EX-10.1



 Exhibit 10.1 

 

					
	



	  		  	 P.O.Box 708
 Warsaw, IN 46581-0708
 574 267-6131


 Confidential 
 March 20, 2013 
 Jeffrey B. Paulsen 
 Dear Jeff: 
 This will confirm the termination of your employment by Zimmer, effective
March 20, 2013. This letter and the attached material summarize important issues regarding severance and other benefits you may be eligible to receive as the result of your separation. 
 SEVERANCE 
 Zimmer’s standard severance benefit includes two components: an amount
representing a number of weeks of base pay based on years of service and an amount equal to the cost of continued health insurance coverage (“COBRA coverage”) for a certain number of weeks after your current coverage ends. Under the Zimmer
Holdings, Inc. Restated Severance Plan (“Severance Plan”), dated August 2010, you would be eligible, subject to the terms of the Severance Plan, for a severance benefit of 4.5 weeks of base pay, which would equal $42,188, plus 4.5 weeks of
COBRA subsidy, which would equal $1,520, for a total benefit of $43,708. 
 However, in the interest of a mutually respectful parting of ways,
and taking into account your senior executive status, Zimmer is willing to offer you an enhanced severance benefit as a one-time exception to our policy. This enhanced severance offer totals six months of base pay, which equals $243,750, plus
six months of COBRA subsidy, which equals $8,100, for a total severance offer of $251,850. This total amount, which is in lieu of the standard benefit under the Severance Plan, will be paid to you in a lump sum, less applicable tax withholdings, as
soon as administratively feasible following receipt of the executed General Release that is attached and expiration of a seven-day rescission period, assuming you do not rescind the General Release within that period. This enhanced benefit will be
provided to you in accordance with, and subject to, all terms and provisions of the Severance Plan, with the sole exception from Severance Plan terms and provisions being the calculation of the benefit amount. 

Although the COBRA component is intended to help you with the costs of maintaining health insurance coverage after your separation from employment, it is
not restricted as to use and if you fulfill all conditions of receiving severance benefits as described below, you may use that monetary sum as you see fit. Also, you must still timely complete and return the COBRA enrollment form, and pay premiums
to maintain this coverage. 
 ATTACHMENT I — GENERAL RELEASE 
 You must sign and not rescind the General Release in order to qualify for any severance benefit. Please read this attachment carefully, and consult with an attorney and/or any other advisor of









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your choice prior to signing the General Release. In summary, by signing the General Release, you waive all legal claims against Zimmer and its affiliates through the date of your signing, to the
fullest extent permitted by law. Certain rights under the Zimmer Holdings, Inc. 2001, 2006 and 2009 Stock Incentive Plans, if applicable, are also contingent upon your executing the General Release. You have 21 calendar days from the date of this
letter to review, consider, sign and return the General Release, and 7 calendar days thereafter to revoke your signature. Should you revoke the General Release within the time allowed, you will forego any severance benefits as well as any unvested
Zimmer Holdings, Inc. 2001, 2006 and 2009 Stock Incentive Plan stock options. 
 OUTPLACEMENT SERVICES 

Zimmer will provide you with certain outplacement services to assist you in transitioning to other employment, in an amount not to exceed $25,000. The
services will be provided by Right Management. You may contact Right Management at 1-800-966-6880 or via email at rightindianapolis@right.com. 

ATTACHMENT II — VACATION PAY SUMMARY 

You will receive payment for any unused and earned vacation. If applicable, payment will be made in a lump sum as soon as administratively feasible
following your separation date in accordance with applicable state law. Your vacation pay will also include any banked vacation you may have. 

ATTACHMENT III — TERMINATION OF BENEFIT COVERAGES 
 Group medical, dental and vision benefits, if applicable, end as of 11:59 p.m. on the last calendar day of the month during which your employment terminates. All other benefits terminate as of 11:59 p.m.
on your last day of employment. If you have elected a flexible spending account (FSA), expenses incurred after your last day of active employment are not reimbursable from your FSA unless you are eligible for and timely elect applicable COBRA
coverage. Shortly following your termination date, detailed information concerning medical care continuation options that are available to you as a result of your termination of employment will be mailed to your home, as provided by the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Attachment III sets forth a summary of COBRA premiums, which are subject to change. 
 You must elect COBRA coverage in accordance with the instructions that will be sent to you, and pay all applicable premiums as instructed, to continue medical care coverage. As explained above, although
the severance benefit you are being offered includes an amount intended to subsidize your COBRA premiums for a period of time, it is up to you to decide whether or not to use that money for payment of COBRA premiums. Zimmer will not enroll you for
COBRA coverage or make any COBRA payments on your behalf. 








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 Please note that, as long as you are eligible for benefits under Zimmer’s medical plans or dental
plan, you will also continue to be eligible to participate in the Employee Assistance Program. Plan benefits are explained more fully in the summary plan description. 
 Life and Accidental Death and Dismemberment (AD&D) insurance coverage will terminate as of 11:59 p.m. on your last day of active employment. You will have the opportunity to convert or port a portion
of your life insurance benefit into an individual policy as described in Attachment IV, which is an excerpt from the Life Insurance and AD&D Insurance Programs Summary Plan Description. Information regarding this opportunity will be sent to you
from the Zimmer Benefit Service Center. If you have not received that information within 15 days from the date of this letter, please contact the Service Center at 1-877-588-0933. You must elect to convert or port your insurance coverage in a timely
manner to qualify for individual-policy coverage. 
 SAVINGS AND INVESTMENT PROGRAM (401(k))

You are fully vested in your Employee account balance and 60% vested in your Employer account balance. Within four to six weeks following your termination
date, you will receive important information from Fidelity describing your options as an inactive participant in the 401(k) Program. 

BENEFIT EQUALIZATION PLAN OF THE SAVINGS AND INVESTMENT PROGRAM (BEP – SAVINGS PLAN) 
 You elected to participate in the BEP-Savings Plan, which is a non-qualified plan. As with the 401(k) Program, you are fully vested in your Employee account balance and 60% vested in your Employer
account balance. Your vested account balance of December 31, 2012 is estimated to be $58,188.22. Your account balance will be paid to you as a lump sum.
 Because you are an officer of Zimmer and considered a Specified Employee under Section 409A as of your separation date, the vested account balance will be paid to you in a lump sum, less applicable
taxes, on the first payroll period date after six months have elapsed from your date of separation, which we expect will be October 11, 2013. 
 Your BEP-Savings Plan account balance as of December 31, 2012 will be adjusted for investment experience through August 31, 2013. You will continue to receive quarterly Statements of
Account providing you with updated account balance information. Please note that, because this is a non-qualified plan, the distribution may not be rolled into an IRA or other qualified plan. 

Payment of your BEP – Savings Plan account balance will be automatic, so there is no action you must take to initiate payment.








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 TAXATION OF BENEFITS UNDER BEP-SAVINGS PLAN 

As noted above, the amount/value of your benefit payment from the BEP-Savings Plan is considered ordinary income and subject to applicable income
tax withholding.
 You have been paying applicable Social Security and Medicare taxes on your BEP-Savings Plan deferrals and Company match
during each payroll period. Therefore, we do not expect that there will be any additional Social Security and Medicare taxes due on the amount to be distributed to you. Federal, State and Local taxes will be withheld from the
distribution. 
 STOCK OPTIONS 

You have vested stock options that were granted under the 2001, 2006 and/or 2009 Stock Incentive Plans and you are not eligible for retiree treatment.
Consequently, you will have three (3) months from your date of termination to exercise your vested stock options. In addition, you have unvested stock options that were granted under the 2006 and/or 2009 Stock Incentive Plans that you held for
at least one year as of the date of your termination. If you sign and do not rescind the General Release, Zimmer will accelerate the vesting of these options and you will have three (3) months from your date of termination to exercise
these options. Any stock options that you do not exercise within three months of your termination date, including stock options that are not “in-the-money,” will expire. We are unable to extend this 90 day period of time. 

Please remember, even if you are no longer an employee, you may be prohibited from transacting in Zimmer stock during any Company blackout period. Please
plan accordingly. The current blackout period will run from Friday, March 15, 2013 through Friday, April 26, 2013. 
 RESTRICTED
STOCK UNIT AWARDS (RSUs) 
 With respect to RSUs granted prior to 2012, you will receive a pro-rata number (as applicable) of RSUs that you
have held for at least one year in accordance with the applicable Award Agreement(s). 
 Please note that the 2012 performance-based RSUs tied
to three-year iTSR performance will be cancelled. 
 Please contact Jan Zolman, Stock Option Administrator, at (574) 372-4185 if you have
any questions regarding your stock options or RSUs. 








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 CONFIDENTIALITY 
 You are reminded of the continuing nature of your obligation to maintain confidentiality and to not use any information concerning Zimmer’s business or affairs of any nature that is not otherwise a
matter of public record. This obligation, which you acknowledged and agreed to in the non-disclosure, non-competition and non-solicitation agreement that you signed, continues after the termination of your employment. This means, among other things,
that in addition to any restrictions already existing by law, you are contractually prohibited from disclosing or using Zimmer’s confidential, proprietary, and trade secret information. 
 Because you are a Named Executive Officer (an officer named in the Summary Compensation Table of Zimmer’s most recent proxy statement), the material terms of the enhanced severance benefit will be
described in a Form 8-K filed with the Securities and Exchange Commission within four business days of your execution of the General Release. 

NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION AGREEMENT 
 Given that your employment with Zimmer is terminating, we remind you of your continuing obligations under your non-disclosure, non-competition and non-solicitation agreement (“Agreement”) with
Zimmer. In the Agreement, you promised not to engage in certain competitive activities for the period set forth in the Agreement and not to disparage Zimmer. We request that you be mindful of your continuing obligations under the Agreement and that
you strictly comply with them. Please understand that if you do not comply fully with your legal obligations under the Agreement, Zimmer will take all necessary actions to enforce its legal rights, including the forfeiture or clawback of any option
and severance benefits. We trust, however, that you will honor your obligations under the Agreement and that no further action or communication on this subject will be necessary. 
 COMPANY PROPERTY 
 To the extent you still have in your possession or control any Zimmer
property or any materials (including, without limitation, documents, electronic data, computers, PDA’s, cell phones or files in your possession, or any copies thereof) containing any of Zimmer’s confidential, proprietary, or trade secret
information, please immediately deliver all such property to me or coordinate with me regarding the return of such materials. 
 You must also
delete any electronic confidential Zimmer information stored on your personal computer or other electronic device. 








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 SUMMARY 
 This letter is intended to summarize the benefits to which you may be entitled as a result of your separation from Zimmer. Your benefits are governed by the terms of each applicable plan document and/or
award agreement, and if there is a conflict, the terms of the plan document will control. For your reference, we have included a list of service providers and contact information for Zimmer benefit programs (Attachment V). 

Please note that the severance benefit should not be subject to Section 409A of the Internal Revenue Code of 1986, as amended. Zimmer does not
guarantee any tax consequences related to any benefit under severance or non-qualified plans. 








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 Please notify me promptly of any address changes, so that we can ensure that all communication and tax
information is directed to the correct address. If you have any questions concerning this letter or any of the arrangements surrounding your separation from the Company, please feel free to contact me. 

Sincerely, 
 /s/ Bill P. Fisher 

Bill P. Fisher 
 Senior Vice President, Global
Human Resources 
  

	cc:	Vice President, Global Compensation, Benefits and HRIS 

 Attachments: 
 Attachment I - General Release 

Attachment II - Vacation Pay Worksheet 

Attachment III - COBRA Rates 
 Attachment IV -
Excerpt from Life Insurance and AD&D Insurance Programs Summary Plan Description, Regarding Portability and Conversion 
 Attachment V -
Vendor Contact Information