exv10w1



 






Exhibit 10.1




Zimmer Holdings, Inc.




2001 STOCK INCENTIVE PLAN

NONQUALIFIED PERFORMANCE-CONDITIONED

STOCK OPTION GRANTED TO




OPTIONEE: o




STOCK AWARD SHARES: o*




EXERCISE PRICE PER SHARE: o




AWARD DATE: o



* This is the maximum number of shares that you may become entitled to purchase pursuant to
this award. In addition to the time-based vesting provisions described in sections 1 and 5(e)
below, the number of shares, if any, you may be entitled to purchase will depend upon whether and
the extent to which the performance criteria set forth in Annex A hereto have been achieved, as
determined by the Compensation and Management Development Committee of the Board of Directors of
Zimmer Holdings, Inc.




Compensation and Management Development Committee:



Ladies and Gentlemen:



     I understand that this option has been granted to provide a means for me to acquire and/or
expand an ownership position in Zimmer Holdings, Inc., and it is expected that I will retain the
stock I receive upon the exercise of this option consistent with the Company’s share retention
guidelines in effect at the time of exercise.



     I hereby agree to the foregoing and following terms and conditions and accept the grant of
this option subject thereto.



	 	 	 
	 
	 	 
	 

	 	 
	Date

	 	Signature







 



ZIMMER HOLDINGS, INC.

2001 STOCK INCENTIVE PLAN

NONQUALIFlED PERFORMANCE-CONDITIONED STOCK OPTION




     Zimmer Holdings, Inc (the “Company”) hereby grants pursuant to the terms of the heretofore
designated stock option plan (the “Plan”) to the heretofore named employee (the “Optionee”), as a
matter of separate inducement and agreement in connection with her/his employment, and not as or in
lieu of any salary or other compensation for her/his services, and upon the terms and conditions
set forth below, the performance-conditioned option to purchase up to the number of fully paid and
non-assessable shares of the common stock of Zimmer Holdings, Inc., par value $.01 per share
(“Common Stock”), heretofore set forth on or before the expiration of ten years from the date
hereof (the “Expiration Date”) at the aforementioned exercise price per share. The Board of
Directors of the Company (the “Board”) has authorized the Compensation and Management Development
Committee of the Board (the “Committee”) to administer the Plan.



     This option is granted upon and subject to the following terms and conditions:



     1. No option may be exercised hereunder for the purchase of shares until the Committee shall
have determined whether or not and to what extent the performance criteria set forth in Annex A
hereto have been met and, accordingly, the number of shares that may be purchased pursuant to this
option (such maximum number of shares being hereinafter referred to as the “Performance-Vested
Option”). The Committee shall make its determination on or before the date of the Committee’s
first



 









 




regularly scheduled meeting following the Company’s release of earnings information for the
year ended December 31, 20      to the public (such date being hereafter referred to as the
“Determination Date”). Thereafter, provided that the Optionee shall at the time of such exercise,
except as specifically set forth herein to the contrary, have remained in the continuous employ of
the Company or of one of its subsidiaries, the Performance-Vested Option may from time to time
prior to the Expiration Date be exercised in the manner hereinafter set forth, and may be exercised
(i) only to the extent of 25 percent of the number of shares to which the Performance-Vested Option
applies on or after the Determination Date and prior to the second anniversary of the date of grant
hereof, (ii) only to the extent of 50 percent of the number of shares to which the
Performance-Vested Option applies on or after the second anniversary and prior to the third
anniversary of the date of grant hereof, and (iii) only to the extent of 75 percent of the number
of shares to which the Performance-Vested Option applies on or after the third anniversary and
prior to the fourth anniversary of the date of grant hereof.




     2. The option hereby granted may be exercised, in whole or in part in accordance with the
conditions and installment schedule heretofore set forth, by written notification delivered in
person or by mail to the Secretary of the Company at its executive office in Warsaw, Indiana, such
notification to be effective upon receipt by the Secretary on or before the specified Expiration
Date, in substantially the form enclosed herewith, specifying the number of shares with respect to
which the option is then being exercised and accompanied by payment for such shares. In the event
the specified Expiration Date falls on a day which is not a regular business day at the Company’s
executive office in Warsaw, Indiana, then such written notification must be received at such office
on or before the last regular business day prior to such Expiration Date. Payment is to be made by
certified personal check, or bank draft payable to the order of Zimmer Holdings, Inc., by payment
through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve
Board, or by delivery of a certificate or certificates for shares of Common Stock owned by the
Optionee for at least six months having a fair market value at the date of exercise equal to the
purchase price for such shares, or in any combination of the foregoing; provided, however, 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. Any stock certificate or certificates so delivered
must be endorsed, or accompanied by an appropriate stock power, to the order of Zimmer Holdings,
Inc., with the signature guaranteed by a bank or trust company or by a member firm of the New York
Stock Exchange. No shares shall be sold or delivered hereunder until full payment for such shares
has been made. At its discretion, the Committee may modify or suspend any method for the exercise
of this option. The Optionee shall have the rights of a shareholder only with respect to shares of
stock for which certificates have been issued to her/him.



     3. The Company shall not be required to issue or deliver any certificate or certificates for
shares of its Common Stock purchased upon the exercise of any part of this option 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 exercise of this option or the transfer of
shares thereupon (the “Withholding Tax Obligation”). The Optionee may satisfy the Withholding Tax
Obligation by authorizing the Company to withhold an appropriate number of shares being issued on
exercise; provided, however, that the value of the shares withheld shall not exceed the Company’s
minimum required Withholding Tax Obligation with respect to the exercise of this option.



     4. This option is not transferable by the Optionee otherwise than by will or by the laws of
descent and distribution, and is exercisable, during the life of the Optionee, only by her/him.



     5. Notwithstanding any other provision hereof:



        (a) If the Optionee shall retire or cease to be employed by the Company or any of its
subsidiaries for any reason (other than death or disability entitling the Optionee to receive
payments under a disability pay plan of the Company or any of its subsidiaries) after the Optionee
shall have been continuously so employed through the Determination Date, the Optionee may exercise
this option only to the extent that the Optionee was otherwise entitled to exercise it at the time
of such retirement or cessation of employment with the Company or any of its subsidiaries, but in
no event after (i) the date that is ten years next succeeding the date this option was granted, in
the case of retirement or cessation of employment with the Company or any of its subsidiaries on or
after the Optionee’s 65th birthday, or on or after the Optionee’s 55th birthday after having
completed 10 years of service with the Company or any of its subsidiaries, or on or after the date
the sum of the Optionee’s age plus years of service, when rounded up to the next highest number,
equals at least 70 and the Optionee has completed ten years of service with the Company or any of
its subsidiaries and the Optionee’s employment terminates for any reason other than death,
disability, resignation, willful misconduct, or activity deemed detrimental to the interest of the
Company and, where applicable, the Optionee has executed a general release, a covenant not to
compete and/or a covenant not to solicit as required by the Company, or (ii) the date that is three
months next succeeding retirement or cessation of employment, in the case of any other retirement
or cessation of employment with the Company or any of its subsidiaries.



        (b) Whether military or government service or other bona fide leave of absence shall
constitute termination of employment for the purpose of this option shall be determined in each
case by the Committee in its sole discretion.



        (c) If the Optionee has been continuously employed by the Company or one of its subsidiaries
through the Determination Date and retires or ceases to be so employed by reason of disability
entitling such Optionee to receive payments under a disability pay plan of the Company or a
subsidiary, the Optionee shall be treated as though he/she remained in the
employ of the Company or a subsidiary until the earlier of (i) cessation of payments under the
disability pay plan, (ii) death, or (iii) attainment of 65th birthday.



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        (d) Except as provided in section 4, in the event of the death of the Optionee while in the
employ of the Company or of any of its subsidiaries or within whichever period after retirement or
cessation of employment of the Optionee specified in subparagraphs (a) and (c) is applicable, and
after the Optionee shall have been continuously so employed through the Determination Date, the
Performance-Vested Option theretofore granted to the Optionee shall be exercisable by the
executors, administrators, legatees or distributees of the Optionee’s estate, as the case may be,
only to the extent that the Optionee would have been entitled to exercise it if the Optionee were
then living, subject to subparagraph (e) herein, but in the case of the death of any Optionee after
retirement or cessation of employment in no event after the later of (i) the date twelve months
next succeeding such death and (ii) the last day of the period after Retirement or other cessation
of employment of the Optionee specified in subparagraphs (a)(i) or (a)(ii) and provided, in any
case, not after the Expiration Date.



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



        (e) The provisions of section 1 hereof restricting the percentage of shares of the
Performance-Vested Option which can be exercised prior to the fourth anniversary of the date of
grant of such option shall not apply if (i) the Optionee has reached age 60; (ii) the Optionee dies
while in the employ of the Company or any of its subsidiaries; (iii) the Optionee shall have
retired or ceased to be employed by the Company or any of its subsidiaries (1) on or after the
Optionee’s 65th birthday, or (2) on or after the Optionee’s 55th birthday after having completed 10
years of service with the Company or any of its subsidiaries, or (3) on or after the date the sum
of the Optionee’s age plus years of service, when rounded up to the next highest number, equals at
least 70 and the Optionee has completed ten years of service with the Company or any of its
subsidiaries and the Optionee’s employment terminates for any reason other than death, resignation,
willful misconduct, or activity deemed detrimental to the interest of the Company and, where
applicable, the Optionee has executed a general release, a non-solicitation and/or non-compete
agreement with the Company as required by the Company; or (iv) the Optionee’s employment terminates
for any reason other than death, resignation, willful misconduct, or activity deemed detrimental to
the interest of the Company provided the Optionee executes a general release and, where applicable,
a non-solicitation and/or non-compete agreement with the Company as required by the Company. For
the purposes of this option, service with Bristol-Myers Squibb Company and its subsidiaries and
affiliates before the effective date of the Plan shall be included as service with the Company.



     6. Under certain circumstances, if the Optionee’s employment with the Company or one of its
subsidiaries terminates during the three year period following a change in control of the Company,
the Performance-Vested Option may become fully vested and exercisable. If the change in control
occurs prior to the Determination Date, the performance criteria shall have been deemed to have
been achieved so as to permit the optionee to purchase the maximum number of shares underlying the
Performance-Vested Option. Please refer to the Plan for more information.



     7. If prior to the Expiration Date 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 exercise price per share and the number and class of shares subject to
this option shall be appropriately adjusted by the Committee, whose determination shall be
conclusive. If as a result of any adjustment under this paragraph any Optionee should become
entitled to a fractional share of stock, the Optionee shall have the right to purchase only the
adjusted number of full shares and no payment or other adjustment will be made with respect to the
fractional share so disregarded.



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



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



     9. Except as explicitly provided in this agreement, this agreement will not confer any rights
upon the Optionee, including any right with respect to continuation of employment by the Company or
any of its subsidiaries 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 agreement 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 it subsidiaries
unless otherwise specifically provided for in such plan.



     10. 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 Optionee 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



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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-BASED CONDITIONS TO VESTING




     The maximum number of shares that you may become entitled to purchase pursuant to this
Performance-Vested Option will be determined based upon the Company’s achievement of certain
performance objectives for the following performance metrics: adjusted earnings per share,
consolidated revenue and consolidated free cash flow.



     Weighted Aggregate Achievement Level. The Company’s actual performance for the year
ended December 31, 20      will be compared to a target level of performance for each of the three
performance metrics. Actual performance between      % and      %, inclusive, of the target level of
performance will result in a corresponding achievement level between      % and      %, inclusive, for
each of the performance metrics. Actual performance below      % of target for any metric will
result in a corresponding achievement level for that metric of 0%. The three corresponding
achievement levels will then be weighted and aggregated to result in a final weighted aggregate
achievement level (the “Achievement Level”). If the Achievement Level is 95% or below, you will
not be entitled to purchase any shares pursuant to this option. If the Achievement Level is above
95%, the percentage of the total shares underlying this option that will be considered vested as to
performance will be as follows:



	 	 	 
	 	 	Percentage of Total Shares
	 	 	Underlying Option Considered
	Achievement Level	 	Vested as to Performance
	95% or below
	 	0%
	96%
	 	4%
	97%
	 	8%
	98%
	 	12%
	99%
	 	16%
	100%
	 	20%
	101%
	 	28%
	102%
	 	36%
	103%
	 	44%
	104%
	 	52%
	105%
	 	60%
	106%
	 	68%
	107%
	 	76%
	108%
	 	84%
	109%
	 	92%
	110%
	 	100%






     Performance Weights and Targets. Following are the performance weights and targets
for each of the performance metrics:



	 	 	 	 	 	 	 	 	 
	Performance Metric	 	Weight	 	Target
	Adjusted Earnings per Share*
	 	 	     	%	 	$           per share
	Consolidated Revenue
	 	 	     	%	 	$                            
	Consolidated Free Cash Flow
	 	 	     	%	 	$                            












	* Adjusted Earnings per Share must be at or above target for the aggregate performance to exceed
100% of target. “Adjusted” refers to operating performance measures that exclude acquisition and
integration expenses and purchase accounting.





 









 





     Actual Performance; Corresponding Achievement Levels. Following are the achievement
levels that correspond to actual performance as a percentage of target for each of the performance
metrics:



	 	 	 	 	 
	Actual Performance	 	 	 
	as a Percentage of Target*	 	Corresponding Achievement Level
	     %+
	 	 	     	%
	     %
	 	 	     	%
	     %
	 	 	     	%
	Less than      %
	 	 	0	%












	 	* Linear interpolation between points.






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