under the U.S. Term Loan Facility, resulting in $2.85 billion in outstanding borrowings as of September 30, 2015.

Borrowings under the Multicurrency Revolving Facility may be used for general corporate purposes. There were no borrowings outstanding under the Multicurrency Revolving Facility as of September 30, 2015.

Of the total $8.95 billion aggregate principal amount of senior notes outstanding at September 30, 2015, we issued $7.65 billion of this amount in March 2015 (the “Merger Notes”), the proceeds of which were used to finance a portion of the cash consideration payable in the Biomet merger, pay merger related fees and expenses and pay a portion of Biomet’s funded debt. The Merger Notes consist of the following seven tranches: the 1.450% Senior Notes due 2017, the 2.000% Senior Notes due 2018, the 2.700% Senior Notes due 2020, the 3.150% Senior Notes due 2022, the 3.550% Senior Notes due 2025, the 4.250% Senior Notes due 2035 and the 4.450% Senior Notes due 2045.

We may, at our option, redeem our senior notes, in whole or in part, at any time upon payment of the principal, any applicable make-whole premium, and accrued and unpaid interest to the date of redemption. In addition, the Merger Notes and the 3.375% Senior Notes due 2021 may be redeemed at our option without any make-whole premium at specified dates ranging from one month to six months in advance of the scheduled maturity date.

Between the Closing Date and June 30, 2015, we repaid the Biomet senior notes we assumed in the merger. The fair value of the principal amount plus interest was $2,798.6 million. These senior notes required us to pay a call premium in excess of the fair value of the notes when they were repaid. As a result, we recognized $22.0 million in non-operating other expense related to this call premium.

The estimated fair value of our senior notes as of September 30, 2015, based on quoted prices for the specific securities from transactions in over-the-counter markets (Level 2), was $8,893.5 million. The estimated fair value of the Japan Term Loan as of September 30, 2015, based upon publicly available market yield curves and the terms of the debt (Level 2), was $97.2 million. The carrying value of the U.S. Term Loan approximates fair value as it bears interest at short-term variable market rates.

10. Accumulated Other Comprehensive Income

Other comprehensive income (“OCI”) refers to certain gains and losses that under GAAP are included in comprehensive income but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Amounts in OCI may be reclassified to net earnings upon the occurrence of certain events.

Our OCI is comprised of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges, unrealized gains and losses on available-for-sale securities, and amortization of prior service costs and unrecognized gains and losses in actuarial assumptions on our defined benefit plans. Foreign currency translation adjustments are reclassified to net earnings upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. Unrealized gains and losses on cash flow hedges are reclassified to net earnings when the hedged item affects net earnings. Unrealized gains and losses on available-for-sale securities are reclassified to net earnings if we sell the security before maturity or if the unrealized loss is considered to be other-than-temporary. Amounts related to defined benefit plans that are in OCI are reclassified over the service periods of employees in the plan. The reclassification amounts are allocated to all employees in the plans and, therefore, the reclassified amounts may become part of inventory to the extent they are considered direct labor costs. See Note 14 for more information on our defined benefit plans.

The following table shows the changes in the components of OCI, net of tax (in millions):


	Foreign Currency Translation			Cash Flow Hedges			Unrealized Gains on Securities			Defined Benefit Plan Items
Balance December 31, 2014	$	111.8		$	70.1		$	(0.4	)	$	(143.4	)
OCI before reclassifications		(276.6	)		43.4			0.5			4.7
Reclassifications		—			(69.7	)		—			6.5

Balance September 30, 2015	$	(164.8	)	$	43.8		$	0.1		$	(132.2	)

The following table shows the reclassification adjustments from OCI (in millions):


Component of OCI	Amount of Gain / (Loss) Reclassified from OCI												Location on Statement of Earnings
	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Cash flow hedges
Foreign exchange forward contracts	$	30.5		$	8.7		$	91.7		$	20.4		Cost of products sold
Foreign exchange options		—			(0.1	)		—			(0.3	)	Cost of products sold
Forward starting interest rate swaps		(0.4	)		—			(0.9	)		—		Interest expense

		30.1			8.6			90.8			20.1		Total before tax
		7.1			3.6			21.1			10.4		Provision for income taxes

	$	23.0		$	5.0		$	69.7		$	9.7		Net of tax

Investments
Realized gains on securities	$	—		$	—		$	—		$	0.4		Interest income
		—			—			—			—		Provision for income taxes

	$	—		$	—		$	—		$	0.4		Net of tax

Defined benefit plans
Prior service cost	$	1.1		$	1.0		$	3.4		$	2.9		*
Unrecognized actuarial (loss)		(5.0	)		(2.9	)		(13.5	)		(8.6	)	*

		(3.9	)		(1.9	)		(10.1	)		(5.7	)	Total before tax
		(2.8	)		0.2			(3.6	)		(1.9	)	Provision for income taxes

	$	(1.1	)	$	(2.1	)	$	(6.5	)	$	(3.8	)	Net of tax

Total reclassifications	$	21.9		$	2.9		$	63.2		$	6.3		Net of tax

*	These OCI components are included in the computation of net periodic pension expense (see Note 14).

The following table shows the tax effects on each component of OCI recognized in our condensed consolidated statements of comprehensive income (in millions):


	Three Months Ended September 30, 2015									Nine Months Ended September 30, 2015
	Before Tax			Tax			Net of Tax			Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	(137.0	)	$	—		$	(137.0	)	$	(276.6	)	$	—		$	(276.6	)
Unrealized cash flow hedge gains/(losses)		7.3			3.2			4.1			48.0			4.6			43.4
Reclassification adjustments on foreign currency hedges		(30.1	)		(7.1	)		(23.0	)		(90.8	)		(21.1	)		(69.7	)
Unrealized gains/(losses) on securities		—			—			—			0.5			—			0.5
Adjustments to prior service cost and unrecognized actuarial assumptions		9.3			3.5			5.8			15.5			4.3			11.2

Total Other Comprehensive Gain/(Loss)	$	(150.5	)	$	(0.4	)	$	(150.1	)	$	(303.4	)	$	(12.2	)	$	(291.2	)


	Three Months Ended September 30, 2014									Nine Months Ended September 30, 2014
	Before Tax			Tax			Net of Tax			Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	(132.4	)	$	—		$	(132.4	)	$	(128.8	)	$	—		$	(128.8	)
Unrealized cash flow hedge gains/(losses)		62.8			12.9			49.9			47.3			8.8			38.5
Reclassification adjustments on foreign currency hedges		(8.6	)		(3.6	)		(5.0	)		(20.1	)		(10.4	)		(9.7	)
Unrealized gains/(losses) on securities		—			—			—			0.2			—			0.2
Reclassification adjustments on securities		—			—			—			(0.4	)		—			(0.4	)
Adjustments to prior service cost and unrecognized actuarial assumptions		1.9			(0.2	)		2.1			5.7			— 1.9			3.8

Total Other Comprehensive Gain/(Loss)	$	(76.3	)	$	9.1		$	(85.4	)	$	(96.1	)	$	0.3		$	(96.4	)

11 . Fair Value Measurement of Assets and Liabilities

The following assets and liabilities are recorded at fair value on a recurring basis (in millions):


	As of September 30, 2015
	Recorded Balance		Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Available-for-sale securities
Corporate debt securities	$	372.2	$	—	$	372.2	$	—
U.S. government and agency debt securities		66.9		—		66.9		—
Commercial paper		11.5		—		11.5		—
Certificates of deposit		15.9		—		15.9		—

Total available-for-sale securities		466.5		—		466.5		—
Derivatives, current and long-term
Foreign currency forward contracts and options		114.7		—		114.7		—
Interest rate swaps		34.0		—		34.0		—

	$	615.2	$	—	$	615.2	$	—

Liabilities
Derivatives, current and long-term
Foreign currency forward contracts and options	$	1.8	$	—	$	1.8	$	—


	As of December 31, 2014
	Recorded Balance		Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Available-for-sale securities
Corporate debt securities	$	516.5	$	—	$	516.5	$	—
U.S. government and agency debt securities		194.3		—		194.3		—
Commercial paper		57.8		—		57.8		—
Certificates of deposit		100.3		—		100.3		—

Total available-for-sale securities		868.9		—		868.9		—
Derivatives, current and long-term
Foreign currency forward contracts and options		125.5		—		125.5		—
Interest rate swaps		24.0		—		24.0		—

	$	1,018.4	$	—	$	1,018.4	$	—

Liabilities
Derivatives, current and long-term
Foreign currency forward contracts and options	$	1.7	$	—	$	1.7	$	—
Forward starting interest rate swaps		59.3		—		59.3		—

	$	61.0	$	—	$	61.0	$	—

We value our available-for-sale securities using a market approach based on broker prices for identical assets in over-the-counter markets and we perform ongoing assessments of counterparty credit risk.

We value our foreign currency forward contracts and foreign currency options using a market approach based on foreign currency exchange rates obtained from active markets and we perform ongoing assessments of counterparty credit risk.

We value our interest rate swaps using a market approach based on publicly available market yield curves and the terms of our swaps and we perform ongoing assessments of counterparty credit risk.

12. Derivative Instruments and Hedging Activities

We are exposed to certain market risks relating to our ongoing business operations, including foreign currency exchange rate risk, commodity price risk, interest rate risk and credit risk. We manage our exposure to these and other market risks through regular operating and financing activities. Currently, the only risks that we manage through the use of derivative instruments are interest rate risk and foreign currency exchange rate risk.

Interest Rate Risk

Derivatives Designated as Fair Value Hedges

We use interest rate derivative instruments to manage our exposure to interest rate movements by converting fixed-rate debt into variable-rate debt. Under these agreements, we agree to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. The objective of the instruments is to more closely align interest expense with interest income received on cash and cash equivalents. These derivative instruments are designated as fair value hedges under GAAP. Changes in the fair value of the derivative instrument are recorded in current earnings and are offset by gains or losses on the underlying debt instrument.

We have multiple fixed-to-variable interest rate swap agreements that we have designated as fair value hedges of the fixed interest rate obligations on our 4.625% Senior Notes due 2019 and 3.375% Senior Notes due 2021. The total notional amounts are $250 million and $300 million for the 4.625% Senior Notes due 2019 and 3.375% Senior Notes due 2021, respectively. On the interest rate swap agreements for the 4.625% Senior Notes due 2019, we receive a fixed interest rate of 4.625 percent and pay variable interest equal to the three-month LIBOR plus an average of 133 basis points. On the interest rate swap agreements for the 3.375% Senior Notes due 2021, we receive a fixed interest rate of 3.375 percent and pay variable interest equal to the three-month LIBOR plus an average of 99 basis points.

Derivatives Designated as Cash Flow Hedges

In 2014, we entered into forward starting interest rate swaps that were designated as cash flow hedges of the thirty year tranche of senior notes we expected to issue in 2015. The forward starting interest rate swaps mitigated the risk of changes in interest rates prior to the completion of the Merger Notes offering. The total notional amounts of the forward starting interest rate swaps were $1 billion and settled in March 2015 at a loss of $97.6 million. The loss will be recognized using the effective interest rate method over the maturity period of the 4.450% Senior Notes due 2045.

Foreign Currency Exchange Rate Risk

We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts and options with major financial

institutions. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, Swiss Francs, Japanese Yen, British Pounds, Canadian Dollars, Australian Dollars, Korean Won, Swedish Krona, Czech Koruna, Thai Baht, Taiwan Dollars, South African Rand, Russian Rubles and Indian Rupees. We do not use derivative financial instruments for trading or speculative purposes.

Derivatives Designated as Cash Flow Hedges

Our revenues are generated in various currencies throughout the world. However, a significant amount of our inventory is produced in U.S. Dollars. Therefore, movements in foreign currency exchange rates may have different proportional effects on our revenues compared to our cost of products sold. To minimize the effects of foreign currency exchange rate movements on cash flows, we hedge intercompany sales of inventory expected to occur within the next 30 months with foreign currency exchange forward contracts and options. We designate these derivative instruments as cash flow hedges.

We perform quarterly assessments of hedge effectiveness by verifying and documenting the critical terms of the hedge instrument and that forecasted transactions have not changed significantly. We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default. For derivatives which qualify as hedges of future cash flows, the effective portion of changes in fair value is temporarily recorded in other comprehensive income and then recognized in cost of products sold when the hedged item affects net earnings. The ineffective portion of a derivative’s change in fair value, if any, is immediately reported in cost of products sold. On our condensed consolidated statement of cash flows, the settlements of these cash flow hedges are recognized in operating cash flows.

For foreign currency exchange forward contracts and options outstanding at September 30, 2015, we had obligations to purchase U.S. Dollars and sell Euros, Japanese Yen, British Pounds, Canadian Dollars, Australian Dollars, Korean Won, Swedish Krona, Czech Koruna, Thai Baht, Taiwan Dollars, South African Rand, Russian Rubles and Indian Rupees and obligations to purchase Swiss Francs and sell U.S. Dollars. These derivatives mature at dates ranging from October 2015 through March 2018. As of September 30, 2015, the notional amounts of outstanding forward contracts and options entered into with third parties to purchase U.S. Dollars were $1,415.5 million. As of September 30, 2015, the notional amounts of outstanding forward contracts and options entered into with third parties to purchase Swiss Francs were $312.1 million.

Derivatives Not Designated as Hedging Instruments

We enter into foreign currency forward exchange contracts with terms of one month to manage currency exposures for monetary assets and liabilities denominated in a currency other than an entity’s functional currency. As a result, any foreign currency re-measurement gains/losses recognized in earnings are generally offset with gains/losses on the foreign currency forward exchange contracts in the same reporting period. Starting in 2015, the net amount of these offsetting gains/losses is recorded in other expense. In 2014 and prior periods, the net amount was recorded in cost of products sold and was not material. The 2014 presentation has been reclassified to conform to the 2015 presentation. These contracts are settled on the last day of each reporting period. Therefore, there is no outstanding balance related to these contracts recorded on the balance sheet as of the end of the reporting period. The notional amounts of these contracts are typically in a range of $1.2 billion to $1.7 billion per quarter.

Income Statement Presentation

Derivatives Designated as Fair Value Hedges

Derivative instruments designated as fair value hedges had the following effects on our condensed consolidated statements of earnings (in millions):


Derivative Instrument	Location on Statement of Earnings		Gain (Loss) on Instrument									Gain (Loss) on Hedged Item
			Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended September 30,					Nine Months Ended September 30,
			2015		2014			2015		2014		2015			2014		2015			2014
Interest rate swaps		Interest expense	$	10.8	$	(4.9	)	$	10.0	$	7.0	$	(10.8	)	$	4.9	$	(10.0	)	$	(7.0	)

We had no ineffective fair value hedging instruments during the three or nine month periods ended September 30, 2015 and 2014.

Derivatives Designated as Cash Flow Hedges

Derivative instruments designated as cash flow hedges had the following effects, before taxes, on OCI and net earnings on our condensed consolidated statements of earnings, condensed consolidated statements of comprehensive income and condensed consolidated balance sheets (in millions):


Derivative Instrument	Amount of Gain / (Loss) Recognized in OCI									Location on Statement of Earnings	Amount of Gain / (Loss) Reclassified from OCI
	Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2015		2014		2015			2014			2015			2014			2015			2014
Foreign exchange forward contracts	$	7.3	$	62.6	$	86.3		$	47.3	Cost of products sold	$	30.5		$	8.7		$	91.7		$	20.4
Foreign exchange options		—		0.2		—			—	Cost of products sold		—			(0.1	)		—			(0.3	)
Forward starting interest rate swaps		—		—		(38.3	)		—	Interest expense		(0.4	)		—			(0.9	)		—

	$	7.3	$	62.8	$	48.0		$	47.3		$	30.1		$	8.6		$	90.8		$	20.1

The net amounts recognized in earnings during the three and nine month periods ended September 30, 2015 and 2014 due to ineffectiveness and amounts excluded from the assessment of hedge effectiveness were not significant.

The fair value of outstanding derivative instruments designated as cash flow hedges and recorded on the balance sheet at September 30, 2015, together with settled derivatives where the hedged item has not yet affected earnings, was a net unrealized gain of $45.1 million, or $43.8 million after taxes, which is deferred in OCI. Of the net unrealized gain, $105.4 million, or $79.9 million after taxes, is expected to be reclassified to earnings over the next twelve months. The disproportionate amount of net unrealized gain deferred in OCI and the expected reclassification over the next twelve months is due to the significant loss from the forward starting interest rate swaps deferred in OCI which will be reclassified to earnings over the maturity period of the 4.450% Senior Notes due 2045.

Derivatives Not Designated as Hedging Instruments

The following gains from these derivative instruments were recognized on our condensed consolidated statements of earnings (in millions):


Derivative Instrument	Location on Statement of Earnings	Three Months Ended September 30,				Nine Months Ended September 30,
Derivative Instrument	Location on Statement of Earnings	2015		2014		2015		2014
Foreign exchange forward contracts	Other income (expense), net	$	8.4	$	9.7	$	22.0	$	5.4

This impact does not include any offsetting gains/losses recognized in earnings as a result of foreign currency re-measurement of monetary assets and liabilities denominated in a currency other than an entity’s functional currency.

Balance Sheet Presentation

As of September 30, 2015 and December 31, 2014, all derivative instruments designated as fair value hedges and cash flow hedges were recorded at fair value on the balance sheet. On our condensed consolidated balance sheets, we recognize individual forward contracts and options with the same counterparty on a net asset/liability basis if we have a master netting agreement with the counterparty. Under these master netting agreements, we are able to settle derivative instrument assets and liabilities with the same counterparty in a single transaction, instead of settling each derivative instrument separately. We have master netting agreements with all of our counterparties. The fair value of derivative instruments on a gross basis is as follows (in millions):


	September 30, 2015			December 31, 2014
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
*Asset Derivatives*
Foreign exchange forward contracts	Other current assets	$	109.6	Other current assets	$	98.7
Foreign exchange forward contracts	Other assets		29.3	Other assets		53.1
Interest rate swaps	Other assets		34.0	Other assets		24.0

Total asset derivatives		$	172.9		$	175.8


*Liability Derivatives*
Foreign exchange forward contracts	Other current liabilities	$	15.6	Other current liabilities	$	16.4
Forward starting interest rate swaps	Other current liabilities		—	Other current liabilities		59.3
Foreign exchange forward contracts	Other long-term liabilities		10.4	Other long-term liabilities		11.6

Total liability derivatives		$	26.0		$	87.3

The table below presents the effects of our master netting agreements on our condensed consolidated balance sheets (in millions):


	Location	As of September 30, 2015						As of December 31, 2014
Description	Location	Gross Amount		Offset		Net Amount in Balance Sheet		Gross Amount		Offset		Net Amount in Balance Sheet
*Asset Derivatives*
Cash flow hedges	Other current assets	$	109.6		14.8	$	94.8	$	98.7	$	15.9	$	82.8
Cash flow hedges	Other assets		29.3		9.4		19.9		53.1		10.4		42.7

*Liability Derivatives*
Cash flow hedges	Other current liabilities		15.6		14.8		0.8		16.4		15.9		0.5
Cash flow hedges	Other long-term liabilities		10.4		9.4		1.0		11.6		10.4		1.2

13. Income Taxes

We operate on a global basis and are subject to numerous and complex tax laws and regulations. Our income tax filings are regularly under audit in multiple federal, state and foreign jurisdictions. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed. The net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, expiration of statutes of limitations, settlements of tax assessments and other events which could impact our determination of unrecognized tax benefits. Currently, we cannot reasonably estimate the amount by which our unrecognized tax benefits will change.

During the second quarter of 2014, the Internal Revenue Service (“IRS”) began the audit of our U.S. federal returns for the years 2010 through 2012. During the second quarter of 2011, the IRS concluded its examination of our U.S. federal returns for years 2005 through 2007, and during the fourth quarter of 2013, the IRS concluded its examination of our U.S. federal returns for years 2008 through 2009. For years 2006 through 2009, the IRS has proposed adjustments reallocating profits between certain of our U.S. and foreign subsidiaries. During the second quarter of 2014, the IRS issued a corrected Revenue Agent Report for years 2008 through 2009, assessing a penalty with respect to a 2008 uncertain tax position. We have disputed these proposed adjustments and continue to pursue resolution with the IRS. During the second quarter of 2014, the IRS issued a statutory notice of deficiency for the years 2005 through 2007. We are contesting this deficiency notice and we filed a petition with the U.S. Tax Court during the third quarter of 2014. Although the ultimate timing for resolution of the disputed tax issues is uncertain, we may resolve certain tax matters with the IRS within the next twelve months and pay amounts for other unresolved tax matters in order to limit the potential impact of IRS interest charges. Final resolution of these matters could have a material impact on our income tax expense, results of operations and cash flows for future periods.

In the three and nine month periods ended September 30, 2015, our effective tax rate was 30.2 percent and 2.7 percent, respectively. Our effective tax rate was lower than the U.S. statutory income tax rate of 35.0 percent primarily due to income earned in foreign locations with lower tax rates as well as the majority of “Special items” expense has been incurred in higher tax jurisdictions.

14. Retirement Benefit Plans

We have defined benefit pension plans covering certain U.S. and Puerto Rico employees. The employees who are not participating in the defined benefit plans receive additional benefits under our defined contribution plans. Plan benefits are primarily based on years of credited service and the participant’s compensation. In addition to the U.S. and Puerto Rico defined benefit pension plans, we sponsor various foreign pension arrangements, including retirement and termination benefit plans required by local law or coordinated with government sponsored plans.

The components of net periodic pension expense for our U.S. and foreign defined benefit pension plans are as follows (in millions):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Service cost	$	7.6		$	6.3		$	22.8		$	19.0
Interest cost		7.2			6.1			18.3			18.4
Expected return on plan assets		(12.3	)		(10.1	)		(34.1	)		(30.4	)
Amortization of prior service cost		(1.1	)		(1.0	)		(3.4	)		(2.9	)
Amortization of unrecognized actuarial loss		5.0			2.9			13.5			8.6

Net periodic pension expense	$	6.4		$	4.2		$	17.1		$	12.7

We expect that we will have minimal legally required funding obligations in 2015 for our U.S. and Puerto Rico defined benefit pension plans, and therefore we have not made, nor do we voluntarily expect to make, any material contributions to these plans during 2015. We contributed $11.4 million to our foreign-based defined benefit pension plans in the nine month period ended September 30, 2015, and we expect to contribute $3.6 million to these foreign-based plans during the remainder of 2015.

15. Earnings Per Share

The following is a reconciliation of weighted average shares for the basic and diluted shares computations (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Weighted average shares outstanding for basic net earnings per share		203.5		169.0		182.1		168.8
Effect of dilutive stock options and other equity awards		2.2		2.7		2.6		2.7

Weighted average shares outstanding for diluted net earnings per share		205.7		171.7		184.7		171.5

During the three and nine month periods ended September 30, 2015, an average of 2.2 million options and 0.7 million options, respectively, to purchase shares of common stock were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of our common stock. During the three and nine month periods ended September 30, 2014, all outstanding options to purchase shares of common stock were included in the computation of diluted earnings per share because the exercise prices of all options were less than the average market price of our common stock.

16. Segment Information

We design, develop, manufacture and market orthopaedic reconstructive products; sports medicine, biologics, extremities and trauma products; spine, bone healing, craniomaxillofacial (“CMF”) and thoracic products, dental implants; and related surgical products. We also provide other healthcare-related services. We manage operations through three major geographic segments—the Americas, which is comprised principally of the U.S. and includes other North, Central and South American markets; EMEA, which is comprised principally of Europe and includes the Middle East and African markets; and Asia Pacific, which is comprised primarily of Japan and includes other Asian and Pacific markets. This structure is the basis for our reportable segment information discussed below. Management evaluates reportable segment performance based upon segment operating profit exclusive of operating expenses pertaining to inventory step-up and certain other inventory and manufacturing related charges, “Certain claims,” goodwill impairment, intangible asset amortization, “Special items,” and global operations and corporate functions. Global operations and corporate functions include research, development engineering, medical education, brand management, corporate legal, finance and human resource functions, U.S., Puerto Rico and Ireland-based manufacturing operations and logistics and share-based payment expense. Intercompany transactions have been eliminated from segment operating profit.

Net sales and segment operating profit are as follows (in millions):


	Net Sales				Operating Profit
	Three Months Ended September 30,				Three Months Ended September 30,
	2015		2014		2015			2014
Americas	$	1,133.5	$	637.9	$	549.7		$	316.8
EMEA		375.2		270.7		105.1			82.7
Asia Pacific		253.5		197.4		121.6			90.8

Total	$	1,762.2	$	1,106.0


Inventory step-up and other inventory and manufacturing related charges						(132.6	)		(7.7	)
Intangible asset amortization						(122.6	)		(20.6	)
Certain claims						—			0.3
Special items						(195.9	)		(65.9	)
Global operations and corporate functions						(209.3	)		(141.2	)

Operating profit					$	116.0		$	255.2


	Net Sales				Operating Profit
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015			2014
Americas	$	2,458.2	$	1,916.3	$	1,217.6		$	947.4
EMEA		964.2		932.3		321.4			302.5
Asia Pacific		641.8		601.8		317.4			286.6

Total	$	4,064.2	$	3,450.4


Inventory step-up and other inventory and manufacturing related charges						(151.2	)		(32.9	)
Intangible asset amortization						(176.0	)		(72.0	)
Certain claims						(7.7	)		(21.5	)
Special items						(751.9	)		(164.3	)
Global operations and corporate functions						(515.8	)		(434.8	)

Operating profit					$	253.8		$	811.0

Due to the change in our interim quarter-end closing convention for the majority of our international subsidiaries, net sales for our EMEA and Asia Pacific reportable segments in the three and nine month periods ended September 30, 2015 include sales through September 30, 2015, whereas in the three and nine month periods ended September 30, 2014, net sales for those operating segments included sales through September 25, 2014. We have not restated the presentation of the 2014 financial statements to conform to this change of closing convention because the impact of the change is not material to our consolidated results of operations or to the comparisons between the 2015 and 2014 periods.

Net sales by product category are as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Knees	$	632.0	$	443.3	$	1,564.8	$	1,398.9
Hips		434.5		315.6		1,066.8		988.3
S.E.T		371.0		208.6		811.1		634.1
Dental		103.4		53.9		220.2		176.0
Spine & CMF		147.7		51.0		256.1		151.5
Other		73.6		33.6		145.2		101.6

Total	$	1,762.2	$	1,106.0	$	4,064.2	$	3,450.4

“S.E.T” refers to our Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma product category.

17. Commitments and Contingencies

On a quarterly and annual basis, we review relevant information with respect to loss contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. We establish liabilities for loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made.

Litigation

Durom ^® Cup-related claims : On July 22, 2008, we temporarily suspended marketing and distribution of the Durom Acetabular Component (“ Durom Cup”) in the U.S. Subsequently, a number of product liability lawsuits were filed against us in various U.S. and foreign jurisdictions. The plaintiffs seek damages for personal injury, and they generally allege that the Durom Cup contains defects that result in complications and premature revision of the device. We have settled some of these claims and others are still pending. The majority of the pending U.S. lawsuits are currently in a federal Multidistrict Litigation (MDL) in the District of New Jersey ( In Re: Zimmer Durom Hip Cup Products Liability Litigation ). Multi-plaintiff state court cases are pending in St. Clair County, Illinois ( Santas, et al. v. Zimmer, Inc., et al. ) and Los Angeles County, California ( McAllister, et al. v. Zimmer, Inc., et al. ). As of September 30, 2015, case specific discovery in these lawsuits was ongoing. The initial trial in Santas took place in November 2014, the initial trial in the MDL took place in May 2015 and the initial trial in McAllister took place in July 2015. Other lawsuits are pending in various jurisdictions, and additional claims may be asserted in the future.

Since 2008, we have recognized expense of $479.4 million for Durom Cup-related claims, including $7.7 million during the nine month period ended September 30, 2015 that is reported on the “Certain claims” line of our condensed consolidated statement of earnings. With respect to the same prior year period, we recognized $21.5 million in expense for Durom Cup-related claims.

We maintain insurance for product liability claims, subject to self-insurance retention requirements. As of September 30, 2015, we have exhausted our self-insured retention under our insurance program and have a claim for insurance proceeds for ultimate losses which exceed the self-insured retention amount, subject to a 20 percent co-payment requirement and a cap. We believe our contracts with the insurance carriers are enforceable for these claims and, therefore, it is probable that we will recover some amount from our insurance carriers. We have received a portion of the insurance proceeds we estimate we will recover. We have a $95.3 million receivable in “Other assets” remaining on our condensed consolidated balance sheet as of September 30, 2015 for estimated insurance recoveries for Durom Cup-related claims. As is customary in this process, our insurance carriers have reserved all rights under their respective policies and could still ultimately deny coverage for some or all of our insurance claims.

Our estimate as of September 30, 2015 of the remaining liability for all Durom Cup-related claims is $322.9 million, of which $50.0 million is classified as short-term in “Other current liabilities” and $272.9 million is classified as long-term in “Other long-term liabilities” on our condensed consolidated balance sheet. We expect to pay the majority of the Durom Cup-related claims within the next few years.

Our understanding of clinical outcomes with the Durom Cup and other large diameter hip cups continues to evolve. We rely on significant estimates in determining the provisions for Durom Cup-related claims, including our estimate of the number of claims that we will receive and the average amount we will pay per claim. The actual number of claims and the actual amount we pay per claim may differ from our estimates. Among other factors, since our understanding of the clinical outcomes is still evolving, we cannot reasonably estimate the possible loss or range of loss that may result from Durom Cup-related claims in excess of the losses we have accrued.

Margo and Daniel Polett v. Zimmer, Inc. et al. : On August 20, 2008, Margo and Daniel Polett filed an action against us and an unrelated third party, Public Communications, Inc. (“PCI”), in the Court of Common Pleas, Philadelphia, Pennsylvania seeking an unspecified amount of damages for injuries and loss of consortium allegedly suffered by Mrs. Polett and her spouse, respectively. The complaint alleged that defendants were negligent in connection with Mrs. Polett’s participation in a promotional video featuring one of our knee products. The case was tried in November 2010 and the jury returned a verdict in favor of plaintiffs. The jury awarded $27.6 million in compensatory damages and apportioned fault 30 percent to plaintiffs, 34 percent to us and 36 percent to PCI. Under applicable law, we may be liable for any portion of the damages apportioned to PCI that it does not pay. On December 2, 2010, we and PCI filed a motion for post-trial relief seeking a judgment notwithstanding the verdict, a new trial or a remittitur. On June 10, 2011, the trial court entered an order denying our motion for post-trial relief and affirming the jury verdict in full and entered judgment for $20.3 million against us and PCI. On June 29, 2011, we filed a notice of appeal to the Superior Court of Pennsylvania and posted a bond for the verdict amount plus interest. Oral argument before the appellate court in Philadelphia, Pennsylvania was held on March 13, 2012. On March 1, 2013, the Superior Court of Pennsylvania vacated the $27.6 million judgment and remanded the case for a new trial. On March 15, 2013, plaintiffs filed a motion for re-argument en banc, and on March 28, 2013, we filed our response in opposition. On May 9, 2013, the Superior Court of Pennsylvania granted plaintiffs’ motion for re-argument en banc. Oral argument (re-argument en banc) before the Superior Court of Pennsylvania was held on October 16, 2013. On December 20, 2013, the Court issued its opinion again vacating the trial court judgment and remanding the case for a new trial. On January 21, 2014, plaintiffs filed a petition for allowance of appeal in the Supreme Court of Pennsylvania, which was granted on May 21, 2014. Oral argument before the Supreme Court of Pennsylvania took place on October 8, 2014. On October 27, 2015, the Supreme Court of Pennsylvania reversed the order of the Superior Court of Pennsylvania and remanded the case to that court to consider the question of whether the trial court erred in refusing to remit the jury’s compensatory damages award. Although we are defending this lawsuit vigorously, its ultimate resolution is uncertain.

NexGen ^® Knee System claims : Following a wide-spread advertising campaign conducted by certain law firms beginning in 2010, a number of product liability lawsuits have been filed against us in various jurisdictions. The plaintiffs seek damages for personal injury, alleging that certain products within the NexGen Knee System suffer from defects that cause them to loosen prematurely. The majority of the cases are currently pending in a federal MDL in the Northern District of Illinois ( In Re: Zimmer NexGen Knee Implant Products Liability Litigation ). Other cases are pending in other state and federal courts, and additional lawsuits may be filed. As of September 30, 2015, discovery in these lawsuits was ongoing. The initial bellwether trial commenced in October 2015. We have not accrued an estimated loss relating to these lawsuits because we believe the plaintiffs’ allegations are not consistent with the record of clinical success for these products. As a result, we do not believe that it is probable that we have incurred a liability, and we cannot reasonably estimate any loss that might eventually be incurred. Although we are vigorously defending these lawsuits, their ultimate resolution is uncertain.

Biomet metal-on-metal hip implant claims : Biomet is a defendant in a number of product liability lawsuits relating to metal-on-metal hip implants. The majority of these cases involve the M2a-Magnum hip system. The majority of the cases are currently consolidated in one federal MDL proceeding in the U.S. District Court for the Northern District of Indiana (In Re: Biomet M2a Magnum Hip Implant Product Liability Litigation) . Other cases are pending in various state and foreign courts.

On February 3, 2014, Biomet announced the settlement of the MDL. Lawsuits filed in the MDL by April 15, 2014 may participate in the settlement. Biomet continues to evaluate the inventory of lawsuits in the MDL pursuant to the categories and procedures set forth in the settlement agreement. The final amount of payments under the settlement is uncertain. The settlement does not affect certain other claims relating to Biomet’s metal-on-metal hip products that are pending in various state and foreign courts, or other claims that may be filed in the future. Our estimate as of September 30, 2015 of the remaining liability for all Biomet metal-on-metal hip implant claims is $39.3 million, which is classified as short-term in “Other current liabilities” on our condensed consolidated balance sheet.

Biomet has exhausted the self-insured retention in its insurance program and has been reimbursed for claims related to its metal-on-metal products up to its policy limits in the program. Zimmer Biomet will be responsible for any amounts by which the ultimate losses exceed the amount of Biomet’s third-party insurance coverage. As of September 30, 2015, Biomet had received all of the insurance proceeds it expects to recover under the excess policies.

Heraeus trade secret misappropriation lawsuits : In December 2008, Heraeus Kulzer GmbH (together with its affiliates, “Heraeus”) initiated legal proceedings in Germany against Biomet, Biomet Europe BV and certain other subsidiaries of Biomet, Inc., alleging that Biomet, Inc. and Biomet Europe BV misappropriated Heraeus trade secrets when developing Biomet Europe’s Refobacin and Biomet Bone Cement line of cements (“European Cements”). The lawsuit sought to preclude the defendants from producing, marketing and offering for sale their current line of European Cements and to compensate Heraeus for any damages incurred (alleged to be in excess of €30.0 million). On December 20, 2012, the trial court dismissed Biomet, Inc., Biomet Europe BV, Biomet Deutschland GmbH and other defendants from the lawsuit. Biomet Orthopaedics Switzerland GmbH was the only Biomet entity remaining as a defendant.

Following an appeal by Heraeus, on June 5, 2014, the German appeals court (i) enjoined Biomet, Inc., Biomet Europe BV and Biomet Deutschland GmbH from manufacturing, selling or offering the European Cements to the extent they contain certain raw materials in particular specifications; (ii) held the defendants jointly and severally liable to Heraeus for any damages from the sale of European Cements since 2005; and (iii) ruled that no further review may be sought. Damages have not been determined. The judgment is not final and the defendants are seeking review (including review of the appeals court ruling that no further review may be sought) from Germany’s Supreme Court. No prediction can be made as to the likelihood of review being granted by Germany’s Supreme Court.

As a result, Biomet Europe BV and Biomet Deutschland GmbH are enjoined from the manufacture, marketing, sale and offering of European Cements in Germany. While Heraeus has indicated that it intends to take the position that the judgment would prohibit the manufacture, marketing, sale and offering of European Cements outside of Germany as well and is attempting to enforce the judgment in a limited number of other European jurisdictions, Biomet, Inc., Biomet Europe BV and Biomet Deutschland GmbH are vigorously contesting any enforcement of the judgment beyond Germany. Biomet, Inc., Biomet Europe BV and Biomet Deutschland GmbH thus filed a declaratory action in Germany on August 3, 2014 to have the court determine the reach of the appeals court decision.

On September 8, 2014, Heraeus filed a complaint against a Biomet supplier, Esschem, Inc. (“Esschem”), in the United States District Court for the Eastern District of Pennsylvania. The lawsuit contains allegations that focus on two copolymer compounds that Esschem sells to Biomet, which Biomet incorporates into certain bone cement products that compete with Heraeus’ bone cement products. The complaint alleges that Biomet helped Esschem to develop these copolymers, using Heraeus trade secrets that Biomet allegedly misappropriated. The complaint asserts a claim under the Pennsylvania Trade Secrets Act, as well as other various common law tort claims, all based upon the same trade secret misappropriation theory. Heraeus is seeking to enjoin Esschem from supplying the copolymers to any third party and actual damages in an unspecified amount. The complaint also seeks punitive damages, costs and attorneys’ fees. If Esschem is enjoined, Biomet may not be able to obtain the copolymers from another supplier and as a result may not be able to continue to manufacture the subject bone

cement products. Although Heraeus has not named Biomet as a party to this lawsuit, Biomet has agreed, at Esschem’s request and subject to certain limitations, to indemnify Esschem for any liability, damages and legal costs related to this matter. On November 3, 2014, the court entered an order denying Heraeus’ motion for a temporary restraining order.

Heraeus continues to initiate other related legal proceedings in Europe seeking various forms of relief, including injunctive relief and damages, against Biomet-related entities relating to the European Cements.

No assurance can be made as to the time or resources that will be needed to devote to this litigation or its final outcome.

Stryker patent infringement lawsuit : On December 10, 2010, Stryker Corporation and related entities (“Stryker”) filed suit against us in the U.S. District Court for the Western District of Michigan, alleging that certain of our Pulsavac Plus Wound Debridement Products infringe three U.S. patents assigned to Stryker. The case was tried beginning on January 15, 2013, and on February 5, 2013, the jury found that we infringed certain claims of the subject patents. The jury awarded $70.0 million in monetary damages for lost profits. The jury also found that we willfully infringed the subject patents. We filed multiple post-trial motions, including a motion seeking a new trial. On August 7, 2013, the trial court issued a ruling denying all of our motions and awarded treble damages and attorneys’ fees to Stryker. We filed a notice of appeal to the Court of Appeals for the Federal Circuit to seek reversal of both the jury’s verdict and the trial court’s rulings on our post-trial motions. Oral argument before the Court of Appeals for the Federal Circuit took place on September 8, 2014. On December 19, 2014, the Federal Circuit issued a decision affirming the $70.0 million lost profits award but reversed the willfulness finding, vacating the treble damages award and vacating and remanding the attorneys’ fees award. We accrued an estimated loss of $70.0 million related to this matter in the three month period ended December 31, 2014. On January 20, 2015, Stryker filed a motion with the Federal Circuit for a rehearing en banc. On March 23, 2015, the Federal Circuit denied Stryker’s petition. Stryker subsequently filed a petition for certiorari to the U.S. Supreme Court. In July 2015, we paid the final award of $90.3 million, which includes the original $70 million plus pre- and post-judgment interest and damages for sales that occurred post-trial but prior to our entry into a license agreement with Stryker. On October 19, 2015, the U.S. Supreme Court granted Stryker’s petition for certiorari. No date has been set for oral argument. Although we are defending this lawsuit vigorously, the ultimate resolution of this matter is uncertain. In the future, we could be required to record a charge of up to $140.0 million that could have a material adverse effect on our results of operations.

Regulatory Matters, Government Investigations and Other Matters

FDA warning letters : In September 2012, Zimmer received a warning letter from the U.S. Food and Drug Administration (“FDA”) citing concerns relating to certain manufacturing and validation processes pertaining to Trilogy ^® Acetabular System products manufactured at our Ponce, Puerto Rico manufacturing facility. In June 2015, Biomet received a warning letter from the FDA that requested additional information to allow the FDA to evaluate the adequacy of Biomet’s responses to certain Form 483 observations issued following an inspection of Biomet’s Zhejiang, China manufacturing facility in January 2015. We have provided detailed responses to the FDA as to our corrective actions and will continue to work expeditiously to address the issues identified by the FDA during inspections in Ponce and Zhejiang. As of September 30, 2015, these warning letters remained pending. Until the violations are corrected, we may be subject to additional regulatory action by the FDA, including seizure, injunction and/or civil monetary penalties. Additionally, requests for Certificates to Foreign Governments related to products manufactured at the Ponce facility may not be granted and premarket approval applications for Class III devices to which the quality system regulation deviations at that facility are reasonably related will not be approved until the violations have been corrected. In addition to responding to the warning letters described above, we are in the process of addressing various FDA Form 483 inspectional observations at certain of our manufacturing facilities. The ultimate outcome of these matters is presently uncertain.

Biomet DPA and Consent : On March 26, 2012, Biomet entered into a Deferred Prosecution Agreement (“DPA”) with the U.S. Department of Justice, Criminal Division, Fraud Section (“DOJ”) and a Consent to Final

Judgment (“Consent”) with the U.S. Securities and Exchange Commission (“SEC”) related to an investigation by the DOJ and the SEC into possible violations of the Foreign Corrupt Practices Act (“FCPA”) in the marketing and sale of medical devices in certain foreign countries. Pursuant to the DPA, the DOJ agreed to defer prosecution of Biomet in connection with those matters, provided that Biomet satisfies its obligations under the DPA over the term of the DPA. The DPA had a three-year term and provided that it could be extended in the sole discretion of the DOJ for an additional year. Pursuant to the Consent, Biomet consented to the entry of a Final Judgment which, among other things, permanently enjoined Biomet from violating the provisions of the FCPA. In addition, pursuant to the terms of the DPA, an independent external compliance monitor was appointed to review Biomet’s compliance with the DPA, particularly in relation to Biomet’s international sales practices. The Consent that Biomet entered into with the SEC mirrors the DPA’s provisions with respect to the compliance monitor.

In October 2013, Biomet became aware of certain alleged improprieties regarding its operations in Brazil and Mexico, including alleged improprieties that predated the entry of the DPA. Biomet retained counsel and other experts to investigate both matters. Based on the results of the ongoing investigations, Biomet has terminated, suspended or otherwise disciplined certain of the employees and executives involved in these matters, and has taken certain other remedial measures. Additionally, pursuant to the terms of the DPA, in April 2014 and thereafter, Biomet disclosed these matters to and discussed these matters with the independent compliance monitor and the DOJ and SEC. On July 2, 2014 and July 13, 2015, the SEC issued subpoenas to Biomet requiring that Biomet produce certain documents relating to such matters. These matters remain under investigation by the DOJ.

On March 13, 2015, the DOJ informed Biomet that the DPA and the independent compliance monitor’s appointment have been extended for an additional year. On April 2, 2015, at the request of the staff of the SEC, Biomet consented to an amendment to the Final Judgment to extend the term of the compliance monitor’s appointment for one year from the date of entry of the Amended Final Judgment.

Pursuant to the DPA, the DOJ has sole discretion to determine whether conduct by Biomet constitutes a violation or breach of the DPA. The DOJ has informed Biomet that it retains its rights under the DPA to bring further action against Biomet relating to the conduct in Brazil and Mexico referenced above or the violations set forth in the DPA. The DOJ could, among other things, revoke the DPA or prosecute Biomet and/or the involved employees and executives. Biomet continues to cooperate with the SEC and DOJ and expects that discussions with the SEC and the DOJ will continue. While we are devoting significant time and resources to these matters, we can give no assurances as to their final outcome.

Other Government Investigations and Document Requests : In June 2013, Biomet received a subpoena from the U.S. Attorney’s Office for the District of New Jersey requesting various documents relating to the fitting of custom-fabricated or custom-fitted orthoses, or bracing, to patients in New Jersey, Texas and Washington. Biomet has produced responsive documents and is fully cooperating with the request of the U.S. Attorney’s Office. We may need to devote significant time and resources to this inquiry and can give no assurances as to its final outcome.

In July 2011, Biomet received an administrative subpoena from the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) requesting documents concerning the export of products to Iran. OFAC informed Biomet that the subpoena related to allegations that Biomet may have been involved in unauthorized sales of dental products to Iran. Biomet is fully cooperating in the investigation and submitted its response to the subpoena in October 2011. We may need to devote significant time and resources to this inquiry and can give no assurances as to its final outcome.

In February 2010, Biomet received a subpoena from the Office of the Inspector General of the U.S. Department of Health and Human Services requesting various documents relating to agreements or arrangements between physicians and Biomet’s Interpore Cross subsidiary for the period from 1999 through the date of the subpoena and the marketing and sales activities associated with Interpore Cross’ spinal products. We may need to devote significant time and resources to this inquiry and can give no assurances as to its final outcome.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and corresponding notes included elsewhere in this Form 10-Q. Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and, therefore, may not recalculate from the rounded numbers used for disclosure purposes. In addition, certain amounts in the 2014 condensed consolidated financial statements have been reclassified to conform to the 2015 presentation.

On June 24, 2015, we completed our merger with Biomet and its results of operations have been included in our results subsequent to that date. The Biomet merger is a transformational event for us and has had significant effects on all aspects of our business. Accordingly, our revenues and expenses have increased significantly in the three and nine month periods ended September 30, 2015.

In portions of this discussion and analysis, we also present sales information on a pro forma basis for the nine month period ended September 30, 2015 and the three and nine month periods ended September 30, 2014. This pro forma information includes Zimmer and Biomet sales in those periods as if the merger occurred on January 1, 2014. Accordingly, the pro forma net sales information for periods prior to the Closing Date includes the net sales of Biomet, but does not include the impact of the divestiture of certain product line rights and assets.

Executive Level Overview

Results for the Three and Nine Month Periods ended September 30, 2015

The third quarter of 2015 was our first full quarter following the closing of the Biomet merger. We made significant progress by accomplishing important commercial integration milestones across all geographies. We largely completed the appointment of our global sales leaders during the quarter, and we expect to substantially complete all commercial integration efforts by the end of this year. We also began to execute our integration roadmaps designed to capture the net operating synergy opportunities presented by this merger.

Our results have been significantly impacted by the Biomet merger. Our sales for the three month period ended September 30, 2015 increased by 59.3 percent due to the Biomet merger. Volume/mix growth from the merger was partially offset by the negative effects of changes in foreign currency exchange rates and continued, but stable, pricing pressure in all of our operating segments.

Our net earnings in the three and nine month periods ended September 30, 2015 decreased compared to the same prior year periods. The primary driver of the lower net earnings was expense incurred in connection with the Biomet merger. As a result of the merger, we recognized significant expenses due to stepping up the acquired inventory to fair value, the acceleration of unvested LVB stock options and LVB stock-based awards, retention bonuses paid to Biomet employees and third-party sales agents who remained with Biomet through the Closing Date, severance expense, contract termination expense related to agreements with independent agents, distributors, suppliers and lessors, a loss related to a call premium on Biomet debt we redeemed, third party fees, and other acquisition and integration charges. Interest expense also increased due to financing-related costs for the merger.

2015 Outlook

The Biomet merger will continue to have a significant effect on our operating results for the remainder of the year. We will continue executing the integration plan which will drive enhanced competition in our core and emerging franchises and geographic markets. These integration activities will result in significant “Special items” expense throughout the remainder of 2015. We will also continue recognizing significant expenses in cost of products sold related to stepping up the value of acquired Biomet inventory to fair value and increased intangible asset amortization from acquired assets.

We expect that R&D spending as a percentage of sales may increase compared to prior years as we intend to invest in this area. Our selling, general and administrative (“SG&A”) expenses as a percentage of sales may also increase compared to prior years until we realize the full operating synergies of our combined business. Additionally, since many of our R&D and fixed SG&A expenses are denominated in U.S. Dollars, including our primary R&D centers as well as corporate and business unit headquarter expenses, such expenses may not decrease in similar proportion to net sales decreases expected from changes in foreign currency exchange rates.

Net Sales by Operating Segment

The following tables present our net sales by operating segment and the components of the percentage changes (dollars in millions):


	Three Months Ended September 30,				% Inc			Volume / Mix			Price			Foreign Exchange
	2015		2014		% Inc			Volume / Mix			Price			Foreign Exchange
Americas	$	1,133.5	$	637.9		77.7	%		81.5	%		(2.8	)%		(1.0	)%
EMEA		375.2		270.7		38.5			54.6			(0.7	)		(15.4	)
Asia Pacific		253.5		197.4		28.5			44.2			(2.4	)		(13.3	)

Total	$	1,762.2	$	1,106.0		59.3			68.2			(2.2	)		(6.7	)


	Nine Months Ended September 30,				% Inc			Volume / Mix			Price			Foreign Exchange
	2015		2014		% Inc			Volume / Mix			Price			Foreign Exchange
Americas	$	2,458.2	$	1,916.3		28.3	%		31.6	%		(2.5	)%		(0.8	)%
EMEA		964.2		932.3		3.4			21.3			(1.2	)		(16.7	)
Asia Pacific		641.8		601.8		6.7			20.3			(2.4	)		(11.2	)

Total	$	4,064.2	$	3,450.4		17.8			26.8			(2.1	)		(6.9	)

“Foreign Exchange,” as used in the tables in this report represents the effect of changes in foreign currency exchange rates on sales.

The following tables present our pro forma net sales by operating segment and the components of the percentage changes (dollars in millions):


	Three Months Ended September 30,				% Dec			Volume / Mix			Price			Divestiture Impact			Foreign Exchange
	Reported 2015		Pro forma 2014		% Dec			Volume / Mix			Price			Divestiture Impact			Foreign Exchange
Americas	$	1,133.5	$	1,170.2		(3.1	)%		1.5	%		(2.2	)%		(1.7	)%		(0.7	)%
EMEA		375.2		439.7		(14.7	)		2.9			(1.3	)		(1.2	)		(15.1	)
Asia Pacific		253.5		278.5		(9.0	)		7.1			(2.4	)		—			(13.7	)

Total	$	1,762.2	$	1,888.4		(6.7	)		2.7			(2.1	)		(1.3	)		(6.0	)


	Nine Months Ended September 30,				% Dec			Volume / Mix			Price			Divestiture Impact			Foreign Exchange
	Pro Forma 2015		Pro forma 2014		% Dec			Volume / Mix			Price			Divestiture Impact			Foreign Exchange
Americas	$	3,480.9	$	3,517.9		(1.1	)%		1.7	%		(1.6	)%		(0.6	)%		(0.6	)%
EMEA		1,314.3		1,533.2		(14.3	)		3.3			(1.0	)		(0.3	)		(16.3	)
Asia Pacific		788.9		855.1		(7.7	)		5.6			(1.9	)		—			(11.4	)

Total	$	5,584.1	$	5,906.2		(5.5	)		2.6			(1.5	)		(0.4	)		(6.2	)

Net Sales by Product Category

The following tables present our net sales by product category and the components of the percentage changes (dollars in millions):


	Three Months Ended September 30,				% Inc			Volume / Mix			Price			Foreign Exchange
	2015		2014		% Inc			Volume / Mix			Price			Foreign Exchange
Knees	$	632.0	$	443.3		42.5	%		51.7	%		(2.4	)%		(6.8	)%
Hips		434.5		315.6		37.6			48.4			(2.4	)		(8.4	)
S.E.T.		371.0		208.6		77.8			85.2			(1.6	)		(5.8	)
Dental		103.4		53.9		91.9			98.3			(1.2	)		(5.2	)
Spine & CMF		147.7		51.0		189.8			196.5			(2.1	)		(4.6	)
Other		73.6		33.6		120.4			125.8			(2.1	)		(3.3	)

Total		1,762.2		1,106.0		59.3			68.2			(2.2	)		(6.7	)


	Nine Months Ended September 30,				% Inc			Volume / Mix			Price			Foreign Exchange
	2015		2014		% Inc			Volume / Mix			Price			Foreign Exchange
Knees	$	1,564.8	$	1,398.9		11.8	%		21.1	%		(2.5	)%		(6.8	)%
Hips		1,066.8		988.3		7.9			19.1			(2.6	)		(8.6	)
S.E.T.		811.1		634.1		27.9			34.7			(0.9	)		(5.9	)
Dental		220.2		176.0		25.1			32.5			(1.3	)		(6.1	)
Spine & CMF		256.1		151.5		69.1			75.3			(1.4	)		(4.8	)
Other		145.2		101.6		43.2			49.0			(2.5	)		(3.3	)

Total		4,064.2		3,450.4		17.8			26.8			(2.1	)		(6.9	)

The following tables present our pro forma net sales by product category and the components of the percentage changes (dollars in millions):


	Three Months Ended September 30,
	Reported 2015		Pro Forma 2014		% Dec			Volume / Mix			Price			Divestiture Impact			Foreign Exchange
Knees	$	632.0	$	676.8		(6.6	)%		3.9	%		(2.3	)%		(1.9	)%		(6.3	)%
Hips		434.5		471.9		(7.9	)		2.3			(2.6	)		—			(7.6	)
S.E.T.		371.0		390.2		(4.9	)		2.4			(1.5	)		(0.6	)		(5.2	)
Dental		103.4		110.8		(6.6	)		0.1			(1.0	)		—			(5.7	)
Spine & CMF		147.7		151.8		(2.7	)		1.7			(1.4	)		—			(3.0	)
Other		73.6		86.9		(15.3	)		0.8			(2.1	)		(10.8	)		(3.2	)

Total		1,762.2		1,888.4		(6.7	)		2.7			(2.1	)		(1.3	)		(6.0	)


	Nine Months Ended September 30,
	Pro Forma 2015		Pro Forma 2014		% Dec			Volume / Mix			Price			Divestiture Impact			Foreign Exchange
Knees	$	2,024.0	$	2,133.8		(5.2	)%		3.9	%		(1.9	)%		(0.7	)%		(6.5	)%
Hips		1,372.3		1,479.1		(7.2	)		2.7			(2.1	)		—			(7.8	)
S.E.T.		1,168.0		1,202.2		(2.8	)		3.4			(0.7	)		(0.1	)		(5.4	)
Dental		339.2		368.5		(7.9	)		(1.0	)		(0.7	)		—			(6.2	)
Spine & CMF		435.2		448.5		(2.9	)		0.8			(0.7	)		—			(3.0	)
Other		245.4		274.1		(10.5	)		(3.0	)		(1.3	)		(2.7	)		(3.5	)

Total		5,584.1		5,906.2		(5.5	)		2.6			(1.5	)		(0.4	)		(6.2	)

The following table presents our net sales by product category by geography (dollars in millions):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2015		2014		% Inc			2015		2014		% Inc / (Dec)
Knees
Americas	$	401.1	$	266.9		50.2	%	$	950.0	$	802.3		18.4	%
EMEA		134.1		101.2		32.4			368.5		365.3		0.9
Asia Pacific		96.8		75.2		28.8			246.3		231.3		6.5

Total		632.0		443.3		42.5			1,564.8		1,398.9		11.8

Hips
Americas		239.7		149.8		60.0			539.9		453.2		19.1
EMEA		117.5		99.6		18.0			322.3		332.3		(3.0	)
Asia Pacific		77.3		66.2		16.7			204.6		202.8		0.9

Total		434.5		315.6		37.6			1,066.8		988.3		7.9

S.E.T.
Americas		251.3		126.8		98.3			525.7		378.4		39.0
EMEA		66.5		39.2		69.5			146.8		127.9		14.7
Asia Pacific		53.2		42.6		24.7			138.6		127.8		8.4

Total		371.0		208.6		77.8			811.1		634.1		27.9

Dental
Americas		66.7		34.3		94.5			139.5		105.7		32.0
EMEA		28.3		15.6		81.3			65.0		56.8		14.5
Asia Pacific		8.4		4.0		112.0			15.7		13.5		16.6

Total		103.4		53.9		91.9			220.2		176.0		25.1

Spine & CMF
Americas		117.1		33.7		248.4			188.2		95.7		96.8
EMEA		17.6		10.7		63.5			41.2		37.6		9.6
Asia Pacific		13.0		6.6		97.2			26.7		18.2		46.7

Total		147.7		51.0		189.8			256.1		151.5		69.1

Other
Americas		57.6		26.4		118.2			114.9		81.0		41.9
EMEA		11.2		4.4		158.4			20.4		12.4		64.1
Asia Pacific		4.8		2.8		80.1			9.9		8.2		23.6

Total		73.6		33.6		120.4			145.2		101.6		43.2

The following table presents our pro forma net sales by product category by geography (dollars in millions):


	Three Months Ended September 30,							Nine Months Ended September 30,
	Reported 2015		Pro forma 2014		% Inc / (Dec)			Pro forma 2015		Pro forma 2014		% Inc / (Dec)
Knees
Americas	$	401.1	$	419.2		(4.3	)%	$	1,243.2	$	1,258.9		(1.3	)%
EMEA		134.1		153.9		(12.9	)		482.8		553.4		(12.8	)
Asia Pacific		96.8		103.7		(6.6	)		298.0		321.5		(7.3	)

Total		632.0		676.8		(6.6	)		2,024.0		2,133.8		(5.2	)

Hips
Americas		239.7		244.7		(2.1	)		730.4		743.8		(1.8	)
EMEA		117.5		137.9		(14.8	)		400.3		465.1		(13.9	)
Asia Pacific		77.3		89.3		(13.4	)		241.6		270.2		(10.6	)

Total		434.5		471.9		(7.9	)		1,372.3		1,479.1		(7.2	)

S.E.T.
Americas		251.3		252.2		(0.3	)		774.1		763.7		1.4
EMEA		66.5		78.6		(15.4	)		223.6		258.7		(13.5	)
Asia Pacific		53.2		59.4		(10.5	)		170.3		179.8		(5.3	)

Total		371.0		390.2		(4.9	)		1,168.0		1,202.2		(2.8	)

Dental
Americas		66.7		68.5		(2.6	)		208.0		212.7		(2.2	)
EMEA		28.3		34.4		(17.5	)		107.8		128.2		(15.9	)
Asia Pacific		8.4		7.9		6.2			23.4		27.6		(14.9	)

Total		103.4		110.8		(6.6	)		339.2		368.5		(7.9	)

Spine & CMF
Americas		117.1		118.9		(1.5	)		334.9		335.8		(0.2	)
EMEA		17.6		20.1		(12.7	)		60.2		72.8		(17.3	)
Asia Pacific		13.0		12.8		1.6			40.1		39.9		0.5

Total		147.7		151.8		(2.7	)		435.2		448.5		(2.9	)

Other
Americas		57.6		66.7		(13.7	)		190.3		203.0		(6.2	)
EMEA		11.2		14.8		(23.9	)		39.6		55.0		(28.1	)
Asia Pacific		4.8		5.4		(11.4	)		15.5		16.1		(4.3	)

Total		73.6		86.9		(15.3	)		245.4		274.1		(10.5	)

Demand (Volume and Mix) Trends

Increased volume and changes in the mix of product sales contributed 68.2 percentage points of year-over-year sales growth during the three month period ended September 30, 2015. Volume/mix growth was driven by the Biomet merger, new product introductions and sales in key emerging markets.

We believe long-term indicators point toward sustained growth driven by an aging global population, growth in emerging markets, obesity, proven clinical benefits, new material technologies, advances in surgical techniques and more active lifestyles, among other factors. In addition, demand for clinically proven premium products and patient specific devices are expected to continue to positively affect sales growth in markets that recognize the value of these advanced technologies.

Pricing Trends

Global selling prices had a negative effect of 2.2 percentage points on year-over-year sales during the three month period ended September 30, 2015. The negative 2.2 percent effect on year-over-year sales is consistent with what we have experienced over the past three years. The majority of countries in which we operate continued to experience pricing pressure from governmental healthcare cost containment efforts and from local hospitals and health systems. For the remainder of the year, we expect this pricing pressure will continue.

Foreign Currency Exchange Rates

For the three month period ended September 30, 2015, changes in foreign currency exchange rates had a negative effect of 6.7 percentage points on year-over-year sales. If foreign currency exchange rates remain consistent with September 30, 2015 rates, we estimate that a stronger U.S. Dollar versus foreign currency exchange rates will continue to cause declines in sales relative to the prior year period. We address currency risk through regular operating and financing activities and through the use of forward contracts and foreign currency options solely to manage foreign currency volatility and risk. Changes to foreign currency exchange rates affect sales growth, but due to offsetting gains/losses on hedge contracts and options, which are recorded in cost of products sold, the effect on net earnings in the near term is reduced.

Sales by Product Category

Knees

Knee sales increased in the three and nine month periods ended September 30, 2015 when compared to the same prior year periods due to the Biomet merger. On a pro forma basis, Knee sales declined in both 2015 periods due to changes in foreign currency exchange rates, the divestiture of certain product line rights and assets and continued pricing pressure. The volume/mix growth on a pro forma basis was driven by recent product introductions, such as Persona ^® The Personalized Knee System. In particular, our EMEA and Asia Pacific operating segments experienced strong volume/mix growth in this product category.

Hips

Hip sales increased in the three and nine month periods ended September 30, 2015 when compared to the same prior year periods due to the Biomet merger. On a pro forma basis in both periods, positive volume and mix trends were more than offset by pricing pressure and the negative effects of changes in foreign currency exchange rates.

S.E.T.

Our S.E.T product category sales increased in the three and nine month periods ended September 30, 2015 when compared to the same prior year periods due to the Biomet merger. On a pro forma basis in both periods, positive volume and mix trends were more than offset by pricing pressure, the divestiture of certain product line rights and assets and the negative effects of changes in foreign currency exchange rates. On a pro forma basis within this category, our extremities business achieved solid sales growth from sales of our shoulder and elbow products.

Dental

Dental sales increased in the three and nine month periods ended September 30, 2015 when compared to the same prior year periods due to the Biomet merger. On a pro forma basis, sales in both 2015 periods declined due to continued pricing pressure and the negative effects of changes in foreign currency exchange rates.

Spine and CMF

Spine and CMF sales increased in the three and nine month periods ended September 30, 2015 when compared to the same prior year periods due to the Biomet merger. On a pro forma basis in both 2015 periods, strong sales of our CMF products were partially offset by a decline in Spine product sales.

Expenses as a Percentage of Net Sales


	Three Months Ended September 30,									Nine Months Ended September 30,
	2015			2014			Inc/(Dec)			2015			2014			Inc/(Dec)
Cost of products sold, excluding intangible asset amortization		31.3	%		26.8	%		4.5			27.8	%		26.9	%		0.9
Intangible asset amortization		7.0			1.9			5.1			4.3			2.1			2.2
Research and development		4.7			4.2			0.5			4.5			4.1			0.4
Selling, general and administrative		39.3			38.2			1.1			38.4			38.0			0.4
Certain claims		—			—			—			0.2			0.6			(0.4	)
Special items		11.1			6.0			5.1			18.5			4.8			13.7
Operating profit		6.6			23.1			(16.5	)		6.2			23.5			(17.3	)

The increase in cost of products sold as a percentage of net sales for the 2015 periods compared to the same prior year periods was primarily due to $137.1 million of expense from stepping up the acquired Biomet inventory to fair value and lower average selling prices. This was partially offset by higher hedge gains in the 2015 periods from our foreign currency hedging program compared to the same prior year period. For derivatives which qualify as hedges of future cash flows, the effective portion of changes in fair value is temporarily recorded in other comprehensive income and then recognized in cost of products sold when the hedged items affect earnings.

Intangible asset amortization increased in the 2015 periods when compared to the same prior year periods due to amortization of assets acquired in the Biomet merger.

R&D expenses and R&D as a percentage of sales increased in the 2015 periods when compared to the same prior year periods. The primary driver of the increased expense was the Biomet merger. The combination of our R&D functions subsequent to the merger will allow us to allocate a greater portion of the combined R&D spending towards innovations to address unmet needs and create new-market adjacencies. Additionally, most of our R&D activities occur in the U.S., so expenses do not decrease proportionally to changes in net sales when there are significant changes in foreign currency exchange rates, which caused an increase in R&D as a percentage of sales.

SG&A expenses and SG&A as a percentage of sales increased in the 2015 periods when compared to the same prior year periods. The primary driver of the increased expense was the Biomet merger. Additionally, a significant portion of our SG&A expenses occur in the U.S., so expenses do not decrease proportionally to changes in net sales when there are significant changes in foreign currency exchange rates. We expect that SG&A as a percentage of sales will continue to be higher than prior to the Biomet merger until we can realize synergy benefits of the merger.

“Special items” increased in the 2015 periods compared to the same prior year periods. The increases were due to Biomet merger-related expenses such as the acceleration of unvested LVB stock options and LVB stock-based awards, retention bonuses paid to Biomet employees and third-party sales agents who remained with Biomet through the Closing Date, severance expense and contract terminations. See Note 3 to the interim condensed consolidated financial statements included in Part I, Item 1 of this report for more information regarding “Special items” charges.

Other Income (Expense), Net, Interest Income, Interest Expense and Income Taxes

Other income (expense), net, represents debt issuance costs that we recognized for the bridge credit agreement that we entered into in May 2014 in connection with the Biomet merger, the net expense related to remeasuring monetary assets and liabilities denominated in a foreign currency other than an entity’s functional currency offset by foreign currency forward exchange contracts we enter into to mitigate any gain or loss, and the call premium expense we recognized when we repaid Biomet’s senior notes, offset by a gain related to selling certain product line rights and assets. In the three month period ended September 30, 2015, we realized income driven by the gain on selling certain product line rights and assets compared to expense in the same prior year period driven by the bridge credit agreement debt issuance costs. The increase in the nine month period ended September 30, 2015 other expense, net compared to the same prior year period was primarily the call premium expense.

Net interest expense increased in the three and nine month periods ended September 30, 2015 due to the issuance of the Merger Notes in March 2015.

The effective tax rate (“ETR”) on earnings before income taxes for the three and nine month periods ended September 30, 2015 was 30.2 percent and 2.7 percent, respectively. Our ETR has been significantly impacted by the various “Special items” expenses. The majority of these expenses have been incurred in higher tax jurisdictions. We anticipate that future “Special items” expense, the outcome of various federal, state and foreign audits, as well as expiration of certain statutes of limitations, could potentially impact our ETR in future quarters. Currently, we cannot reasonably estimate the impact of these items on our financial results.

Segment Operating Profit

Similar to our consolidated results, our segment operating profit has been significantly impacted by the addition of Biomet sales and expenses to these segments. In the Americas and EMEA segments, operating profit as a percentage of sales declined in the three month period ended September 30, 2015 compared to the same prior year period due to the increased Biomet expenses. This decline is expected to continue until we can realize the synergy benefits of the merger. In the Asia Pacific segment, operating profit as a percentage of sales increased in the three month period ended September 30, 2015 compared to the same prior year period. While the Asia Pacific segment has similar increased Biomet expenses as our other segments, due to changes in foreign currency exchange rates and our hedging program, operating profit as a percentage of sales increased as a result of higher hedge gains recorded in the 2015 period compared to the same prior year period.

Non-GAAP Operating Performance Measures

We use financial measures that differ from financial measures determined in accordance with GAAP to evaluate our operating performance. These non-GAAP financial measures exclude the impact of inventory step-up, certain inventory and manufacturing related charges connected to quality enhancement and remediation efforts, “Certain claims,” intangible asset amortization, “Special items,” other expenses related to financing obtained for the Biomet merger, other expenses related to the call premium expense recognized to redeem the assumed Biomet senior notes, the gain recognized in other expense, net, related to selling certain product line rights and assets, the interest expense incurred on the Merger Notes during the period prior to the consummation

of the Biomet merger and any related effects on our income tax provision associated with these items. We use this information internally and believe it is helpful to investors because it provides useful period-to-period comparisons of our ongoing operating results, it helps to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by these types of items, and it provides additional transparency of certain items. Certain of these non-GAAP financial measures are used as metrics for our incentive compensation programs.

Our non-GAAP adjusted net earnings used for internal management purposes for the three and nine month periods ended September 30, 2015 were $338.4 million and $882.2 million, respectively, compared to $249.7 million and $790.3 million in the same prior year periods, respectively. Our non-GAAP adjusted diluted earnings per share for the three and nine month periods ended September 30, 2015 were $1.64 and $4.78, respectively, compared to $1.45 and $4.61 in the same prior year periods, respectively.

The following are reconciliations from our GAAP net earnings and diluted earnings per share to our non-GAAP adjusted net earnings and non-GAAP adjusted diluted earnings per share used for internal management purposes:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
(In millions)
Net Earnings of Zimmer Biomet Holdings, Inc.	$	22.2		$	173.1		$	20.0		$	566.5
Inventory step-up and other inventory and manufacturing related charges		132.6			7.7			151.2			32.9
Certain claims		—			(0.3	)		7.7			21.5
Intangible asset amortization		122.6			20.6			176.0			72.0
Special items
Biomet-merger related		146.6			27.5			563.0			41.2
Other special items		49.3			38.4			188.9			123.1
Biomet merger-related expenses in other expense		(11.9	)		10.4			33.1			20.4
Interest expense on Biomet merger financing		—			—			70.0			—
Taxes on above items*		(123.0	)		(27.7	)		(327.7	)		(87.3	)

Adjusted Net Earnings	$	338.4		$	249.7		$	882.2		$	790.3

*	The tax effect is calculated based upon the statutory rates for the jurisdictions where the items were incurred.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Diluted EPS	$	0.11		$	1.01		$	0.11		$	3.30
Inventory step-up and other inventory and manufacturing related charges		0.64			0.04			0.82			0.19
Certain claims		—			—			0.04			0.13
Intangible asset amortization		0.60			0.12			0.95			0.42
Special items
Biomet-merger related		0.71			0.16			3.05			0.24
Other special items		0.24			0.22			1.02			0.72
Biomet merger-related expenses in other expense		(0.06	)		0.06			0.18			0.12
Interest expense on Biomet merger financing		—			—			0.38			—
Taxes on above items*		(0.60	)		(0.16	)		(1.77	)		(0.51	)

Adjusted Diluted EPS	$	1.64		$	1.45		$	4.78		$	4.61

*	The tax effect is calculated based upon the statutory rates for the jurisdictions where the items were incurred.

Liquidity and Capital Resources

Cash flows provided by operating activities were $429.6 million in the nine month period ended September 30, 2015, compared to $698.6 million in the same prior year period. The decreased cash flows provided by operating activities in the 2015 period were primarily due to a $97.6 million loss on our forward starting interest rate swaps we settled in March 2015 when we issued the Merger Notes, higher expenses related to the Biomet merger and inventory investments. These unfavorable items were partially offset by lower tax payments and the receipt of insurance proceeds related to Durom Cup product liability claims in the 2015 period. In the prior year period, we made significant tax payments for certain unresolved matters in order to limit the potential impact of IRS interest charges.

Cash flows used in investing activities were $7,679.4 million in the nine month period ended September 30, 2015, compared to $498.1 million in the same prior year period. The primary investing activity in the 2015 period was the Biomet merger. We continued to invest in instruments for significant product launches, such as Persona The Personalized Knee System, as we deploy that system around the world. We continued to invest in other property, plant and equipment at levels necessary to complete new product-related investments and to replace older machinery and equipment. We also received proceeds from the divestiture of certain product line rights and assets.

Cash flows provided by financing activities were $7,655.6 million in the nine month period ended September 30, 2015, compared to a use of cash of $307.0 million in the same prior year period. We issued the Merger Notes and borrowed the U.S. Term Loan in the 2015 period for the Biomet merger, which resulted in proceeds and related debt issuance costs. We also repaid Biomet’s senior notes that we assumed in the merger. Additionally, with an increase in our stock price throughout 2014, many employees exercised stock options in the prior year. Accordingly, there were fewer stock options outstanding at the end of 2014, leading to fewer option exercises in the nine month period ended September 30, 2015, compared to the same prior year period.

In February, May and July 2015, our Board of Directors declared cash dividends of $0.22 per share. We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change. As further discussed below, our debt facilities restrict the payment of dividends in certain circumstances.

As of September 30, 2015, $599.5 million remained authorized under our $1.0 billion share repurchase program, which has no expiration date. In anticipation of the merger with Biomet, we suspended repurchases after the first quarter of 2014. Now that we have completed the merger, we intend to use available cash for debt repayment and dividends and we have reinstated our share repurchase program.

In order to achieve operational synergies, we expect cash outlays related to our integration plans to be approximately $250 million in 2015 and exceed $500 million in the first two years post-Closing Date. These cash outlays are necessary to achieve our integration goals of net annual pre-tax operating profit synergies of $155 million in the first year and $350 million by the end of the third year post-Closing Date.

As discussed in Note 13 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, the IRS has issued proposed adjustments for years 2006 through 2009 reallocating profits between certain of our U.S. and foreign subsidiaries. We have disputed these proposed adjustments and continue to pursue resolution with the IRS. Although the ultimate timing for resolution of the disputed tax issues is uncertain, future payments may be significant to our operating cash flows.

Also as discussed in Note 17 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, as of September 30, 2015, a short-term liability of $50.0 million and long-term liability of $272.9 million related to Durom Cup product liability claims was recorded on our condensed consolidated balance sheet. We expect to continue paying these claims over the next few years. We expect to be reimbursed a

portion of these payments for product liability claims from insurance carriers. As of September 30, 2015, we have received a portion of the insurance proceeds we estimate we will recover. We have a long-term receivable of $95.3 million remaining for future expected reimbursements from our insurance carriers. We also had a short-term liability of $39.3 million related to Biomet metal-on-metal hip implant claims.

At September 30, 2015, we had ten tranches of senior notes outstanding as follows (dollars in millions):


Principal		Interest Rate			Maturity Date
$	500.0		1.450	%	April 1, 2017
	1,150.0		2.000		April 1, 2018
	500.0		4.625		November 30, 2019
	1,500.0		2.700		April 1, 2020
	300.0		3.375		November 30, 2021
	750.0		3.150		April 1, 2022
	2,000.0		3.550		April 1, 2025
	500.0		4.250		August 15, 2035
	500.0		5.750		November 30, 2039
	1,250.0		4.450		August 15, 2045

We have a $4.35 billion Senior Credit Facility that contains: (i) a 5-year unsecured U.S. Term Loan Facility in the principal amount of $3.0 billion, and (ii) a 5-year unsecured Multicurrency Revolving Facility in the principal amount of $1.35 billion. The Multicurrency Revolving Facility will mature in May 2019, with two one-year extensions available at our option. Borrowings under the Multicurrency Revolving Facility may be used for general corporate purposes. There were no borrowings outstanding under the Multicurrency Revolving Facility as of September 30, 2015. On June 24, 2015, we borrowed the full $3.0 billion available under the U.S. Term Loan Facility. The U.S. Term Loan Facility will mature in June 2020, with principal payments due beginning September 30, 2015, as follows: $75.0 million on a quarterly basis during the first three years, $112.5 million on a quarterly basis during the fourth year, and $412.5 million on a quarterly basis during the fifth year. In the three month period ended September 30, 2015, we paid $150.0 million in principal under the U.S. Term Loan Facility, resulting in $2.85 billion in outstanding borrowings as of September 30, 2015.

We and certain of our wholly owned foreign subsidiaries are the borrowers under the Senior Credit Facility. Borrowings under the Senior Credit Facility bear interest at floating rates based upon indices determined by the currency of the borrowings plus an applicable margin determined by reference to our senior unsecured long- term credit rating, or at an alternate base rate, or, in the case of borrowings under the Multicurrency Revolving Facility only, at a fixed rate determined through a competitive bid process. The Senior Credit Facility contains customary affirmative and negative covenants and events of default for an unsecured financing arrangement, including, among other things, limitations on consolidations, mergers and sales of assets. Financial covenants include a consolidated indebtedness to consolidated EBITDA ratio of no greater than 5.0 to 1.0 through June 24, 2016 and no greater than 4.5 to 1.0 thereafter. If our credit rating falls below investment grade, additional restrictions would result, including restrictions on investments and payment of dividends. We were in compliance with all covenants under the Senior Credit Facility as of September 30, 2015.

Commitments under the Senior Credit Facility are subject to certain fees. On the Multicurrency Revolving Facility, we pay a facility fee at a rate determined by reference to our senior unsecured long-term credit rating.

We have a Japan Term Loan agreement with one of the lenders under the Senior Credit Facility for 11.7 billion Japanese Yen that will mature on May 31, 2018. Borrowings under the Japan Term Loan bear interest at a fixed rate of 0.61 percent per annum until maturity.

We also have other available uncommitted credit facilities totaling $31.3 million.

We place our cash and cash equivalents in highly-rated financial institutions and limit the amount of credit exposure to any one entity. We invest only in high-quality financial instruments in accordance with our internal investment policy.

As of September 30, 2015, we had short-term and long-term investments in debt securities with a fair value of $466.5 million. These investments are in debt securities of many different issuers and, therefore, we believe we have no significant concentration of risk with a single issuer. All of these debt securities remain highly rated and we believe the risk of default by the issuers is low.

As of September 30, 2015, $1,527.7 million of our cash and cash equivalents and short-term and long-term investments were held in jurisdictions outside of the U.S. and are expected to be indefinitely reinvested for continued use in foreign operations. Repatriation of these assets to the U.S. may have tax consequences. $1,292.7 million of this amount is denominated in U.S. Dollars and, therefore, bears no foreign currency translation risk. The balance of these assets is denominated in currencies of the various countries where we operate.

Our concentrations of credit risks with respect to trade accounts receivable is limited due to the large number of customers and their dispersion across a number of geographic areas and by frequent monitoring of the creditworthiness of the customers to whom credit is granted in the normal course of business. Substantially all of our trade receivables are concentrated in the public and private hospital and healthcare industry in the U.S. and internationally or with distributors or dealers who operate in international markets and, accordingly, are exposed to their respective business, economic and country specific variables.

Our ability to collect accounts receivable in some countries depends in part upon the financial stability of the hospital and healthcare sectors and the respective countries’ national economic and healthcare systems. Most notably, in Europe healthcare is typically sponsored by the government. Since we sell products to public hospitals in those countries, we are indirectly exposed to government budget constraints. The ongoing financial uncertainties in the Euro zone impact the indirect credit exposure we have to those governments through their public hospitals. As of September 30, 2015, in Greece, Italy, Portugal and Spain, countries that have been widely recognized as presenting the highest risk, our gross short-term and long-term trade accounts receivable combined were $250.5 million. With allowances for doubtful accounts of $16.9 million recorded in those countries, the net balance was $233.6 million, representing 17 percent of our total consolidated short-term and long-term trade accounts receivable balance, net. Italy and Spain accounted for $203.5 million of that net amount. We are actively monitoring the situations in these countries. We maintain contact with customers in these countries on a regular basis. We continue to receive payments, albeit at a slower rate than in the past. We believe our allowance for doubtful accounts is adequate in these countries, as ultimately we believe the governments in these countries will be able to pay. To the extent the respective governments’ ability to fund their public hospital programs deteriorates, we may have to record significant bad debt expenses in the future.

Management believes that cash flows from operations and available borrowings under the Senior Credit Facility or from the public and private debt markets are sufficient to meet our working capital, capital expenditure and debt service needs, as well as return cash to stockholders in the form of dividends and share repurchases. Should additional investment opportunities arise, we believe that our earnings, balance sheet and cash flows will allow us to obtain additional capital, if necessary.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09— Revenue from Contracts with Customers (Topic 606) . This ASU provides a five-step model for revenue recognition that all industries will apply to recognize revenue when a customer obtains control of a good or service. The ASU will be effective for us beginning January 1, 2018. We are in the initial phases of our adoption plans and, accordingly, we are unable to estimate any effect this may have on our revenue recognition practices.

In April 2015, the FASB issued ASU 2015-03 —Simplifying the Presentation of Debt Issuance Costs . This ASU requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. This ASU does not affect the measurement and recognition of debt issuance costs in our statement of earnings. As of September 30, 2015, this change would result in a reclassification of $8.4 million of other current assets and $62.5 million of other assets to debt. The ASU will be effective for us beginning January 1, 2016.

There are no other recently issued accounting pronouncements that we have not yet adopted that are expected to have a material effect on our financial position, results of operations or cash flows.

Critical Accounting Estimates

Our financial results are affected by the selection and application of accounting policies and methods. There were no changes in the three or nine month periods ended September 30, 2015 to the application of critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2014.

Forward-Looking Statements

This quarterly report contains certain statements that are forward-looking statements within the meaning of federal securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this report, the words “may,” “will,” “should,” “would,” “could,” “anticipate,” “expect,” “plan,” “seek,” “believe,” “predict,” “estimate,” “potential,” “project,” “target,” “forecast,” “intend,” “strategy,” “future,” “opportunity,” “assume,” “guide” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to:

•

the possibility that the anticipated synergies and other benefits from the Biomet merger will not be realized, or will not be realized within the expected time periods;

•

the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of the legacy companies;

•

the effect of the potential disruption of management’s attention from ongoing business operations due to integration matters related to the Biomet merger;

•

the effect of the Biomet merger on our relationships with customers, vendors and lenders and on our operating results and business generally;

•

Biomet’s compliance with the terms of its Deferred Prosecution Agreement through March 2016;

•

the outcome of government investigations;

•

competition;

•

pricing pressures;

•

the impact of the federal healthcare reform measures, including the impact of the U.S. excise tax on medical devices, reductions in reimbursement levels by third-party payors and cost-containment efforts of healthcare purchasing organizations;

•

challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the FDA and foreign government regulators, such as more stringent requirements for regulatory clearance of our products;

•

our ability to remediate matters identified in any inspectional observations or warning letters issued by the FDA;

•

the success of our quality and operational excellence initiatives;

•

changes in tax obligations arising from tax reform measures or examinations by tax authorities;

•

changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations;

•

changes in general industry and market conditions, including domestic and international growth rates;

•

changes in customer demand for our products and services caused by demographic changes or other factors;

•

dependence on new product development, technological advances and innovation;

•

product liability and intellectual property litigation losses;

•

our ability to obtain and maintain adequate intellectual property protection;

•

our ability to retain the independent agents and distributors who market our products;

•

our dependence on a limited number of suppliers for key raw materials and outsourced activities;

•

the possible disruptive effect of additional strategic acquisitions and our ability to successfully integrate acquired companies;

•

our ability to form and implement alliances;

•

the impact of the ongoing financial uncertainty on countries in the Euro zone on our ability to collect accounts receivable in affected countries;

•

changes in prices of raw materials and products and our ability to control costs and expenses; and

•

shifts in our product category sales mix or our regional sales mix away from products or geographic regions that generate higher operating margins.

This report, as well as our Annual Report on Form 10-K for the year ended December 31, 2014 and our Quarterly Reports on Form 10-Q for the three month periods ended March 31, 2015 and June 30, 2015 contain discussions of these and other important factors under the heading “Risk Factors.” You should understand that it is not possible to predict or identify all factors that could cause actual results to differ materially from forward-looking statements. Consequently, you should not consider any list or discussion of such factors to be a complete set of all potential risks or uncertainties.

Readers of this report are cautioned not to place undue reliance on these forward-looking statements. While we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this report.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8-K and 10-K reports and our other filings with the Securities and Exchange Commission.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2014.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective at a reasonable assurance level, due to a material weakness in our internal control over financial reporting discussed below.

In the three month period ended September 30, 2015, our management identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness in our internal control over financial reporting was a result of us not enhancing the level of resources and processes necessary to analyze and determine the appropriate accounting treatment of non-routine, complex transactions under GAAP commensurate with the additional complexities existing subsequent to the Biomet merger. As a result of this material weakness, we inappropriately accounted for the divestiture of certain Biomet product lines and rights in the three month period ended June 30, 2015, and we subsequently revised our financial statements for that period. See Note 2 to the interim condensed consolidated financial statements included in Part I, Item 1 of this report for further information regarding this revision. Additionally, the control deficiency could result in misstatements of the consolidated financial statements and disclosures that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that this control deficiency constitutes a material weakness.

Remediation Plan

We are in the process of remediating this material weakness by adding additional resources dedicated to analyzing non-routine, complex accounting transactions under GAAP and enhancing the review process for such transactions. We believe that these additional resources and enhanced processes will effectively remediate the material weakness, but the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As we continue to evaluate and improve our internal control over financial reporting, we may decide to take additional measures to address this material weakness, which may require additional implementation time.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2015 that has materially affected, or is

reasonably likely to materially affect, our internal control over financial reporting. As previously noted, we completed our merger with Biomet on June 24, 2015. We have begun the process of reviewing the internal control structure of Biomet and, in addition to the measures previously discussed in our remediation plan, we will make appropriate changes as necessary as we integrate Biomet into our overall internal control over financial reporting process.

Part II—Other Information

Item 1.

Legal Proceedings

Information pertaining to legal proceedings can be found in Note 17 to the interim condensed consolidated financial statements included in Part I, Item 1 of this report and is incorporated herein by reference.

Item 1A.

Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015, other than the addition of the risk factor set forth below:

We have determined that a material weakness exists in our internal control over financial reporting which could, if not remediated, result in a material misstatement in our financial statements.

We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. As discussed in Part I, Item 4 of this report, we identified a material weakness in our internal control over financial reporting as of September 30, 2015 related to the control over accounting for non-routine, complex transactions. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of this material weakness, our management concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of September 30, 2015. We are actively engaged in developing a remediation plan designed to address this material weakness. However, we cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts. If the remedial measures are insufficient to address the material weakness or if additional material weaknesses or significant deficiencies in internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

Not applicable

Item 5.

Other Information

During the three month period ended September 30, 2015, the Audit Committee of our Board of Directors approved the engagement of PricewaterhouseCoopers LLP, our independent registered public accounting firm, to perform certain non-audit services. This disclosure is made pursuant to Section 10A(i)(2) of the Exchange Act, as added by Section 202 of the Sarbanes-Oxley Act of 2002.

Item 6.

Exhibits

The following exhibits are filed or furnished as part of this report:


10.1*		Change in Control Severance Agreement with Sang Yi

10.2*		Confidentiality, Non-Competition and Non-Solicitation Agreement with Sang Yi

10.3*		Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan, as amended May 7, 2013 and further amended as of June 24, 2015

10.4*		Zimmer Biomet Holdings, Inc. Executive Performance Incentive Plan, as amended May 7, 2013 and further amended as of June 24, 2015

10.5*		Zimmer Biomet Holdings, Inc. Amended Stock Plan for Non-Employee Directors, as amended May 5, 2015 and further amended as of June 24, 2015

10.6*		Amended and Restated Zimmer Biomet Holdings, Inc. Deferred Compensation Plan for Non-Employee Directors, as amended May 5, 2015 and further amended as of June 24, 2015

21		Subsidiaries of the Registrant

31.1		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99		Zimmer Biomet Holdings, Inc. Employee Stock Purchase Plan, as amended and restated effective January 1, 2010, and further amended June 24, 2015 and September 25, 2015

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

*	Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ZIMMER BIOMET HOLDINGS, INC.
	(Registrant)

Date: November 9, 2015	By:	/s/ Daniel P. Florin
		Daniel P. Florin
		Senior Vice President and Chief Financial Officer

Date: November 9, 2015	By:	/s/ Tony W. Collins
		Tony W. Collins
		Vice President, Finance, Corporate Controller and Chief Accounting Officer

Exhibit 10.1

Zimmer Pte Ltd

315 Alexandra Road

#03-03 Sime Darby Business Center

Singapore 159944

Change in Control Severance Agreement

This Change in Control Severance Agreement (“ Agreement ”) is made by and between Zimmer Pte Ltd (“ Employer ” or “ Company ” as case may be) and Yi Sang-Uk (“ Executive ”).

Recitals

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

(B)

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

(C)

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

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

Defined terms as used herein and not defined elsewhere in this Agreement, shall have the meaning as described to them in Annex 1 to this Agreement.

1.	Term of Agreement

This Agreement will commence on the date stated below and will continue in effect through December 31, 2015. Beginning on January 1, 2016, 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.

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Change in Control Severance Agreement

2.	Compensation other than Severance Payments

2.1

Compensation Previously Earned

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

2.2

Normal Post-Termination Compensation and Benefits.

Except as provided in Section 3.1, 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 compensation and benefits payable to the Executive under the terms of the Company’s compensation or benefit plans, programs, and arrangements, as in effect immediately prior to the Change in Control, including but not limited to the Non-Competition Period Payments (if any). 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.

2.3

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.

3.	Severance Payments

3.1

Payment Triggers

In addition to the payments as set out in Section 2 above, but 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, the Company will pay the Executive the Severance Payments described in Section 3.2 upon termination of the Executive’s employment following a Change in Control and during the term of this Agreement, 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.

For purposes of this Section 3.1, 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 Ultimate Parent 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.

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Change in Control Severance Agreement

The Severance Payments described in this Section 3 are subject to the conditions stated in Section 4 below and shall be reduced in part or in their totality if and to the extent the Severance Payments were, at the time of their payment, to be deemed a golden parachute or similar arrangement prohibited under the laws where the Company is incorporated and has its registered office or the costs associated with the Severance Payments could no longer be booked as expenditures in the Company’s profit and loss statement.

3.2

Severance Payments.

The following are the Severance Payments referenced in Section 3.1:

(a)

Lump Sum Severance Payment

In lieu of any further salary payments to the Executive for periods after the Date of Termination, and in lieu of any severance benefits otherwise payable to the Executive, the Company will pay to the Executive, in accordance with Section 3.3, a lump sum severance payment, in cash, equal to (a) two 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, plus (2) the amount of the Executive’s target annual bonus entitlement under the Cash 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, less (b) the amount of any statutory payment to which the Executive is entitled related to any statutory notice period and (c) any mandatory statutory deductions and tax withholding, if applicable. 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 average of 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)

Options and Restricted Shares

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

3.3

Time of Payment

Except as otherwise expressly provided in Section 3.2, payments provided for in that Section will be made as follows:

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 payments under Section 3.2 (a) to which the Executive is clearly entitled.

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Change in Control Severance Agreement

The Company will pay to the Executive the remainder of the payments due to him under Section 3.2 not later than 90 business days after the Date of Termination.

At the time that payment is made under this Section 3.3, 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.

3.4

Outplacement Services

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

4.	The Executive’s Covenants

4.1

Confidentiality, Non-Competition and Non-Solicitation Agreement

The Executive herewith acknowledges and affirms his continuing obligations under the Confidentiality, Non-Competition and Non-Solicitation Agreement he executed and re-affirms his agreement to honor the obligations as set forth therein.

4.2

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 a General Release in substantially the form attached to this Agreement as Annex 2. The Executive will be given 30 days to consider the terms of the General Release. If the Executive does not return the executed General Release to the Company by the end of the 30 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.

5.	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 registered mail, return receipt requested, 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 Section 5, except that notice of change of address will be effective only upon actual receipt:

To the Company:

Zimmer Pte Ltd

Attention: Regional Vice President, Legal and Compliance, Asia Pacific

315 Alexandra Road

Sime Darby Business Centre #05-03

Singapore 159944

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Change in Control Severance Agreement

With a copy to:

Zimmer Biomet Holdings, Inc.

Attention: General Counsel

345 East Main Street

Warsaw, Indiana 46580

United States of America

To the Executive:

Yi-Sang Uk

6.	Miscellaneous

This Agreement constitutes and expresses the entire agreement between the Parties pertaining to the subject matter contained herein and supersedes all prior and contemporaneous oral or written agreements, representations, understandings and the like between the Parties.

This Agreement may not be modified, amended, altered or supplemented, in whole or in part, except by a written agreement signed by the Parties.

If any provision of this Agreement is found by any competent authority to be void, invalid or unenforceable, such provision shall be deemed to be deleted from this Agreement and the remaining provisions of this Agreement shall continue in full force. In this event, the Agreement shall be construed, and, if necessary, amended in a way to give effect to, or to approximate, or to achieve a result which is as close as legally possible to the result intended by the provision hereof determined to be void, illegal or unenforceable.

This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which when taken together will constitute one and the same agreement.

7.	Governing Law and Jurisdiction

This Agreement shall be governed by, interpreted and construed in accordance with the substantive laws of Singapore.

The Parties irrevocably agree that the courts of Singapore are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that, accordingly, any legal action or proceedings arising out of or in connection with this Agreement may be brought in those courts and the Parties irrevocably submit to the jurisdiction of those courts.

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Change in Control Severance Agreement

8.	Third Party Rights

Any person other than the Company and the Executive has no right under the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore, to enforce any term of, or enjoy any benefit under, this Agreement.

This Agreement enters into force on the later date set-out below.


Zimmer Pte Ltd				Executive

/s/ Benedict L.T. Seah				/s/ Yi Sang-Uk
Benedict L.T. Seah				Yi Sang-Uk
Regional Vice President,
Human Resources

Date: August 13, 2015				Date: August 18, 2015

7 / 13

Change in Control Severance Agreement

Annex 1: Definitions

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

“ Board ” means the Board of Directors of the Ultimate Parent Company.

“ Cash Incentive Plan ” means the Ultimate Parent Company’s Executive Performance Incentive Plan.

“ 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) for a period of at least 30 consecutive days after a written demand for substantial performance is delivered to the Executive by the Company, which demand specifically identifies the manner in which the Company 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, the Ultimate Parent Company or its subsidiaries, monetarily or otherwise; or (3) the Executive is convicted of a criminal offense.

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

(a)

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

(b)

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 Ultimate Parent Company to effect a transaction described in clause (a), (c) or (d) of this paragraph whose election by the Board or nomination for election by the Ultimate Parent 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

(c)

the shareholders of the Ultimate Parent Company approve a merger or consolidation of the Ultimate Parent Company with any other corporation, other than (A) a merger or consolidation that would result in the voting securities of the Ultimate Parent Company outstanding immediately prior to the merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Ultimate Parent Company, at least 75% of the combined voting power of the voting securities of the Ultimate Parent Company

8 / 13

Change in Control Severance Agreement

or the surviving entity outstanding immediately after the merger or consolidation; or (B) a merger or consolidation effected to implement a recapitalization of the Ultimate Parent Company (or similar transaction) in which no Person acquires more than 50% of the combined voting power of the Ultimate Parent Company’s then outstanding securities; or

(d)

the shareholders of the Ultimate Parent Company approve a plan of complete liquidation of the Ultimate Parent Company or an agreement for the sale or disposition by the Ultimate Parent Company of all or substantially all the Ultimate Parent 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.

“ Date of Termination ” means the date on which the notice of termination under the Employment Agreement has lapsed.

“ Employment Agreement ” means the letter of appointment dated June 1, 2015, including the additional terms and conditions of employment and the appendices attached thereto, which together form the terms and conditions of employment.

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

“ 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 following a Change in Control:

(a)

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;

(b)

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 (b), 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 Cash 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 30 days of the date the compensation is due;

(c)

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 Cash Incentive Plan and the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan or any substitute plans adopted prior to the Change in Control,

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Change in Control Severance Agreement

unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to that plan, or the Company’s failure to continue the Executive’s participation in such a plan (or in a substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, as existed at the time of the Change in Control.

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.

“ Non-Competition Period Payments ” has the meaning as defined in the Confidentiality, Non-Competition and Non-Solicitation Agreement between the Company and the Executive.

“ Notice of Termination ” means the notice provided for under Section 8 of the additional terms and conditions of employment that form a part of the Employment Agreement.

“ Options ” means options to purchase Shares awarded to the Executive during his employment with the Company.

“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 Ultimate Parent Company or any of its subsidiaries, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Ultimate Parent 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 Ultimate Parent Company in substantially the same proportions as their ownership of stock of the Ultimate Parent Company.

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

(a)

the Ultimate Parent Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(b)

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

(c)

any Person who is or becomes the Beneficial Owner, directly or indirectly, of securities of the Ultimate Parent Company representing 10% or more of the combined voting power of the Ultimate Parent 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

(d)

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

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Change in Control Severance Agreement

“ Shares ” means shares of the common stock, $0.01 par value, of the Ultimate Parent Company.

“ Severance Payments ” means the payments described in Section 3.2.

“ Ultimate Parent Company ” means Zimmer Biomet Holdings, Inc., a Delaware corporation, and any successor to its business and/or assets.

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Change in Control Severance Agreement

Annex 2

GENERAL RELEASE


Name:						Notification Date:

Zimmer Pte Ltd (the “Company”) and/or Zimmer Biomet Holdings, Inc. (the “Ultimate Parent Company”) has offered me certain severance benefits (the “Severance Benefits”) pursuant to a Change in Control Severance Agreement (“Agreement”) between the Company and me. I will only be able to receive the Severance Benefits in consideration for my signing this General Release.

The Company has advised me of, and I acknowledge the following:

I have 30 calendar days (the “Review Period”) from the date I receive this General Release to consider and sign it. If I do not return this signed General Release by the end of the Review Period (i.e., by INSERT DATE), the Company will consider this my refusal to sign, and I will not receive the Severance Benefits. If I choose to sign this General Release prior to expiration of the Review Period, I thereby waive my right to review for the full time period allowed. If I sign this General Release and am age 40 or older as of the date of my signing, it will not be effective for a period of seven calendar days thereafter, during which time I may change my mind and revoke my signature. To revoke my signature, I must notify the Ultimate Parent Company in writing at Zimmer Biomet Holdings, Inc., 345 East Main Street, Warsaw, IN, 46580, Attention: General Counsel, within seven calendar days of the date I signed this General Release.

By signing this General Release I am giving up, to the fullest extent permitted by law, my right to sue the Company and any of its affiliates, parent companies and subsidiaries, and its and their past and present officers, directors, employees, and agents (collectively, the “Released Parties”) based upon any act or event occurring prior to my signing this General Release. Without limitation, and again to the fullest extent permitted by law, I specifically release the Company from any and all claims arising out of my employment and termination, up to and including the date of my signing of this General Release, including claims based on discrimination under anti-discrimination laws and any and all applicable laws. I acknowledge and agree that I have received all compensation to which I am entitled from the Released Parties other than the above-referenced Severance Benefits (which remain subject to my entering into this General Release) and agree that I am not eligible to receive any additional form of compensation under any Released Party’s pay, bonus, commission, or incentive policy or program. I further agree that although I am not precluded by this Agreement from filing an administrative charge with an applicable civil rights commission, I specifically and expressly waive any rights to receive, directly or indirectly, any monetary damages or other monies from the filing of such charge.

I agree, as a condition of receiving the Severance Benefits, and subject to any rights and obligations I may have under applicable law (including, but not limited to, my right to file and participate in the investigation of an administrative charge of the type described above and any non-waivable rights I may have to make disclosures specifically allowed or required by applicable law), that I will not make negative comments about or otherwise disparage or try to injure the reputation of any of the Released Parties. I agree to refrain from making negative statements about any Released Party and/or its methods of doing business, management practices, policies, and the quality of its services or products. I acknowledge and agree that this restriction applies to all forms of communication including such things as oral statements, written statements, e-mail, text messages, comments on blogs or any other form of electronic or other type of communication.

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Change in Control Severance Agreement

For the sake of clarification, and subject to any non-waivable rights as described above, I acknowledge that this General Release shall not affect my legal obligation to protect the confidentiality of the Released Parties’ information or any of my other obligations under any confidentiality, intellectual property, non-competition, and/or non-solicitation agreement that I have entered into with the Company or with any of the other Released Parties.

As a condition of receiving the Severance Benefits I agree that for a period of 90 calendar days beginning with my separation date I shall make myself reasonably available to respond to inquiries from the Released Parties related to carrying out an orderly transition of business following my termination of employment. I agree that I will provide the Company’s General Counsel or his or her delegate two contact telephone numbers at which I can be reached, either in person or by message, and will update that contact information within 24 hours if it changes. I further agree that I will return such calls from any of the Released Parties no later than the end of the business day immediately following the date of the call, and will provide information responsive to the request to the best of my ability. I understand and acknowledge that my agreement to promptly and fully respond to such inquiries is a material condition of my eligibility for the Severance Benefits, and further understand and agree that in the event I do not cooperate as described herein, I will be immediately obligated to repay to the Company the entire gross amount of my Severance Benefits.

By signing this General Release, I affirm that I have provided complete and truthful information in response to all inquiries (the “Inquiries”) made by any of the Released Parties and any investigating authorities in connection with any governmental investigation of any of the Released Parties or litigation involving any of the Released Parties. By signing this General Release, I further affirm that I have disclosed to the Ultimate Parent Company’s General Counsel or his or her delegate any and all concerns I may have had arising from or related to my employment regarding potential material violations of applicable law and/or the Company’s Code of Conduct. I agree, by signing the General Release, that if it is later determined that I knowingly provided materially misleading or untruthful information in response to any such Inquiries or failed to disclose during my employment any potential material violations of applicable law or the Company’s Code of Conduct of which I was aware, I will be immediately obligated to repay to the Company the entire gross amount of my Severance Benefits.

I agree to cooperate with any of the Released Parties in response to any governmental investigation. I acknowledge that in connection with my job responsibilities with any of the Released Parties I may have obtained or been privy to information that could be relevant to its or their defense of Company-related lawsuits currently pending or which may be asserted against it or them. I agree to make myself reasonably available for providing such information and, to the extent necessary, testimony. I understand that the Company will reimburse any reasonable out- of-pocket expenses I may incur in providing this cooperation. I further understand that the Company will compensate me for time spent on such assistance at an hourly rate based on my base salary as of my termination date, with time spent rounded to the nearest quarter hour for billing purposes. Any such payment will be reported to me as required under applicable law, and I agree that I will be responsible for any resulting tax liability.

By signing this General Release, I am NOT giving up my right to appeal a denial of a claim for benefits submitted under my medical or dental coverage, life insurance or disability program maintained by the Company. Also, I am NOT giving up my right to file for unemployment

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Change in Control Severance Agreement

insurance benefits at the appropriate time if I so choose, and my signing of this General Release will NOT affect my rights, if any, to coverage by Workers’ Compensation insurance. In addition, this General Release will not affect any benefits to which I am entitled under the Agreement or any claim arising out of the enforcement of the Agreement.

This General Release shall be governed by, interpreted and construed in accordance with the substantive laws of Singapore.

I irrevocably agree that the courts of Singapore are to have jurisdiction to settle any disputes which may arise out of or in connection with this General Release and that, accordingly, any legal action or proceedings arising out of or in connection with this General Release may be brought in those courts and I irrevocably submit to the jurisdiction of those courts.

My signature below acknowledges that I have read the above, understand what I am signing, and am acting of my own free will. The Company has advised me to consult with an attorney and any other advisors of my choice prior to signing this General Release.


SIGNATURE						DATE

PRINT NAME

Exhibit 10.2

Zimmer Pte Ltd

315 Alexandra Road

#03-03 Sime Darby Business Center

Singapore 159944

CORPORATE EXECUTIVE CONFIDENTIALITY, NON-COMPETITION

AND NON-SOLICITATION AGREEMENT

This Corporate Executive Confidentiality, Non-Competition and Non-Solicitation Agreement (“Agreement”) is made by and between Zimmer Pte Ltd (“Zimmer”), Zimmer, Inc., Zimmer Biomet Holdings, Inc., and Yi-Sang Uk (“Employee”) (hereinafter collectively referred to as the “Parties” and each a “Party”).

Recitals

A. For purposes of this Agreement, the term “Company” means Zimmer, Inc., Zimmer Biomet Holdings, Inc., Zimmer Pte. Ltd and/or any or each of their affiliates, parents, or direct or indirect subsidiaries, as well as any successor-in-interest to Zimmer, Inc., Zimmer Biomet Holdings, Inc., Zimmer Pte. Ltd and/or to any of their direct or indirect subsidiaries, affiliates, or parents.

B. Employee is employed by Zimmer in an executive and/or high-level managerial capacity in which Employee will have extensive access to trade secrets and confidential information of Company.

C. Company has offered Employee the grant of certain equity-based awards under an equity incentive plan or program of Zimmer Biomet Holdings, Inc., contingent upon Employee’s entering into this Agreement.

Agreement

NOW, THEREFORE, in consideration of the foregoing recitals and Company’s agreement to employ Employee in an executive and/or high-level managerial capacity, the promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree to be legally bound as follows:

1. Acknowledgements . Employee acknowledges that Company is engaged in the highly competitive business of the development, manufacture, distribution, and sale of orthopaedic medical, oral rehabilitation, spine and/or trauma devices, products, processes and services, among other products and services, and that Employee serves in an executive and/or high-level managerial capacity for Company and in that capacity Employee has and/or will have access to and will gain knowledge of substantial trade secrets and confidential information of Company.

2. Non-Disclosure and Ownership of Confidential Information . Employee acknowledges that Confidential Information is a valuable, special, and unique asset of Company, and solely the property of Company, and agrees to the following:

a. Confidential Information Defined . The term “Confidential Information” includes, but is not limited to, any and all of Company’s trade secrets, confidential and proprietary information and all other information and data of Company that is not generally known to the public or other third parties who could derive economic value from its use or disclosure. Confidential Information includes, without limitation, confidential business methods and processes, research and development information, business plans and strategies, marketing plans and strategies, information pertaining to current and prospective customers, information pertaining to distributors, pricing information, costing information, non-public financial information, personnel information, and information about current and prospective products or services, whether or not reduced to writing or other tangible medium of expression, including work product created by Employee in rendering services for Company.

b. Non-Disclosure of Confidential Information . During Employee’s employment with Zimmer and thereafter, Employee will not disclose, transfer, or use (or seek to induce others to disclose, transfer, or use) any Confidential Information for any purpose other than i) disclosure to authorized employees and agents of Company who are bound to maintain the confidentiality of the Confidential Information; and/or ii) for authorized purposes during the course of Employee’s employment in furtherance of Company’s business. Employee’s non-disclosure obligations shall continue as long as the Confidential Information remains confidential and shall not apply to information that becomes generally known to the public through no fault or action of Employee.

c. Protection of Confidential Information . Employee will notify Company in writing of any circumstances which may constitute unauthorized disclosure, transfer, or use of Confidential Information. Employee will use Employee’s best efforts to protect Confidential Information from unauthorized disclosure, transfer, or use. Employee will implement and abide by all procedures adopted by Company to prevent unauthorized disclosure, transfer, or use of Confidential Information.

3. Ownership of Intellectual Property .

a. Invention Defined . The term “Invention” includes, but is not limited to ideas, programs, processes, systems, intellectual property, works of authorship, copyrightable materials, discoveries, and/or improvements which Employee discovers, invents, originates, develops, makes, authors, or conceives alone or in conjunction with others during Employee’s employment with Zimmer and/or within six (6) months after Employee’s employment ends which relate to Company’s present or future business. An Invention is covered by this Agreement regardless of whether i) Employee conceived of the Invention in the scope of Employee’s employment; ii) the Invention is patentable; or iii) Company takes any action to commercialize or develop the Invention.

b. Ownership of Inventions . Inventions are solely the property of Zimmer or such other Company appointed by Zimmer. Employee agrees that by operation of law and/or the effect of this Agreement Employee does not have any rights, title, or interest in any Inventions. Notwithstanding, Employee may, at the Company’s discretion, be recognized as the inventor of an Invention without retaining any other rights associated therewith.

c. Disclosure and Assignment of Inventions . Employee hereby assigns to Zimmer or such other Company appointed by Zimmer all right, title and interest Employee may have in any Inventions that are discovered, invented, originated, developed, made, authored, or conceived by Employee (whether alone or with others) during Employee’s employment with Zimmer and/or within six (6) months after Employee’s employment ends which relate to Company’s present or future business. Employee agrees to: (i) promptly disclose all such Inventions in writing to Zimmer or such other Company appointed by Zimmer; (ii) keep complete and accurate records of all such Inventions, which records shall be Zimmer or such other Company appointed by Zimmer property and shall be retained on the relevant Company premises; and (iii) execute such documents and do such other acts as may be necessary in the opinion of Zimmer or such other Company appointed by Zimmer to establish and preserve its property rights in all such Inventions. This section shall not apply to any Invention for which no equipment, supplies, facility or trade secret information of Company was used and which was developed entirely on Employee’s own time, and (1) which does not relate (a) directly to the business of Company, or (b) to Company’s actual or demonstrably anticipated research or development, and (2) which does not result from any work performed by Employee for Zimmer.

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d. Works of Authorship . All written, graphic or recorded material and all other works of authorship fixed in a tangible medium of expression made or created by Employee, solely or jointly with others, during Employee’s employment with Zimmer and relating to Company’s business, actual or contemplated, shall be the exclusive property of Company (collectively “Works”). All rights, title and interests (including intellectual property rights) in and to the Works shall belong to Company and Employee hereby assigns and conveys (including by way of present assignment of future rights) to Company all rights, title and interests (including any copyright and renewals) in the Works.

e. Attribution and Use of Works and Inventions; Waiver of Assertion of “Moral” Rights in Inventions and Works . Employee agrees that Company and its licensees are not required to designate Employee as author, inventor or developer of any Works or Inventions when distributed or otherwise. Employee hereby waives, and agrees not to assert, any “moral” rights in any Inventions and Works which Employee may have under the Singapore Copyright Act (including those rights set out or referred to under Part IX therein) or similar legislation in any jurisdiction and any other moral rights to which Employee is or may be entitled to under any legislation now existing or in future enacted in any part of the world. Employee agrees that Company and its licensees shall have sole discretion with regard to how and for what purposes any Inventions or Works are used or distributed.

f. Employee Cooperation in Establishment of Company Proprietary Rights . Employee will sign documents of assignment, declarations and other documents and take all other actions reasonably required by Company, at Company’s expense, to perfect and enforce any of its proprietary rights or give Company or its nominee the full benefit of the provisions of this Agreement. In the event Company is unable, for any reason whatsoever, to secure Employee’s signature to any lawful or necessary documents required to apply for, prosecute, perfect, or assign any United States or foreign application for Letters Patent, trademark, copyright registration, or other filing to protect any Invention or Work, Employee hereby irrevocably designates and appoints Company and its duly authorized officers and agents as Employee’s agent and attorney in fact, to act for and on Employee’s behalf, to execute and file any such application, registration or other filing, and to do all other lawfully permitted acts to further the prosecution, issuance or assignment of Letters Patent or other protections on such Inventions, or registrations for trademark or copyright or other protections on such Works, with the same force and effect as if executed by Employee.

4. Return of Confidential Information and Company Property . Immediately upon termination of Employee’s employment with Zimmer, Employee shall return to Zimmer all of Company’s property relating to Company’s business, including without limitation all of Company’s property which is in the possession, custody, or control of Employee such as Confidential Information, documents, hard copy files, copies of documents and electronic information/files.

5. Obligations to Other Entities or Persons . Employee warrants that Employee is not bound by the terms of a confidentiality agreement or any other legal obligation which would either preclude or limit Employee from disclosing or using any of Employee’s ideas, inventions, discoveries or other information or otherwise fulfilling Employee’s obligations to Company. While employed by Zimmer, Employee shall not disclose or use any confidential information belonging to another entity or other person.

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6. Conflict of Interest and Duty of Loyalty . During Employee’s employment with Zimmer, Employee shall not engage, directly or indirectly, in any activity, employment or business venture, whether or not for remuneration, that i) is competitive with Company’s business; ii) deprives or potentially could deprive Company of any business opportunity; iii) conflicts or potentially could conflict with Company’s business interests; or iv) is otherwise detrimental to Company, including but not limited to preparations to engage in any of the foregoing activities.

7. Restrictive Covenants . Employee agrees to, and covenants to comply with, each of the following separate and divisible restrictions:

a. Definitions .

(1) “Competing Product” is defined as any product, process or service that is similar to (or would serve as a substitute for) and competitive with any product, process or service that Company is researching, developing, manufacturing, distributing, selling and/or providing at the time of Employee’s termination of employment with Zimmer.

(2) “Competing Entity” is defined as any entity that researches, develops, manufactures, markets, distributes and/or sells one or more Competing Products, including but not limited to Astra Tech Dental (part of AstraZeneca Group); DePuy Orthopaedics, Inc. and DePuy Spine, Inc. (subsidiaries of Johnson & Johnson); Japan Medical Materials Corporation; Japan Medical Dynamic Marketing, Inc.; Medtronic, Inc.; Nobel Biocare Holding AG; NuVasive, Inc.; Smith & Nephew plc; Straumann Holding AG; Stryker Corporation; Synthes, Inc.; and the subsidiaries and affiliates of each of the foregoing. A Competing Entity is diversified if it operates multiple, independently operating business divisions, units, lines or segments some of which do not research, develop, manufacture, market, distribute and/or sell any Competing Products.

(3) “Prohibited Capacity” is defined as (a) any same or similar capacity to that held by Employee at any time during Employee’s last two (2) years of employment with Company; (b) any executive or managerial capacity; or (c) any capacity in which Employee may be required, or in which it may be advantageous to a person other than the Company for the Employee to use or refer to the Employee’s knowledge of Confidential Information and/or Inventions.

(4) “Restricted Geographic Area” is defined as: Australia, China, Hong Kong, India, Japan, Korea, Malaysia, New Zealand, Singapore, Taiwan, Thailand and any other country where Zimmer has, at the relevant time, established a representative office or entity.

Employee acknowledges that this geographic scope is reasonable given Employee’s position with Company, the international scope of Company’s business; and the fact that Employee could compete with Company from anywhere Company does business.

(5) “Restricted Period” is defined as the date Employee executes this Agreement throughout the time Employee is employed by Zimmer, and a period of twelve (12) months from the date Employee’s employment with Zimmer ceases for any reason, unless otherwise extended by Employee’s breach of this Agreement. The running time on the Restricted Period shall be suspended during any period in which Employee is in violation of any of the restrictive covenants set forth herein, and all restrictions shall automatically be extended by the period Employee was in violation of any such restrictions.

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6. “Customer” is defined as any person or entity with respect to whom, as of the date of Employee’s separation from his employment with Company or at any time during the twelve (12) months prior to such separation, Company sold or provided any products, processes or services.

7. “Active Prospect” is defined as any person or entity that Company individually and specifically marketed to and/or held discussions with regarding the distribution and/or sale of any of Company’s products, processes or services at any time during the last six (6) months of Employee’s employment with Company.

b. Restrictive Covenants . Employee agrees that during the Restricted Period, Employee is bound by each of the following independent and divisible restrictions:

(1) Covenant Not to Compete .

(a) Employee will not, directly or indirectly, within the Restricted Geographic Area, be employed by, work for, consult with, provide services to, or lend assistance to any Competing Entity in a Prohibited Capacity. (b) Employee may be employed by, work for, consult with, provide services to, or lend assistance to a Competing Entity provided that: i) the Competing Entity’s business is diversified; ii) the part of the Competing Entity’s business with which Employee will be affiliated would not, evaluated on a stand-alone basis, be a Competing Entity; iii) Employee’s affiliation with the Competing Entity does not involve any Competing Products; and iv) Employee provides Company a written description of Employee’s anticipated activities on behalf of the Competing Entity which includes, without limitation, an assurance satisfactory to Company that Employee’s affiliation with the Competing Entity does not constitute a Prohibited Capacity.

(2) Covenant Not to Solicit Customers or Active Prospects . Employee will not i) provide, sell, or market; ii) assist in the provision, selling or marketing of; or iii) attempt to provide, sell or market any Competing Products to any of Company’s Customers or Active Prospects located in the Restricted Geographic Area in respect of which Employee had access to confidential information or with whose custom or business Employee was personally concerned.

(3) Covenant Not to Interfere With Business Relationships . Employee will not, within the Restricted Geographic Area, urge, induce or seek to induce any of Company’s independent contractors, subcontractors, distributors, brokers, consultants, sales representatives, customers, vendors, suppliers or any other person or entity with whom Company has a business relationship at the time of Employee’s separation from his employment with Company to terminate its or their relationship with, or representation of, Company or to cancel, withdraw, reduce, limit or in any manner modify any such person’s or entity’s business with, or representation of, Company, provided that such business relationship is in respect of which Employee had access to confidential information or with whose custom or business Employee was personally concerned.

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(4) Covenant Not to Solicit Company Employees . Employee will not, within the Restricted Geographic Area, employ, solicit for employment, or advise any other person or entity to employ or solicit for employment, any individual employed by Company at the time of Employee’s separation from his employment with Company, or otherwise directly or indirectly induce or entice any such employee to leave his/her employment with Company to work for, consult with, provide services to, or lend assistance to any Competing Entity.

(5) Covenant Not to Disparage Company . Employee will not make or publish any disparaging or derogatory statements about Company; about Company’s products, processes, or services; or about Company’s past, present and future officers, directors, employees, attorneys and agents. Disparaging or derogatory statements include, but are not limited to, negative statements regarding Company’s business or other practices; provided, however, nothing herein shall prohibit Employee from providing any information as may be compelled by law or legal process.

8. Reasonableness of Terms . Employee acknowledges and agrees that the restrictive covenants contained in this Agreement restrict Employee from engaging in activities for a competitive purpose and are reasonably necessary to protect Company’s legitimate interests in Confidential Information, Inventions, and goodwill. Additionally, Employee acknowledges and agrees that the restrictive covenants are reasonable in all respects, including, but not limited to, temporal duration, scope of prohibited activities and geographic area. Employee further acknowledges and agrees that the restrictive covenants set forth in this Agreement will not pose any hardship on Employee and that Employee will reasonably be able to earn an equivalent livelihood without violating any provision of this Agreement.

9. Non-Competition Period Payments . To the extent Employee is denied a specific employment position that would otherwise be offered to Employee by a Competing Entity solely because of the restrictive covenant provisions of Section 7 of this Agreement, and provided Employee satisfies all conditions stated herein, then upon expiration of the period of time represented by any severance benefits Employee was offered, Zimmer will make payments to Employee equal to Employee’s monthly base pay at the time of Employee’s separation from his employment with Company (exclusive of bonus and other extra compensation and any other employee benefits) for each month of such unemployment through the end of the Restricted Period.

a. Expiration of Severance Benefits . Severance benefits shall be deemed to have expired at the conclusion of the period of time represented by the total amount of any notice or severance benefits offered to Employee (whether or not actually paid or given, and whether or not given, paid in a lump sum or through continuing payments).

b. Verification of Eligibility for Non-Competition Period Payments . To qualify for payments under this Section 9, Employee must provide Company detailed written documentation supporting eligibility for payment, including, at a minimum, (a) the name and location of the Competing Entity that would have employed Employee but for the provisions of Section 7 of this Agreement, (b) the title, nature, and detailed job responsibilities of the employment position with the Competing Entity that Employee was denied, (c) the date Employee was denied the employment position, and (d) the name and contact information of a managerial employee at the Competing Entity who has sufficient authority to confirm that Employee was denied this specific employment position with the Competing Entity solely because Employee is subject to the provisions of Section 7 of this Agreement (the “eligibility documentation”). Upon receipt of the eligibility documentation, Company will determine eligibility for payment and, if eligibility is established, payments will commence as of the date of Company’s receipt of the eligibility documentation.

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c. Obligation to Pursue Replacement Employment and Verification of Continued Eligibility for Non-Competition Period Payments . Employee is obligated to diligently seek and pursue replacement employment that does not violate Section 7 of this Agreement (“replacement employment”) during any period in which Employee seeks and/or accepts payment from Company under this Section 9. After eligibility for non-competition period payments is established, Employee will, on or before the 15 ^th day of each month of eligibility for continued payments, submit to Company a written statement (i) identifying by name and address all prospective employers with whom Employee has applied or inquired about employment; (ii) identifying positions sought with each listed employer and specific actions taken in seeking each position; (iii) describing all other efforts made to obtain replacement employment; and (iv) describing any offers of employment received, including the name of the employer; the nature, title, and compensation terms of the position offered; the actual or anticipated start date if the offer has been accepted; and the reason(s) for declining if the offer was declined.

d. Effect of Replacement Employment on Non-Competition Period Payments . If Employee is denied a specific employment position with a Competing Entity solely because of the restrictive covenant provisions of Section 7 of this Agreement but obtains replacement employment, and the monthly compensation (including base pay, commissions, incentive compensation, bonuses and other compensation) for the replacement employment is less than Employee’s monthly base pay at the time of Employee’s separation from employment with Company, Company agrees to pay Employee the difference for each such month through the end of the Restricted Period, again upon expiration of any severance benefits which Employee was offered and provided Employee satisfies all conditions stated herein. Employee shall submit to Company payroll records (as well as any other records reasonably requested by Company) showing all compensation received by Employee from the replacement employment as a condition of Company’s payment of Non-Competition Period Payments covering any period of time when Employee is working in replacement employment. For the avoidance of doubt, in the event payment is made by Company to Employee under this Section 9(d), Employee’s entitlement to payment under Section 9(a) shall cease.

e. Company’s Right To Provide Release of Obligations in Lieu of Non-Competition Period Payments . Notwithstanding any of the foregoing provisions of this Section 9, Company reserves the right to release Employee from Employee’s obligations under Section 7 of this Agreement at any time during the Restricted Period, in full or in sufficient part to allow Employee to accept employment that would otherwise be prohibited under this Agreement, at which time Company’s payment obligations under this Section 9 shall cease immediately and Employee shall not be entitled to any further such payments or compensation.

10. Severability, Modification of Restrictions : The covenants and restrictions in this Agreement are separate and divisible, and to the extent any clause, portion or section of this Agreement is determined to be unenforceable or invalid for any reason, Company and Employee acknowledge and agree that such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement. If any particular covenant, provision or clause of this Agreement is determined to be unreasonable or unenforceable for any reason, including, without limitation, temporal duration, scope of prohibited activity, and/or scope of geographic area, Company and Employee acknowledge and agree that such covenant, provision or clause shall automatically be deemed reformed to have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law. The parties agree that any court interpreting the provisions of this Agreement shall have the authority, if necessary, to reform any such provision to make it enforceable under applicable law.

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11. Remedies . Employee acknowledges that a breach or threatened breach by Employee of this Agreement will give rise to irreparable injury to Company and that money damages will not be adequate relief for such injury. Accordingly, Employee agrees that Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available. In addition to all other relief to which it shall be entitled, Company shall be entitled to cease all payments to which Employee would otherwise be entitled under Section 9 hereto; continue to enforce this Agreement; recover from Employee all payments made under Section 9 to the extent attributable to a time during which Employee was in violation of the covenants for which payment was made; and recover from Employee all litigation costs and attorneys’ fees incurred by Company in any action or proceeding relating to this Agreement in which Company prevails in any respect, including, but not limited to, any action or proceeding in which Company seeks enforcement of this Agreement or seeks relief from Employee’s violation of this Agreement.

12. Survival of Obligations . Employee acknowledges and agrees that Employee’s obligations under this Agreement, including, without limitation, Employee’s non-disclosure and non-competition obligations, shall survive the termination of Employee’s employment with Company, whether such termination is with or without cause and whether it is voluntary or involuntary. Employee acknowledges and agrees that nothing in this Agreement alters the at-will nature of Employee’s employment and that either Company or Employee may terminate the employment relationship at any time, with or without cause or notice. Employee further acknowledges and agrees that: (a) Employee’s non-disclosure, non-disparagement, non-solicitation and non-competition covenants set forth in Sections 2 and 7 of this Agreement shall be construed as independent covenants and that no breach of any contractual or legal duty by Company shall be held sufficient to excuse or terminate Employee’s obligations or to preclude Company from obtaining injunctive relief or other remedies for Employee’s violation or threatened violation of such covenants, and (b) the existence of any claim or cause of action by Employee against Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to Company’s enforcement of Employee’s obligations under Sections 2 and 7 of this Agreement.

13. Governing Law . This Agreement shall be construed and enforced in accordance with the laws of Singapore, notwithstanding any state’s choice-of-law rules to the contrary.

14. Successors and Assigns . Company shall have the right to assign this Agreement, and, accordingly, this Agreement shall inure to the benefit of, and may be enforced by, any and all successors and assigns of Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization, and shall be binding on Employee. The services to be provided by Employee to Company are personal to Employee, and Employee shall not have the right to assign Employee’s duties under this Agreement.

15. Modification . This Agreement may not be amended, supplemented, or modified except by a written document signed by both Employee and a duly authorized officer of Company.

16. No Waiver . The failure of Company to insist in any one or more instances upon performance of any provision of this Agreement or to pursue its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights.

17. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which when taken together will constitute one and the same agreement.

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18. Entire Agreement . This Agreement, including Recitals, constitutes the entire agreement of the parties with respect to the subjects specifically addressed herein, and supersedes any prior agreements, understandings, or representations, oral or written, on the subjects addressed herein. Notwithstanding the foregoing, to the extent the employee has an existing non-competition, confidentiality, and/or non-solicitation agreement in favor of Company and has breached or violated the terms thereof, Company may continue to enforce its rights and remedies under and pursuant to such existing agreement.

19. Third Party Rights . Any person other than Company and Employee has no right under the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore, to enforce any term of, or enjoy any benefit under, this Agreement

Employee’s signature below indicates that Employee has read the entire Agreement, understands what Employee is signing, and is signing the Agreement voluntarily. Employee agrees that Company advised Employee to consult with an attorney prior to signing the Agreement.

EMPLOYEE

/s/ Yi Sang-Uk

(Employee Signature)

Printed Name: Yi Sang-Uk

Date: August 18, 2015


ZIMMER PTE. LTD.

By:		/s/ Benedict L.T. Seah
Name:		Benedict L.T. Seah
Title:		Regional Vice President, Human Resources

Date: August 13, 2015

ZIMMER, INC.

By:		/s/ Bill P. Fisher
Name:		Bill P. Fisher
Title:		Senior Vice President, Global Human Resources

Date: August 18, 2015

ZIMMER BIOMET HOLDINGS, INC.

By:		/s/ Bill P. Fisher
Name:		Bill P. Fisher
Title:		Senior Vice President, Global Human Resources

Date: August 18, 2015

-9-

Exhibit 10.3

ZIMMER BIOMET HOLDINGS, INC.

2009 STOCK INCENTIVE PLAN

(as amended May 7, 2013

and further amended as of June 24, 2015)

1. General:

(a) Establishment of Plan; Merger of Prior Plans . The Zimmer Holdings, Inc. 2009 Stock Incentive Plan (now known as the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan) (the “Plan”) became effective on May 4, 2009 (the “Effective Date”) as a successor to the Zimmer Holdings, Inc. 2006 Stock Incentive Plan and the Zimmer Holdings, Inc. TeamShare Stock Option Plan (collectively, the “Prior Plans”). The Prior Plans were merged with and into the Plan effective as of the Effective Date, and no additional grants have been made thereafter under the Prior Plans. Outstanding grants under the Prior Plans shall continue in effect according to their terms as in effect before the Plan merger (subject to such amendments as the Committee (defined below) determines, consistent with the Prior Plans, as applicable), and the shares with respect to outstanding grants under the Prior Plans shall be issued or transferred under this Plan.

(b) Effective Date of Amendment . The Plan, as amended, was approved by the Board of Directors on February 22, 2013 and became effective on May 7, 2013 (the “Amendment Effective Date”), upon the affirmative vote of the holders of a majority of the votes cast at the 2013 annual meeting of stockholders. The Plan was further amended effective as of June 24, 2015 to change the name of the Plan to the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan.

(c) Purpose . The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of employees of the Company to those of the Company’s stockholders and by providing employees with long-term incentives for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of employees who will be largely responsible for the long-term performance, growth and financial success of the Company.

2. Definitions: For purposes of this Plan:

(a) “Affiliate” means any entity in which the Issuer has, directly or indirectly, an ownership interest of at least 20%.

(b) “Associated Option” shall have the meaning set forth in Section 7.

(c) “Award” means an award of options, stock appreciation rights, performance shares, performance units, restricted stock or restricted stock units granted under this Plan.

(d) “Board” or “Board of Directors” means the Board of Directors of the Issuer.

(e) “Change in Control” shall have the meaning set forth in Section 14(d).

(f) “Committee” shall have the meaning set forth in Section 4.

(g) “Current Portion” shall have the meaning set forth in Section 8(a).

(h) “Code” means the Internal Revenue Code of 1986, as amended.

(i) “Common Stock” means the Issuer’s common stock.

(j) “Company” means the Issuer (Zimmer Biomet Holdings, Inc.) and its Subsidiaries and Affiliates.

(k) “Deferred Portion” shall have the meaning set forth in Section 8(a).

(l) “Disability” means total disability as defined by the Company’s group long-term disability insurance policy applicable to participants.

(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(n) “Fair Market Value” means the average of the high and low sale prices of a share of Common Stock on the New York Stock Exchange composite tape on the date of measurement or on any date as determined by the Committee and, if there were no trades on such date, on the day on which a trade occurred next preceding such date.

(o) “Issuer” means Zimmer Biomet Holdings, Inc.

(p) “Plan” means this Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan.

(q) “Prior Plans” means, collectively, the Zimmer Holdings, Inc. 2006 Stock Incentive Plan and the Zimmer Holdings, Inc. TeamShare Stock Option Plan.

(r) “Qualifying Performance Criteria” shall have the meaning set forth in Section 6(a).

(s) “Qualifying Termination” shall have the meaning set forth in Section 14(e).

(t) “Regulations” shall have the meaning set forth in Section 4(c).

(u) “Restriction Period” shall have the meaning set forth in Section 9(b)(2).

(v) “Retirement” shall mean termination of the employment of an employee with the Company on or after (i) the employee’s 65th birthday or (ii) the employee’s 55th birthday if the employee has completed 10 years of service with the Company. For purposes of this Section 2(v) and all other purposes of this Plan, Retirement shall also mean termination of employment of an employee with the Company for any reason (other than the employee’s death, resignation, willful misconduct or activity deemed detrimental to the interests of the Company) where, on termination, the employee’s attained age (expressed as a whole number) plus completed years of service (expressed as a whole number) plus one (1) equals at least 70 and the employee has completed 10 years of service with the Company and, where applicable, the employee has executed a general release, a covenant not to compete and/or a covenant not to solicit. For purposes of this Plan, an employee’s service with the Company’s former parent, Bristol-Myers Squibb Company, and its subsidiaries and affiliates before August 6, 2001, shall be included as service with the Company, provided that the employee was employed by Bristol-Myers Squibb Company on August 5, 2001 and has been continuously employed by the Company since August 6, 2001.

(w) “Subcommittee” shall have the meaning set forth in Section 4(b).

(x) “Subsidiary” shall mean any corporation which at the time qualifies as a subsidiary of the Issuer under the definition of “subsidiary corporation” in Section 424 of the Code.

(y) “Tax Date” shall have the meaning set forth in Section 13(a).

(z) “Withholding Tax” shall have the meaning set forth in Section 13(c).

3. Shares of Common Stock Subject to the Plan:

(a) Shares Authorized; Share Counting; Fungible Share Pool . Subject to the other provisions of this Section 3, effective as of the Amendment Effective Date, the total number of shares available for grant as Awards pursuant to this Plan shall be equal to the sum of the following: (i) 8,700,000 shares, plus (ii) the aggregate number of shares remaining available for issuance under the Prior Plans as of the Effective Date, and (iii) the aggregate number of shares underlying outstanding awards under the Prior Plans as of the Effective Date that terminate or expire or are cancelled or forfeited during the term of this Plan without having been exercised or fully vested. Substitute or assumed Awards made under Section 19 shall not be considered in applying this limitation. Solely for the purpose of applying the foregoing limitation and subject to the replenishment provisions of Section 3(b) below:

(1) each option or stock appreciation right granted under this Plan shall reduce the number of shares available for grant by one share for every one share granted;

(2) effective as of the Amendment Effective Date, each Award granted under this Plan that may result in the issuance of Common Stock, other than an option or stock appreciation right, shall reduce the number of shares available for grant by two and thirty-seven hundredths (2.37) shares for every one share granted; and

(3) if Awards are granted in tandem, so that only one of the Awards may actually be exercised, only the Award that results in the greater reduction in the number of shares available for grant shall result in a reduction of the shares so available, and the other Award shall be disregarded.

(b) Shares Again Available .

(1) In the event all or any portion of an Award terminates or expires or is cancelled or forfeited during the term of this Plan without being exercised or fully vested or is settled for cash (collectively, “cancelled awards”), then (A) with respect to options and stock appreciation rights, the shares underlying such cancelled award shall be restored to the Plan on a one-for-one basis and may again be used for Awards under the Plan; and (B) with respect to each Award granted under this Plan that may result in the issuance of Common Stock, other than an option or stock appreciation right, effective as of the Amendment Effective Date, shares underlying such cancelled awards (whether such Awards were granted before or after the Amendment Effective Date) shall be restored to the Plan at a rate of two and thirty-seven hundredths (2.37) shares for each cancelled share and may again be used for Awards under the Plan.

(2) Notwithstanding anything to the contrary contained herein:

(A) shares that participants tender during the term of this Plan to pay the purchase price of options in accordance with Section 7(b)(5) shall not be added to the aggregate Plan limit described above;

(B) shares that the Company retains or causes participants to surrender to satisfy Withholding Tax requirements in accordance with Section 13 shall not be added to the aggregate Plan limit described above;

(C) shares that are repurchased by the Company using option exercise proceeds shall not be added to the aggregate Plan limit described above;

(D) if a stock appreciation right included in an option in accordance with Section 7(b)(12) is exercised, the number of shares covered by the option or portion thereof which is surrendered on exercise of the stock appreciation right shall be considered issued pursuant to the Plan and shall count against the aggregate Plan limit described above, regardless of whether or not any shares are actually issued to the participant upon exercise of the stock appreciation right; and

(E) shares covered by any stock appreciation right granted in accordance with Section 18, to the extent that it is exercised and settled in Common Stock, and whether or not shares are actually issued to the participant upon exercise of the right, shall be considered issued pursuant to the Plan and shall count against the aggregate Plan limit described above.

(c) Individual Limitation . No individual participant may be granted, in any single calendar year during the term of this Plan, stock options and/or stock appreciation rights to purchase more than 500,000 shares of Common Stock. No individual participant may be granted, in any single calendar year during the term of this Plan, restricted stock, restricted stock units, performance units and/or performance shares representing more than 250,000 shares of Common Stock. Substitute or assumed Awards made under Section 19 shall not be included in applying these limitations.

(d) Maximum Number of Incentive Stock Options. The number of shares of Common Stock with respect to which incentive stock options may be granted shall not exceed 1,000,000 shares during the term of this Plan.

(e) Adjustment . The limitations under Sections 3(a), (c) and (d) are subject to adjustment in number and kind pursuant to Section 12.

(f) Treasury or Market Purchased Shares. Common Stock issued hereunder may be authorized and unissued shares or issued shares acquired by the Company on the market or otherwise.

(g) Effect of Plans Operated by Acquired Companies . If a company acquired by the Company or with which the Company combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Common Stock authorized for grant under the Plan. Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees of the Company prior to such acquisition or combination.

4. Administration: The Plan shall be administered under the supervision of the Board of Directors, which may exercise its powers, to the extent herein provided, through the agency of its Compensation and Management Development Committee (the “Committee”), which shall be appointed by the Board of Directors.

(a) Composition of Committee . The Committee shall consist of not less than two (2) members of the Board who are intended to meet the definition of “outside director” under the provisions of Section 162(m) of the Code and the definition of “non-employee directors” under the provisions of the Exchange Act or rules or regulations promulgated thereunder.

(b) Delegation and Administration . The Committee may delegate to one or more separate committees (any such committee a “Subcommittee”) composed of one or more directors of the Issuer (who may, but need not be, members of the Committee) the ability to grant Awards with respect to participants who are not executive officers of the Company under the provisions of the Exchange Act or rules or regulations promulgated thereunder, and such actions shall be treated for all purposes as if taken by the Committee. Any action by any such Subcommittee within the scope of such delegation shall be deemed for all purposes to have been taken by the Committee and references in this Plan to the Committee shall include any such Subcommittee. The Committee may delegate the administration of the Plan to an officer or officers of the Issuer, and such administrator(s) may have the authority to execute and distribute agreements or other documents evidencing or relating to Awards granted by the Committee under this Plan, to maintain records relating to the grant, vesting, exercise, forfeiture or expiration of Awards, to process or oversee the issuance of shares of Common Stock upon the exercise, vesting and/or settlement of an Award, to interpret the terms of Awards and to take such other actions as the Committee may specify, provided that in no case shall any such administrator be authorized to grant Awards under the Plan. Any action by any such administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee and references in this Plan to the Committee shall include any such administrator, provided that the actions and interpretations of any such administrator shall be subject to review and approval, disapproval or modification by the Committee.

(c) Regulations . The Committee, from time to time, may adopt rules and regulations (“Regulations”) for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate. The interpretation and construction of any provision of the Plan by the Committee shall, unless otherwise determined by the Board of Directors, be final and conclusive.

(d) Records and Actions . The Committee shall maintain a written record of its proceedings. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the Committee.

5. Eligibility: Awards may be granted only to employees of the Company, including Subsidiaries and Affiliates which become such after the Effective Date. Any director who is not an employee of the Company shall be ineligible to receive an Award under the Plan. The adoption of this Plan shall not be deemed to give any employee any right to an Award, except to the extent and upon such terms and conditions as may be determined by the Committee.

6. Qualifying Performance Criteria: Awards under Section 8 of this Plan shall be, and any other type of Award (other than incentive stock options) in the discretion of the Committee may be, contingent upon achievement of Qualifying Performance Criteria.

(a) Available Criteria . For purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, Affiliate or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the Award:

(1)

net sales,

(2)

revenue,

(3)

gross profit,

(4)

operating profit,

(5)

net earnings,

(6)

earnings per share,

(7)

profit margin (gross, operating or net),

(8)

cash flow, net cash flow or free cash flow,

(9)

acquisition integration synergies (measurable savings and efficiencies resulting from integration),

(10)

acquisition integration milestone achievements,

(11)

stock price performance,

(12)

total shareholder return,

(13)

internal total shareholder return (derived from operating profit growth and free cash flow yield)

(14)

expense reduction,

(15)

debt or net debt reduction, and

(16)

financial return ratios (including return on equity, return on assets or net assets, return on capital or invested capital and return on operating profit).

(b) Adjustments . The Committee may adjust any evaluation of performance under a Qualifying Performance Criteria to exclude the effects of any of the following items or events that occurs or otherwise impacts reported results during a performance period: (1) asset write-downs, (2) litigation or claim judgments or settlements, (3) changes in tax law, accounting principles or other such laws or provisions affecting reported results, (4) accruals and expenses associated with reorganization, restructuring and/or transformation programs, (5) acquisition and integration expenses and purchase accounting, (6) share-based payments, and (7) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Issuer’s annual report to stockholders for the applicable year. Notwithstanding satisfaction or completion of any Qualifying Performance Criteria, to the extent specified at the time of grant of an Award, the number of shares, stock options, stock appreciation rights, performance shares, performance units, restricted stock, or restricted stock units or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Qualifying Performance Criteria may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine.

(c) Establishment and Achievement of Targets . The Committee shall establish the specific targets for the selected Qualified Performance Criteria. For Awards that are intended to qualify for exemption from the limitation on deductibility imposed by Section 162(m) of the Code or any successor provision, the targets shall be established within the required time period. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index. In cases where Qualifying Performance Criteria are established, the Committee shall determine the extent to which the criteria have been achieved and the corresponding level to which vesting requirements have been satisfied or other restrictions are to be removed from the Award or the extent to which a participant’s right to receive an Award should lapse in cases where the Qualifying Performance Criteria have not been met, and shall certify these determinations in writing. The Committee may provide for the determination of the attainment of such targets in installments where it deems appropriate.

7. Stock Options: Stock options under the Plan shall consist of incentive stock options under Section 422 of the Code or nonqualified stock options (options not intended to qualify as incentive stock options), as the Committee shall determine. In addition, the Committee may grant stock appreciation rights in conjunction with an option, as set forth in Section 7(b)(12), or may grant an option in conjunction with an award of performance units or performance shares, as set forth in Section 7(b)(11) (an “Associated Option”).

Each option shall be subject to the following terms and conditions:

(a) Grant of Options . The Committee shall (1) select the employees of the Company to whom options may from time to time be granted, (2) determine whether incentive stock options or nonqualified stock options are to be granted, (3) determine the number of shares to be covered by each option so granted, (4) determine the terms and conditions (not inconsistent with the Plan) of any option granted hereunder (including but not limited to restrictions upon the options, conditions of their exercise (including as to nonqualified stock options, subject to any Qualifying Performance Criteria), or restrictions on the shares of Common Stock issuable upon exercise thereof), (5) determine whether nonqualified stock options or incentive stock options granted under the Plan shall include stock appreciation rights and, if so, the Committee shall determine the terms and conditions thereof in accordance with Section 7(b)(12) hereof, (6) determine whether any nonqualified stock options granted under the Plan shall be Associated Options, and (7) prescribe the form of the instruments necessary or advisable in the administration of options.

(b) Terms and Conditions of Option . Any option granted under the Plan shall be evidenced by a Stock Option Agreement entered into by the Company and the optionee, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan, and in the case of an incentive stock option not inconsistent with the provisions of the Code applicable to incentive stock options, as the Committee shall prescribe:

(1) Number of Shares Subject to an Option . The Stock Option Agreement shall specify the number of shares of Common Stock subject to the Agreement. If the option is an Associated Option, the number of shares of Common Stock subject to such Associated Option shall initially be equal to the number of performance units or performance shares subject to the Award, but one share of Common Stock shall be canceled for each performance unit or performance share paid out under the Award.

(2) Option Price . The purchase price per share of Common Stock purchasable under an option will be determined by the Committee but will be not less than the Fair Market Value of a share of Common Stock on the date of the grant of the option, except as provided in Section 19 relating to assumed or substitute Awards.

(3) Option Period . The period of each option shall be fixed by the Committee, but no option shall be exercisable after the expiration of ten years from the date the option is granted.

(4) Consideration . Unless the Committee determines otherwise, each optionee, as consideration for the grant of an option, shall remain in the continuous employ of the Company for at least one year from the date of the granting of such option, and no option shall be exercisable until after the completion of such one year period of employment by the optionee.

(5) Exercise of Option . The Committee shall determine the time or times at which an option may be exercised in whole or in part during the option period. An option will be deemed exercised when the Company receives written or electronic notice of exercise (in accordance with the Stock Option Agreement) from the person entitled to exercise the option and payment in full of the purchase price and Withholding Taxes (as defined in Section 13 hereof). Payment in full may be made (i) by certified or bank check, (ii) by wire transfer, (iii) by payment through a broker under a cashless exercise program implemented by the Company in connection with the Plan, (iv) in shares of Common Stock owned by the optionee having a Fair Market Value at the date of exercise equal to such purchase price, provided that payment in shares of Common Stock will not be permitted unless at least 100 shares of Common Stock are required and delivered for such purpose, (v) in any combination of the foregoing, or (vi) by any other method that the Committee approves. At its discretion, the Committee may modify or suspend any method for the exercise of stock options, including any of the methods specified in the previous sentence. Delivery of shares for exercising an option shall be made either through the physical delivery of shares or through an appropriate certification or attestation of valid ownership. Shares of Common Stock used to exercise an option shall have been held by the optionee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the option. No shares shall be issued until full payment therefor has been made. An optionee shall have the rights of a stockholder only with respect to shares of stock that have been recorded on the Company’s books on behalf of the optionee or for which certificates have been issued to the optionee.

Notwithstanding anything in the Plan to the contrary, the Committee may, in its sole discretion, allow the exercise of a lapsed grant if the Committee determines that: (i) the lapse was solely the result of the Company’s inability to execute the exercise of an option Award due to conditions beyond the Company’s control and (ii) the optionee made valid and reasonable efforts to exercise the Award. In the event the Committee makes such a determination, the Company shall allow the exercise to occur as promptly as possible following its receipt of exercise instructions subsequent to such determination.

(6) Nontransferability of Options . An option or stock appreciation right granted under the Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution, and may be exercised, during the optionee’s lifetime, only by the optionee; provided that the Board may permit further transferability, on a general or specific basis, and may impose conditions and limitations on any permitted transferability.

Notwithstanding the foregoing, the Committee may set forth in a Stock Option Agreement at the time of grant or thereafter, that the options (other than incentive stock options) may be transferred to members of the optionee’s immediate family, to one or more trusts solely for the benefit of such immediate family members and to partnerships in which such family members or trusts are the only partners. For this purpose, immediate family means the optionee’s spouse, parents, children, stepchildren, grandchildren and legal dependants. Any transfer of options under this provision will not be effective until notice of such transfer is delivered to the Company.

(7) Termination of Employment Other than by Retirement or Death . If an optionee shall cease to be employed by the Company for any reason (other than termination of employment by reason of Retirement or death) after the optionee shall have been continuously so employed for one year after the granting of the option, or as otherwise determined by the Committee, the option shall be exercisable only to the extent that the optionee was otherwise entitled to exercise it at the time of such cessation of employment with the Company, unless otherwise determined by the Committee. The option shall remain exercisable for three months after such cessation of employment (or, if earlier, the end of the option period), unless the Committee determines otherwise. The Plan does not confer upon any optionee any right with respect to continuation of employment by the Company.

(8) Retirement of Optionee . If an optionee shall cease to be employed by the Company by reason of Retirement after the optionee shall have been continuously employed by the Company for a period of at least one year after the granting of the option, or as otherwise determined by the Committee, all remaining unexercised portion(s) of the option shall immediately vest and become exercisable by the optionee and shall remain exercisable for the remainder of the option period set forth therein, except that, in the case of an incentive stock option, the option shall remain exercisable for three months following Retirement (or, if earlier, the end of the option period).

(9) Death of Optionee . Except as otherwise provided in Section 7(b)(14), in the event of the optionee’s death (i) while in the employ of the Company or (ii) after cessation of employment due to Retirement, the option shall be fully exercisable by the executors, administrators, legatees or distributees of the optionee’s estate, as the case may be, at any time following such death. In the event of the optionee’s death after cessation of employment for any reason other than Retirement, the option shall be exercisable by the executors, administrators, legatees or distributees of the optionee’s estate, as the case may be, at any time during the twelve month period following such death. Notwithstanding the foregoing, unless the Committee determines otherwise, in no event shall an option be exercisable unless the optionee shall have been continuously employed by the Company for a period of at least one year after the option grant, and no option shall be exercisable after the expiration of the option period set forth in the Stock Option Agreement. In the event any option is exercised by the executors, administrators, legatees or distributees of the estate of a deceased optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the option are the duly appointed legal representatives of the deceased optionee’s estate or the proper legatees or distributees thereof.

(10) No Deferral Feature. No option or stock appreciation right granted under this Plan shall include any feature for the deferral of compensation other than, in the case of an option, the deferral of recognition of income until the later of exercise or disposition of the option under Section 83 of the Code, or the time the stock acquired pursuant to the exercise of the option first becomes substantially vested (as defined in regulations interpreting Section 83 of the Code), or, in the case of a stock appreciation right, the deferral of recognition of income until the exercise of the stock appreciation right.

(11) Long-Term Performance Awards . The Committee may from time to time grant nonqualified stock options under the Plan in conjunction with and related to an award of performance units or performance shares made under a Long-Term Performance Award as set forth in Section 8(b)(11). In such event, notwithstanding any other provision hereof, (i) the number of shares to which the Associated Option applies shall initially be equal to the number of performance units or performance shares granted by the Award, but such number of shares shall be reduced on a one-share-for-one unit or share basis to the extent that the Committee determines, pursuant to the terms of the Award, to pay to the optionee or the optionee’s beneficiary the performance units or performance shares granted pursuant to such Award, and (ii) such Associated Option shall be cancelable in the discretion of the Committee, without the consent of the optionee, under the conditions and to the extent specified in the Award.

(12) Stock Appreciation Rights . In the case of any option granted under the Plan, either at the time of grant or by amendment of such option at any time after such grant, there may be included a stock appreciation right which shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall impose, including the following:

(A) A stock appreciation right shall be exercisable to the extent, and only to the extent, that the option in which it is included is at the time exercisable, and may be exercised within such period only at such time or times as may be determined by the Committee (and in no event after expiration of ten years from the date the option was granted);

(B) A stock appreciation right shall entitle the optionee (or any person entitled to act under the provisions of Section 7(b)(9)) to surrender unexercised the option in which the stock appreciation right is included (or any portion of such option) to the Company and to receive from the Company in exchange therefor that number of shares having an aggregate value equal to (or, in the discretion of the Committee, less than) the excess of the value of one share (provided such value does not exceed such multiple of the option price per share as may be specified by the Committee) over the option price per share specified in such option (as determined by the Committee in accordance with Section 7(b)(2)) times the number of shares called for by the option, or portion thereof, which is so surrendered. The Committee shall be entitled to cause the Company to settle its obligation, arising out of the exercise of a stock appreciation right, by the payment of cash equal to the aggregate value of the shares the Company would otherwise be obligated to deliver or partly by the payment of cash and partly by the delivery of shares. Any such election shall be made within 30 business days after the receipt by the Committee of written or electronic notice of the exercise of the stock appreciation right. The value of a share for this purpose shall be the Fair Market Value thereof on the last business day preceding the date of the election to exercise the stock appreciation right;

(C) No fractional shares shall be delivered under this Section 7(b)(12) but in lieu thereof a cash adjustment shall be made;

(D) If a stock appreciation right included in an option is exercised, such option shall be deemed to have been exercised to the extent of the number of shares called for by the option or portion thereof which is surrendered on exercise of the stock appreciation right and no new option may be granted covering such shares under this Plan; and

(E) If an option which includes a stock appreciation right is exercised, such stock appreciation right shall be deemed to have been canceled to the extent of the number of shares called for by the option or portion thereof is exercised and no new stock appreciation rights may be granted covering such shares under this Plan.

(13) Incentive Stock Options . Incentive stock options may only be granted to employees of the Issuer and its Subsidiaries and parent corporations, as defined in Section 424 of the Code. In the case of any incentive stock option granted under the Plan, the aggregate Fair Market Value of the shares of Common Stock (determined at the time of grant of each option) with respect to which incentive stock options granted under the Plan and any other plan of the Issuer or its parent or a Subsidiary which are exercisable for the first time by an employee during any calendar year shall not exceed $100,000 or such other amount as may be required by the Code.

(14) Rights of Transferee . Notwithstanding anything to the contrary herein, if an option has been transferred in accordance with Section 7(b)(6), the option shall be exercisable solely by the transferee. The option shall remain subject to the provisions of the Plan, including that it will be exercisable only to the extent that the optionee or optionee’s estate would have been entitled to exercise it if the optionee had not transferred the option. In the event of the death of the optionee prior to the expiration of the right to exercise the transferred option, the period during which the option shall be exercisable will terminate on the date one year following the date of the optionee’s death. In the event of the death of the transferee prior to the expiration of the right to exercise the option, the period during which the option shall be exercisable by the executors, administrators, legatees and distributees of the transferee’s estate, as the case may be, will terminate on the date one year following the date of the transferee’s death. In no event will the option be exercisable after the expiration of the option period set forth in the Stock Option Agreement. The option shall be subject to such other rules as the Committee shall determine.

(15) No Reload . Options shall not be granted under this Plan in consideration for and shall not be conditioned upon the delivery of shares of Common Stock in payment of the option price and/or tax withholding obligation under any other employee stock option.

8. Long-term Performance Awards: Long-term performance awards under the Plan shall consist of the conditional grant of a specified number of performance units or performance shares. The conditional grant of a performance unit to a participant will entitle the participant to receive a specified dollar value, variable under conditions specified in the Award, if the Qualifying Performance Criteria specified in the Award are achieved and the other terms and conditions thereof are satisfied. The conditional grant of a performance share to a participant will entitle the participant to receive a specified number of shares of Common Stock, or the equivalent cash value, as determined by the Committee, if the Qualifying Performance Criteria specified in the Award are achieved and the other terms and conditions thereof are satisfied. Each Award shall be subject to the following terms and conditions:

(a) Grant of Awards . The Committee shall (1) select the employees of the Company to whom Awards under this Section 8 may from time to time be granted, (2) determine the number of performance units or performance shares covered by each Award, (3) determine the terms and conditions of each performance unit or performance share awarded and the award period and performance objectives with respect to each Award, (4) determine the extent to which a participant may elect to defer payment of a percentage of an Award (the “Deferred Portion”) pursuant to the terms of a deferred compensation plan of the Company, (5) determine whether payment with respect to the portion of an Award which has not been deferred (the “Current Portion”) and the payment with respect to the Deferred Portion of an Award shall be made entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock, (6) determine whether the Award is to be made independently of or in conjunction with a nonqualified stock option granted under the Plan, and (7) prescribe the form of the instruments necessary or advisable in the administration of the Awards.

(b) Terms and Conditions of Award . Any Award conditionally granting performance units or performance shares to a participant shall be evidenced by a Performance Unit Agreement or Performance Share Agreement, as applicable, executed by the Company and the participant, in such form as the Committee shall approve, which agreement shall contain in substance the following terms and conditions applicable to the Award and such additional terms and conditions as the Committee shall prescribe:

(1) Number and Value of Performance Units . The Performance Unit Agreement shall specify the number of performance units conditionally granted to the participant. If the Award has been made in conjunction with the grant of an Associated Option, the number of performance units granted shall initially be equal to the number of shares which the participant is granted the right to purchase pursuant to the Associated Option, but one performance unit shall be canceled for each share of the Issuer’s Common Stock purchased upon exercise of the Associated Option or for each stock appreciation right included in such option that has been exercised. The Performance Unit Agreement shall specify the threshold, target and maximum dollar values of each performance unit and corresponding performance objectives as provided under Section 8(b)(5).

(2) Number and Value of Performance Shares . The Performance Share Agreement shall specify the number of performance shares conditionally granted to the participant. If the Award has been made in conjunction with the grant of an Associated Option, the number of performance shares granted shall initially be equal to the number of shares which the participant is granted the right to purchase pursuant to the Associated Option, but one performance share shall be canceled for each share of the Issuer’s Common Stock purchased upon exercise of the Associated Option or for each stock appreciation right included in such option that has been exercised. The Performance Share Agreement shall specify that each Performance Share will have a value equal to one (1) share of Common Stock.

(3) Award Periods . For each Award, the Committee shall designate an award period with a duration to be determined by the Committee in its discretion, but in no event less than three calendar years, within which specified performance objectives are to be attained. There may be several award periods in existence at any one time and the duration of performance objectives may differ from each other.

(4) Consideration . Each participant, as consideration for the award of performance units or performance shares, shall remain in the continuous employ of the Company for at least one year after the date of the making of such Award, and no Award shall be payable until after the completion of such one year of employment by the participant, except as otherwise determined by the Committee.

(5) Performance Objectives . The Committee shall select the Qualifying Performance Criteria and specific targets for each award period.

(6) Determination and Payment of Performance Units or Performance Shares Earned . As soon as practicable after the end of an award period, the Committee shall determine the extent to which Awards have been earned on the basis of actual performance in relation to the Qualifying Performance Criteria as set forth in the Performance Unit Agreement or Performance Share Agreement and certify these results in writing. The Performance Unit Agreement or Performance Share Agreement shall specify that as soon as practicable after the end of each award period, the Committee shall determine whether the conditions of Sections 8(b)(4) and 8(b)(5) hereof have been met and, if so, shall ascertain the amount payable or shares which should be distributed to the participant in respect of the performance units or performance shares. As promptly as practicable after it has determined that an amount is payable or should be distributed in respect of an Award, and within 90 days after the end of the award period, the Committee shall cause the Current Portion of such Award to be paid or distributed to the participant or the participant’s beneficiaries, as the case may be, in the Committee’s discretion, either entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock. Payment of any Deferred Portion of an Award shall be determined by the terms of the Company deferred compensation plan under which the deferral was elected.

In making payment in the form of Common Stock hereunder, the cash equivalent of such Common Stock shall be determined by the Fair Market Value of the Common Stock on the day the Committee designates the performance units shall be payable.

(7) Nontransferability of Awards and Designation of Beneficiaries . No Award under this Section of the Plan shall be transferable by the participant other than by will or by the laws of descent and distribution, except that a participant may designate a beneficiary pursuant to the provisions hereof. If any participant or the participant’s beneficiary shall attempt to assign the participant’s rights under the Plan in violation of the provisions thereof, the Company’s obligation to make any further payments to such participant or the participant’s beneficiaries shall forthwith terminate.

A participant may name one or more beneficiaries to receive any payment of an Award to which the participant may be entitled under the Plan in the event of the participant’s death, on a form to be provided by the Committee. A participant may change the participant’s beneficiary designation from time to time in the same manner. If no designated beneficiary is living on the date on which any payment becomes payable to a participant’s beneficiary, or if no beneficiary has been specified by the participant, such payment will be payable to the participant’s estate.

(8) Retirement and Termination of Employment Other Than by Death . In the event of the Retirement prior to the end of an award period of a participant who has satisfied the one year employment requirement of Section 8(b)(4) with respect to an Award prior to Retirement, or as otherwise determined by the Committee, the participant, or his estate, shall be entitled to a payment of such Award at the end of the award period, pursuant to the terms of the Plan and the participant’s Performance Unit Agreement or Performance Share Agreement, provided, however, that the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such Award as the number of months of the award period which have elapsed since the first day of the calendar year in which the Award was made to the end of the month in which the participant’s Retirement occurs, bears to the total number of months in the award period, subject to the attainment of performance objectives associated with the Award as certified by the Committee. The participant’s right to receive any remaining performance units or performance shares shall be canceled and forfeited.

Subject to Section 8(b)(6) hereof, the Performance Unit Agreement or Performance Share Agreement shall specify that the right to receive the performance units or performance shares granted to such participant shall be conditional and shall be canceled, forfeited and surrendered if the participant’s continuous employment with the Company shall terminate for any reason, other than the participant’s death or Retirement, prior to the end of the award period, or as otherwise determined by the Committee.

(9) Reserved.

(10) Death of Participant . In the event of the death prior to the end of an award period of a participant who has satisfied the one year employment requirement with respect to an Award under this Section 8 prior to the date of death, or as otherwise determined by the Committee, the participant’s beneficiaries or estate, as the case may be, shall be entitled to a payment of such Award upon the end of the award period, pursuant to the terms of the Plan and the participant’s Performance Unit Agreement or Performance Share Agreement, provided, however, that the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such Award as the number of months of the award period which have elapsed since the first day of the calendar year in which the Award was made to the end of the month in which the participant’s death occurs, bears to the total number of months in the award period. The participant’s right to receive any remaining performance units or performance shares shall be canceled and forfeited.

The Committee may, in its discretion, waive, in whole or in part, such cancellation and forfeiture of any performance units or performance shares.

(11) Grant of Associated Option . If the Committee determines that the conditional grant of performance units or performance shares under the Plan is to be made to a participant in conjunction with the grant of a nonqualified stock option under the Plan, the Committee shall grant the participant an Associated Option under the Plan subject to the terms and conditions of this Section 8(b)(11). In such event, such Award shall be contingent upon the participant’s being granted such an Associated Option pursuant to which: (i) the number of shares the optionee may purchase shall initially be equal to the number of performance units or performance shares conditionally granted by the Award, (ii) such number of shares shall be reduced on a one-share-for-one-unit or share basis to the extent that the Committee determines, pursuant to Section 8(b)(6) hereof, to pay to the participant or the participant’s beneficiaries the performance units or performance shares conditionally granted pursuant to the Award, and (iii) the Associated Option shall be cancelable in the discretion of the Committee, without the consent of the participant, under the conditions and to the extent specified herein and in Section 8(b)(6) hereof.

If no amount is payable in respect of the conditionally granted performance units or performance shares, the Award and such performance units or performance shares shall be deemed to have been canceled, forfeited and surrendered, and the Associated Option, if any, shall continue in effect in accordance with its terms. If any amount is payable in respect of the performance units or performance shares and such units or shares were granted in conjunction with an Associated Option, the Committee shall, within 30 days after the determination of the Committee referred to in the first sentence of Section 8(b)(6), determine, in its sole discretion, either:

(A) to cancel in full the Associated Option, in which event the value of the performance units or performance shares payable pursuant to Sections 8(b)(5) and (6) shall be paid or the performance shares shall be distributed;

(B) to cancel in full the performance units or performance shares, in which event no amount shall be paid to the participant in respect thereof and no shares shall be distributed but the Associated Option shall continue in effect in accordance with its terms; or

(C) to cancel some, but not all, of the performance units or performance shares, in which event the value of the performance units payable pursuant to Sections 8(b)(5) and (6) which have not been canceled shall be paid or the performance shares shall be distributed and the Associated Option shall be canceled with respect to that number of shares equal to the number of conditionally granted performance units or performance shares that remain payable.

Any action taken by the Committee pursuant to the preceding sentence shall be uniform with respect to all Awards having the same award period. If the Committee takes no such action, it shall be deemed to have determined to cancel in full the Award in accordance with clause (B) above.

9. Restricted Stock and Restricted Stock Units: An Award of restricted stock under the Plan shall consist of a grant of shares of Common Stock of the Issuer, the grant, issuance, retention and/or vesting of which is subject to the terms and conditions hereinafter provided. An Award of a restricted stock unit to a participant will entitle the participant to receive a specified number of shares of Common Stock or cash, as determined by the Committee, if the objectives specified in the Award, if any, are achieved and the other terms and conditions thereof are satisfied. Each Award shall be subject to the following terms and conditions:

(a) Grant of Awards : The Committee shall (i) select the employees to whom restricted stock or restricted stock units may from time to time be granted, (ii) determine the number of shares to be covered by each Award granted, (iii) determine the terms and conditions (not inconsistent with the Plan) of any Award granted hereunder, and (iv) prescribe the form of the agreement, legend or other instrument necessary or advisable in the administration of Awards under the Plan.

(b) Terms and Conditions of Awards : Any Award granted under this Section 9 shall be evidenced by a Restricted Stock Agreement or Restricted Stock Unit Agreement entered into by the Issuer and the participant, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan as the Committee shall prescribe:

(1) Number of Shares Subject to an Award: The agreement shall specify the number of shares of Common Stock or the number of restricted stock units subject to the Award.

(2) Restriction Period: The period of restriction applicable to each Award (the “Restriction Period”) shall be established by the Committee but may not be less than one year, unless the Committee determines otherwise. The Restriction Period applicable to each Award shall commence on the award date.

(3) Consideration: Each participant, as consideration for the grant of an Award, shall remain in the continuous employ of the Company for at least one year from the date of the granting of such Award, or as otherwise determined by the Committee, and the participant’s right to any shares of restricted stock or restricted stock units covered by such an Award shall be forfeited if the participant does not remain in the continuous employ of the Company for at least one year from the date of the granting of the Award, except as otherwise determined by the Committee.

(4) Restriction Criteria: The Committee shall establish the criteria upon which the Restriction Period shall be based. Restrictions shall be based upon either or both of (i) the continued employment of the participant or (ii) the attainment of one or more Qualifying Performance Criteria.

(c) Terms and Conditions of Restrictions and Forfeitures: The restricted stock or restricted stock units awarded pursuant to the Plan shall be subject to the following restrictions and conditions:

(1) During the Restriction Period, the participant will not be permitted to sell, transfer, pledge or assign the Award made under this Section 9.

(2) Except as provided in Section 9(c)(1), or as the Committee may otherwise determine, a participant holding restricted stock shall have all of the rights of a stockholder of the Issuer, including the right to vote the shares and receive dividends and other distributions, provided that cash dividends paid with respect to restricted stock that is subject to the satisfaction of targets for Qualifying Performance Criteria shall be retained by the Company during the Restriction Period and shall be subject to the same

restrictions as the underlying restricted stock. In addition, distributions in the form of stock shall be subject to the same restrictions as the underlying restricted stock. A participant holding restricted stock units shall have none of the rights of a stockholder of the Issuer during the Restriction Period.

(3) Unless the Committee shall expressly otherwise provide in the agreement relating to an Award made under this Section 9, in the event of a participant’s Retirement or death prior to the end of the Restriction Period for a participant who has satisfied the one year employment requirement of Section 9(b)(3), all time-based restrictions imposed under such Award shall immediately lapse, but such Award shall continue to be subject to the satisfaction of any targets for Qualifying Performance Criteria set forth in the agreement relating to such Award.

(4) Unless the Committee shall expressly otherwise provide in the agreement relating to an Award made under this Section 9, if during the Restriction Period a participant terminates employment with the Company for any reason other than Retirement or death, the shares covered by a restricted stock Award that are not already vested shall be canceled and forfeited and will be deemed to be reacquired by the Issuer and any restricted stock units still subject to restriction shall be forfeited by the participant.

(5) In cases of special circumstances as determined by the Committee, the Committee may, in its sole discretion when it finds that such an action would be in the best interests of the Company, accelerate or waive in whole or in part any or all remaining time-based restrictions with respect to all or part of a participant’s restricted stock or restricted stock units.

(6) In the event that the participant fails promptly to pay or make satisfactory arrangements as to the Withholding Taxes as provided in Section 13, (i) all shares of restricted stock still subject to restriction shall be forfeited by the participant and will be deemed to be reacquired by the Company; and (ii) all restricted stock units still subject to restriction shall be forfeited by the participant.

(7) A participant may, at any time prior to the expiration of the Restriction Period, waive all rights to receive all or some of the shares covered by or corresponding to an Award by delivering to the Company a written or electronic notice of such waiver.

(8) Notwithstanding the other provisions of this Section 9, the Committee may adopt rules which would permit a gift by a participant holding restricted stock or the benefits of a restricted stock unit, to members of the participant’s immediate family (spouse, parents, children, stepchildren, grandchildren or legal dependants) or to a trust whose beneficiary or beneficiaries shall be either such a person or persons or the participant.

(9) Any attempt to dispose of an Award under this Section 9 in a manner contrary to the restrictions shall be ineffective.

10. Forfeiture of Awards; Recapture of Benefits:

(a) Breach of Restrictive Covenants . The Committee may, in its discretion, provide in an agreement evidencing any Award that, in the event that the participant engages, within a specified period after termination of employment, in certain activity specified by the Committee that is deemed detrimental to the interests of the Company (including, but not limited to, the breach of any non-solicitation and/or non-compete agreements with the Company), the Committee may require the participant to forfeit his or her right to any unvested portion of the Award and, to the extent that any portion of the Award has previously vested, the Committee may require the participant to return to the Company the shares of Common Stock covered by the Award or any cash proceeds the participant received upon the sale of such shares or, in the case of stock appreciation rights, performance units or restricted stock units that are settled in cash, an amount of cash, equal to the amount of any gain realized upon the exercise of or lapsing of restrictions on any Award that occurred within a specified time period.

(b) Other Bases for Forfeiture, Recovery or Other Actions . Awards and any compensation or benefits associated therewith shall be subject to repayment or forfeiture as may be required to comply with (i) any applicable

listing standards of a national securities exchange adopted in accordance with Section 10D of the Exchange Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder; (ii) similar rules under the laws of any other jurisdiction; and (iii) any policies adopted by the Company to implement such requirements, all to the extent determined by the Company in its discretion to be applicable to a participant . Any agreement evidencing an Award may be unilaterally amended by the Committee to comply with any such compensation recovery policy.

11. Determination of Breach of Conditions: The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination of an Award or any reduction of the Company’s obligations in accordance with the provisions of the Plan shall be conclusive.

12. Adjustment of and Changes in the Common Stock:

(a) Effect of Outstanding Awards . The existence of outstanding Awards shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company or any issuance of Common Stock or other securities or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. Further, except as expressly provided herein or by the Committee, (i) the issuance by the Company of Common Stock or any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations to the Company convertible into such shares or other securities, (ii) the payment of a dividend in property other than shares of Common Stock, or (iii) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to stock options or other Awards theretofore granted or the purchase price per share, unless the Committee shall determine, in its sole discretion, that an adjustment is necessary or appropriate.

(b) Adjustments . If the outstanding Common Stock or other securities of the Company, or both, for which an Award is then exercisable or as to which an Award is to be settled shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, extraordinary dividend of cash and/or assets, recapitalization, reorganization, corporate separation or division (including, but not limited to, a split-up, spin-off, split-off or distribution to Company stockholders other than a normal cash dividend) or any similar event affecting the Common Stock or other securities of the Company, the Committee shall appropriately and equitably adjust the number and kind of shares or other securities which are subject to this Plan or subject to any Awards theretofore granted, and the exercise or settlement prices of such Awards, so as to maintain the proportionate number of shares of Common Stock or other securities without changing the aggregate exercise or settlement price.

(c) Fractional Shares . No right to purchase fractional shares shall result from any adjustment in stock options or stock appreciation rights pursuant to this Section 12. In case of any such adjustment, the shares subject to the stock option or stock appreciation right shall be rounded down to the nearest whole share.

(d) Assumption of Awards . Any other provision hereof to the contrary notwithstanding (except for Section 12(a)), in the event the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the assumption of outstanding Awards by the surviving corporation or its parent, for their continuation by the Company (if it is the surviving corporation), for accelerated vesting and accelerated expiration, or for settlement in cash.

13. Taxes:

(a) Each participant shall, no later than the Tax Date (as defined below), pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Withholding Tax (as defined below) with respect to an Award, and the Company shall, to the extent permitted by law, have the right to deduct such amount from any payment of any kind otherwise due to the participant. The Company shall also have the right to retain or

sell without notice, or to demand surrender of, shares of Common Stock in value sufficient to cover the amount of any Withholding Tax, and to make payment (or to reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the participant. For purposes of this paragraph, the value of shares of Common Stock so retained or surrendered shall be the average of the high and low sales prices per share on the New York Stock Exchange composite tape on the date that the amount of the Withholding Tax is to be determined (the “Tax Date”) and the value of shares of Common Stock so sold shall be the actual net sales price per share (after deduction of commissions) received by the Company.

(b) Notwithstanding the foregoing, if the stock options have been transferred, the optionee shall provide the Company with funds sufficient to pay such Withholding Tax. If such optionee does not satisfy the optionee’s tax payment obligation and the stock options have been transferred, the transferee may provide the funds sufficient to enable the Company to pay such taxes. However, if the stock options have been transferred, the Company shall have no right to retain or sell without notice, or to demand surrender from the transferee of, shares of Common Stock in order to pay such Withholding Tax.

(c) The term “Withholding Tax” means the minimum required withholding amount applicable to the participant, including federal, state and local income taxes, Federal Insurance Contribution Act taxes, social insurance contributions, payroll tax, payment on account and any other governmental impost or levy.

(d) The participant shall be entitled to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Company with funds sufficient to enable the Company to pay such Withholding Tax or, unless the Committee determines otherwise, by requiring the Company to retain or to accept upon delivery thereof by the participant shares of Common Stock held by the participant having a Fair Market Value sufficient to cover the amount of such Withholding Tax. Each election by a participant to have shares retained or to deliver shares for this purpose shall be subject to the following restrictions: (i) the election must be in writing and be made on or prior to the Tax Date; (ii) the election must be irrevocable; and (iii) the election shall be subject to the disapproval of the Committee.

14. Change in Control .

(a) Unless the Committee shall otherwise expressly provide in the agreement relating to an Award, in the event a participant’s employment with the Company terminates pursuant to a Qualifying Termination (as defined below) during the three (3) year period following a Change in Control of the Issuer (as defined below):

(1) all outstanding options shall become immediately fully vested and exercisable (to the extent not yet vested and exercisable as of the date of the Qualifying Termination); and

(2) all time-based restrictions imposed under all outstanding Awards of restricted stock and restricted stock units shall immediately lapse.

(b) Unless the Committee shall otherwise expressly provide in the agreement relating to an Award, if the Company undergoes a Change in Control during the award period applicable to an Award that is subject to the satisfaction of any targets for Qualifying Performance Criteria, the number of shares or units deemed earned shall be the greater of (i) the target number of shares or units specified in the participant’s Award agreement or (ii) the number of shares or units that would have been earned by applying the Qualifying Performance Criteria specified in the Award agreement to the Company’s actual performance from the beginning of the applicable award period to the date of the Change in Control.

(1) determine that outstanding options shall be assumed by, or replaced with comparable options by, the surviving corporation (or a parent or subsidiary of the surviving corporation) and that outstanding Awards shall be converted to similar awards of the surviving corporation (or a parent or subsidiary of the surviving corporation), or

(2) take such other actions with respect to outstanding options and other Awards as the Committee deems appropriate; provided, however, that such actions are compliant with Section 409A of the Code, to the extent applicable.

(d) For purposes of this Plan, a Change in Control shall be deemed to have occurred on the earliest of the following dates:

(1) The date any person (as defined in Section 14(d)(3) of the Exchange Act) shall have become the direct or indirect beneficial owner of twenty percent (20%) or more of the then outstanding common shares of the Issuer;

(2) The date a merger or consolidation of the Issuer with any other corporation is consummated, other than (i) a merger or consolidation which would result in the voting securities of the Issuer outstanding immediately prior thereto continuing to represent at least 75% of the combined voting power of the voting securities of the Issuer or the surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Issuer in which no Person acquires more than 50% of the combined voting power of the Issuer’s then outstanding securities;

(3) The date the stockholders of the Issuer approve a plan of complete liquidation of the Issuer or an agreement for the sale or disposition by the Issuer of all or substantially all of the Issuer’s assets; or

(4) The date there shall have been a change in a majority of the Board of Directors within a two (2) year period beginning after the effective date of the Plan, unless the nomination for election by the Issuer’s stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the two (2) year period.

(e) For purposes of this Plan provision, a Qualifying Termination shall be deemed to have occurred under the following circumstances:

(1) A Company-initiated termination for reasons other than the employee’s death, Disability, resignation without good cause, willful misconduct or activity deemed detrimental to the interests of the Company, provided the participant executes a general release and, where applicable, a non-solicitation and/or non-compete agreement with the Company;

(2) The participant resigns with good cause, which includes (i) a substantial adverse alteration in the nature or status of the participant’s responsibilities, (ii) a reduction in the participant’s base salary or levels of entitlement or participation under any incentive plan, award program or employee benefit program without the substitution or implementation of an alternative arrangement of substantially equal value, or (iii) the Company requiring the participant to relocate to a work location more than fifty (50) miles from the participant’s work location prior to the Change in Control.

15. Amendment of the Plan: The Board of Directors may amend or suspend this Plan at any time and from time to time; provided, however, that, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding awards may not be amended to reduce the exercise price of outstanding stock options or stock appreciation rights or cancel outstanding stock options or stock appreciation rights in exchange for cash, other awards or stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original stock options or stock appreciation rights without stockholder approval; and provided, further, that the Board of Directors shall submit for stockholder approval any amendment (other than an amendment pursuant to the adjustment provisions of Section 12) required to be submitted for stockholder approval by law, regulation or applicable stock exchange requirements or that otherwise would:

(a) increase the limitations in Section 3;

(b) reduce the price at which stock options may be granted to below Fair Market Value on the date of grant;

(d) change the class of persons eligible to be participants.

In addition, no such amendment or alteration shall be made which would impair the rights of any participant, without such participant’s consent, under any Award theretofore granted, provided that no such consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been adequately compensated.

16. Miscellaneous:

(a) By accepting any benefits under the Plan, each participant and each person claiming under or through such participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or to be taken or made under the Plan by the Company, the Board, the Committee or any other committee appointed by the Board.

(b) No participant or any person claiming under or through him shall have any right or interest, whether vested or otherwise, in the Plan or in any Award, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Agreement that affect such participant or such other person shall have been complied with.

(c) Neither the adoption of the Plan nor its operation shall in any way affect the rights and powers of the Company to dismiss or discharge any employee at any time.

17. Term of the Plan: The Plan shall expire on May 31, 2020, unless suspended or discontinued earlier by action of the Board of Directors. The expiration of the Plan, however, shall not affect the rights of participants under Awards theretofore granted to them, and all Awards shall continue in force and operation after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.

18. Employees Based Outside of the United States: Notwithstanding any provision of the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws in other countries in which the Company operates or has employees, the Committee, in its sole discretion, shall have the power and authority to (i) determine which employees employed outside the United States are eligible to participate in the Plan, (ii) modify the terms and conditions of Awards granted to employees who are employed outside the United States, (iii) establish subplans, modified option exercise procedures and other terms and procedures to the extent such actions may be necessary or advisable, and (iv) grant to employees employed in countries wherein the granting of stock options is impossible or impracticable, as determined by the Committee, stock appreciation rights with terms and conditions that, to the fullest extent possible, are substantially identical to the stock options granted hereunder; provided, however, that in no event shall the exercise price of an option or stock appreciation right be less than the Fair Market Value of a share of Common Stock on the date of grant and provided, further, that in no event shall an option or stock appreciation right be exercisable after the expiration of ten years from the date of grant thereof.

19. Grants in Connection with Corporate Transactions and Otherwise: Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to assume the equity-based awards or make substitute Awards under this Plan to an employee of another corporation who becomes an employee of the Company by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for an award granted by such corporation, or (ii) limit the right of the Company to grant options or make other awards outside of this Plan. The terms and conditions of any substitute or assumed Awards may vary from the terms and conditions required by the Plan. Any substitute or assumed Awards that are made pursuant to this Section 19 shall not count against the limitations provided under Section 3.

20. Governing Law: The validity, construction, interpretation and effect of the Plan and agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Indiana, without giving effect to the conflict of laws provisions thereof. The Committee may provide that any dispute as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration.

21. Unfunded Plan: Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate or earmark any cash or other property which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation or earmarking, nor shall the Company or the Committee be deemed to be a trustee of stock or cash to be awarded under the Plan.

22. Compliance with Other Laws and Regulations: This Plan, the grant and exercise of Awards hereunder, and the obligation of the Issuer to sell, issue or deliver shares of Common Stock under such Awards, shall be subject to all applicable federal, state and local laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Issuer shall not be required to register in a participant’s name or deliver any shares of Common Stock prior to the completion of any registration or qualification of such shares under any federal, state or local law or any ruling or regulation of any government body which the Committee shall determine to be necessary or advisable. To the extent the Issuer is unable to or the Committee deems it infeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Issuer’s counsel to be necessary to the lawful issuance and sale of any shares of Common Stock hereunder, the Issuer shall be relieved of any liability with respect to the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. No stock option shall be exercisable and no shares of Common Stock shall be issued and/or transferable under any other Award unless a registration statement with respect to the shares underlying such stock option is effective and current or the Issuer has determined that such registration is unnecessary.

23. Liability of Issuer: The Issuer shall not be liable to a participant or other persons as to (a) the non-issuance or sale of shares of Common Stock as to which the Issuer has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Issuer’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and (b) any tax consequence expected, but not realized, by any participant or other person due to the receipt, exercise or settlement of any Award granted hereunder.

24. Compliance with Section 409A of the Code: Notwithstanding any provision of the Plan to the contrary, in the event any Award constitutes or provides for a deferral of compensation within the meaning of Section 409A of the Code, the Award shall comply in all respects with the applicable requirements of Section 409A of the Code; the agreement evidencing the Award shall include all provisions required for the Award to comply with the applicable requirements of Section 409A of the Code; and those provisions of such agreement shall be deemed to constitute provisions of the Plan.

Exhibit 10.4

ZIMMER BIOMET HOLDINGS, INC.

EXECUTIVE PERFORMANCE INCENTIVE PLAN

(As Amended May 7, 2013 and Further Amended as of June 24, 2015)

1. Purpose: This document, the Zimmer Biomet Holdings, Inc. Executive Performance Incentive Plan (the “Plan”), amends and restates the Prior Plan. The Plan’s purpose is to promote the interests of the Company and its stockholders by providing additional compensation as incentive to certain key executives who contribute materially to the success of the Company and its Subsidiaries and Affiliates.

2. Definitions: The following terms when used in the Plan shall, for the purposes of the Plan, have the following meanings:

“Affiliate” means any entity in which the Company has an ownership interest of at least 20%.

“Adjusted” refers to operating performance measures that have been adjusted to exclude the effects of certain items or events that occur or otherwise impact reported results during a performance period, as approved by the Committee and disclosed from time to time in the Company’s quarterly or annual earnings releases.

“Award” means the compensation payable to a Participant as described in Section 5.

“Board” means the Board of Directors of Zimmer Biomet Holdings, Inc.

“Code” means the Internal Revenue Code of 1986, as amended, and its interpretive rules and regulations.

“Company” means Zimmer Biomet Holdings, Inc., its Subsidiaries and Affiliates.

“Committee” means the Compensation and Management Development Committee of the Board, which shall consist of not less than two (2) members of the Board who meet the definition of “outside directors” under Code Section 162(m) and the definition of “non-employee directors” under the Exchange Act.

“Current Portion” means the portion of an Award that is not deferred pursuant to Section 10.

“Deferred Portion” means the portion, if any, of an Award that is deferred pursuant to Section 10.

“Disability” means total disability as defined by the Company’s group long-term disability insurance policy applicable to Participants.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and its interpretive rules and regulations.

“Executive Officer” means a Participant who has been designated by the Board as an executive officer pursuant to Rule 3b-7 under the Exchange Act.

“Final Payment Date” means, with respect to Awards for a Fiscal Year, the date that the final Current Portions of Awards are paid to Participants after the end of the Fiscal Year.

“Fiscal Year” means a fiscal year of the Company.

“Free Cash Flow” means net cash provided by operating activities less additions to instruments and other property, plant and equipment.

“Fund” means an investment fund, index, or other measure designated by the Committee pursuant to Section 10 to serve as a notional measure of earnings and losses on the Deferred Portion of any Award.

“Participant” means a key executive of the Company chosen to participate in the Plan in any applicable Fiscal Year.

“Plan” means this document as it may be amended from time to time.

“Prior Plan” means the Zimmer Holdings, Inc. Executive Performance Incentive Plan in effect prior to May 7, 2013.

“Regulations” means rules and regulations adopted by the Committee pursuant to Section 3.

“Retirement” means a Participant’s voluntary termination of employment with the Company on or after the earlier of (i) the Participant’s 65 ^th birthday, or (ii) the date as of which the Participant has both attained 55 years of age and completed 10 years of service with the Company.

“Section 409A Standards” means the applicable requirements and standards for non-qualified deferred compensation plans established by Code Section 409A.

“Separation from Service” means a Participant’s death, Retirement, or termination of employment with the Company. Whether a Separation from Service has occurred will be determined in accordance with the Section 409A Standards, including §1.409A-1(h).

“Specified Employee” has the meaning given in Code Section 409A(a)(2)(B)(i). The determination of which individuals are Specified Employees will be made in accordance with such rules and practices, consistent with the Section 409A Standards, as are established from time to time by the Board or its designee.

“Subsidiary” means any corporation that at the time qualifies as a subsidiary of the Company under the definition of “subsidiary corporation” in Code Section 424.

“Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Code Section 152, without regard to Sections 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant’s control.

3. Administration: The Plan shall be administered under the supervision of the Board, which may exercise its powers, to the extent herein provided, through the agency of the Committee.

The Committee, from time to time, may adopt Regulations for carrying out the provisions and purposes of the Plan and make such determinations, not inconsistent with the terms of the Plan, as the Committee deems appropriate. The Committee may alter, amend or revoke any Regulation adopted.

The authority of the Committee shall include the right to exercise discretion at any time prior to the payment of an Award to increase an Award subject to the maximum provided in Section 7 or reduce the Award to any amount, including zero, that is below the computed amount of the Award; provided, however, the Committee shall not have the discretion to increase an Award with respect to any Participant who is, or may reasonably be expected to be, subject to Code Section 162(m) or any successor provision. The reduction of the Award to one or more Participants shall not have the effect of increasing the Award payable to any other Participant.

The Committee may delegate its responsibilities for administering the Plan with respect to Participants who are not Executive Officers to a committee of two or more Executive Officers. Any Awards under the Plan to members of this committee shall be referred to the Committee or Board for approval.

4. Participation:

(a) Committee Determinations. For each Fiscal Year, the Committee shall determine not later than 90 days after the commencement of that Fiscal Year the names of those key executives who will be Participants for the Fiscal Year.

(b) Addition of Participants. The Committee may determine that a key executive should be designated a Participant after the commencement of a Fiscal Year due to commencement of employment or promotion. In such event, the Committee may make an Award to such a Participant for a portion of the remainder of the Fiscal Year commencing the first day of the Fiscal Year quarter coinciding with or next following the day on which that Participant was employed or promoted.

(c) Termination of Participants. A key executive shall cease to be a Participant upon Separation of Service for any reason.

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5. Determination of Performance Measures and Targets: For each Fiscal Year, not later than 90 days after the commencement of that Fiscal Year, the Committee shall determine:

(a) The performance measures that will be used to determine the Awards to Participants, which may include one or more of the following, either reported or Adjusted, and either individually, alternatively or in any combination: net sales; revenue; gross profit; operating profit; net earnings; earnings per share; profit margin (gross, operating or net); cash flow, net cash flow or free cash flow; acquisition integration synergies (measurable savings and efficiencies resulting from integration); acquisition integration milestone achievements; stock price performance; total stockholder return; expense reduction; debt or net debt reduction; financial return ratios (including return on equity, return on assets or net assets, return on capital or invested capital and return on operating profit); earnings before interest, taxes, depreciation and amortization; earnings before interest and taxes; quality measures; and regulatory compliance measures. Any of the foregoing performance measures may be subsequently adjusted by the Committee to exclude the effects of unanticipated material transactions or events such as acquisitions, divestitures, accounting changes, restructurings and special charges or gains (determined according to objective criteria established by the Committee), but only to the extent permitted by Code Section 162(m).

(b) The specific targets for each of the selected performance measures that will determine the amount of the Award, which may be set at a specific level or growth rate. Any targets or performance measures may be applied to the Company or any Subsidiary, or subdivision thereof, or may be expressed as relative to comparable measures at peer companies or a defined index.

(c) Whether a percentage of an Award shall be deferred or whether a Participant may elect to defer payment of a percentage (not less than 25%) of an Award pursuant to the provisions of Section 10. The Current Portion of any Award shall be paid subject to the provisions of Section 6. Any Award that includes a Deferred Portion shall be subject to the terms and conditions stated in Section 10 and in any Regulations.

6. Payment of Current Portion of Performance Incentive Awards:

(a) Time of Determination of Award. Subject to such forfeitures of Awards and other conditions as are provided in the Plan, the Awards made to Participants shall be paid to them or their beneficiaries as follows:

(i) As soon as practicable after the end of a Fiscal Year, the Committee shall determine the extent to which Awards have been earned on the basis of the actual performance in relation to the specific targets for the performance measures established for that Fiscal Year and shall certify in writing those determinations. The Current Portion of any Award for a Fiscal Year shall be paid in a lump sum not later than 2 ¹ ⁄ ₂ months after the end of the Fiscal Year.

(ii) Except as provided in the following sentence or by a Regulation, a Participant must be employed by the Company on the Final Payment Date with respect to an Award to be entitled to payment of the Current Portion of such Award. If a Participant experiences a Separation from Service prior to the end of a Fiscal Year because of the Participant’s death, Disability or Retirement, the Participant or his designated beneficiary, where applicable, shall be eligible, at the Committee’s discretion, to receive a prorated portion of any Award granted to the Participant for that Fiscal Year based upon eligible earnings paid to the Participant in such year.

(iii) While no Participant has an enforceable right to receive a Current Portion until the end of the Fiscal Year as outlined in subparagraph (i) above, the Committee, in its discretion, may make a provisional payment of part of the Current Portion of an Award, in accordance with the Regulations, based on tentative estimates of the amount of the Current Portion, subject to any terms and conditions the Committee may establish. A Participant shall be required to repay any portion or all of such provisional payments in order that the total payments may not exceed the Current Portion as finally determined, or if the Participant shall forfeit his or her Award for any reason during the Fiscal Year. The Committee may exclude a Participant from receiving any provisional payment pursuant to this subparagraph (iii).

(b) Withholding . There shall be deducted from all payments of Awards any taxes required to be withheld by any government entity and paid over to any such government in respect of any such payment. Unless otherwise elected by the Participant, such deductions shall be at the established withholding tax rate. Participants may elect to have the deduction of taxes cover the amount of any applicable tax (the amount of withholding tax plus the incremental amount determined on the basis of the highest marginal tax rate applicable to the Participant).

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7. Maximum Awards: Notwithstanding anything elsewhere in the Plan to the contrary, the maximum amount of any Award that may be payable to a Participant in respect of any single Fiscal Year will be 400% of the Participant’s base rate of salary determined as of the beginning of such Fiscal Year.

8. Conditions Imposed on Payment of Awards: Payment of each Award to a Participant or to the Participant’s beneficiary shall be subject to the following provisions and conditions:

(a) Rights to Awards. No Participant or any person claiming under or through the Participant shall have any right or interest, whether vested or otherwise, in the Plan or in any Award thereunder, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Regulations that affect that Participant or such other person shall have been complied with. Nothing contained in the Plan or in the Regulations shall require the Company to segregate or earmark any cash, shares, stock, or other property. Neither the adoption of the Plan nor its operation shall in any way affect the rights and power of the Company or any of its Subsidiaries or Affiliates to dismiss and/or discharge any employee at any time.

(b) Assignment or Pledge of Rights of Participant. No rights under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature, except that a Participant may designate a beneficiary pursuant to the provisions of Section 9.

(c) Right to Payment. No absolute right to any Award shall be considered as having accrued to any Participant prior to the Final Payment Date, and then such right shall be absolute only with respect to any Current Portion thereof. The Deferred Portion will continue to be forfeitable and subject to all of the conditions of the Plan. No Participant shall have any enforceable right to receive any Award made with respect to a Fiscal Year or to retain any payment made with respect thereto if, for any reason (death included), the Participant, during such entire Fiscal Year, has not performed his or her duties to the satisfaction of the Company.

9. Designation of Beneficiary: A Participant may name a beneficiary to receive any payment to which the Participant may be entitled under the Plan in the event of the Participant’s death, on a form approved by the Committee. A Participant may change his or her beneficiary from time to time in the same manner.

If no designated beneficiary is living on the date on which any payment becomes payable to a Participant’s beneficiary, the payment will be payable to the Participant’s estate.

10. Deferral of Payments: The Deferred Portion of an Award shall be subject to the following provisions:

(a) Mandatory Deferrals . The Committee, in its sole discretion, may require all or any portion of any Award to be a Deferred Portion. The Committee’s determination as to whether to require a Deferred Portion for any Award shall be made on or before January 15 of the Fiscal Year for which an Award is earned and shall be irrevocable. If the Committee does not make any such determination by the deadline described in the preceding sentence, the entire portion of any Award for the applicable Fiscal Year shall be deemed the Current Portion.

(b) Elective Deferrals . The Committee, in its sole discretion, will determine whether or not a Participant may elect a Deferred Portion of an Award for a Fiscal Year. Unless otherwise provided by the Committee, a Participant may irrevocably elect to defer any whole percentage between twenty-five percent (25%) and ninety-five percent (95%) of any Award earned for a Fiscal Year by filing a deferral election form with the Company’s Compensation Department on or before January 15 of that Fiscal Year.

(c) Crediting of Deferred Portion . The Deferred Portion, if any, of a Participant’s Award will be credited to a record keeping account in the Participant’s name as of the Final Payment Date.

(d) Earnings on Deferred Portion . Prior to the beginning of a Fiscal Year, the Committee shall designate the Funds among which a Participant may elect to serve as the measure(s) of earnings and losses to be credited on the Deferred Portion of an Award. The Funds may include a Fixed Income Fund, an Equity Fund, and any other Fund the Committee may select. For the Deferred Portion of Awards granted prior to January 1, 2008, the Funds may also include a Company Stock Fund. A Participant shall allocate the Deferred Portion, if any, of his Award for a Fiscal Year among the Funds then offered under the Plan at the same time he elects to defer a portion of his Award. The Committee shall designate the Fund that will serve as the measure of earnings and losses on the Deferred Portion for any Participant who fails to make a timely allocation election. A Participant’s allocation election (or deemed allocation election) shall be effectuated as of the applicable Final Payment Date. In the event the Committee offers a Company Stock Fund, a Participant who elects the Company Stock Fund is not entitled to dividends or voting rights.

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(e) Changes to Allocation Elections . Prior to the beginning of each Fiscal Year, the Committee shall determine if the Fund(s) used to value the account of any Participant may be changed from the Fund currently used to any other Fund established for use under this Plan. Unless otherwise provided by the Committee, a Participant, including one who has terminated employment, or a beneficiary may elect to reallocate the value of his Deferred Portion among the Funds by completing and filing an allocation form with the Company’s Compensation Department on or before January 15 of the Fiscal Year in which the reallocation is to become effective. A reallocation election will be effectuated as of the immediately following Final Payment Date, except to the extent that the Committee rejects or limits the election. The Committee shall have the discretion to limit or deny any Participant’s or beneficiary’s reallocation election. The Committee shall notify a Participant or beneficiary of any change or rejection of his proposed allocation election within seven (7) days of its decision to reject or limit the election.

(f) Payment of Deferred Portion .

(i) Except as provided in the following sentence, a Participant’s Deferred Portion shall be distributed on (or, in the case of installments, commencing on) the first business day of the first calendar month that begins at least fifteen (15) calendar days after the Participant’s Separation from Service. If a Participant is a Specified Employee at the time of his Separation from Service, then his Deferred Portion shall be distributed on (or, in the case of installments, commencing on) the date that is six (6) months after the date on which the Participant’s Separation from Service occurs.

(ii) With respect to any Award granted on or after January 1, 2008, the Deferred Portion shall be distributed in a single lump sum payment.

(iii) With respect to any Award that is subject to the Section 409A Standards and was granted before January 1, 2008, the Deferred Portion shall be distributed, in cash, either in a lump sum or in annual installments over a specified period, not to exceed ten (10) years, as elected by the Participant in accordance with this subparagraph (iii). To be valid and effective, a Participant’s distribution election must either be a transition election made in accordance with the following sentence or it must have been made in 2005 (in accordance with the Section 409A Standards then in effect) or by January 15 of the Fiscal Year for which the Award to which it pertains was granted. On or before December 31, 2008, a Participant may make a one-time, irrevocable transition election to designate or change the form of distribution for his entire Deferred Portion, by submitting to the Company’s Compensation Department a written election form satisfactory to the Committee. The form of distribution so elected must either be a single lump sum payment or annual installment payments over a specified period, not to exceed ten (10) years. A transition election shall become effective as of the first day of the first Fiscal Year that begins after the date on which the Participant submits the written election to the Company’s Compensation Department. If a Participant does not make any election in accordance with the foregoing provisions of this subparagraph (iii), he shall be deemed to have elected to receive his entire Deferred Portion in a single lump sum payment.

(g) Mandatory Cash Out of Small Amounts . If, at any time after the commencement of installment payments with respect to a Participant, the entire unpaid value of the Participant’s Deferred Portion does not exceed $15,000, the entire remaining balance of the Participant’s Deferred Portion shall be paid in a lump sum cash payment.

(h) Assignment of Rights by Participant or Beneficiary. If any Participant or beneficiary of a Participant attempts to assign his rights under the Plan in violation of the provisions hereof, the Company’s obligation to make any further payments to such Participant or beneficiary shall immediately terminate.

(i) Fund Composition and Valuation. Deferred Portions of Awards under the Plan shall be valued and maintained as follows:

(i) In accordance with the provisions, and subject to the conditions, of the Plan and the Regulations, the Deferred Portion shall be valued in reference to the Participant’s account(s) in the Equity Fund, in the Fixed Income Fund, in the Company Stock Fund, and in any other Fund established under this Plan. Account balances shall be maintained as dollar values, units, or share equivalents, as appropriate based upon the nature of the Fund. For unit or share-based Funds, the number of units or shares credited shall be based upon the established unit or share value as of the last day of the quarter preceding the crediting of the Deferred Portion.

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(ii) Investment income credited to Participants’ accounts under the Fixed Income Fund shall be based upon the prevailing rates of return experienced by the Company. The investment income credited to Participants under the Equity Fund shall be established based upon an established market index reflecting the rate of return on equity investments. The Company shall advise Participants of the specific measures used and the current valuations of these Funds as appropriate to facilitate deferral decisions and investment allocation choices and to communicate payout levels. The Company Stock Fund shall consist of units valued as one share of common stock of Zimmer Biomet Holdings, Inc. (par value $0.01).

(iii) Nothing contained in the Fund definitions in subparagraphs (i) and (ii) above shall require the Company to segregate or earmark any cash, shares, stock or other property to determine Fund values or maintain Participant account levels.

(iv) The establishment of the “Fixed Income Fund,” the “Equity Fund” and the “Company Stock Fund” as detailed in subparagraphs (i) and (ii) of this paragraph shall not preclude the right of the Committee to direct the establishment of additional Funds. In establishing additional Funds, the Committee shall determine the criteria to be used for determining the value of such Funds.

(j) Distributions Upon Unforeseeable Emergency. The Committee may, at its sole discretion, allow for the early payment of a Participant’s Deferred Portion in the event of an Unforeseeable Emergency. Such distributions shall be limited to the amount necessary to sufficiently address the financial hardship, and distribution will not be permitted to the extent that the Unforeseeable Emergency may reasonably be relieved through reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant’s assets (to the extent liquidation would not itself cause a financial hardship). Any distributions under this paragraph shall be consistent with the Section 409A Standards.

11. Miscellaneous:

(a) Acceptance by Participant. By accepting any benefits under the Plan, each Participant and each person claiming under or through him shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or made to be taken or made under the Plan by the Company, the Board and the Committee.

(b) Conclusive Actions. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of the Plan or of the Regulations shall lie within its absolute discretion, as the case may be, and shall be conclusive and binding upon all Participants and all persons claiming under or through any Participant.

(c) No Liability. No member of the Board or the Committee shall be liable for any action or failure to act, or any action or failure to act of any other member, or of any officer, agent or employee of the Company, as the case may be, except for his or her own actions or inactions done in bad faith. The fact that a member of the Board or the Committee shall have previously been or subsequently thereafter may be a Participant in the Plan shall not disqualify such a person from voting at any time as a director with regard to any matter concerning the Awards, or in favor of or against any amendment or alteration of the Plan, provided that the amendment or alteration shall be of general application.

(d) Reliance on Third Parties. The Board and the Committee may rely upon any information supplied to them by any officer of the Company or any of its Subsidiaries or Affiliates and may rely upon the advice of counsel in connection with the administration of the Plan and shall be fully protected in relying upon information or advice.

(e) Grounds for Recovery. After the certification of attainment of the specific targets for performance measures as described in subparagraph 6(a)(i) above, no adjustments will be made to reflect any subsequent change in accounting, the effect of federal, state or municipal taxes later assessed or determined, or otherwise. Notwithstanding the foregoing, the Company reserves the right to and, in appropriate cases, will, seek recovery of all or any portion of Award if:

(i) The amount of the Award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement of all or a portion of the Company’s financial statements;

(ii) The Participant engaged in intentional misconduct that caused or partially caused the need for such a restatement; and

(iii) The amount of the Award that would have been awarded to the Participant had the financial results been properly reported would have been lower than the amount actually awarded.

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This subsection is not intended to limit the Company’s power to take such other actions as it deems necessary to remedy the misconduct, prevent its recurrence and, if appropriate, based on all relevant facts and circumstances, punish the wrongdoer in a manner it deems appropriate.

(f) Other Bases for Forfeiture, Recovery or Other Actions . Awards and any compensation or benefits associated therewith shall be subject to repayment or forfeiture as may be required to comply with (i) any applicable listing standards of a national securities exchange adopted in accordance with Section 10D of the Exchange Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder; (ii) similar rules under the laws of any other jurisdiction; and (iii) any policies adopted by the Company to implement such requirements, all to the extent determined by the Company in its discretion to be applicable to a Participant . Any agreement evidencing an Award may be unilaterally amended by the Committee to comply with any such compensation recovery policy.

12. Adoption, Amendment, Suspension and Termination of the Plan:

(a) Effective Time. The Plan became effective on May 7, 2013 upon the affirmative vote of a majority of votes cast at the 2013 annual meeting of stockholders. The Plan was amended as of June 24, 2015 to change the name of the Plan to the Zimmer Biomet Holdings, Inc. Executive Performance Incentive Plan. Unless terminated earlier, the Plan shall terminate on May 31, 2020.

(b) Termination and Amendment. Subject to the limitations set forth in subparagraph (c) below, the Board may at any time suspend or terminate the Plan and may amend it from time to time in such respects as the Board may deem advisable, subject to any requirements for stockholder approval imposed by applicable law, including Code Section 162(m).

(c) Rights of Participants. No amendment, suspension or termination of the Plan shall, without the consent of the person affected thereby, materially, adversely alter or impair any rights or obligations under any Award previously awarded under the Plan.

13. Compliance with Section 409A Standards: It is intended that this Plan and all Awards hereunder comply with the applicable Section 409A Standards and will be construed accordingly. In construing or interpreting any vague or ambiguous Plan provision, the interpretation that will prevail is the interpretation that will cause the Plan to comply with the applicable Section 409A Standards. To the extent that any terms of the Plan or an Award would subject any Participant to gross income inclusion, interest, or additional tax pursuant to Code Section 409A, those terms are to that extent superseded by the applicable Section 409A Standards.

14. Governing Laws: The validity, interpretation and effect of the Plan, and the rights of all persons hereunder, shall be governed by and determined in accordance with the laws of the State of Indiana, other than the choice of law rules thereof.

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Exhibit 10.5

ZIMMER BIOMET HOLDINGS, INC.

AMENDED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS

(As Amended May 5, 2015 and Further Amended as of June 24, 2015)

1. Purpose.

The purpose of the Zimmer Biomet Holdings, Inc. Amended Stock Plan for Non-Employee Directors (the “Plan”) is to secure for Zimmer Biomet Holdings, Inc. (the “Company”) and its stockholders the benefits of the incentive inherent in increased Common Stock ownership by the members of the Board of Directors of the Company (the “Board”) who are Eligible Directors as defined in the Plan.

2. Administration.

The Plan shall be administered by the Board. The Board shall have all the powers vested in it by the terms of the Plan, such powers to include authority (within the limitations described herein) to prescribe the form of the agreement embodying awards of stock options (“Options”), restricted stock (“Restricted Stock”) and restricted stock units (“Restricted Stock Units”) made under the Plan (Options, Restricted Stock and Restricted Stock Units, in the aggregate, to be “Awards”). The Board shall, subject to the provisions of the Plan, grant Awards under the Plan and shall have the power to construe the Plan, to determine all questions arising thereunder and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. Any decision of the Board in the administration of the Plan, as described herein, shall be final and conclusive. No member of the Board shall be liable for anything done or omitted to be done by such member or by any other member of the Board in connection with the Plan, except for such member’s own willful misconduct or as expressly provided by statute.

The Committee shall maintain appropriate records of awards granted and vested prior to January 1, 2005, that may provide for a deferral of compensation within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), together with any earnings or losses attributable thereto. Such awards shall be governed by the terms of the Plan as in effect on October 3, 2004.

3. Amount of Stock; Individual Limitation.

The stock which may be issued and sold under the Plan will be the common stock (par value $.01 per share) of the Company (“Common Stock”), of a total number not exceeding 800,000 shares, subject to adjustment as provided in Section 7 below. The stock to be issued may be either authorized and unissued shares or issued shares acquired by the Company or its subsidiaries. In the event that Awards granted under the Plan terminate or expire (without being exercised, in the case of Options) or are cancelled, forfeited, exchanged or surrendered, new Awards may be granted covering the shares not issued under such lapsed Awards. No more than 50% of the Awards will be in the form of Restricted Stock or Restricted Stock Units.

No individual participant may be granted, in any single calendar year during the term of the Plan, Awards with an aggregate grant date fair value in excess of $300,000.

4. Eligible Directors.

The members of the Board who are eligible to participate in the Plan (“Eligible Directors”) are persons who serve as directors of the Company on or after the effective date of the Plan and:

(a) who are not current or former employees of the Company and

(b) who are not and, in the past, have not been eligible to receive options on Company stock by participation as an employee in another plan sponsored by the Company or under a contractual arrangement with the Company.

5. Terms and Conditions of Options.

Each Option granted under the Plan shall be evidenced by an agreement in such form as the Board shall prescribe from time to time in accordance with the Plan and shall comply with the following terms and conditions:

(a) The Option exercise price shall be the fair market value of the Common Stock shares subject to such Option on the date the Option is granted, which shall be the average of the high and the low sales prices of a Common Stock share on the date of grant as reported on the New York Stock Exchange Composite Transactions Tape or, if the New York Stock Exchange is closed on that date, on the last preceding date on which the New York Stock Exchange was open for trading.

(b) Each year, as of the date of the annual meeting of the stockholders of the Company (“Annual Meeting”), and at such other dates as the Board deems appropriate, the Board may award Options to purchase shares of Common Stock to Eligible Directors who have been elected or reelected or who are continuing as members of the Board.

(c) No Option granted under the Plan shall be transferable by the optionee other than by will or by the laws of descent and distribution, and such Option shall be exercisable, during the optionee’s lifetime, only by the optionee. Notwithstanding the foregoing, the Board may set forth in a Stock Option Agreement, at the time of grant or thereafter, that the Options may be transferred to members of the optionee’s immediate family, to trusts solely for the benefit of such immediate family members and to partnerships in which such family members and/or trusts are the only partners. For this purpose, immediate family means the optionee’s spouse, parents, children, stepchildren, grandchildren and legal dependants. Any transfer of Options made under this provision will not be effective until notice of such transfer is delivered to the Company.

(d) No Option or any part of an Option shall be exercisable:

(i) after the expiration of ten years from the date the Option was granted,

(ii) unless written notice of the exercise is delivered to the Company specifying the number of shares to be purchased and payment in full is made for the shares of Common Stock being acquired thereunder at the time of exercise, such payment shall be made in such form or manner that the Board at its discretion may from time to time designate and that may include, without limitation, payment:

(A) in United States dollars by certified check, or bank draft, or

(B) by tendering to the Company Common Stock shares owned by the person exercising the Option and having a fair market value equal to the cash exercise price applicable to such Option, such fair market value to be the average of the high and low sales prices of a Common Stock share on the date of exercise as reported on the New York Stock Exchange Composite Transactions Tape or, if the New York Stock Exchange is closed on that date, on the last preceding date on which the New York Stock Exchange was open for trading (shares of Common Stock used to exercise an option shall have been held by the optionee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the option) or

(iii) unless the person exercising the Option has been, at all times during the period beginning with the date of grant of the Option and ending on the date of such exercise, an Eligible Director of the Company, except that:

(A) if such a person shall cease to be such an Eligible Director for reasons other than retirement or death, while holding an Option that has not expired and has not been fully exercised, such person, at any time within one year after the date he ceases to be such an Eligible Director (but in no event after the Option has expired under the provisions of Section 5(d)(i) above), may exercise the Option with respect to any Common Stock shares as to which such person has not exercised the Option on the date the person ceased to be such an Eligible Director only to the extent that the Option is exercisable at the time of termination.

(B) if such person shall cease to be such an Eligible Director by reason of retirement or death while holding an Option that has not expired and has not been fully exercised, such person, or in the case of death, the executors, administrators or distributees, as the case may be, may at any time following the date of retirement or death (but in no event after the expiration of the Option period set forth in Section 5(d)(i) above), exercise the Option with respect to any shares of Common Stock as to which such person has not exercised the Option on the date the person ceased to be such an Eligible Director, notwithstanding the provisions of Section 5(e).

(C) if any person who has ceased to be such an Eligible Director for reasons other than death, shall die holding an Option that has not been fully exercised, such person’s executors,

administrators, heirs or distributees, as the case may be, may, at any time within the greater of (1) one year after the date of death or (2) the remainder for the period in which such person could have exercised the Option had the person not died (but in no event under either (1) or (2) after the Option has expired under the provisions of Section 5(d)(i) above), exercise the Option with respect to any shares as to which the decedent could have exercised the Option at the time of death.

In the event any Option is exercised by the executors, administrators, legatees or distributees of the estate of a deceased optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the Option are the duly appointed legal representatives of the deceased optionee’s estate or the proper legatees or distributees thereof.

(e) One-quarter (25%) of the total number of shares of Common Stock covered by the Option shall become exercisable on the first anniversary date of the grant of the Option; thereafter an additional one-quarter (25%) of the shares shall become exercisable annually on each subsequent anniversary date of the grant of the Option until the Option is fully exercisable.

(f) Notwithstanding anything to the contrary herein, if an Option has been transferred in accordance with Section 5(c), the Option shall be exercisable solely by the transferee. The Option shall remain subject to the provisions of the Plan, including that it will be exercisable only to the extent that the optionee or optionee’s estate would have been entitled to exercise it if the optionee had not transferred the Option. In the event of the death of the transferee prior to the expiration of the right to exercise the Option, the Option shall be exercisable by the executors, administrators, legatees and distributees of the transferee’s estate, as the case may be for a period of one year following the date of the transferee’s death but in no event shall the Option be exercisable after the expiration of the Option period set forth in the Stock Option Agreement. The Option shall be subject to such other rules as the Board shall determine.

(g) No Deferral Feature. No Option granted under this Plan shall include any feature for the deferral of compensation other than the deferral of recognition of income until the later of exercise or disposition of the Option under Section 83 of the Code, or the time the stock acquired pursuant to the exercise of the Option first becomes substantially vested (as defined in regulations interpreting Section 83 of the Code).

6. Terms and Conditions of Restricted Stock and Restricted Stock Units.

Restricted Stock Awards under the Plan shall consist of grants of shares of Common Stock of the Company. The conditional grant of a Restricted Stock Unit to a participant will entitle the participant to receive a specified number of shares of Common Stock, if the objectives specified in the Award, if any, are achieved and the other terms and conditions thereof are satisfied. Each Award will be subject to the following terms and conditions:

(a) The Board shall (i) select the members to whom Restricted Stock and Restricted Stock Unit Awards may from time to time be granted, (ii) determine the number of shares to be covered by each Award granted, (iii) determine the terms and conditions (not inconsistent with the Plan) of any Award granted hereunder, and (iv) prescribe the form of the agreement, legend or other instrument necessary or advisable in the administration of Awards under the Plan.

(b) Any Restricted Stock and Restricted Stock Unit Award granted under the Plan shall be evidenced by an agreement executed by the Company and the recipient, in such form as the Board shall approve and with such terms and conditions as the Board shall prescribe.

(c) The shares of Restricted Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions:

(i) During the restriction period, the participant will not be permitted to sell, transfer, pledge or assign Restricted Stock awarded under this Plan.

(ii) Except as the Board may otherwise determine, a participant holding Restricted Stock shall have all of the rights of a stockholder of the Company, including the right to vote the shares and receive dividends and other distributions, provided that distributions in the form of stock shall be subject to the same restrictions as the underlying Restricted Stock. A participant holding Restricted Stock Units shall have none of the rights of a stockholder of the Company during the restriction period.

(d) Compliance with Section 409A of the Code . Notwithstanding any provision of the Plan to the contrary, in the event any Award under this Section 6 constitutes or provides for a deferral of compensation within the meaning of Section 409A of the Code, the Award shall comply in all respects with the applicable requirements of Section 409A of the Code; the agreement evidencing the Award shall include all provisions required for the Award to comply with the applicable requirements of Section 409A of the Code; and those provisions of the Award agreement shall be deemed to constitute provisions of the Plan.

7. Adjustment in the Event of Change in Stock.

In the event of changes in the outstanding Common Stock by reason of stock dividends, recapitalizations, mergers, consolidations, stock splits, combinations or exchanges of shares and the like, the aggregate number and class of shares available under the Plan, the number, class and the price of shares subject to outstanding Options and Awards of Restricted Stock and Restricted Stock Units shall be appropriately adjusted by the Board, whose determination shall be conclusive.

8. Miscellaneous Provisions.

(a) Except as expressly provided for in the Plan, no Eligible Director or other person shall have any claim or right to be granted an Award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Eligible Director any right to be retained in the service of the Company.

(b) Except as provided for under Section 5(c), a participant’s rights and interest under the Plan may not be assigned or transferred in whole or in part either directly or by operation of law or otherwise (except in the event of a participant’s death, by will or the laws of descent and distribution), including, but not by way of limitations, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no such right or interest of any participant in the Plan shall be subject to any obligation or liability of such participant.

(c) No Common Stock shares shall be issued hereunder unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable federal, state and other securities laws and regulations.

(d) It shall be a condition to the obligation of the Company to issue Common Stock shares upon exercise of an Option or with respect to any other Award, that the participant (or any beneficiary or person entitled to receive the benefit of an Award) pay to the Company, upon its demand, such amount as may be requested by the Company for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue Common Stock shares.

(e) The expenses of the Plan shall be borne by the Company.

(f) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares in connection with an Award under the Plan and issuance of shares in connection with Awards shall be subordinate to the claims of the Company’s general creditors.

(g) By accepting any Award or other benefit under the Plan, each participant and each person claiming under or through such person shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, any action taken under the Plan by the Company or the Board.

9. Change in Control.

In the event an Eligible Director’s membership on the Board terminates pursuant to a qualifying termination (as defined below) during the three (3) year period following a change in control of the Company (as defined below) and prior to the exercise of Options granted under this Plan, all outstanding Options shall immediately become fully vested and exercisable notwithstanding any provisions of the Plan or of the applicable Option agreement to the contrary. In addition, in the event of a change in control of the Company, the Board may (i) determine that outstanding Options shall be assumed by, or replaced with comparable options by, the surviving corporation (or a parent or subsidiary of the surviving corporation) and that outstanding Awards shall be converted to similar awards of the surviving corporation (or a parent or subsidiary of the surviving corporation), or (ii) take such other actions with respect to outstanding Options and Awards as the Board deems appropriate.

The following definitions shall apply for purposes of the Plan:

(a) For the purpose of this Plan, a change in control shall be deemed to have occurred on the earlier of the following dates:

(1) The date any person, as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 (“Person”), shall have become the direct or indirect beneficial owner of twenty percent (20%) or more of the then outstanding common shares of the Company;

(2) The date a merger or consolidation of the Company with any other corporation is consummated other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent at least 75% of the combined voting power of the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company in which no Person acquires more than 50% of the combined voting power of the Company’s then outstanding securities;

(3) The date 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;

(4) The date there shall have been a change in a majority of the Board of Directors of the Company within a two (2) year period beginning after the effective date of the Plan, unless the nomination for election by the Company’s shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the two (2) year period.

(b) For purposes of this Plan provision, a qualifying termination shall be deemed to have occurred if the Eligible Director ceases to be a member of the Board for any reason other than death, disability, voluntary resignation, willful misconduct or activity deemed detrimental to the interests of the Company.

10. Amendment or Discontinuance.

The Plan may be amended at any time and from time to time by the Board as the Board shall deem advisable, including, but not

limited to, amendments necessary to qualify for any exemption or to comply with applicable law or regulations; provided, however, that, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding Awards may not be amended, without stockholder approval, to reduce the exercise price of outstanding Options or to cancel outstanding Options in exchange for cash, other awards, or stock options with an exercise price that is less than the exercise price of the original Options; and provided, further, that except as provided in Section 7 above, the Board may not, without further approval by the stockholders of the Company, increase the maximum number of shares of Common Stock as to which Awards may be granted under the Plan, reduce the minimum Option exercise price described in Section 5(a) above, extend the period during which Awards may be granted or exercised under the Plan or change the class of persons eligible to receive Awards under the Plan. No amendment of the Plan shall materially and adversely affect any right of any participant with respect to any Award theretofore granted without such participant’s written consent.

11. Termination.

This Plan shall terminate upon the earlier of the following dates or events to occur:

(a) upon the adoption of a resolution of the Board terminating the Plan; or

(b) December 31, 2022.

12. Governing Law.

The validity, construction, interpretation and effect of the Plan and agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Indiana, without giving effect to the conflict of laws provisions thereof.

Exhibit 10.6

AMENDED AND RESTATED

ZIMMER BIOMET HOLDINGS, INC.

DEFERRED COMPENSATION PLAN

FOR NON-EMPLOYEE DIRECTORS

(As Amended May 5, 2015 and Further Amended as of June 24, 2015)

Section 1.

Grandfathered Benefits.

Mandatory Deferrals and Elective Deferrals, as defined below, that were deferred and vested prior to January 1, 2005, shall be subject to the terms of the Plan as in effect on October 3, 2004. The Company shall maintain appropriate records to identify deferrals made and vested prior to 2005, together with any attributable earnings or losses.

Section 2.

Eligibility.

Any member of the Board of Directors (the “Board”) of Zimmer Biomet Holdings, Inc. who is not an officer or employee of the Company or a subsidiary thereof is eligible to participate in the Plan and will be a participant.

Section 3.

Deferred Compensation Account.

There shall be established on the books of the Company for each participant a deferred compensation account in the participant’s name. The account shall distinguish between compensation deferred and vested prior to 2005 and compensation deferred or vested after 2004.

Section 4.

Amount of Deferral.

(a) Mandatory Deferrals . Until such time as a participant meets the guideline level of Share Unit or Company common stock ownership established by the Board, fifty percent of the basic fee payable to a participant for membership on the Board (the “Mandatory Deferral”) shall be deferred and credited to the participant’s deferred compensation account as Share Units equal to the number of shares of the Company’s common stock that could have been purchased with the deferred fee, determined by dividing the dollar value of the deferred fee by the fair market value of a share of the Company’s common stock as reported in The Wall Street Journal on the effective date of the deferral. As an additional Mandatory Deferral, at each annual meeting of the stockholders of the Company (“Annual Meeting”), each participant will receive 500 deferred Share Units (the “Annual Deferred Share Units”). The value of each Annual Deferred Share Unit will be equal to a share of the Company’s common stock as reported in The Wall Street Journal on the date of grant.

(b) Elective Deferrals . For any calendar year, a participant may elect to defer receipt of compensation in excess of the participant’s Mandatory Deferral for that year (the “Elective Deferral”) by filing the appropriate form in accordance with Section 9 and requesting deferral of: (1) all of the participant’s compensation in excess of the participant’s Mandatory Deferral payable to the participant for serving on the Board and any committee thereof; or (2) any percentage specified by the participant of the compensation described in clause (1) that is in excess of the participant’s Mandatory Deferral.

Section 5.

Form and Computation of Deferred Amounts.

Subject to Section 4, at the time a participant elects to make an Elective Deferral, the participant shall elect to have the Elective Deferral credited to his or her deferred compensation account as Treasury Units, Dollar Units, or Share Units (each an “Investment Option”). A participant may allocate the Elective Deferrals among the Investment Options in increments of 0%, 33 1/3%, 50%, 66 2/3% or 100%. Any deferred amount credited to a participant’s deferred compensation account as Treasury Units shall be credited with interest at a rate to be set by the Company in January of each year after a review of the six-month United States Treasury bill discount rates for the preceding year. Any deferred amount credited to a participant’s deferred compensation account as Dollar Units shall be credited with interest at a rate to be set by the Company in January of each year after a review of investment return on the invested cash of the Company. If a participant elects to allocate a deferred amount to Share Units, the participant will be credited with Share Units equal to the number of shares of the Company’s common stock that could have been purchased with the deferred amount, determined by dividing the dollar value of the deferred amount by the fair market value of a share of the Company’s common stock as reported in The Wall Street Journal on the effective date of the deferral. Upon payment by the Company of dividends on its common stock, the amount credited to a participant’s deferred compensation account as Share Units shall be credited with an amount equal to the number of Share Units multiplied by a fraction, the numerator of which is the amount of the dividend and the denominator of which is the fair market value of a share of the Company’s common stock as reported in The Wall Street Journal on the day the dividend is payable. The amount of Share Units in a participant’s deferred compensation account shall be adjusted in the discretion of the Board to take into account a merger, consolidation, reorganization, recapitalization, stock split or other change in corporate structure of capitalization affecting the Company’s common stock. At its discretion, the Board may discontinue, modify, or offer additional Investment Options.

Section 6.

Period of Deferral.

A participant’s Mandatory Deferrals, including Annual Deferred Share Units, will be paid sixty days after the participant’s Separation From Service, defined as the expiration or other termination of all contracts, agreements, or arrangements under which the participant performs services for the Company, or any other company under common control with the Company, whether as a Director or other independent contractor or employee, provided that the expiration or termination constitutes a good-faith and complete termination of the contractual relationship between the participant and the Company (and all other companies under common control with the Company). Whether a Separation From Service has occurred for purposes of this Plan will be determined in accordance with the applicable standards under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), including § 1.409A-1(h). At the time a

participant makes a deferral election in accordance with Section 9, the participant may elect the period of deferral for amounts attributable to the Elective Deferrals that are the subject of that election. A participant may elect to defer receipt of amounts attributable to Elective Deferrals (1) until a specified year in the future, (2) until the participant’s Separation From Service, or (3) until the end of the calendar year in which the participant’s Separation From Service occurs. If the participant elects alternative (1), payment will be made or commence within sixty days after the beginning of the year specified in the election; if the participant elects alternative (2), payment will be made or commence within sixty days after the participant’s Separation From Service; and if the participant elects alternative (3), payment will be made or commence within sixty days after the end of the calendar year in which the participant’s Separation From Service occurs. If, with respect to an Elective Deferral, a participant does not make a timely election (in accordance with Section 9) as to the period of deferral, payment of amounts attributable to the Elective Deferral will be made or commence within sixty days after the participant’s Separation From Service.

Section 7.

Form of Payment.

Mandatory Deferrals, including Annual Deferred Share Units, will be paid in shares of the Company’s common stock.

At the time a participant makes a deferral election in accordance with Section 9, the participant may elect the form of payment for amounts attributable to the Elective Deferrals that are the subject of that election. A participant may elect to receive payment of amounts attributable to Elective Deferrals in either (1) a lump sum cash payment or (2) a number of annual cash installments, not more than ten, as specified by the participant. If installment payments are elected, the amount of each installment shall be equal to the balance in the participant’s deferred compensation account divided by the number of installments remaining to be paid (including the installment in question). If a participant fails to make a timely election as to form of payment, payment will be made in a lump sum cash payment.

Section 8.

Death Prior to Receipt.

If a participant dies prior to receipt of any of the amounts payable pursuant to this Plan, the participant’s Mandatory Deferrals, including Annual Deferred Share Units, will be paid, in shares of the Company’s common stock, to the participant’s beneficiary or estate, as the case may be, within sixty days after the participant’s death.

At the time a participant makes a deferral election in accordance with Section 9, the participant may elect that, in the event he or she dies prior to receipt of any of the amounts payable pursuant to this Plan, the participant’s deferred compensation account attributable to Elective Deferrals will be paid to the participant’s beneficiaries or estate, as the case may be, in either (1) a lump sum cash payment within sixty days following the participant’s death, or (2) a number of annual cash installments, not more than ten, as specified by the participant. If the participant elects alternative (2), the initial installment payment to the beneficiaries or estate will be made sixty days after the participant’s death, and the amount of each installment will be determined as provided in the third sentence of Section 7. If payment to the participant pursuant to clause (2) of Section 7 had commenced prior to death, the installment payments to the

participant’s beneficiaries or estate, as the case may be, will be made at the same time and in the same amount as installment payments would have been made to the participant had he or she survived. For purposes of this Section 8, any amounts deferred as Share Units will be converted to Dollar Units by multiplying the number of Share Units credited to a participant’s deferred compensation account on the date of his or her death by the fair market value of a share of the Company’s common stock on such date as reported in The Wall Street Journal.

Section 9.

Time of Election of Deferral.

This Section 9 governs the time for making “Deferral Elections,” which include elections to make Elective Deferrals pursuant to Section 4, elections as to the form and computation of deferred amounts pursuant to Section 5, elections of the period of deferral pursuant to Section 6, elections of the form of payment pursuant to Section 7, and elections with respect to death benefits pursuant to Section 8.

A nominee for election as a Director may make a Deferral Election prior to his or her election for the calendar year in which he or she is being elected, except that a person elected a Director by the Board may make a Deferral Election within 30 days after his/her election as a Director, in which event the Deferral Election shall be effective only with respect to compensation paid after the Deferral Election is made. A person then currently serving as a Director may make a Deferral Election with respect to compensation for the next succeeding calendar year no later than the preceding November 30th. This Deferral Election will be deemed to apply for each succeeding calendar year, unless (1) the participant elects, in accordance with Section 11, to discontinue the Deferral Election or make a new Deferral Election, or (2) the election is stated, in writing, to apply only to the current calendar year.

Section 10.

Manner of Electing Deferral.

A participant may make a Deferral Election by giving written notice to the Board on a form provided by the Company, which notice shall include the amount to be deferred, the form in which the amount deferred is to be credited, whether the deferral will be converted into options to purchase shares of the Company’s common stock pursuant to Section 12, the period of deferral and the form of payment, including the number of installments, if any.

Section 11.

Effect of Election.

A Deferral Election shall be irrevocable by the participant once the calendar year to which it applies has commenced. An election may be discontinued or modified by the participant with respect to calendar years not yet begun by notifying the Board in writing no later than November 30th of the preceding year.

Section 12.

Maximum Number of Shares.

The maximum number of shares of the Company’s common stock that may be issued and distributed under this Plan on or after the Effective Date shall be Two Hundred Thousand (200,000) shares, subject to adjustment as provided under Section 5, above.

Section 13.

Participant’s Rights Unsecured.

The right of any participant to receive future payments under the provisions of the Plan shall be an unsecured claim against the general assets of the Company.

Section 14.

Statement of Account.

A statement will be sent to each participant each year reflecting the value of his or her deferred compensation account as of the end of the preceding year.

Section 15.

Assignability and Beneficiaries.

No right to receive payments under the Plan shall be transferable or assignable by a participant other than by will or under the laws of descent and distribution, except that a participant may designate one or more beneficiaries pursuant to the provisions of this Section. On a form to be provided by the Company, a participant may name beneficiaries to receive any amounts to which the participant may be entitled under the Plan in the event of the participant’s death. A participant may change his or her beneficiary designation from time to time in the same manner. If a participant fails to designate any beneficiary, or if no designated beneficiary is living on the date on which any payment becomes payable to the participant’s beneficiaries, the payment will be payable to the participant’s estate.

Section 16.

Administration.

The Plan will be administered by the Board, which will have the authority to adopt rules and regulations to carry out the Plan and to interpret, construe and implement the provisions of the Plan. The

Plan, as amended and restated, is intended to comply with Section 409A and will be construed accordingly. In construing or interpreting any vague or ambiguous Plan provision, the interpretation that will prevail is the interpretation that will cause the Plan to comply with the applicable standards under Code Section 409A. To the extent that any terms of the Plan would subject any participant to gross income inclusion, interest, or additional tax pursuant to Code Section 409A, those terms are to that extent superseded by the applicable Section 409A standards.

Section 17.

Amendment.

This Plan may at any time or from time to time be amended, modified or terminated by the Board. No amendment, modification or termination shall, without the consent of the participant, adversely affect that participant’s accruals in his or her deferred compensation account as of the date of amendment, modification or termination.

Section 18.

Governing Law.

The validity, construction, interpretation and effect of the Plan and agreements issued under the Plan shall be governed and construed by and determined in accordance with the Code, and, to the extent not in conflict, with the laws of the State of Indiana, without giving effect to the conflict of laws provisions thereof.

Section 19.

Termination Date.

The Plan shall terminate effective as of December 31, 2022. Notwithstanding the foregoing, any Mandatory Deferrals and Elective Deferrals deferred prior to January 1, 2023, shall be distributed in accordance with the Plan as in effect on December 31, 2022.

Exhibit 21

Subsidiaries of Zimmer Biomet Holdings, Inc.

As of September 30, 2015


Name of Subsidiary ⁱ		Jurisdiction of Formation

Domestic subsidiaries :
Accelero Health Partners, LLC		Pennsylvania
Biomet, Inc.		Indiana
Biomet 3i, LLC		Florida
Biomet Biologics, LLC		Indiana
Biomet CV Holdings, LLC		Delaware
Biomet Europe Holdings, LLC		Delaware
Biomet Europe Ltd.		Delaware
Biomet Fair Lawn LLC		Indiana
Biomet Florida Services, LLC		Florida
Biomet Holdings US Inc.		Delaware
Biomet International Ltd.		Delaware
Biomet Leasing, Inc.		Indiana
Biomet Manufacturing, LLC		Indiana
Biomet Microfixation, LLC		Florida
Biomet Orthopedics, LLC		Indiana
Biomet Spine, LLC		Delaware
Biomet Sports Medicine, LLC		Indiana
Biomet Trauma, LLC		Indiana
Biomet US Inc.		Delaware
Biomet U.S. Reconstruction, LLC		Indiana
Biomet Veterinary Solutions, LLC		Indiana
Citra Labs, LLC		Indiana
Dornoch Medical Systems, Inc.		Illinois
EBI, LLC		Indiana
EBI Holdings, LLC		Delaware
EBI Medical Systems, LLC		Delaware
Electro-Biology, LLC		Delaware
ETEX Corporation		Massachusetts
ETEX Holdings, Inc.		Delaware
Implant Innovations Holdings, LLC		Indiana
Interpore Cross International, LLC		California
Interpore Spine, LLC		Delaware
Jamabil US, Inc.		Delaware
Kirschner Medical Corporation		Delaware
Lanx Sales, LLC		Delaware
LVB Acquisition, Inc.		Delaware
Orthopaedic Advantage, LLC		Indiana
Synvasive Technology, Inc.		California
ZB Holdings LLC		Delaware
Zimmer, Inc.		Delaware
Zimmer Biomet Asia Holdings, LLC		Delaware
Zimmer Biomet Finance US Holding, Inc.		Delaware
Zimmer Biomet Spine, Inc.		Delaware
Zimmer Biomet US 2 Holding, Inc.		Delaware
Zimmer Caribe, LLC		Delaware


Zimmer CBT I Holding, Inc.		Delaware
Zimmer CBT II Holding, Inc.		Delaware
Zimmer CEP USA Holding Co.		Delaware
Zimmer CEP USA, Inc.		Delaware
Zimmer Co-op Holdings, LLC		Delaware
Zimmer CV, Inc.		Delaware
Zimmer Dental Inc.		Delaware
Zimmer Investments, LLC		Delaware
Zimmer Knee Creations, Inc.		Delaware
Zimmer Orthobiologics, Inc.		New Jersey
Zimmer Production, Inc.		Delaware
Zimmer Southeast Florida, LLC		Delaware
Zimmer Spine, Inc.		Delaware
Zimmer Spine Next, Inc.		Delaware
Zimmer Surgical, Inc.		Delaware
Zimmer Trabecular Metal Technology, Inc.		New Jersey
Zimmer US, Inc.		Delaware

Foreign subsidiaries :
Biomet Argentina SA		Argentina
Biomet 3i Australia Pty. Ltd.		Australia
Biomet Australia Pty. Ltd.		Australia
Zimmer Australia Holding Pty. Ltd.		Australia
Zimmer Pty. Ltd.		Australia
Biomet Austria GmbH		Austria
Zimmer Austria GmbH		Austria
Biomet 3i Belgium N.V.		Belgium
Biomet 3i Benelux Holdings N.V.		Belgium
Biomet Belgium BVBA		Belgium
Zimmer BVBA		Belgium
Biomet Insurance Ltd.		Bermuda
Biomet 3i de Brasil Ltda.		Brazil
Biomet Brazil Medical Device Ltda.		Brazil
Exopro Industria Comercio, Importacao Exportacao SA		Brazil
Zimmer Dental do Brasil Participacoes Ltda.		Brazil
Zimmer do Brasil Comercio Ltda.		Brazil
Biomet 3i Canada, Inc.		Canada
ORTHOsoft, Inc.		Canada
Zimmer Biomet Canada, Inc.		Canada
Zimmer Dental Corp.		Canada
Zimmer Cayman Islands Holding Co. Ltd.		Cayman Islands
Biomet Chile SA		Chile
Zimmer Dental Chile Spa		Chile
Beijing Montagne Medical Device Co. Ltd.		China
Biomet China Business Trust		China
Biomet China Business Trust No. 2		China
Biomet China Co., Ltd.		China
Changzhou Biomet Medical Devices Co. Ltd.		China
Shanghai Biomet Business Consulting Co. Ltd.		China
Zhejiang Biomet Medical Products Co. Ltd.		China
Zimmer (Beijing) Medical Device Manufacture Co. Ltd.		China
Zimmer Biomet CBT		China
Zimmer (Shanghai) Medical Device Co. Ltd.		China


Zimmer (Shanghai) Medical International Trading Co., Ltd.		China
Zimmer Columbia SAS		Columbia
Orthopedic Biomet CentroAmericana SA		Costa Rica
Zimmer Czech sro		Czech Republic
Biomet Danmark Aps		Denmark
Zimmer Denmark ApS		Denmark
Biomet El Salvador SA de CV		El Salvador
Biomet Finland OY		Finland
Zimmer Finland Oy		Finland
Biomet 3i France SAS		France
Biomet France Holding SAS		France
Biomet France Sarl		France
Biomet SAS		France
Zimmer Dental SAS		France
Zimmer France Manufacturing Sarl		France
Zimmer France SAS.		France
Zimmer Holdings France SAS		France
Zimmer Spine SAS		France
Biomet 3i Deutschland GmbH		Germany
Biomet Deutschland GmbH		Germany
Biomet Deutschland Holding GmbH		Germany
Biomet Deutschland Vertrieb GmbH		Germany
Biomet Healthcare Management GmbH		Germany
Normed Medizin Technik GmbH		Germany
Zimmer Dental GmbH		Germany
Zimmer Germany GmbH		Germany
Zimmer Germany Holdings GmbH		Germany
Zimmer International Logistics GmbH		Germany
Zfx GmbH		Germany
Biomet (Gibraltar) Finance Ltd.		Gibraltar
Biomet Hellas SA		Greece
Zimmer Hellas Medical Devices LLC		Greece
SM Re Ltd.		Guernsey
Biomet Hong Kong CBT Ltd.		Hong Kong
Biomet Hong Kong Holding Ltd.		Hong Kong
Biomet Hong Kong No. 1 Ltd.		Hong Kong
Biomet Hong Kong No. 2 Ltd.		Hong Kong
Biomet Hong Kong No. 3 Ltd.		Hong Kong
ZB Hong Kong Ltd.		Hong Kong
Zimmer Asia (HK) Ltd.		Hong Kong
Zimmer Pte. Ltd. (branch)		Hong Kong
Biomet Orthopaedics India Private Limited		India
Zimmer India Private Ltd.		India
Zimmer Finance Ireland		Ireland
Biomet Ireland Ltd.		Ireland
Zimmer Orthopedics Manufacturing Limited		Ireland
Zimmer Dental Ltd.		Israel
Biomet Italia Srl		Italy
Lanx Srl		Italy
Zimmer Dental Italy Srl		Italy
Zimmer Srl		Italy
Zfx Innovation GmbH		Italy
Biomet 3i Japan, Inc.		Japan


Biomet Japan, GK		Japan
Zimmer K.K.		Japan
Biomet Korea Co. Ltd.		Korea
Zimmer Korea Co., Ltd.		Korea
Biomet Luxembourg Sarl		Luxembourg
JERDS Luxembourg Holding Sarl		Luxembourg
Zimmer Biomet LHS-1 Sarl		Luxembourg
Zimmer Investment Luxembourg Sarl		Luxembourg
Zimmer Luxembourg Sarl		Luxembourg
Zimmer Luxembourg II Sarl		Luxembourg
Biomet S.E.A. SDN BHD		Malaysia
Zimmer Medical Malaysia SDN BHD		Malaysia
Biomet 3i Mexico S.A. de C.V.		Mexico
Biomet Mexico S.A. de C.V.		Mexico
Representaciones Zimmer Inc., S. de R.L. de C.V.		Mexico
Biomet 3i Global Supply Chain Center B.V.		Netherlands
Biomet 3i Netherlands B.V.		Netherlands
Biomet C.V.		Netherlands
Biomet Europe B.V.		Netherlands
Biomet Global Supply Chain Center B.V.		Netherlands
Biomet Holdings B.V.		Netherlands
Biomet Nederland B.V.		Netherlands
Biomet Microfixation B.V.		Netherlands
Zimmer Biomet Asia Holding B.V.		Netherlands
Zimmer Europe Holdings B.V.		Netherlands
Zimmer Manufacturing B.V.		Netherlands
Zimmer Netherlands B.V.		Netherlands
Zimmer Netherlands Cooperatief U.A.		Netherlands
Zimmer Netherlands Holdings B.V.		Netherlands
Biomet New Zealand Ltd.		New Zealand
Zimmer New Zealand Ltd.		New Zealand
Biomet Norge AS		Norway
Zimmer Norway AS		Norway
Biomet Polska Sp. z.o.o.		Poland
Zimmer Polska Sp. z.o.o		Poland
Biomet 3i Portugal Lda		Portugal
Biomet Portugal Unipessoal, Lda		Portugal
Zimmer, S.A. Sucursal em Portugal (branch)		Portugal
Biomet Orthopedics Puerto Rico, Inc.		Puerto Rico
EBI Patient Care, Inc.		Puerto Rico
Lanx Puerto Rico, LLC		Puerto Rico
Zimmer Manufacturing B.V. (branch)		Puerto Rico
Zimmer Puerto Rico, Inc.		Puerto Rico
Zimmer CIS Ltd.		Russia
Zimmer Pte. Ltd.		Singapore
Zimmer Slovakia sro		Slovakia
Biomet South Africa (Pty.) Ltd.		South Africa
Zimmer South Africa Pty. Ltd.		South Africa
Biomet 3i Dental Iberica SL		Spain
Biomet Spain Orthopedics S.L.		Spain
Espanormed S.L.		Spain
Zimmer Dental Ibérica S.L.		Spain
Zimmer S.A.		Spain


Biomet 3i Nordic AB		Sweden
Biomet Cementing Technologies AB		Sweden
Biomet Orthopaedics AB		Sweden
Zimmer Dental Sweden AB		Sweden
Scandimed Holding AB		Sweden
Zimmer Sweden AB		Sweden
Biomet 3i Switzerland GmbH		Switzerland
Biomet Orthopaedics Switzerland GmbH		Switzerland
Guillaume Genin & Co.		Switzerland
Zimmer Europe Holdings GmbH		Switzerland
Zimmer GmbH		Switzerland
Zimmer Investment Luxembourg Sarl, Luxembourg (LU), Winterthur Branch (branch)		Switzerland
Zimmer Surgical SA		Switzerland
Zimmer Switzerland Holdings LLC		Switzerland
Zimmer Switzerland Manufacturing GmbH		Switzerland
Zimmer Biomet Taiwan Co., Ltd.		Taiwan
Biomet 3i Turkey		Turkey
Biomet Medikal Drunjer Dadytym Pazarlama Yhracat ve Dys Ticaret Ltd. Sti.		Turkey
Zimmer Tibbi Cihazlar Sanayi ve Ticaret AS		Turkey
Zimmer Medical (Thailand) Co., Ltd.		Thailand
Zimmer Gulf FZ LLC		United Arab Emirates
Biomet 3i UK Ltd.		United Kingdom
Biomet Acquisitions Unlimited		United Kingdom
Biomet UK Ltd.		United Kingdom
Biomet Healthcare Ltd.		United Kingdom
Centerpulse (UK) Ltd.		United Kingdom
Zimmer Ltd.		United Kingdom
Zimmer Trustee Ltd.		United Kingdom
Zimmer UK Ltd.		United Kingdom

ⁱ	Excludes certain entities that have de minimis activity or are in the process of being liquidated or dissolved and that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of September 30, 2015.

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT

OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David C. Dvorak, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Zimmer Biomet Holdings, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2015

/s/ David C. Dvorak

David C. Dvorak

President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT

OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel P. Florin, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Zimmer Biomet Holdings, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2015

/s/ Daniel P. Florin

Daniel P. Florin

Senior Vice President

and Chief Financial Officer

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Zimmer Biomet Holdings, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David C. Dvorak

David C. Dvorak

President and Chief Executive Officer

November 9, 2015

/s/ Daniel P. Florin

Daniel P. Florin

Senior Vice President

and Chief Financial Officer

November 9, 2015

Exhibit 99

ZIMMER BIOMET HOLDINGS, INC.

EMPLOYEE STOCK PURCHASE PLAN

(As amended and restated effective January 1, 2010

and further amended June 24, 2015 and September 25, 2015)

Section 1 . Designation and Purpose . The name of this Plan is the Zimmer Biomet Holdings, Inc. Employee Stock Purchase Plan. The purpose of the Plan is to provide Employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company. The Plan is intended to qualify as an “Employee Stock Purchase Plan” under Code Section 423. The provisions of the Plan will, accordingly, be construed so as to extend and limit participation in a manner within the requirements of that section of the Code. However, the Company makes no undertaking or representation to maintain such qualification. In addition, this Plan authorizes the grant of options and issuance of Common Stock that do not qualify under Code Section 423 pursuant to rules, procedures, or sub-plans adopted by the Committee and designed to achieve desired tax or other objectives in particular locations outside the United States.

For purposes of this Plan and with respect to the Code Section 423 component of the Plan, unless the Committee otherwise determines, each Designated Subsidiary (as defined in Section 2(l) below) shall be deemed to participate in a separate offering from the Company or any other Designated Subsidiary, provided that the terms of participation within any such offering are the same for all Employees in such offering, as determined under Code Section 423.

Section 2 . Definitions . As used in the Plan, the following terms, when capitalized, have the following meanings:

(a) “ Beneficiary ” means, with respect to a Participant, the individual or estate designated, pursuant to Section 12, to receive the Participant’s Payroll Deduction Account balance and Common Stock Account assets after the Participant’s death.

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

(c) “ Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time, and its interpretive rules and regulations.

(d) “ Committee ” means a committee established pursuant to Section 13 to administer the Plan.

(e) “ Common Stock ” means the common stock of the Company or any stock into which that common stock may be converted.

(f) “ Common Stock Account ” means the account established for each Participant to hold Common Stock purchased under the Plan pursuant to Section 6.

(g) “ Company ” means Zimmer Biomet Holdings, Inc, a Delaware corporation, and any successor by Corporate Transaction.

(h) “ Compensation ” means the total cash compensation received by an Employee from the Company, a partnership of which the Company is a general partner, or a Designated Subsidiary, including an Employee’s salary, wages, overtime, shift differentials, bonuses, commissions, and incentive compensation, but excluding relocation and expense reimbursements, tuition reimbursements, scholarship grants, and income realized as a result of participation in any stock option, stock purchase, or similar plan of the Company or any Subsidiary.

(i) “ Contributions ” means all amounts made by a Participant and credited to the Participant’s Payroll Deduction Account pursuant to the Plan (whether via payroll deductions, check or other means determined by the Committee).

(j) “ Corporate Transaction ” means a sale of all or substantially all of the Company’s assets, or a merger, consolidation, or other capital reorganization of the Company with or into another corporation.

(k) “ Designated Broker ” means a broker (or any successor or replacement broker) selected by the Committee from time to time to serve as the Designated Broker under the terms of the Plan.

(l) “ Designated Subsidiary ” means a Subsidiary that has been designated by the Board or the Committee, in their sole discretion, as eligible to participate in the Plan with respect to its Employees.

(m) “ Employee ” means any person, including an Officer, who performs services for the Company or a Subsidiary and who is initially classified as an employee on the payroll records of the Company or a Designated Subsidiary. If the Company or a Designated Subsidiary treats a person as an independent contractor for tax or labor law purposes, and that person is subsequently determined to be an employee of the Company or a Designated Subsidiary by the Internal Revenue Service or any other federal, state, or local government agency or court of competent authority, that person will become an Employee on the date that the determination is finally adjudicated or otherwise accepted by the Company or the affected Designated Subsidiary, as long as he or she otherwise meets the requirements of this Section 2(m). Such a person will not, under any circumstances, be treated as an Employee for the period of time during which the Company or Designated Subsidiary treated the person as an independent contractor, even if the determination of employee status has retroactive effect.

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

(o) “ Fair Market Value ” means, with respect to any date, the closing price of the Common Stock for that date (or, in the event that the Common Stock is not traded on that date, the closing price on the immediately preceding trading date),

as reported by the New York Stock Exchange. If the Common Stock is no longer traded on the New York Stock Exchange, then “Fair Market Value” means, with respect to any date, the fair market value of the Common Stock as determined by the Committee in good faith. The Committee’s determination will be conclusive and binding on all persons.

(p) “ Offering Date ” means the first business day of each Offering Period of the Plan.

(q) “ Offering Period ” means a period of six (6) months commencing on January 1 and July 1 of each year, or such other period as determined by the Committee, provided, however, that in no event will the Offering Period be a period longer than twenty-seven (27) months.

(r) “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.

(s) “ Payroll Deduction Account ” means the account established for a Participant to hold the Participant’s Contributions pursuant to Section 5.

(t) “ Plan ” means the Zimmer Biomet Holdings, Inc. Employee Stock Purchase Plan.

(u) “ Purchase Date ” means the last day of each Offering Period of the Plan.

(v) “ Purchase Price ” means, with respect to an Offering Period, an amount equal to eighty-five percent (85%) of the Fair Market Value of a Share of Common Stock on the Purchase Date, or such other amount as may be determined by the Committee.

(w) “ Share ” means a share of Common Stock, as adjusted in accordance with Section 16 of the Plan.

(x) “ Subsidiary ” means a domestic or foreign corporation of which not less than fifty percent (50%) of the voting shares are held by the Company or a Subsidiary, within the meaning of Code Section 424, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.

Section 3 . Eligibility .

(a) Any person who is an Employee as of an Offering Date in a given Offering Period will be eligible to participate in the Plan for that Offering Period, subject to the requirements of Section 4 and the limitations imposed by Code Section 423(b). Notwithstanding the foregoing, (1) the Committee may restrict participation in the Plan to full-time Employees pursuant to criteria and procedures established by the Committee, and (2) the Committee may establish administrative rules and may impose an eligibility service requirement of up to two years of

employment with the Company or a Designated Subsidiary with respect to participation on any prospective Offering Date. The Board may also determine that a designated group of highly compensated employees are ineligible to participate in the Plan, so long as the excluded category fits within the definition of “highly compensated employee” in Code Section 414(q). For purposes of the Plan, an Employee will be considered a full-time Employee unless his or her customary employment is less than 20 hours per week or five months per year. Further, the Committee may designate whether a Subsidiary is a Designated Subsidiary for purposes of the Code Section 423 or non-Code Section 423 component.

(b) Notwithstanding any other provision of the Plan, no Employee will be eligible to participate in the Plan if the Employee (or any other person whose stock would be attributed to the Employee pursuant to Code Section 424(d)) owns capital stock of the Company and/or holds outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company.

Section 4 . Participation . An Employee may become a Participant in the Plan by completing a subscription agreement that authorizes payroll deductions and any other required documents (“Enrollment Documents”) provided by the Committee or its designee and submitting them to the Committee (or its designee) or the Designated Broker, pursuant to the rules prescribed by the Committee, during the 30-day period prior to the applicable Offering Date, unless a different time for submission of the Enrollment Documents is set by the Board or the Committee for all Employees with respect to a given Offering Period. The Enrollment Documents will set forth the amount of the Participant’s Compensation, up to one hundred percent (100%) or such lower limit as is designated by the Committee, to be paid as Contributions pursuant to the Plan. The Committee may provide for a separate election (of a different percentage) for a specified item or items of pay. In countries where payroll deductions are not feasible, the Committee may permit an Employee to participate in the Plan by an alternative means, such as by check.

Section 5 . Method of Payment of Contributions .

(a) A Participant’s payroll deductions will begin either on the first pay date following the Offering Date or the date on which the Participant submits Enrollment Documents in accordance with Section 4, whichever is later, and will end on the last pay date on or prior to the Purchase Date of the Offering Period to which the Enrollment Documents are applicable, unless the Participant elects to withdraw from the Plan as provided in Section 8. A Participant’s Enrollment Documents will remain in effect for successive Offering Periods unless the Participant elects to withdraw from the Plan as provided in Section 8 or unless the Participant timely submits new Enrollment Documents to change the rate of payroll deductions for a subsequent Offering Period in accordance with rules established by the Committee.

(b) All Contributions made by a Participant will be held by the Company as part of its general assets; however, the Company will establish a Payroll Deduction Account for each Participant and credit each Participant’s Contributions to the

Participant’s Payroll Deduction Account. A Participant may not make any additional payments to the Participant’s Payroll Deduction Account, except as authorized by the Committee in countries where payroll deductions are not feasible.

(c) No interest will accrue on a Participant’s Contributions to the Plan, unless required by local law and specified by the Committee.

(d) Except as otherwise specified by the Committee, payroll deductions made with respect to Employees paid in currencies other than U.S. dollars will be accumulated in local (non-U.S.) currency and converted to U.S. dollars as of the Purchase Date.

Section 6 . Participant Purchases and Common Stock Accounts . On each Purchase Date, each Participant will be deemed, without further action, to have elected to purchase Shares of Common Stock with the entire balance in the Participant’s Payroll Deduction Account, and the Designated Broker will credit the purchased shares to the Participant’s Common Stock Account.

(a) The Participant will be credited with the number of whole and fractional Shares (rounded to the nearest thousandth) that the Participant’s Payroll Deduction Account balance can purchase at the Purchase Price on that Purchase Date.

(b) All dividends paid with respect to the whole and fractional Shares of the Common Stock, and Shares so purchased will be reinvested in Common Stock and added to the Shares held for a Participant in the Participant’s Common Stock Account.

(c) Expenses incurred in the purchase of Shares and the expenses of the Designated Broker will be paid by the Participant.

(d) A Participant will have no interest or voting right in a Share until a Share has been purchased on the Participant’s behalf under the Plan.

(e) Shares held in a Participant’s Common Stock Account will be registered in the name of the Designated Broker or its nominee for the benefit of the Participant. Shares to be delivered to a Participant under the Plan will be reregistered in the name of the Participant or in the name of the Participant and the Participant’s spouse.

Section 7 . Limitation on Purchases . Participant purchases are subject to the following limitations:

(a) During any one calendar year, a Participant may not purchase, under the Plan, or under any other plan qualified under Code Section 423, Shares of Common Stock having a Fair Market Value on the applicable Offering Date in excess of $25,000. In addition, in no event shall the number of Shares of Common Stock that a Participant may purchase during any Offering Period under the Plan exceed 5,000 Shares of Common Stock.

(b) A Participant’s Payroll Deduction Account may not be used to purchase Common Stock on any Purchase Date to the extent that, after such purchase, the Participant would own (or be considered as owning within the meaning of Code Section 424(d)) stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company. For this purpose, stock that the Participant may purchase under any outstanding option will be treated as owned by that Participant.

(c) As of the first Purchase Date on which this Section limits a Participant’s ability to purchase Common Stock, the Participant’s payroll deductions will terminate, and the Participant will receive a refund of the balance in the Participant’s Payroll Deduction Account as soon as practicable after the Purchase Date.

(d) In no event will the aggregate amount of purchases of Common Stock pursuant to the Plan equal or exceed twenty percent (20%) of the outstanding stock of the Company.

Section 8 . Withdrawal from Participation .

(a) A Participant may withdraw all, but not less than all, of the Contributions credited to the Participant’s Payroll Deduction Account at any time prior to a Purchase Date by notifying the Committee or its designee or the Designated Broker of the Participant’s election to withdraw, pursuant to rules prescribed by the Committee. If a Participant elects to withdraw, all of the Participant’s Contributions credited to the Participant’s Payroll Deduction Account will be returned to the Participant and the Participant may not make any further Contributions to the Plan for the purchase of Shares during that Offering Period.

(b) A Participant’s voluntary withdrawal during an Offering Period will not have any effect upon the Participant’s eligibility to participate in the Plan during a subsequent Offering Period or in the Participant’s ability to retain Common Stock previously credited to the Participant in the Participant’s Common Stock Account.

Section 9 . Stock Purchases by Designated Broker . As of each Purchase Date, the Designated Broker will acquire, using the accumulated balances of all Participants’ Payroll Deduction Accounts, Shares of Common Stock to be credited to those Participants’ Common Stock Accounts.

(a) The Designated Broker will acquire Shares that are newly issued or held as treasury shares by the Company or, if directed by the Committee, will acquire Shares by purchases on the open market or in private transactions.

(b) If Shares are purchased in one or more transactions on the open market or in private transactions at the direction of the Committee, the Company will pay the Designated Broker the difference between the Purchase Price and the price at which the Shares are purchased for Participants.

Section 10 . Common Stock Account Withdrawals . Except as otherwise provided in this Section, upon 14 days advance written notice to the Designated Broker, a Participant may elect to withdraw the assets in the Participant’s Common Stock Account.

(a) A Participant may elect to obtain a certificate for the whole Shares of Common Stock credited to the Participant’s Common Stock Account. As a condition of participation in the Plan, each Participant will agree to notify the Company if the Participant sells or otherwise disposes of any of the Participant’s Shares of Common Stock within two years of the Purchase Date on which the Shares were purchased.

(b) A Participant may elect that all Shares in the Participant’s Common Stock Account be sold and that the proceeds, less expenses of sale, be remitted to the Participant.

(c) In either event, the Designated Broker will sell any fractional Shares held in the Common Stock Account and remit the proceeds of such sale, less selling expenses, to the Participant.

Notwithstanding the foregoing, the Committee may require that Shares of Common Stock credited to a Participant’s Common Stock Account be retained by the Designated Broker for a designated period of time and may restrict dispositions during that period, and/or the Committee may establish other procedures to permit tracking of disqualifying dispositions of the Shares of Common Stock or to restrict transfer of the Shares.

Section 11 . Cessation of Participation . If a Participant dies or terminates employment, the Participant will cease to participate in the Plan, the Company or its designee will refund the balance in the Participant’s Payroll Deduction Account, and the Designated Broker will distribute the assets in the Participant’s Common Stock Account.

(a) In the event of a Participant’s death, the Participant’s Payroll Deduction Account balance and the Participant’s Common Stock Account assets will be distributed to the Participant’s Beneficiary.

(b) If a Participant terminates employment, the Participant’s Payroll Deduction Account balance and the Participant’s Common Stock Account assets will be distributed to the Participant. For purposes of this Section 11, a Participant’s employment will not be considered terminated in the case of a transfer of employment to the Company or another Subsidiary. However, in the event of a transfer of employment, the Committee may transfer a Participant’s participation to a separate offering or non-Code Section 423 offering that the entity the Participant is being transferred to participates in, if advisable or necessary considering the application of local law and the Code Section 423 requirements.

(c) Upon distribution, the Participant or, in the event of the Participant’s death, the Participant’s Beneficiary, may elect to obtain a certificate for the whole Shares of Common Stock credited to the Participant’s Common Stock Account or may elect that any whole Shares in the Participant’s Common Stock Account be sold. In that event, the Designated Broker will sell such whole Shares and any fractional Shares held in the Common Stock Account and remit the proceeds of such sale, less selling expenses, to the Participant or Beneficiary.

Notwithstanding the foregoing, if a Participant dies or terminates employment, the Committee may require that Shares of Common Stock credited to the Participant’s or Beneficiary’s Common Stock Account be retained by the Designated Broker for a designated period of time and may restrict dispositions during that period, and/or the Committee may establish other procedures to permit tracking of disqualifying dispositions of the Shares of Common Stock or to restrict transfer of the Shares.

Section 12 . Designation of Beneficiary . Each Payroll Deduction Account and each Common Stock Account will be in the name of the Participant. To the extent permitted by the Committee, a Participant may designate a Beneficiary to receive the Participant’s interests in both accounts in the event of the Participant’s death by complying with procedures prescribed by the Committee. If a Participant is married and the designated Beneficiary is not the spouse, spousal consent will be required for such designation to be effective. A Participant may change a Beneficiary designation (with spousal consent if necessary) at any time by complying with the procedures prescribed by the Committee. If a Participant dies without having designated a Beneficiary, or if the Beneficiary does not survive the Participant, the Participant’s estate will be the Participant’s Beneficiary.

Section 13 . Administration of the Plan . The Plan will be administered by the Committee, consisting of not less than three members appointed by the Board.

(a) The Committee will be the Compensation Committee of the Board unless the Board appoints another committee to administer the Plan. The Board from time to time may fill vacancies on the Committee.

(b) Subject to the express provisions of the Plan, the Committee will have the discretionary authority to take any and all actions (including directing the Designated Broker as to the acquisition of Shares) necessary to implement the Plan and to interpret the Plan; to prescribe, amend, and rescind rules and regulations relating to it; and to make all other determinations necessary or advisable in administering the Plan. All such determinations will be final and binding upon all persons.

(c) A quorum of the Committee will consist of a majority of its members and the Committee may act by vote of a majority of its members at a meeting at which a quorum is present, or without a meeting by a written consent to their action taken signed by all members of the Committee.

(d) The Committee may request advice or assistance or employ or designate such other persons as are necessary for proper administration of the Plan.

Section 14 . Rights Not Transferable . Rights under the Plan are not transferable by a Participant.

Section 15 . Shares Reserved for the Plan . Subject to the following sentence and any adjustments as provided in Section 16, the maximum number of Shares that will be made available for purchase under the Plan will be 3,000,000 Shares or the lesser number of Shares determined by the Board.

Section 16 . Change in Capital Structure . Despite anything in the Plan to the contrary, the Committee may take the following actions without the consent of any Participant or Beneficiary, and the Committee’s determination will be conclusive and binding on all persons for all purposes.

(a) In the event of a Common Stock dividend, Common Stock split, or any combination of Shares, a Corporate Transaction in which the Company is the surviving corporation, or any other change in the Company’s capital stock (including, but not limited to, the creation or issuance to stockholders generally of rights, options or warrants for the purchase of common stock or preferred stock of the Company), the number and kind of shares of stock or securities of the Company to be subject to the Plan, the maximum number of shares or securities that may be delivered under the Plan, and the selling price and other relevant provisions of the Plan will be appropriately adjusted by the Committee, whose determination will be binding on all persons.

(b) If the Company is a party to a Corporate Transaction in which the Company is not the surviving corporation, the Committee may take such actions with respect to the Plan as the Committee deems appropriate.

Section 17 . Amendment of the Plan . The Board may at any time, or from time to time, amend the Plan in any respect. The stockholders of the Company, however, must approve any amendment that would increase the number of Shares of Common Stock that may be issued under the Plan (other than an increase merely reflecting a change in capitalization of the Company pursuant to Section 16) or a change in the designation of any corporations (other than a Subsidiary) whose employees become Employees under the Plan.

Section 18 . Termination of the Plan . The Plan and all rights of Employees and Beneficiaries under the Plan will terminate:

(a) on the Purchase Date that Participants become entitled to purchase a number of Shares greater than the number of reserved Shares remaining available for purchase as set forth in Section 15, or

(b) at any date at the discretion of the Board.

In the event that the Plan terminates under circumstances described in (a) above, reserved Shares remaining as of the termination date will be credited to Participants’ Common Stock Accounts on a prorata basis. Upon termination of the Plan, each Participant will receive the balance in the Participant’s Payroll Deduction Account and all Shares in the Participant’s Common Stock Account.

Section 19 . Indemnification of Committee . Service on the Committee will constitute service as a director of the Company so that members of the Committee will be entitled to indemnification and reimbursement as directors of the Company pursuant to its Certificate of Incorporation and Bylaws.

Section 20 . Government Regulations . The Plan, the grant and exercise of the rights to purchase Shares under the Plan, and the Company’s or Designated Broker’s obligation to sell and deliver Shares upon the exercise of rights to purchase Shares, will be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any regulatory or government agency as may, in the opinion of counsel for the Company, be required.

Section 21 . Reports . Statements of account will be provided to Participants by the Committee or the Designated Broker at least annually, which statements will set forth the amounts of Contributions, the per Share Purchase Price, the number of Shares purchased and credited to Participants’ Common Stock Accounts, and the remaining cash balance, if any, in Participants’ Payroll Deduction Accounts.

Section 22 . Governing Law . This Plan shall be governed by the laws of the State of Indiana, except that a sub-plan adopted for a Designated Subsidiary in a location outside of the United States will be governed by the laws of the jurisdiction in which that Designated Subsidiary is located.

Section 23 . Effective Date . This Plan as amended and restated by the Board on February 12, 2010 shall be effective as of January 1, 2010.