exv10w1



 






Exhibit 10.1




Zimmer Holdings, Inc.




2001 STOCK INCENTIVE PLAN

PERFORMANCE SHARE AWARD GRANTED TO




AWARD RECIPIENT: [     ]




TARGET NUMBER OF PERFORMANCE SHARES: [     ]




MAXIMUM NUMBER OF PERFORMANCE SHARES: [     ]




AWARD DATE: [     ]



Compensation and Management Development Committee:



Gentlemen:




     You have advised me that I have been granted the above performance share award subject to the
terms, restrictions and conditions set forth in this agreement. I understand that I may be
expected to retain shares of common stock of Zimmer Holdings, Inc. (the “Company”) earned by me
under this award to comply with the Company’s stock retention guidelines in effect at the time the
shares are paid.



     My signature below indicates my agreement to all the terms, restrictions and conditions herein
set forth.



							
	 

Date

	 	 
	 	 

Signature
	 	 






ZIMMER HOLDINGS, INC.

2001 STOCK INCENTIVE PLAN

PERFORMANCE SHARE AWARD




     1. PERFORMANCE SHARE AWARD



     Under Section 8 of the Zimmer Holdings, Inc. 2001 Stock Incentive Plan (the “Plan”), the
Compensation and Management Development Committee of the Board of Directors of Zimmer Holdings,
Inc. (the “Committee”) has granted to the Award Recipient on the Award Date the award of
performance shares set forth above (the “Award”). Each performance share shall entitle the Award
Recipient to earn a share of the Company’s common stock, par value $0.01 per share (“Common
Stock”), subject to the terms, conditions, and restrictions set forth in this agreement. The
purposes of the Award are to motivate and retain the Award Recipient as an employee of the Company
or a subsidiary of the Company, to encourage the Award Recipient to continue to give best efforts
for the Company’s future success, and to further the opportunity for stock ownership by the Award
Recipient in order to increase the Award Recipient’s proprietary interest in the Company. Except
as may be required by law, the Award Recipient is not required to make any payment (other than
payments for taxes pursuant to Section 4(c) hereof) or provide any additional consideration for the
Award other than the rendering of future services to the Company or one of its subsidiaries.



 









 





     2. GENERAL



     (a) No shares of Common Stock shall be earned unless and until the Committee shall have
determined the extent to which the performance criteria set forth in Annex A hereto have been met
with respect to the three-year period beginning January 1, 2006 and ending December 31, 2008 (the
“Award Period”).



     (b) The Award Recipient shall not have any of the rights of a stockholder of the Company,
including the right to vote or receive dividends and other distributions with respect to the shares
of Common Stock covered by this Award until the shares have been earned.



     (c) The Committee has not granted the Award Recipient any Associated Options (as described in
Section 8(b)(11) of the Plan) in conjunction with the Award.



     (d) Notwithstanding anything to the contrary herein, the number of shares of Common Stock that
may be earned under this Award shall be limited to the maximum number of shares that would not
exceed the individual participant limitation contained in Section 3(b) of the Plan.



     3. CONDITIONS



     (a) Except as set forth in sub-sections (b) and (c) below, if during the Award Period, the
Award Recipient’s employment with the Company or any Subsidiary or Affiliate terminates for any
reason other than Retirement, death or Disability, the Award Recipient’s right to receive any
shares covered by the Award shall be canceled, forfeited and surrendered, unless determined
otherwise by the Committee in its sole discretion. For the avoidance of doubt, it is expressly
stated that, except as set forth in sub-sections (b) and (c) below or unless determined otherwise
by the Committee, an Award Recipient whose employment with the Company or any Subsidiary or
Affiliate terminates during the Award Period for any reason other than Retirement, death or
Disability shall not be deemed to have earned a pro rata portion of the shares covered by this
Award and instead shall forfeit the Award in its entirety. The terms “Subsidiary,” “Affiliate,”
“Retirement” and “Disability” shall have the meanings specified in Section 2 of the Plan.



     (b) In the event of an Award Recipient’s Retirement, death or Disability prior to the end of
the Award Period, if such Retirement, death or Disability occurs after the Award Recipient has been
continuously employed for one year or more from the Award Date and prior to a “change in control”
of the Company, or as otherwise determined by the Committee, the Award Recipient or his estate
shall be entitled to a portion of the shares covered by this Award at the end of the Award Period,
subject to the attainment of the performance criteria described in Annex A as certified by the
Committee. As soon as practicable following the availability of audited results of the Company for
the year ended December 31, 2008, the Committee shall determine whether and the extent to which the
performance criteria described in Annex A have been satisfied and the number of shares covered by
the Award that would have been earned if the Award Recipient’s employment had not terminated prior
to the end of the Award Period. The Award Recipient or his estate shall be entitled only to a pro
rata portion (rounded down to the nearest whole share) of such shares based on the number of whole
calendar months the Award Recipient was employed from the beginning of the Award Period to the date
of termination divided by thirty-six (36).



     (c) If the Company undergoes a “change in control” during the Award Period, the number of
shares earned under this sub-section (c) shall be the greater of: (i) the Target Number as
specified above or (ii) the number of shares that would have been earned by applying the
performance criteria specified in Annex A to the Company’s actual performance from the beginning of
the Award Period to the date of the change in control. The Committee shall determine the “Fair
Market Value” of the shares earned under this sub-section (c) as of the date of the change in
control, the payment of which shall be deferred until the earlier of: (i) any termination of
employment of the Award Recipient that is a “Qualifying Termination” or (ii) December 31, 2008.
The Company shall pay the value of the earned Award (net of any Withholding Tax Obligation as
defined in Section 4(c)) in cash as soon as practicable thereafter. The terms “change in control,”
“Fair Market Value” and “Qualifying Termination” shall have the meanings specified in Sections 2
and 14 of the Plan. Notwithstanding the foregoing, to the extent any payment under this
sub-section 3(c) is “nonqualified deferred compensation” and the Award Recipient is considered a
“specified employee” of the Company within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended, then the payment will be made on the date ending on the expiration of the
sixth month following the date of the Award Recipient’s Qualifying Termination.



     (d) In the event that the Award Recipient fails promptly to pay or make satisfactory
arrangements as to the Withholding Tax Obligation as provided in Section 4(c), all shares covered
by the Award shall be forfeited by the Award Recipient.



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     (e) The Award Recipient may, at any time prior to the expiration of the Award Period, waive
all rights with respect to earning all or some of the shares covered by this Award by delivering to
the Company a written notice of such waiver.



     (f) (i) A transfer of an Award Recipient’s employment from the Company to a Subsidiary or
Affiliate, or vice versa, or from one Subsidiary or Affiliate to another, (ii) a leave of absence,
duly authorized in writing by the Company, for military service or sickness or for any other
purpose approved by the Company if the period of such leave does not exceed ninety (90) days, and
(iii) a leave of absence in excess of ninety (90) days, duly authorized in writing, by the Company,
provided the Award Recipient’s right to reemployment is guaranteed either by a statute or by
contract, shall not be deemed a termination of employment. However, any failure of the Award
Recipient to return to the employ of the Company at the end of an approved leave of absence shall
be deemed a termination. During a leave of absence as defined in (ii) or (iii), the Award
Recipient will be considered to have been continuously employed by the Company.



     (g) As a condition of receiving the Award, the Award Recipient has entered into or reaffirmed
a non-solicitation and/or non-compete agreement with the Company. The Award Recipient understands
and agrees that if he or she violates any provision of such agreement, the Committee may require
the Award Recipient to forfeit any or all unearned shares covered by this Award and to repay to the
Company any portion or all of any gain or benefit received by the Award Recipient with respect to
the Award.



     4. ISSUANCE OF SHARES; DEFERRAL AND TAXES



     (a) As soon as practicable following the availability of audited results of the Company for
the year ended December 31, 2008, the Committee shall determine whether and the extent to which the
performance criteria in Annex A have been satisfied and the amount of shares earned. Except as
otherwise provided in sub-section (c) hereof, the shares earned under this Award shall be paid to
the Award Recipient on March 15, 2009.



     (b) The Committee has determined that the Award Recipient may not request the Committee to
approve the deferred payment of any part of the Award.



     (c) The Company shall not be required to issue or deliver any certificate or certificates for
shares of the Common Stock earned pursuant to this Award prior to (i) the admission of such shares
to listing on any stock exchange on which the stock may then be listed, (ii) the completion of any
registration or other qualification of such shares under any state or federal law or rulings or
regulations of any governmental regulatory body, (iii) the obtaining of any consent or approval or
other clearance from any governmental agency, which the Company shall, in its sole discretion,
determine to be necessary or advisable, and (iv) the payment to the Company, upon its demand, of
any amount requested by the Company for the purpose of satisfying its withholding obligation, if
any, with respect to federal, state or local income or FICA or earnings tax or any other applicable
tax assessment (plus interest or penalties thereon, if any, caused by a delay in making such
payment) incurred by reason of the issuance of the shares pursuant to this Award (the “Withholding
Tax Obligation”). The Award Recipient may satisfy the Withholding Tax Obligation by authorizing
the Company to withhold the number of shares of Common Stock otherwise earned having a Fair Market
Value equal to the value of the Company’s minimum required Withholding Tax Obligation with respect
to the Award.



     5. CHANGES IN CAPITALIZATION



     If prior to the issuance of the shares of Common Stock covered by this Award, any changes
occur in the outstanding Common Stock by reason of stock dividends, recapitalization, mergers,
consolidations, stock splits, combinations or exchanges of shares and the like, the number and
class of shares of Common Stock subject to this Award shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. If as a result of any adjustment under this
paragraph any Award Recipient should become entitled to a fractional share of stock, the Award
Recipient shall have the right only to the adjusted number of full shares and no payment or other
adjustment will be made with respect to the fractional share so disregarded.



     6. NOTICE



     Until the Award Recipient is advised otherwise by the Committee, all notices and other
correspondence with respect to this Award will be effective upon receipt at the following address:



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Compensation and Management Development Committee of the Board of Directors of Zimmer Holdings, Inc.

Zimmer Holdings, Inc.

345 East Main Street

Post Office Box 708

Warsaw, Indiana 46581-0708




     7. NO ADDITIONAL RIGHTS



     Except as explicitly provided in this agreement, this agreement will not confer any rights
upon the Award Recipient, including any right with respect to continuation of employment by the
Company or any of its Subsidiaries or Affiliates or any right to future awards under the Plan. In
no event shall the value, at any time, of this agreement, the Common Stock covered by this Award or
any other benefit provided under this agreement be included as compensation or earnings for
purposes of any other compensation, retirement, or benefit plan offered to employees of the Company
or its Subsidiaries unless otherwise specifically provided for in such plan.



     8. CONSTRUCTION AND INTERPRETATION



     The Board of Directors of the Company (the “Board”) and the Committee shall have full
authority and discretion, subject only to the express terms of the Plan, to decide all matters
relating to the administration and interpretation of the Plan and this agreement and all such Board
and Committee determinations shall be final, conclusive, and binding upon the Award Recipient and
all interested parties. The terms and conditions set forth in this agreement are subject in all
respects to the terms and conditions of the Plan, as amended from time to time, which shall be
controlling. This agreement contains the entire understanding of the parties and may not be
modified or amended except in writing duly signed by the parties. The waiver of, or failure to
enforce, any provision of this agreement or the Plan by the Company will not constitute a waiver by
the Company of the same provision or right at any other time or a waiver of any other provision or
right. The various provisions of this agreement are severable and any determination of invalidity
or unenforceability of any provision shall have no effect on the remaining provisions. This
agreement will be binding upon and inure to the benefit of the successors, assigns, and heirs of
the respective parties. The validity and construction of this agreement shall be governed by the
laws of the State of Indiana.



	 	 	 	 	 
	 	 	ZIMMER HOLDINGS, INC.
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 





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ANNEX A




PERFORMANCE CRITERIA




     The number of shares of Common Stock that may be earned with respect to the Award shall
be determined based upon the compound annual growth rate [CAGR] of earnings per share for the Award
Period. The number of earned shares expressed as a percentage of the Maximum Award shall be
determined by reference to the following payout matrix:



	 	 	 	 	 	 	 
	Actual	 	Compound	 	 
	Performance as a	 	Annual Growth Rate	 	 
	Percentage of	 	[CAGR] of	 	Percentage of
	Targeted	 	Earnings per Share**	 	Maximum
	Performance*	 	for the Award Period	 	Award Earned*
	Less than 85%

	 	Less than ___%
	 	None

	85%

	 	___%
	 	 	18.3	%
	90%

	 	___%
	 	 	23.3	%
	100%

	 	___%
	 	 	33.3	%
	110%

	 	___%
	 	 	66.7	%
	120%

	 	___%
	 	 	100.0	%








 




			
	*	 	Linear interpolations between specified percentages.
	 
	**	 	Computed based on net earnings adjusted to exclude (i) the after-tax effect of
inventory step-up costs associated with any acquisition; (ii) the after-tax effect of
acquisition and integration costs; and (iii) any other major non-operational charges to
earnings described in management’s discussion and analysis of financial condition and results
of operations appearing in the Company’s annual report to stockholders for the applicable
year.