1136869--2/25/2010--ZIMMER_HOLDINGS

related topics

{regulation, government, change}

{product, liability, claim}

{financial, litigation, operation}

{product, market, service}

{property, intellectual, protect}

{customer, product, revenue}

{operation, international, foreign}

{acquisition, growth, future}

{loss, insurance, financial}

{cost, operation, labor}

RISKS RELATED TO OUR BUSINESS If we fail to comply with the terms of the Corporate Integrity Agreement we entered into in September 2007, we may be subject to exclusion from federal healthcare programs. We could be subject to further governmental investigations or actions by other third parties based on allegations of wrongdoing similar to those made by the U.S. Attorney. Our temporary suspension of the U.S. marketing and distribution of one of our hip products has adversely affected sales growth, resulted in claims and may adversely affect our ability to compete in the hip resurfacing market in the U.S. If we fail to retain the independent agents and distributors upon whom we rely heavily to market our products, customers may not buy our products and our revenue and profitability may decline. If we do not introduce new products in a timely manner, our products may become obsolete over time, customers may not buy our products and our revenue and profitability may decline. RISKS RELATED TO OUR BUSINESS If we fail to comply with the terms of the Corporate Integrity Agreement we entered into in September 2007, we may be subject to exclusion from federal healthcare programs. We could be subject to further governmental investigations or actions by other third parties based on allegations of wrongdoing similar to those made by the U.S. Attorney. Our temporary suspension of the U.S. marketing and distribution of one of our hip products has adversely affected sales growth, resulted in claims and may adversely affect our ability to compete in the hip resurfacing market in the U.S. If we fail to retain the independent agents and distributors upon whom we rely heavily to market our products, customers may not buy our products and our revenue and profitability may decline. If we do not introduce new products in a timely manner, our products may become obsolete over time, customers may not buy our products and our revenue and profitability may decline. We conduct a significant amount of our sales activity outside of the United States, which subjects us to additional business risks and may cause our profitability to decline due to increased costs. We are subject to risks arising from currency exchange rate fluctuations, which can increase our costs, cause our profitability to decline and expose us to counterparty risks. We may fail to adequately protect our proprietary technology and other intellectual property, which would allow competitors or others to take advantage of our research and development efforts. We may be subject to intellectual property litigation and infringement claims, which could cause us to incur significant expenses or prevent us from selling our products. We may make additional acquisitions or enter into strategic alliances that could increase our costs or liabilities or be disruptive. We conduct a significant amount of our sales activity outside of the United States, which subjects us to additional business risks and may cause our profitability to decline due to increased costs. We are subject to risks arising from currency exchange rate fluctuations, which can increase our costs, cause our profitability to decline and expose us to counterparty risks. We may fail to adequately protect our proprietary technology and other intellectual property, which would allow competitors or others to take advantage of our research and development efforts. We may be subject to intellectual property litigation and infringement claims, which could cause us to incur significant expenses or prevent us from selling our products. We may make additional acquisitions or enter into strategic alliances that could increase our costs or liabilities or be disruptive. We depend on a limited number of suppliers for some key raw materials and outsourced activities. We are subject to putative stockholder class action lawsuits that could be costly to defend and distracting to management. RISKS RELATED TO OUR INDUSTRY The ongoing investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice regarding potential violations of the Foreign Corrupt Practices Act in the sale of medical devices in a number of foreign countries by companies in the medical device industry could have a material adverse effect on our business, financial condition and cash flows. The impact of healthcare reform in the U.S. on us is uncertain. We are subject to healthcare fraud and abuse regulations on an ongoing basis that could require us to change our business practices and restrict our operations in the future. If third-party payors decline to reimburse our customers for our products or reduce reimbursement levels, the demand for our products may decline and our ability to sell our products profitably may be harmed. We depend on a limited number of suppliers for some key raw materials and outsourced activities. We are subject to putative stockholder class action lawsuits that could be costly to defend and distracting to management. RISKS RELATED TO OUR INDUSTRY The ongoing investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice regarding potential violations of the Foreign Corrupt Practices Act in the sale of medical devices in a number of foreign countries by companies in the medical device industry could have a material adverse effect on our business, financial condition and cash flows. The impact of healthcare reform in the U.S. on us is uncertain. We are subject to healthcare fraud and abuse regulations on an ongoing basis that could require us to change our business practices and restrict our operations in the future. If third-party payors decline to reimburse our customers for our products or reduce reimbursement levels, the demand for our products may decline and our ability to sell our products profitably may be harmed. The ongoing cost-containment efforts of healthcare purchasing organizations may have a material adverse effect on our results of operations. Our success depends on our ability to effectively develop and market our products against those of our competitors. We and our customers are subject to various governmental regulations relating to the manufacturing, labeling and marketing of our products, and we may incur significant expenses to comply with these regulations and develop products compatible with these regulations. We may incur product liability losses, and insurance coverage may be inadequate or unavailable to cover these losses. The ongoing cost-containment efforts of healthcare purchasing organizations may have a material adverse effect on our results of operations. Our success depends on our ability to effectively develop and market our products against those of our competitors. We and our customers are subject to various governmental regulations relating to the manufacturing, labeling and marketing of our products, and we may incur significant expenses to comply with these regulations and develop products compatible with these regulations. We may incur product liability losses, and insurance coverage may be inadequate or unavailable to cover these losses.

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1136869--2/25/2010--ZIMMER_HOLDINGS_INC