AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 2003

REGISTRATION NO. 333-105561

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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ZIMMER HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)

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<Table>

DELAWARE 3842 13-4151777
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of Incorporation or Organization) Classification Code Number)
</Table>

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345 EAST MAIN STREET
WARSAW, INDIANA 46580
(574) 267-6131
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID C. DVORAK, ESQ.
ZIMMER HOLDINGS, INC.

345 EAST MAIN STREET

WARSAW, INDIANA 46580
(574) 267-6131
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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COPIES TO:
MORTON A. PIERCE, ESQ.

M. ADEL ASLANI-FAR, ESQ.

JACK S. BODNER, ESQ.

DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 259-8000

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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THE INFORMATION CONTAINED IN THIS PROSPECTUS MAY BE CHANGED. WE MAY NOT SELL
THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JUNE 13, 2003

Offer to Exchange

Each Outstanding Registered Share
of
CENTERPULSE AG
(Including registered shares represented by Centerpulse AG American Depositary
Shares)
for
3.68 Shares of Common Stock of Zimmer Holdings, Inc. and CHF 120
by
ZIMMER HOLDINGS, INC.

OUR OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 4:00 P.M., CENTRAL EUROPEAN
TIME, 10:00 A.M., NEW YORK CITY TIME, ON [--], AUGUST [--], 2003, UNLESS
EXTENDED. CENTERPULSE REGISTERED SHARES AND CENTERPULSE AMERICAN DEPOSITARY
SHARES TENDERED PURSUANT TO OUR OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION OF OUR OFFER.

We are offering to exchange (i) for each outstanding registered share of
Centerpulse AG, nominal value CHF 30 per share, that is validly tendered and not
properly withdrawn prior to the expiration of our offer, 3.68 shares of Zimmer
common stock, par value $0.01 per share, and CHF 120 in cash, without interest,
and (ii) for each outstanding Centerpulse American depositary share, or ADS,
that is validly tendered and not properly withdrawn prior to the expiration of
our offer, 0.368 of a share of Zimmer common stock and the U.S. dollar
equivalent of CHF 12 in cash, without interest, as more fully described in the
section captioned "OUR OFFER -- Terms of Our Offer; Expiration Date." Under
Swiss law, our offer is subject to a "cooling-off" period of 10 Swiss trading
days at the beginning of our offer during which tenders of Centerpulse
registered shares and Centerpulse ADSs will not be recognized as valid tenders
under our offer. Therefore, July [--], 2003 is the first date upon which tenders
of Centerpulse registered shares and Centerpulse ADSs will be recognized as
valid tenders under our offer.

You may elect to vary the proportion of shares of our common stock and cash
that you receive in our offer. Any election you make in our offer will be taken
together with elections made under a similar mix and match election feature
included in our offer for all of the outstanding bearer shares, nominal value
CHF 20 per share, of InCentive Capital AG, which we refer to as our InCentive
offer. The mix and match election you make will be limited to the extent other
holders of Centerpulse registered shares, including registered shares
represented by Centerpulse ADSs, or holders of InCentive bearer shares make
off-setting elections. Credit Suisse First Boston and Mellon Investor Services
LLC, whom we have appointed to act as the Swiss offer manager and U.S. exchange
agent, respectively, for our offer, will allocate the offer consideration among
holders of Centerpulse registered shares and Centerpulse ADSs based on the
off-setting elections made by other tendering securityholders in our offer and
our InCentive offer. To the extent that elections cannot be satisfied as a
result of the lack of such off-setting elections, entitlements to shares of
Zimmer common stock and cash in excess of the standard entitlement will be
reduced on a pro rata basis. Once the share allocations have been determined,
the cash element of the consideration will be reduced or increased, as the case
may be, for each holder of Centerpulse registered shares, including registered
shares represented by Centerpulse ADSs, who has been allocated an increased or
reduced number of shares of Zimmer common stock. We describe our procedures for
election and proration in the section captioned "OUR OFFER -- Mix and Match
Election."

The purpose of this offer is for Zimmer to acquire control of, and
ultimately the entire interest in, Centerpulse. Promptly following this offer,
if Zimmer acquires that number of Centerpulse registered shares, including
registered shares represented by Centerpulse ADSs, representing more than 98% of
the voting power of Centerpulse, Zimmer intends to request the cancellation of
the remaining share certificates in accordance with the compulsory process
available under applicable Swiss law.

We believe that our offer is more favorable to you than the exchange offer
commenced by Smith & Nephew Group plc for Centerpulse registered shares,
including registered shares represented by Centerpulse ADSs, on April 25, 2003.
Based on the closing price of our common stock on the New York Stock Exchange on
May 19, 2003 of US$48.28 and the noon buying rate for Swiss francs on such date
of CHF 1.2945 = US$1.00, our offer has an implied value of CHF 350 per
Centerpulse registered share. Based on the closing price of Smith & Nephew
ordinary shares on May 19, 2003 of [--], and the exchange rate for English
pounds on such date of L1.00 = CHF 2.1168, Smith & Nephew Group's offer for
Centerpulse registered shares has an implied value of CHF 293.02 per Centerpulse
registered share. Based on these closing prices and exchange rates, the implied
value of our offer represents a premium of approximately CHF 57 per Centerpulse
registered share, or approximately 19%, over the implied value of Smith & Nephew
Group's offer for Centerpulse registered shares. Based on the closing price of
our common stock on the New York Stock Exchange on June [--], 2003 of US$[--]
and the noon buying rate for Swiss francs on such date of CHF [--] = US$1.00,
our offer has an implied value of CHF [--] per Centerpulse registered share.
Based on the closing price of Smith & Nephew ordinary shares on June [--], 2003
of [--] and the exchange rate for English pounds on such date of L1.00 = CHF
[--], Smith & Nephew Group's offer for Centerpulse registered shares has an
implied value of CHF [--] per Centerpulse registered share. Based on these
closing prices and exchange rates, the implied value of our offer represents a
premium of approximately CHF [--] per Centerpulse registered share, or
approximately [--]%, over the implied value of Smith & Nephew Group's offer for
Centerpulse registered shares. You should be aware that the value of our offer
and Smith & Nephew Group's offer will fluctuate as the market price of our
common stock and Smith & Nephew ordinary shares change.

Our obligation to exchange shares of Zimmer common stock and cash for
Centerpulse registered shares, including registered shares represented by
Centerpulse ADSs, is subject to a number of conditions which are more fully
described in the section captioned "OUR OFFER -- Conditions of Our Offer,"
including among others, that Centerpulse registered shares, including
Centerpulse registered shares represented by Centerpulse ADSs, and Centerpulse
registered shares held by InCentive, if the InCentive offer has become
unconditional, representing at least 66 2/3% of the total number of Centerpulse
registered shares outstanding, including Centerpulse registered shares
represented by Centerpulse ADSs, on a fully diluted basis have been validly
tendered and not withdrawn.

Our common stock trades on the New York Stock Exchange under the symbol
"ZMH," Centerpulse ADSs trade on the New York Stock Exchange under the symbol
"CEP" and Centerpulse registered shares trade on the SWX Swiss Exchange under
the symbol "CEPN."

FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION
WITH OUR OFFER, PLEASE CAREFULLY READ THE SECTION CAPTIONED "RISK FACTORS"
BEGINNING ON PAGE [--].

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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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The Dealer Manager and Swiss Offer Manager for our offer is:

[CREDIT SUISSE/FIRST BOSTON LOGO]

The date of this prospectus is June [--], 2003

We have not authorized any person to provide any information or to make any
representation in connection with our offer other than the information contained
or incorporated by reference in this prospectus, and if any person provides any
of this information or makes any representation of this kind, that information
or representation must not be relied upon as having been authorized by us.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
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REGULATORY STATEMENT
Our offer is subject to the applicable laws of Switzerland, including the
Federal Act on Stock Exchanges and Securities Trading of Switzerland, and the
United States, including the tender offer rules applicable to equity securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
or Exchange Act. This offer document constitutes a prospectus under Section 5 of
the Securities Act of 1933, as amended, with respect to shares of common stock
to be issued under our offer.

We have filed with the SEC a registration statement on Form S-4, of which
this prospectus is a part. Upon commencement of our offer, we will file a Tender
Offer Statement on Schedule TO, together with exhibits, pursuant to Rule 14d-3
of the General Rules and Regulations under the Exchange Act, furnishing certain
additional information with respect to our offer. The registration statement on
Form S-4 and the Schedule TO and any amendments thereto, including exhibits, may
be examined and copies may be obtained from the offices of the SEC in the manner
set forth in the section captioned "WHERE YOU CAN FIND MORE INFORMATION."

Sales Restrictions in Certain Countries and Jurisdictions

The shares of Zimmer common stock described herein may not be offered or
sold in the United Kingdom, by means of this prospectus or any other document,
other than to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which will not result
in an offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995. THIS DOCUMENT IS IMPORTANT AND REQUIRES
YOUR IMMEDIATE ATTENTION. If you are in any doubt about the action you should
take, you are recommended immediately to seek your own personal financial advice
from your stockbroker, bank manager, solicitor, accountant or other independent
financial adviser duly authorized under the Financial Services & Markets Act
2000 if you are resident in the United Kingdom or, if not, another appropriately
authorized independent financial adviser.

The distribution of this prospectus and the making of our offer may, in
certain jurisdictions, be restricted by law. Our offer is not being made,
directly or indirectly, in or into, and will not be capable of acceptance from
within, any jurisdiction in which the making of our offer or the acceptance
thereof would not be in compliance with the laws of that jurisdiction. Persons
who come into possession of this prospectus should inform themselves of and
observe any of these restrictions. Any failure to comply with these restrictions
may constitute a violation of the securities laws of any of these jurisdictions.
We do not assume any responsibility for any violation by any person of any of
these restrictions. WE ARE NOT MAKING OUR OFFER IN OR INTO -- AND YOU MAY NOT
ACCEPT OUR OFFER IN OR FROM -- AUSTRALIA, CANADA OR JAPAN.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF US NOT CONTAINED IN THIS PROSPECTUS OR IN THE FORM
OF DECLARATION OF ACCEPTANCE AND ASSIGNMENT, THE ADS LETTER OF TRANSMITTAL OR
THE ADS NOTICE OF GUARANTEED DELIVERY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

TABLE OF CONTENTS

<Table>
<Caption>
PAGE
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QUESTIONS AND ANSWERS ABOUT THE
TRANSACTION........................ iii
WHERE YOU CAN FIND MORE INFORMATION.. ix
NOTE ON CENTERPULSE INFORMATION...... xi
SUMMARY.............................. 1
Reasons for Our Offer.............. 1
Our Offer.......................... 1
Risk Factors....................... 4
Indebtedness and the Financing of
Our Offer....................... 4
Comparison of Shareholder Rights... 5
Ownership of Zimmer After Our Offer
and Our InCentive Offer......... 5
The Companies...................... 5
COMPARATIVE MARKET PRICE DATA........ 6
COMPARATIVE HISTORICAL AND PRO FORMA
PER SHARE DATA..................... 7
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA OF ZIMMER........... 9
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA OF CENTERPULSE...... 11
SELECTED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA..................... 13
RISK FACTORS......................... 15
Risks Relating to Our Proposed
Offer........................... 15
Risks Relating to Our Industry..... 21
Risks Relating to Our Business..... 24
THE COMPANIES........................ 30
Zimmer Holdings, Inc. ............. 30
Centerpulse AG..................... 31
BACKGROUND AND REASONS FOR OUR
OFFER.............................. 35
Background of Our Offer............ 35
Reasons for Our Offer.............. 41
OUR OFFER............................ 45
Offer Documentation................ 45
Terms of Our Offer; Expiration
Date............................ 45
Mix and Match Election............. 46
Extension, Termination and
Amendment....................... 48
Subsequent Offering Period......... 48
Exchange of Centerpulse Registered
Shares and Centerpulse ADSs;
Delivery of Zimmer Common Stock
and Cash Consideration.......... 49
Cash Instead of Fractional Shares
of Zimmer Common Stock.......... 50
</Table>

<Table>
<Caption>
PAGE
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Cash Payments to Holders of
Centerpulse Registered Shares
and Centerpulse ADSs............ 50
Withdrawal Rights.................. 51
Procedures for Tendering
Centerpulse Registered Shares... 52
Procedures for Tendering
Centerpulse ADSs................ 54
Transfer and Withholding Taxes..... 57
Matters Concerning Validity and
Eligibility..................... 57
Announcement of Results of Our
Offer........................... 58
Ownership of Zimmer After Our Offer
and Our InCentive Offer......... 58
Currency Exchange Rates............ 58
Taxation........................... 58
Purpose of Our Offer; Plans For
Centerpulse..................... 67
Effect of Our Offer on the Market
For Centerpulse Registered
Shares and Centerpulse ADSs;
Registration Under The Exchange
Act............................. 68
Conditions of Our Offer............ 69
Certain Legal Matters; Regulatory
Approvals....................... 71
Actions of Zimmer Stockholders..... 74
Relationships with Centerpulse..... 74
Source and Amount of Funds......... 75
Fees and Expenses.................. 75
Accounting Treatment............... 76
Stock Exchange Listing............. 76
THE INCENTIVE OFFER.................. 77
Terms of Our InCentive Offer....... 77
Conditions of Our InCentive
Offer........................... 77
SMITH & NEPHEW GROUP OFFERS FOR
CENTERPULSE AND INCENTIVE.......... 79
Combination Agreement.............. 79
Transaction Agreement.............. 79
Tender Agreement................... 79
Commencement of Smith & Nephew
Group Offers.................... 80
MARKET PRICE AND DIVIDEND MATTERS.... 81
Market Price History............... 81
Dividend Information............... 81
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS...... 84
</Table>

<Table>
<Caption>
PAGE
----

DESCRIPTION OF ZIMMER CAPITAL
STOCK.............................. 105
Authorized Capital Stock........... 105
Common Stock....................... 105
Preferred Stock.................... 105
Certain Anti-Takeover Provisions of
Our Restated Certificate of
Incorporation and Restated
By-laws......................... 106
Rights Agreement................... 109
Delaware Business Combination
Statute......................... 112
Transfer Agent and Registrar....... 113
COMPARATIVE RIGHTS OF CENTERPULSE
SHAREHOLDERS AND ZIMMER
STOCKHOLDERS IN GENERAL............ 114
Authorized Capital Stock........... 114
Preferred Stock.................... 114
Voting Rights; Cumulative Voting... 115
Stock Class Rights................. 115
Supermajority Voting............... 116
Shares with Privileged Voting
Rights.......................... 117
Action Without a Meeting........... 117
Meetings........................... 118
Director Nominations/Shareholder
Proposals....................... 118
Directors.......................... 119
Standard of Conduct for
Directors....................... 119
Limitation of Director Liability... 120
</Table>

<Table>
<Caption>
PAGE
----

Directors' Conflicts of Interest... 120
Indemnification and Insurance...... 121
Shareholder Derivative Suits....... 122
Dividends.......................... 122
Appraisal Rights................... 123
Preemptive Rights.................. 123
Amendments to Charter Documents.... 124
By-laws............................ 124
Share Acquisition Provisions....... 125
Anti-Takeover Measures............. 125
Stockholder Rights Plan............ 126
Disclosure of Interests Under Swiss
Law............................. 126
Mandatory Bid Rules Under Swiss
Law............................. 126
Rights of Purchase and
Redemption...................... 127
Rights of Inspection............... 128
Limitations on Enforceability of
Civil Liabilities Under U.S.
Federal Securities Laws......... 128
"Short Swing" Profits.............. 129
Proxy Statements and Reports....... 129
Reporting Requirements............. 130
FORWARD-LOOKING STATEMENTS........... 131
LEGAL MATTERS........................ 131
EXPERTS.............................. 131
INDEX TO FINANCIAL STATEMENTS........ F-1
</Table>

Schedule I -- Information Concerning the Directors and Executive Officers of
Zimmer Holdings, Inc.
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All references to "dollars," "US$" or "$" in this prospectus are to United
States dollars, and all references to "CHF" are to Swiss francs. The noon buying
rate in New York City for cable transfers in foreign currencies, as certified
for customs purposes by the Federal Reserve Bank of New York on June [--], 2003
was CHF [--] = US$1.00. All references to "U.S." in this prospectus are to the
United States of America.

Where a time is stated in this prospectus, it is generally given in Central
European time and the local time in New York City. At the date of this
prospectus, New York City time is 6 hours behind Central European time.

All references to "Swiss trading day" mean a day on which the SWX Swiss
Exchange is open for trading. For purposes of our offer, a "business day" means
any day other than a Saturday, Sunday or federal holiday and consists of the
time period from 12:01 a.m. through 12:00 midnight, New York City time.

THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT ZIMMER HOLDINGS, INC. AND CENTERPULSE AG FROM DOCUMENTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, OR SEC, THAT HAVE NOT BEEN INCLUDED IN OR
DELIVERED WITH THIS PROSPECTUS. THIS INFORMATION IS AVAILABLE AT THE INTERNET
WEBSITE THE SEC MAINTAINS AT http://www.sec.gov, AS WELL AS FROM OTHER SOURCES.
SEE THE SECTION CAPTIONED "WHERE YOU CAN FIND MORE INFORMATION."

YOU ALSO MAY REQUEST COPIES OF THESE DOCUMENTS FROM US, WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST TO OUR INFORMATION AGENT AT ITS ADDRESS OR
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS. IN ORDER TO
RECEIVE TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST MAKE YOUR REQUEST NO LATER
THAN AUGUST [--], 2003.

QUESTIONS AND ANSWERS ABOUT THE TRANSACTION

The following are some of the questions that you as a holder of Centerpulse
registered shares or Centerpulse ADSs may have regarding our offer and answers
to those questions. The information in this summary is not complete and we urge
you to read carefully the remainder of this prospectus and the accompanying Form
of Declaration of Acceptance and Assignment, which we are sending to holders of
Centerpulse registered shares, or ADS Letter of Transmittal, which we are
sending to holders of Centerpulse ADSs.

WHAT IS ZIMMER'S PROPOSED TRANSACTION?

Pursuant to the filing of the registration statement on Form S-4, of which
this prospectus is a part, with the SEC, we are offering to acquire all of the
outstanding Centerpulse registered shares, including registered shares
represented by Centerpulse ADSs, in exchange for shares of Zimmer common stock
and cash. As of April 22, 2003, there were 11,909,313 Centerpulse registered
shares outstanding.

WHAT WILL I RECEIVE IN EXCHANGE FOR MY CENTERPULSE REGISTERED SHARES OR
CENTERPULSE ADSS?

In exchange for each Centerpulse registered share you validly tender and do
not withdraw before the expiration of our offer, and in the absence of a mix and
match election as described in this prospectus, you will receive 3.68 shares of
Zimmer common stock and CHF 120 in cash, without interest. In exchange for each
Centerpulse ADS you validly tender and do not withdraw before the expiration of
our offer, you will receive 0.368 of a share of Zimmer common stock and the U.S.
dollar equivalent of CHF 12 in cash, without interest. If you are a holder of
Centerpulse ADSs, we will convert the Swiss franc sum into U.S. dollars using
the noon buying rate, as published by the Federal Reserve Bank of New York, on
the day on which the funds are made available by Zimmer to the U.S. exchange
agent. Ten Centerpulse ADSs are equivalent to one Centerpulse registered share.
In addition, you will receive cash instead of any fractional shares of Zimmer
common stock to which you may be entitled.

WHAT IS THE PER SHARE VALUE AND PREMIUM IMPLIED BY THIS OFFER?

Based on the exchange ratio of 3.68 shares of Zimmer common stock per
Centerpulse registered share, the closing price of our common stock on the New
York Stock Exchange on May 19, 2003 (the last trading day prior to the
announcement our intention to make this offer) of US$48.28 per share and the
noon buying rate for U.S. dollars on such date of CHF 1.2945 = US$1.00, the
consideration currently being offered by us, including the cash portion of CHF
120 per Centerpulse registered share, implies a per share value for Centerpulse
registered shares of CHF 350, which is a 26% premium over the closing price of
Centerpulse registered shares on March 19, 2003 (the date immediately prior to
Smith & Nephew Group's announcement of its intention to make its offer) of CHF
282 and a 19.9% premium over the closing price of Centerpulse registered shares
on the SWX Swiss Exchange on May 19, 2003 of CHF 292. Based on the closing price
of our common stock on the New York Stock Exchange on June [--], 2003 of US$[--]
and the noon buying rate for Swiss francs on such date of CHF [--] = US$1.00,
the consideration currently being offered by us, including the cash portion,
implies a per share value for Centerpulse registered shares of CHF [--], which
is a [--]% premium over the closing price of Centerpulse registered shares on
March 19, 2003 (the date immediately prior to Smith & Nephew Group's
announcement of its intention to make its offer).

WHY IS ZIMMER'S OFFER SUPERIOR TO THE OFFER MADE BY SMITH & NEPHEW GROUP?
We believe that our offer is superior to Smith & Nephew Group's offer for
the following reasons:

Premium Over the Smith & Nephew Group Offer. As noted above, as of May 19,
2003, our offer implies a per share value for Centerpulse registered shares of
CHF 350, which value represents a 19.4% premium over the per share value for
Centerpulse registered shares implied by Smith & Nephew Group's offer on such
date of CHF 293.02. The value implied by Smith & Nephew Group's offer was
calculated based on the offer price of 25.15 Smith & Nephew Group ordinary
shares and CHF 73.42 for each Centerpulse registered share, the closing price of
Smith & Nephew Group ordinary shares on May 19, 2003 and June [--], 2003 of [--]
and [--] per share, as reported on the London Stock Exchange, and the exchange
rate for English pounds on such dates of L1.00 = CHF 2.1168 and L1.00 = CHF
[--]. As of June [--], 2003, our offer implies a per share value for Centerpulse
registered shares of CHF [--], which value represents a [--]% premium over the
per share value for Centerpulse registered shares implied by Smith & Nephew
Group's offer on such date of CHF [--].

Complementary Businesses and Assets. Consolidation of efforts in the
spinal segment and Europe should allow us to capitalize on high growth
opportunities. We believe that the combination of the diverse
iii

technological resources of Zimmer and Centerpulse will advance Zimmer's
development of new materials, products and procedures through scale with
increased functionality. The combination of Zimmer's and Centerpulse's research
and development, sales/distribution, marketing and financial resources and
compatible cultures is expected to create a business platform upon which new
orthopaedic devices can be brought to the market on a more expedited basis and
at lower cost. In addition, we believe that the business combination provides
Zimmer with a unique opportunity to leverage Centerpulse's product lines and
diversify into dental products.

Financial Performance. We believe that the combination of Zimmer and
Centerpulse will (i) generate approximately US$70 to US$90 million in annual
operational efficiencies and cost savings by 2006 and (ii) be accretive in 2004
to the consensus earnings per share estimate of US$1.91 as of June 13, 2003,
excluding one-time transaction and integration costs. We believe that the
strategic compatibility of the products and technologies of Zimmer and
Centerpulse will provide the combined company with significant earnings power
and a strong platform from which it can actively pursue future growth
opportunities in future technologies such as minimally invasive computer
assisted surgery and alternate materials, as well as biologics.

Global Scale and Increased Geographic Market of Our Products. The
combination of Zimmer and Centerpulse is expected to significantly expand
Zimmer's global reach and enhance its market-leading position in reconstructive
implants, spine, trauma and dental products. We believe that, to the extent the
existing customer relationships of the two companies can be leveraged for the
benefit of the combined company, the combination will create the opportunity for
deeper market and customer penetration in Europe where Zimmer had less than 15%
of 2002 sales. The companies have insignificant overlap in virtually all key
geographic segments on a by-country basis and have corresponding strengths in
each geographic segment.

Stock Performance. We believe that a combination of Zimmer and Centerpulse
has significant beneficial long-term growth prospects, which will maximize
shareholder value. For the past 20 months, our common stock has consistently
outperformed the FTSE 100, S&P 500 and an orthopaedics index comprised of
Synthes-Stratec, Inc., Biomet, Inc., Johnson & Johnson, Medtronic, Inc. and
Stryker Corp. Between January 1, 2002 and June [ -- ], 2003, the per share price
of our common stock has increased approximately [ -- ]% and outperformed Smith &
Nephew and the orthopaedic index by approximately [ -- ]% and [ -- ]%,
respectively.

ARE YOU ALSO MAKING AN OFFER FOR INCENTIVE SHARES?

Yes, we are making a separate exchange offer for all of the outstanding
bearer shares, nominal value CHF 20 per share, of InCentive. As of April 22,
2003, InCentive beneficially owned 2,237,577 Centerpulse registered shares
representing approximately 18.9% of the outstanding Centerpulse registered
shares, including registered shares represented by Centerpulse ADSs, as of such
date. Our InCentive offer is described more fully in this prospectus in the
section captioned, "THE INCENTIVE OFFER."

CAN YOU INCREASE THE CONSIDERATION BEING OFFERED IN YOUR OFFER FOR OUR
REGISTERED SHARES OR ADSS?

There is a possibility that other bidders will choose to commence offers
for Centerpulse registered shares and/or Centerpulse ADSs or that Smith & Nephew
will choose to increase the consideration offered for Centerpulse registered
shares and Centerpulse ADSs. If this occurs, we, in our sole discretion, may
choose to increase the amount of shares of Zimmer common stock and/or cash to be
exchanged for each Centerpulse registered share and Centerpulse ADS in our offer
so that its value is equal to or greater than the highest price per share then
being offered by other bidders, and, in that case, and subject to the Swiss
Takeover Board's approval, we will extend our offer in compliance with
applicable U.S. and Swiss securities laws so that you will receive the increased
amount of shares of Zimmer common stock and/or cash in exchange for your
Centerpulse registered shares or Centerpulse ADSs.

WHAT IF I WANT TO RECEIVE MORE SHARES OF ZIMMER COMMON STOCK AND LESS CASH, OR
MORE CASH AND FEWER SHARES OF ZIMMER COMMON STOCK FOR MY CENTERPULSE REGISTERED
SHARES OR CENTERPULSE ADSS?

This election is described more fully in the section captioned, "OUR
OFFER -- Mix and Match Election." Any securityholder who wishes to elect to
receive a higher proportion of cash or shares of Zimmer common stock should
carefully read and comply with the instructions in the accompanying Form of
Declaration of Acceptance and Assignment or ADS Letter of Transmittal, as
applicable.

WILL I BE TAXED ON THE ZIMMER COMMON STOCK AND CASH I RECEIVE?

U.S. Federal Income Tax. The receipt of Zimmer common stock and/or cash by
a U.S. holder in exchange for its Centerpulse registered shares or Centerpulse
ADSs pursuant to our offer will be a taxable transaction for U.S. federal income
tax purposes. The receipt of Zimmer common stock and/or cash by a non-U.S.
holder in exchange for its Centerpulse registered shares or Centerpulse ADSs
pursuant to our offer generally will not be subject to U.S. federal income tax.

Swiss Income Tax. The receipt of Zimmer common stock and/or cash by a
Swiss holder in exchange for its Centerpulse registered shares or Centerpulse
ADSs pursuant to our offer will be a taxable transaction for Swiss income tax
purposes. However, if a Swiss holder is an individual who holds Centerpulse
registered shares or Centerpulse ADSs as a private asset, the receipt of Zimmer
common stock and/or cash for Centerpulse registered shares or Centerpulse ADSs
pursuant to our offer will not be subject to Swiss income tax. The receipt of
Zimmer common stock and/or cash by a non-Swiss holder in exchange for its
Centerpulse registered shares or Centerpulse ADSs pursuant to our offer
generally will not be subject to Swiss income tax.

U.K. Tax on Capital Gains. In general, a U.K. holder that receives Zimmer
common stock and/or cash from Zimmer pursuant to our offer will not recognize a
chargeable gain or allowable loss for U.K. tax purposes, except to the extent of
the cash. With respect to any U.K. holder that owns (either alone or together
with parties connected with such holder) more than 5% of Centerpulse's shares
(including shares in ADS form), application for clearance from the U.K. Inland
Revenue under Section 138 of the Taxation of Chargeable Gains Act 1992 has been
made to secure this treatment for such a U.K. holder. The receipt of Zimmer
common stock and/or cash by a non-U.K. holder in exchange for its Centerpulse
registered shares or Centerpulse ADSs pursuant to our offer generally will not
be subject to U.K. tax on capital gains.

For a more detailed discussion of material U.S. federal, Swiss and U.K. tax
consequences of our offer, see the section captioned "OUR OFFER -- Taxation."

BECAUSE TAX MATTERS ARE COMPLICATED, WE URGE YOU TO CONTACT YOUR OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU OF OUR OFFER.

WHAT IS THE MINIMUM CONDITION TO YOUR OFFER?

Our offer is subject to a number of conditions, including among others, a
minimum condition that Centerpulse registered shares, including Centerpulse
registered shares represented by Centerpulse ADSs, and Centerpulse registered
shares held by InCentive, if the InCentive offer has become unconditional,
representing at least 66 2/3% of the outstanding Centerpulse registered shares
on a fully diluted basis have been validly tendered and not withdrawn. Based on
11,909,313 Centerpulse registered shares outstanding as of April 22, 2003 and
options to purchase 422,425 Centerpulse registered shares outstanding as of
December 31, 2002, our acquisition of 8,221,570 Centerpulse registered shares
would satisfy the minimum condition. For a complete discussion of the conditions
of our offer, see the section captioned "OUR OFFER -- Conditions of Our Offer."

IS ZIMMER'S FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN YOUR OFFER?
Yes. Centerpulse registered shares and Centerpulse ADSs accepted in our
offer will be exchanged for shares of Zimmer common stock and cash. You should
consider Zimmer's financial condition before you decide to become one of
Zimmer's stockholders through our offer. You also should consider the likely
result Zimmer's acquisition of Centerpulse will have on Zimmer's financial
condition.
WHAT PERCENTAGE OF YOUR SHARES WILL HOLDERS OF CENTERPULSE REGISTERED SHARES AND
CENTERPULSE ADSS OWN AFTER YOUR OFFER?

If we exchange all of the Centerpulse registered shares, including
registered shares represented by Centerpulse ADSs, reported to be outstanding on
April 22, 2003, former holders of Centerpulse registered shares and Centerpulse
ADSs would own in the aggregate approximately 18% of the outstanding shares of
Zimmer common stock.

HAS YOUR OFFER BEEN APPROVED BY CENTERPULSE'S BOARD OF DIRECTORS?

Our offer is being made without the prior approval of Centerpulse's board
of directors and is not conditioned upon the receipt of the approval of
Centerpulse's board of directors. However, it is our objective to complete a
friendly transaction that has the support of Centerpulse's board of directors.
Nevertheless, under the terms of Smith & Nephew Group's offer for Centerpulse,
holders of Centerpulse registered shares and Centerpulse ADSs are permitted to
withdraw their Centerpulse registered shares and Centerpulse ADSs tendered into
Smith & Nephew Group's offer and tender their Centerpulse registered shares and
Centerpulse ADSs into our offer.

HAS YOUR INCENTIVE OFFER BEEN APPROVED BY INCENTIVE'S BOARD OF DIRECTORS?

Our InCentive offer is being made without the prior approval of InCentive's
board of directors. However, our InCentive offer is conditioned on, among other
things, our entering into an agreement with the four principal shareholders of
InCentive containing terms and conditions that are substantially similar to
their agreement with Smith & Nephew Group and Smith & Nephew relating to Smith &
Nephew Group's offer and an agreement with InCentive containing terms and
conditions that are substantially similar to InCentive's transaction agreement
with Smith & Nephew Group and Smith & Nephew, as described in the sections
captioned "THE INCENTIVE OFFER -- Conditions of Our InCentive Offer" and "SMITH
& NEPHEW OFFERS FOR CENTERPULSE AND INCENTIVE." Nevertheless, under the terms of
Smith & Nephew Group's offer, InCentive shareholders are permitted to withdraw
their InCentive bearer shares tendered into Smith & Nephew Group's offer and
tender their InCentive bearer shares into our InCentive offer.

WHEN CAN I TENDER MY CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS?

HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN YOUR OFFER?

You will have at least until 4:00 p.m., Central European time, 10:00 a.m.,
New York City time, on [--], August [--], 2003, to decide whether to tender your
Centerpulse registered shares and Centerpulse ADSs pursuant to our offer unless
we shall have extended the period of time for which our offer is open. When we
make reference to the "expiration of our offer" anywhere in this prospectus,
this is the time we are referring to, including, when applicable, any extension
period that may apply.

UNDER WHAT CIRCUMSTANCES CAN YOUR OFFER BE EXTENDED?
We reserve the right, subject to applicable law, to extend the period of
time during which our offer remains open if the conditions to our offer have not
been satisfied.
HOW WILL I BE NOTIFIED IF YOUR OFFER IS EXTENDED?

If we extend our offer, we will inform Credit Suisse First Boston, the
Swiss offer manager, and Mellon Investor Services LLC, the U.S. exchange agent,
of that fact and will make a public announcement of the extension no later than
the fourth Swiss trading day following the day on which our offer was previously
scheduled to expire.

I AM A REGISTERED HOLDER OF CENTERPULSE REGISTERED SHARES. HOW DO I PARTICIPATE
IN ZIMMER'S OFFER?
If you are a Centerpulse shareholder who holds certificates representing
Centerpulse registered shares and you wish to accept our offer, you must
complete, sign and return the enclosed Form of Declaration of Acceptance and
Assignment. The Form of Declaration of Acceptance and Assignment and your share
certificates must be returned to your bank, broker or custodian before the
expiration of our offer.
I HOLD CENTERPULSE REGISTERED SHARES IN BOOK-ENTRY FORM. HOW DO I PARTICIPATE IN
ZIMMER'S OFFER?

If you hold your Centerpulse registered shares in book-entry form, instruct
the bank, broker or custodian through which you hold your Centerpulse registered
shares to arrange, before the expiration of our offer, for the book-entry
transfer of your Centerpulse registered shares into the Swiss offer manager's
account at SIS SegainterSettle AG, or SIS, and deliver a message to the Swiss
offer manager via SIS's book-entry confirmation system confirming that you have
received and agree to be bound by the terms of our offer. The bank, broker or
custodian through which you hold your Centerpulse registered shares will provide
you with a form which can be used to instruct them to tender your Centerpulse
registered shares.

I HOLD CENTERPULSE REGISTERED SHARES THROUGH A NOMINEE. HOW DO I PARTICIPATE IN
ZIMMER'S OFFER?

If your Centerpulse registered shares are registered in the name of a
nominee, such as a bank, broker or custodian, and you wish to accept our offer,
you have to make such acceptance in accordance with the nominee's instructions.
Zimmer will not send you any documents relating to our offer directly.

I HOLD CERTIFICATES FOR CENTERPULSE ADSs. HOW DO I PARTICIPATE IN ZIMMER'S
OFFER?
If you hold American depositary receipts, or ADRs, representing Centerpulse
ADSs and you wish to accept our offer, you must complete and sign the enclosed
ADS Letter of Transmittal and deliver it, together with the American depositary
receipts representing your Centerpulse ADSs, and any other required documents,
to Mellon Investor Services LLC, the U.S. exchange agent for our offer, at one
of the addresses set forth in the ADS Letter of Transmittal before the
expiration of our offer.
I HOLD CENTERPULSE ADSs IN BOOK-ENTRY FORM. HOW DO I PARTICIPATE IN ZIMMER'S
OFFER?
If you hold your Centerpulse ADSs in book-entry form, instruct the bank,
broker or custodian through which you hold your Centerpulse ADSs to arrange,
before the expiration of our offer, for the book-entry transfer of your
Centerpulse ADSs into the U.S. exchange agent's account at The Depository Trust
Company, or DTC, and deliver a message to the U.S. exchange agent via DTC's
book-entry confirmation system confirming that you have received and agree to be
bound by the terms of our offer. The bank, broker or custodian through which you
hold your Centerpulse ADSs will provide you with a form which can be used to
instruct them to tender your Centerpulse ADSs.
IF THE ADR CERTIFICATES EVIDENCING MY CENTERPULSE ADSS ARE NOT IMMEDIATELY
AVAILABLE, IF THE PROCEDURES FOR BOOK-ENTRY TRANSFER CANNOT BE COMPLETED ON A
TIMELY BASIS OR IF TIME WILL NOT PERMIT ALL REQUIRED DOCUMENTS TO REACH THE U.S.
EXCHANGE AGENT PRIOR TO THE EXPIRATION OF ZIMMER'S OFFER, MAY I STILL
PARTICIPATE IN ZIMMER'S OFFER?
Yes. In these circumstances you may still tender your Centerpulse ADSs in
our offer using the guaranteed delivery procedures described in this prospectus.
Guaranteed delivery procedures cannot be used to tender Centerpulse registered
shares in our offer.
I HOLD OPTIONS ISSUED BY CENTERPULSE UNDER A CENTERPULSE STOCK OPTION PLAN. HOW
DO I PARTICIPATE IN YOUR OFFER?
If you are a holder of options issued by Centerpulse under any of its stock
option plans, you only may accept our offer if you exercise those options in
accordance with their terms and tender into our offer before the expiration of
our offer for the Centerpulse registered shares or Centerpulse ADSs received by
you upon exercise of your options.
UNTIL WHAT TIME CAN I WITHDRAW CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS
PREVIOUSLY TENDERED TO ZIMMER?

You can withdraw previously tendered Centerpulse registered shares or
Centerpulse ADSs at any time during our initial offer period and the period
during which our offer is extended, and if we have not agreed to accept your
Centerpulse registered shares or Centerpulse ADSs and exchange them for shares
of Zimmer common stock and cash by [--] [--], 2003, you can withdraw them at any
time until we do accept your Centerpulse registered shares or Centerpulse ADSs,
as the case may be.

HOW DO I WITHDRAW CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS PREVIOUSLY
TENDERED TO ZIMMER?

To withdraw Centerpulse registered shares or Centerpulse ADSs, you must
deliver a written or facsimile notice of withdrawal with the required
information to your bank, broker or custodian if you are a holder of Centerpulse
registered shares, or the U.S. exchange agent or your broker or nominee, as the
case may be, if you are a holder of Centerpulse ADSs, while you still have the
right to withdraw your Centerpulse registered shares or Centerpulse ADSs, as the
case may be.

CAN I TENDER MY CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSs AFTER YOUR
OFFER EXPIRES?
If all of the conditions to our offer are satisfied or waived, and we
accept for exchange Centerpulse registered shares and Centerpulse ADSs tendered
pursuant to our offer, holders of Centerpulse registered shares and Centerpulse
ADSs who do not accept our offer prior to its expiration will have an
opportunity to accept our offer on the same terms during a ten Swiss trading day
period beginning after the announcement that our offer will be consummated.
There will be no withdrawal rights during this subsequent offering period.

vii

WILL CENTERPULSE CONTINUE AS A PUBLIC COMPANY?
Following the exchange of Centerpulse registered shares and Centerpulse
ADSs pursuant to our offer, to the extent permitted by applicable laws and rules
of the relevant exchange, we intend to seek to delist Centerpulse registered
shares from the SWX Swiss Exchange and Centerpulse ADSs from the New York Stock
Exchange.
IF I DECIDE NOT TO TENDER, HOW WILL YOUR OFFER AFFECT THE CENTERPULSE REGISTERED
SHARES OR CENTERPULSE ADSs?
The exchange of Centerpulse registered shares and Centerpulse ADSs pursuant
to our offer will substantially reduce the number of Centerpulse registered
shares and Centerpulse ADSs that might otherwise trade and will reduce the
number of holders of both the Centerpulse registered shares and Centerpulse
ADSs. The reduction in publicly traded Centerpulse registered shares and
Centerpulse ADSs will adversely affect liquidity and may adversely affect market
values of the Centerpulse registered shares and Centerpulse ADSs. Holders of
Centerpulse registered shares and Centerpulse ADSs do not have appraisal rights
in connection with our offer.

WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?

Zimmer will pay or reimburse any applicable Swiss federal securities
transfer tax payable with respect to the exchange of Centerpulse registered
shares or Centerpulse ADSs pursuant to our offer. Holders of Centerpulse
registered shares and Centerpulse ADSs will bear all costs and expenses
associated with any deposit or withdrawal of Centerpulse registered shares with
Deutsche Bank Trust Company Americas, as depositary. If you are the record owner
of your Centerpulse registered shares or Centerpulse ADSs and you tender your
registered shares or ADSs to us in our offer, you will not have to pay brokerage
fees or similar expenses. If you own your registered shares or ADSs through a
bank, broker or custodian, you should consult your bank, broker or custodian to
determine whether any charges will apply.

WHOM CAN I TALK TO IF I HAVE QUESTIONS ABOUT YOUR OFFER?

If you are a holder of Centerpulse registered shares, you can submit your
questions to Credit Suisse First Boston, the Swiss offer manager, either in
writing at its address set forth on the back cover of this prospectus or via
e-mail at equity.prospectus@csfb.com. In the alternative, you can call your
bank, broker or custodian. If you are a holder of Centerpulse ADSs, you can call
either Innisfree M&A Incorporated, the information agent, toll free at (877)
750-5836 or Credit Suisse First Boston LLC, the dealer manager in the United
States, toll free at (800) 881-8320.

WHERE CAN I FIND MORE INFORMATION ON YOU?
You can find more information about us from various sources described in
the section captioned "WHERE YOU CAN FIND MORE INFORMATION."

viii

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. Centerpulse files annual and current reports with the
SEC. You may read and copy any reports, statements or other information that we
and Centerpulse file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information regarding the public reference room. Zimmer's and Centerpulse's
public filings also are available to the public from commercial document
retrieval services and at the Internet website maintained by the SEC at
http://www.sec.gov.

We have filed a registration statement on Form S-4 to register with the SEC
the offering and sale of our shares to be issued to holders of Centerpulse
registered shares and Centerpulse ADSs pursuant to our offer. This prospectus is
a part of that registration statement. As allowed by SEC rules, this prospectus
does not contain all of the information that you can find in the registration
statement or the exhibits to the registration statement.

The SEC allows us to incorporate information into this prospectus "by
reference," which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that
Zimmer and Centerpulse have previously filed with the SEC. These documents
contain important information about Zimmer and Centerpulse and their financial
condition.

ZIMMER FILINGS (FILE NO. 001-16407):

- Annual Report on Form 10-K for the fiscal year ended December 31, 2002,
filed on March 12, 2003;

- Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2003, filed on May 13, 2003;

- Current Report on Form 8-K, filed on April 23, 2003;

- The description of our common stock set forth in our Registration
Statement on Form 10 filed on March 26, 2001, including all amendments
and reports filed for the purpose of updating such description; and

- The description of our preferred stock purchase rights set forth in our
Registration Statement on Form 10 filed on March 26, 2001, including all
amendments and reports filed for the purpose of updating such
description.

CENTERPULSE FILINGS (FILE NO. 001-14654):

- Annual Report on Form 20-F for the fiscal year ended December 31, 2002,
filed on April 25, 2003 (except for the report of Centerpulse's
independent public accountants contained therein which is not
incorporated herein by reference because the consent of Centerpulse's
independent public accountants has not yet been obtained nor has
exemptive relief under Rule 437, promulgated under the Securities Act of
1933, as amended, been granted to us by the SEC);

- Report by Foreign Issuer on Form 6-K, filed on May 30, 2003;

- Amendment to Report by Foreign Issuer on Form 6-K, filed on May 22, 2003;

- Report by Foreign Issuer on Form 6-K, filed on May 14, 2003;

- Report by Foreign Issuer on Form 6-K, filed on March 31, 2003;

- Report by Foreign Issuer on Form 6-K, filed on March 28, 2003;

- Report by Foreign Issuer on Form 6-K, filed on March 25, 2003;

- Report by Foreign Issuer on Form 6-K, filed on February 12, 2003;

- Report by Foreign Issuer on Form 6-K, for fiscal quarter ended December
31, 2002, filed on February 7, 2003;

- The description of the Centerpulse American depositary receipts set forth
in Centerpulse's Registration Statement on Form F-6, filed on January 28,
2003;

- Report by Foreign Issuer on Form 6-K, filed on January 23, 2003; and

- The description of the Centerpulse registered shares set forth in Sulzer
Medica AG's (Centerpulse's previous name) Registration Statement on Form
8-A, filed on June 18, 1997, including all amendments and reports filed
for the purpose of updating such description.

We hereby incorporate by reference additional documents that either we or
Centerpulse may file with the SEC between the date of this prospectus and the
expiration date of our offer (or the date that our offer is terminated). These
include, but are not limited to, periodic reports, such as annual reports on
Form 10-K or 20-F, quarterly reports on Form 10-Q, current reports on Form 8-K
and Reports by Foreign Issuer on Form 6-K, as well as proxy statements.

You may obtain any of these documents upon request to the information agent
at its address set forth on the back cover of this prospectus or from the SEC at
the SEC's Internet website described above.

IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE CONTACT THE
INFORMATION AGENT NO LATER THAN AUGUST [--], 2003 TO RECEIVE THEM BEFORE THE
EXPIRATION DATE OF OUR OFFER. If you request any incorporated documents, the
information agent will mail them to you by first-class mail, or other equally
prompt means, within one U.S. business day of receipt of your request.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN MAKING YOUR DECISION WHETHER TO TENDER YOUR
CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS INTO OUR OFFER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT DIFFERS FROM THAT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS DATED JUNE [--], 2003. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE
AS OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROSPECTUS
TO SHAREHOLDERS NOR THE ISSUANCE OF SHARES OF ZIMMER COMMON STOCK IN OUR OFFER
SHALL CREATE ANY IMPLICATION TO THE CONTRARY.

NOTE ON CENTERPULSE INFORMATION

CENTERPULSE AG

In respect of information relating to Centerpulse's business, operations
and management presented in, or omitted from, this prospectus, we have relied
upon publicly available information, including information publicly filed by
Centerpulse with the SEC, and documentation provided to us by Centerpulse over
the course of our due diligence review of Centerpulse. Information publicly
filed by Centerpulse may be examined and copies may be obtained at the places
and in the manner set forth in the section captioned "WHERE YOU CAN FIND MORE
INFORMATION." However, Centerpulse has omitted from the due diligence materials
provided to us all the financial information necessary for us to fully assess
the financial condition of Centerpulse. To date, Centerpulse has not cooperated
with us in, and has not been involved in, the preparation of this prospectus,
has not verified the information contained in this prospectus relating to
Centerpulse, provided our representatives only limited access to Centerpulse's
accounting records and has not permitted its independent public accountants to
provide us with all of the information we require, including an independent
public accountants' consent. Although we have no knowledge that would indicate
that any statements contained herein regarding Centerpulse's financial condition
based upon such publicly filed reports and documents are inaccurate, incomplete
or untrue, we were not involved in the preparation of such information and
statements. As a result, we have made adjustments and assumptions in preparing
the pro forma financial information presented in this prospectus which have
necessarily involved our estimates with respect to Centerpulse's financial
information. Any financial information regarding Centerpulse that may be
detrimental to us following our acquisitions of Centerpulse and InCentive that
has not been publicly disclosed by Centerpulse, or errors in our estimates due
to the lack of cooperation from Centerpulse, may have an adverse effect on the
benefits we expect to achieve through the consummation of our offer.

As discussed above, Centerpulse's historical consolidated financial
statements are prepared in accordance with IFRS, which differ, in certain
material respects from U.S. GAAP. Assuming a minimum of 66.7% of the outstanding
registered shares of Centerpulse are tendered for Zimmer common shares, on a
going forward basis, all former Centerpulse shareholders will receive financial
information of the combined group stated in accordance with U.S. GAAP.
Significant differences between IFRS and U.S. GAAP include, among others:

- IFRS requires goodwill and intangible assets to be amortized over their
estimated useful lives while U.S. GAAP only requires the amortization of
finite lived intangible assets. U.S. GAAP requires goodwill and other
indefinite lived intangible assets to be carried at cost without being
amortized and requires an impairment test to be performed on an annual
basis, with any impairment being immediately recognized as an expense.

- IFRS requires the amount of "in-process research and development"
included in the purchase price of acquisitions to be considered a form of
goodwill which is amortized over its estimated useful life. U.S. GAAP
requires the entire amount of "in-process research and development" to be
expensed at the acquisition date.

- IFRS allows the reversal of previously recorded investment impairments
upon subsequent recovery in fair value of the asset. U.S. GAAP does not
allow reversal of previously recorded impairment losses.

- IFRS requires an impairment test to be performed for over funded pension
plans. U.S. GAAP does not permit an impairment to be recorded for over
funded pension plans.

- IFRS does not require expense recognition for repricing of fixed stock
option awards while U.S. GAAP requires that certain modifications to
fixed stock option awards result in variable accounting, resulting in
compensation expense, from the date of the modification to the exercise
date.

Pursuant to Rule 409 promulgated under the Securities Act of 1933, as
amended, referred to as the Securities Act, we requested that Centerpulse and
its independent public accountants provide us with the

information that we require to furnish complete disclosure regarding the
business, operations, financial condition and management of Centerpulse.
Centerpulse responded by providing us with documents for our due diligence
review which omitted the accounting records necessary for us to fully assess the
financial condition of Centerpulse. In addition, pursuant to Rule 437
promulgated under the Securities Act, we have requested that (i) Centerpulse
cooperate in obtaining the consent of its independent public accountants, and
(ii) Centerpulse's independent public accountants provide us with their consent
required for us to incorporate by reference into this prospectus their audit
report included in Centerpulse's Annual Report on Form 20-F for the fiscal year
ended December 31, 2002. Upon our obtaining from Centerpulse or its independent
public accountants the information necessary to enable us to more fully comply
with the disclosure requirements of Form S-4, we will file an amendment to the
registration statement, of which this prospectus is a part, to include such
additional information regarding Centerpulse that we deem material, reliable and
appropriate.

xii

SUMMARY
This summary highlights selected information from this prospectus, and may
not contain all of the information that is important to you. To better
understand our offer to holders of Centerpulse registered shares and Centerpulse
ADSs, you should read this entire prospectus carefully, as well as those
additional documents to which we refer you. You may obtain the information
incorporated by reference into this prospectus by following the instructions in
the section captioned "WHERE YOU CAN FIND MORE INFORMATION."
REASONS FOR OUR OFFER

We believe that a combination of Zimmer and Centerpulse represents a
compelling opportunity to maximize value for stockholders of both companies by
combining Zimmer with a long-term strategic partner that will allow us to
realize myriad strategic advantages resulting in growth opportunities within the
medical devices industry. We believe that the combination will create a global
leader in the design, development, manufacture and marketing of orthopaedic
reconstructive implants, spine, trauma and dental products. For the fiscal year
ended December 31, 2002, the pro forma net earnings of the combined company was
estimated at US$287 million. We believe that the combination of Zimmer and
Centerpulse will (i) generate approximately US$70 to US$90 million in annual
operational efficiencies and cost savings by 2006 and (ii) be accretive in 2004
to the consensus earnings per share estimate of US$1.91 as of June [--], 2003,
excluding one-time transaction and integration costs. The strategic
compatibility of the products and technologies of Zimmer and Centerpulse is
expected to provide the combined company with significant earnings power and a
strong platform from which it can actively pursue growth opportunities in the
industry. For Zimmer, Centerpulse provides a unique platform for growth and
diversification in Europe as well as in the spine and dental segments of the
medical device industry.

OUR OFFER

We are offering to exchange (i) for each outstanding registered share of
Centerpulse AG that is validly tendered and not properly withdrawn prior to the
expiration of our offer, 3.68 shares of Zimmer common stock and CHF 120 in cash,
without interest, and (ii) for each outstanding Centerpulse ADS that is validly
tendered and not properly withdrawn prior to the expiration of our offer, 0.368
of a share of Zimmer common stock and the U.S. dollar equivalent of CHF 12 in
cash, without interest, subject, in each case, to the mix and match election
feature as discussed below. We sometimes refer to the fixed number of shares of
Zimmer common stock you will receive, subject to the mix and match election
feature, in respect of each validly tendered Centerpulse registered share or
Centerpulse ADS, as the case may be, as the "exchange ratio." As discussed
below, our offer also includes a mix and match election feature that will
entitle you to elect to vary the proportions of the shares of Zimmer common
stock and cash that you receive in our offer, subject to the off-setting
elections of other holders in our offer and InCentive shareholders in our
Incentive offer.

The exchange ratio is fixed and will not change between now and the time
our offer closes, subject to the mix and match election feature described below.
The exchange ratio is based on US$48.28, which is the closing price of a share
of Zimmer common stock on May 19, 2003, the day immediately prior to the
announcement of our offer. The value of the shares of Zimmer common stock you
will receive will fluctuate based on changes in the market price for Zimmer
common stock. Fluctuations in the market price of Zimmer common stock between
now and the consummation of our offer will change the value of the shares of
Zimmer common stock that you will receive. Therefore, the value of the shares of
Zimmer common stock that you will receive could be higher or lower than the
price on which the exchange ratio was based. For information on the range of
trading prices of Zimmer common stock on the New York Stock Exchange, please
refer to the section captioned "MARKET PRICE AND DIVIDEND MATTERS."

The amount of cash you will receive in our offer is fixed at CHF 120, in
the case of Centerpulse registered shares, and the U.S. dollar equivalent of CHF
12, in the case of Centerpulse ADSs, in each case, subject to your election, if
any, pursuant to the mix and match election feature as described below. This
amount will not be affected by fluctuations in the market price of Zimmer common
stock.

Therefore, the total value of the consideration that you will receive in
exchange for each Centerpulse registered share is equal to (i) CHF 120 plus (ii)
3.68 shares of Zimmer common stock multiplied by the per share market value of
Zimmer common stock at the closing of our offer. Based on the closing sales
price for Zimmer common stock reported on the New York Stock Exchange on May 19,
2003 of US$48.28 and the noon buying rate for the Swiss francs on such date of
CHF 1.2945 = US$1.00, the total value of the consideration you would have
received for each Centerpulse registered share on that date would have been
approximately CHF 350. Based on the closing price for Zimmer common stock
reported on the New York Stock Exchange on June [--], 2003 of US$[--] and the
noon buying rate for Swiss francs on such date of CHF [--] = US$1.00, the total
value of the consideration you would have received for each Centerpulse
registered share on that date is approximately CHF [--]. The total value of the
consideration you will receive in our offer will fluctuate with the market value
of Zimmer common stock as described above.

MIX AND MATCH ELECTION

Our offer will contain a mix and match election feature, whereby tendering
holders of Centerpulse registered shares and Centerpulse ADSs may elect to
receive either more shares of Zimmer common stock or more cash than the standard
entitlement. However, this election will be available to holders of Centerpulse
registered shares and Centerpulse ADSs only to the extent that off-setting
elections have been made by other tendering securityholders in our offer and our
InCentive offer. Elections made in our offer will be taken together with
elections made under a similar mix and match election feature included in our
InCentive offer (described in the section captioned "THE INCENTIVE OFFER") in
determining whether mix and match elections under our offer will be fulfilled.
All calculations will be made by reference to the number of acceptances and
elections as of the last day of the subsequent offering period and, for the
purposes of these calculations, the assumed value per share of Zimmer common
stock shall be US$48.28, the same as the closing price of a share of Zimmer
common stock on May 19, 2003, the day immediately prior to the announcement of
our offer and our InCentive offer.

This election is described more fully in the section captioned "OUR
OFFER -- Mix and Match Election" below. Any holder of Centerpulse registered
shares or Centerpulse ADSs who wishes to make a mix and match election should
carefully read that section of this prospectus and comply with the instructions
in the accompanying Form of Declaration of Acceptance and Assignment, in the
case of Centerpulse registered shares, or ADS Letter of Transmittal, in the case
of Centerpulse ADSs.

CONDITIONS OF OUR OFFER

The following is a brief summary of the conditions to our offer, all of
which may be waived, if permitted by applicable law:

- Zimmer having received the requisite vote of its stockholders to approve
the issuance of the shares of Zimmer common stock pursuant to our offer
and our InCentive offer;

- the shares of Zimmer common stock issuable upon the consummation of our
offer and our InCentive offer having been approved for listing on the New
York Stock Exchange;

- all competent EU, U.S. and other foreign authorities having approved
and/or granted clearance of the acquisition of Centerpulse without a
party being required to meet any condition or requirement giving rise to:
(i) costs and/or loss of earnings before interest, tax and amortization,
or EBITA, in excess of CHF 23 million in the aggregate; or (ii) a
decrease in consolidated turnover of CHF 75 million in the aggregate of
Zimmer, after giving effect to our offer and our InCentive offer, and no
other orders or directions by any court or other authority prohibiting
the consummation of our offers for Centerpulse and InCentive shall have
been issued;

- the registration statement on Form S-4 filed by Zimmer with the SEC in
connection with our offer having become effective in accordance with the
provisions of the U.S. Securities Act of 1933, as amended; no stop order
suspending the effectiveness of the registration statement having been
issued by the SEC and no proceedings for that purpose having been
initiated by the SEC and not concluded or withdrawn;

- Zimmer having received valid acceptances for at least 66 2/3% of the
total number of the Centerpulse registered shares outstanding (including
Centerpulse registered shares represented by ADSs and, provided our
InCentive offer has become unconditional, Centerpulse registered shares
held by InCentive) on a fully diluted basis at the expiration of the
(possibly extended) offer period;

- either (i) an extraordinary shareholders meeting to be called by the
Centerpulse board of directors having resolved that contingent upon our
offer having been declared unconditional, all incumbent Centerpulse
directors be removed and be replaced by the individuals proposed by
Zimmer, or (ii) all Centerpulse directors having agreed to resign as of
the date our offer is declared unconditional (provided that at least one
director shall not have resigned and shall have entered into a mandate
agreement prior to our offer having been declared unconditional) or
having entered into a mandate agreement with Zimmer for the period from
the date our offer has been declared unconditional until the
shareholders' meeting of Centerpulse at which the persons proposed by
Zimmer shall have been elected as members of the Centerpulse board of
directors; and

- Centerpulse, until the end of the (possibly extended) offer period, not
having:

(i) become subject to a mandated recall for a product, the
consolidated turnover of which product family exceeded CHF 75 million in
Centerpulse's consolidated prior year results and such recall having
resulted in costs and/or loss of EBITA (after insurance payable to
Centerpulse) in excess of CHF 23 million; or

(ii) suffered a disablement of its manufacturing facilities in
Winterthur, Switzerland or Austin, Texas, having resulted in costs
and/or loss of EBITA (after insurance payable to Centerpulse) in excess
of CHF 23 million.

For a more detailed description of the conditions to our offer, please read the
section captioned "OUR OFFER -- Conditions of Our Offer."

EXTENSION, TERMINATION AND AMENDMENT

Subject to applicable Swiss law, the SEC's rules and regulations and the
conditions of our offer, which, among other things, limit our ability to amend
or terminate our offer, we also reserve the right, at any time or from time to
time:
- to extend, for any reason, the period of time during which our offer is
open;
- to delay acceptance for exchange of or, regardless of whether we
previously accepted Centerpulse registered shares or Centerpulse ADSs for
exchange, exchange of any Centerpulse registered shares or Centerpulse
ADSs pursuant to our offer or to terminate our offer and not accept or
exchange any Centerpulse registered shares or Centerpulse ADSs not
previously accepted or exchanged, upon the failure of any of the
conditions of our offer to be satisfied; and
- to waive any condition or otherwise amend our offer in any respect.
EXCHANGE OF CENTERPULSE REGISTERED SHARES AND CENTERPULSE ADSs; DELIVERY OF
SHARES OF ZIMMER COMMON STOCK AND CASH
Subject to the conditions of our offer, we will accept for exchange all
Centerpulse registered shares and Centerpulse ADSs validly tendered and not
properly withdrawn pursuant to our offer. We shall be deemed to have accepted
for exchange tendered Centerpulse registered shares and Centerpulse ADSs when,
as and if we shall give oral or written notice to the Swiss offer manager and
the U.S. exchange agent of our acceptance of the tender of such Centerpulse
registered shares and Centerpulse ADSs. We expect to exchange Zimmer common
stock and pay the applicable cash proceeds and cash instead of fractional shares
for the Centerpulse registered shares and Centerpulse ADSs tendered in our offer
to the Swiss offer manager and U.S. exchange agent no later than 10 Swiss
trading days after the expiration of the subsequent offering period. The Swiss
offer manager and U.S. exchange agent will act as agents for the tendering
holders for the purpose of receiving shares of Zimmer common stock and cash and
cash to be paid instead of fractional shares of Zimmer common stock from us and
transmitting those shares and cash to tendering holders of Centerpulse
registered shares and Centerpulse ADSs.

CASH INSTEAD OF FRACTIONAL SHARES OF ZIMMER COMMON STOCK

Fractional entitlements to shares of Zimmer common stock will not be
delivered to holders of Centerpulse securities validly tendered in our offer. To
the extent that holders of Centerpulse securities are entitled to receive
fractions of shares of Zimmer common stock in exchange for their Centerpulse
securities, those fractional entitlements will be combined with the other
holders' fractional entitlements and subsequently sold on behalf of such holders
on the New York Stock Exchange. Each such holder of Centerpulse securities who
would not receive full consideration as shares of Zimmer common stock will
receive cash consideration corresponding to the fraction of the price of the
share of Zimmer common stock, which price shall be based on the net per share
sale price, after deduction of related fees and expenses, of all of the shares
of Zimmer common stock combined from the fractional entitlements and sold on
behalf of those tendering holders. For a more detailed description regarding the
payment of cash instead of fractional shares of Zimmer common stock, please read
the section captioned "OUR OFFER -- Cash Instead of Fractional Shares of Zimmer
Common Stock."

WITHDRAWAL RIGHTS

PROCEDURES FOR TENDERING SHARES

The procedure for tendering Centerpulse securities varies depending on
whether you hold Centerpulse registered shares or Centerpulse ADSs, whether you
possess physical certificates or a nominee holds your certificates for you and
whether you hold your securities in book-entry form. We urge you to read the
section captioned "OUR OFFER -- Procedures for Tendering Centerpulse Registered
Shares; -- Procedures for Tendering Centerpulse ADSs" as well as the transmittal
materials.

CURRENCY TRANSLATION

References in this prospectus to "dollars," "$" or "US$" are to the
currency of the United States and references to Swiss francs or "CHF" are to the
currency of Switzerland. Solely for your convenience, this prospectus contains
translations of Swiss franc amounts into U.S. dollars at specified rates. These
translations should not be taken as assurances that the Swiss franc amounts
currently represent these U.S. dollar amounts or could be converted into U.S.
dollars at the rate indicated or at any other rate at any time.

In this prospectus, unless otherwise stated, Swiss francs have been
translated into U.S. dollars at a rate of CHF [--] = US$1.00, which was based on
the noon buying rate in New York City for cable transfers in Swiss francs as
certified for customs purposes by the Federal Reserve Bank of New York on June
[--], 2003, which we refer to in this prospectus as the "noon buying rate." For
historical information regarding rates of exchange between Swiss francs and U.S.
dollars, see the section captioned "OUR OFFER -- Currency Exchange Rates."

RISK FACTORS

Our offer is, and upon the consummation of our offer and our InCentive
offer, the combined company will be, subject to several risks. In deciding
whether to tender your Centerpulse registered shares or Centerpulse ADSs
pursuant to our offer, you should carefully read and consider the risk factors
contained in the section captioned "RISK FACTORS."

INDEBTEDNESS AND THE FINANCING OF OUR OFFER

In connection with the cash portion of the consideration payable pursuant
to our offer, Zimmer has entered into credit agreements providing for the
availability of senior unsecured credit facilities in an aggregate principal
amount of up to US$1,750 million. For further information relating to the terms
of such credit agreements, see the section captioned "OUR OFFER -- Source and
Amount of Funds."

COMPARISON OF SHAREHOLDER RIGHTS

You will receive Zimmer common stock if you tender your Centerpulse
registered shares and Centerpulse ADSs in our offer. There are numerous
differences between the rights of a shareholder of Centerpulse, a Swiss company,
and the rights of a stockholder of Zimmer, a Delaware corporation. We urge you
to review the discussion in the section captioned "COMPARATIVE RIGHTS OF
CENTERPULSE SHAREHOLDERS AND ZIMMER STOCKHOLDERS IN GENERAL."

OWNERSHIP OF ZIMMER AFTER OUR OFFER AND OUR INCENTIVE OFFER

Based on the estimated per share consideration payable in connection with
our offer and our InCentive Offer, we estimate that we will issue approximately
43.8 million shares of Zimmer common stock and that, upon the consummation of
our offer and our InCentive offer, current holders of Zimmer common stock will
own approximately 82%, former holders of Centerpulse registered shares,
including holders of Centerpulse ADSs but excluding InCentive, will own
approximately 14.6%, and former InCentive shareholders will own approximately
3.4%, of the then outstanding shares of Zimmer common stock.

THE COMPANIES

Zimmer Holdings, Inc.
345 East Main Street
Warsaw, Indiana 46580
Telephone: (574) 267-6131

Zimmer, based in Warsaw, Indiana, is a global leader in the design,
development, manufacture and marketing of reconstructive orthopaedic implants
and trauma products. Orthopaedic reconstruction implants restore joint function
lost due to disease or trauma in joints such as knees, hips, shoulders and
elbows. Trauma products are devices used primarily to reattach or stabilize
damaged bone and tissue to support the body's natural healing process. Zimmer
also manufactures and markets other products related to orthopaedic and general
surgery. For the year 2002, Zimmer recorded worldwide revenues of approximately
US$1.4 billion. Zimmer was founded in 1927 and has more than 3,600 employees
worldwide.

Centerpulse AG
Andreasstrasse 15
CH-8050 Zurich

Telephone: +41 1 306 96 96

Centerpulse AG, formerly Sulzer Medica AG, is a leading medical technology
group employing over 2,800 employees globally, which serves the reconstructive
joint, spinal and dental implant markets. Following divestiture of its
Cardiovascular Division, which was concluded in January 2003, Centerpulse is
organized into three divisions: orthopaedics, spine-tech and dental.
Centerpulse, which is organized and headquartered in Switzerland, has five
production facilities in Switzerland, the United States and France. For the year
2002, Centerpulse recorded worldwide revenues from continuing operations of
approximately CHF 1.2 billion. Centerpulse has three legal names, each of which
identifies the same legal entity: Centerpulse AG, Centerpulse Ltd. and
Centerpulse SA.

COMPARATIVE MARKET PRICE DATA
Shares of Zimmer common stock are listed on the New York Stock Exchange
under the symbol "ZMH," Centerpulse registered shares are listed on the SWX
Swiss Exchange under the symbol "CEPN," and Centerpulse ADSs are listed on the
New York Stock Exchange under the symbol "CEP."
As reported on their respective exchanges, the following table sets out
historical closing prices per share for shares of Zimmer common stock,
Centerpulse registered shares and Centerpulse ADSs and the equivalent basis
market value per share of Centerpulse registered shares and Centerpulse ADSs on:
- May 19, 2003, the last trading day before we announced our intention to
commence our offer for all of the outstanding Centerpulse registered
shares and Centerpulse ADSs, and

- June [--], 2003, the most recent practicable trading date before the
mailing of this prospectus.

The equivalent basis market value per Centerpulse registered share and
Centerpulse ADS is determined by multiplying the price per share of Zimmer
common stock by the exchange ratio and then adding to that amount the per share
cash purchase price, or its U.S. dollar equivalent of the ADS cash purchase
price, pursuant to the terms of our offer.

<Table>
<Caption>
CENTERPULSE
REGISTERED
CENTERPULSE SHARES CENTERPULSE ADSS
ZIMMER REGISTERED CENTERPULSE EQUIVALENT EQUIVALENT
COMMON STOCK SHARES ADSS BASIS BASIS
(NYSE) (SWX) (NYSE) MARKET VALUE MARKET VALUE
------------ ----------- ----------- ------------ ----------------

May 19, 2003................ US$48.28 CHF 292 US$22.37 CHF 350 US$27.04
June [--], 2003............. US$ CHF US$ CHF US$
</Table>

In determining the equivalent basis market value per Centerpulse registered
share and Centerpulse ADS, amounts in Swiss francs have been translated into
U.S. dollars or Swiss francs, as required, at the noon buying rate in New York
City of CHF 1.2945 = US$1.00, and CHF [--] = US$1.00 for cable transfers in
Swiss francs as certified for customs purposes by the Federal Reserve Bank of
New York on May 19, 2003 and June [--], 2003, respectively. For more information
about U.S. dollar and Swiss franc exchange rates, see the section captioned "OUR
OFFER -- Currency Exchange Rates."

The market prices of Zimmer common stock, Centerpulse registered shares and
Centerpulse ADSs may fluctuate during the offer period and thereafter, and may
be different from the prices set forth above at the expiration of the offer
period and at the time you receive your shares of Zimmer common stock. YOU ARE
ENCOURAGED TO OBTAIN CURRENT MARKET QUOTATIONS PRIOR TO MAKING ANY DECISION WITH
RESPECT TO OUR OFFER.

COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

The table set forth below depicts earnings per common share, pro forma
earnings per common share before cumulative effect of change in accounting
principle, book value per common share and cash dividends declared per common
share for (i) Zimmer and Centerpulse on a historical basis, (ii) the combination
of Zimmer and Centerpulse on a pro forma combined basis and (iii) the
combination of Zimmer and Centerpulse on a per share equivalent pro forma basis
for Centerpulse. The pro forma data of the combined company assumes a 100%
acquisition of Centerpulse registered shares, including registered shares
represented by Centerpulse ADSs, and was derived by combining the historical
consolidated financial information of Zimmer and Centerpulse using the purchase
method of accounting for business combinations as described elsewhere in this
prospectus. For a discussion of the assumptions and adjustments made in the
preparation of the pro forma financial information presented in this prospectus,
see the section captioned "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS." The Centerpulse per share equivalent pro forma data shows the
effect of the combination of Zimmer and Centerpulse from the perspective of an
owner of Centerpulse registered shares.

Operating results for InCentive for the year ended December 31, 2002 and
for the three months ended March 31, 2003 and its net assets at that date have
been excluded from the pro forma financial information. The purchase price for
InCentive is inclusive of an offer for Centerpulse registered shares held by
InCentive equivalent in all respects to our offer for Centerpulse registered
shares plus cash for the value of InCentive's other holdings, which are expected
to be monetized prior to completion of our InCentive offer. Accordingly, at the
time of the acquisition, it is expected that the InCentive balance sheet will
consist of Centerpulse registered shares already contemplated by our offer and
the incremental purchase price to be paid for InCentive should be equal to the
net cash acquired with InCentive and there should be no net effect on the net
assets of the combined company.

Centerpulse's consolidated financial statements are prepared in accordance
with IFRS, which differ in certain material respects from U.S. GAAP. For a
discussion of the significant differences between IFRS and U.S. GAAP, see the
section captioned "NOTE ON CENTERPULSE INFORMATION" and note 31 to the 2002
audited consolidated financial statements of Centerpulse included elsewhere in
this prospectus.

You should read the information presented in this table below together with
the historical financial statements of Zimmer and Centerpulse and the related
notes and the Unaudited Pro Forma Condensed Combined Financial Statements
appearing elsewhere in this prospectus or incorporated herein by reference. The
pro forma data is unaudited and for illustrative purposes only. The companies
may have performed differently had they always been combined. You should not
rely on this information as being indicative of the historical results that
would have been achieved had the companies always been combined or the future
results that the combined company will achieve after the consummation of our
offer.

<Table>
<Caption>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
2003 2002
--------------- ------------

ZIMMER
Historical Per Share Data:
Earnings per common share
Basic............................................. $ 0.69 $ 1.33
Diluted........................................... 0.68 1.31
Pro forma earnings per common share before cumulative
effect of change in accounting principle(1)
Basic............................................. 0.41 1.34
Diluted........................................... 0.41 1.33
Book value of equity per common share.................. 2.76 1.88
Dividends declared per common share.................... -- --
Pro Forma Combined:
Earnings per common share before cumulative effect of
change in accounting principle(1)
Basic............................................. $ 0.41 $ 1.20
Diluted........................................... 0.40 1.19
Book value of equity per common share.................. 10.49 N/A
Dividends declared per common share.................... -- --
CENTERPULSE
Historical Per Share Data:
Earnings per common share
Basic............................................. CHF 3.72 CHF 33.10
Diluted........................................... 3.71 32.82
Book value of equity per common share.................. 111.43 107.70
Dividends declared per common share.................... -- --
Pro Forma Combined:
Earnings per equivalent share using a fixed exchange
ratio of 3.68 shares of Zimmer Common Stock for one
Centerpulse share
Basic............................................. CHF 2.07 CHF 6.89
Diluted........................................... 2.02 6.83
Book value of equity per common share.................. 53.27 N/A
Dividends declared per common share.................... -- --
</Table>

- ---------------

(1) Pro forma net earnings for the three months ended March 31, 2003 are before
the cumulative effect of an accounting change of $55 million and for the
year ended December 31, 2002 reflect the retroactive application of a new
accounting method for instruments. Effective January 1, 2003, Zimmer changed
its method of accounting for instruments which are owned by Zimmer and used
by orthopaedic surgeons during total joint replacement and other surgical
procedures. Instruments are recognized as long-lived assets and are included
in property, plant and equipment and are depreciated using the straight-line
method based on estimated useful lives, determined principally in reference
to associated product life cycles, with the majority over five years. In
prior periods, undeployed instruments were carried as a prepaid expense at
cost and recognized in selling, general and administrative expense in the
year in which the instruments were placed into service.

References to "N/A" mean not applicable.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ZIMMER

The following table sets forth a summary of selected historical
consolidated financial data of Zimmer for each of the years in the five year
period ended December 31, 2002 and for each of the quarters ended March 31, 2003
and March 31, 2002. This information is derived from, and should be read in
conjunction with, the audited consolidated financial statements of Zimmer and
the unaudited interim consolidated financial statements of Zimmer. Certain of
these financial statements also are included elsewhere in this prospectus. The
operating results for the quarter ended March 31, 2003 are not necessarily
indicative of the results for the remainder of the fiscal year or any future
period. Our management believes that its respective unaudited consolidated
interim financial statements reflect all adjustments, which are of a normal
recurring nature, necessary for a fair statement of the results for the interim
periods presented. See the section "WHERE YOU CAN FIND MORE INFORMATION."

<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------- ------------------------------------------
2003 2002 2002 2001 2000 1999 1998
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

STATEMENT OF EARNINGS DATA
Net sales.................................. $ 390 $ 319 $1,372 $1,179 $1,041 $ 939 $ 861
Net earnings............................... 135 55 258 150 176 150 145
Pro forma net earnings before cumulative
effect of change in accounting
principle(1)............................. 80 56 261 156 177 155 147
Earnings per common share
Basic.................................... $ 0.69 $ 0.28 $ 1.33 $ 0.77 $ 0.91 $ 0.77 $ 0.75
Diluted.................................. 0.68 0.28 1.31 0.77 0.91 0.77 0.75
Pro forma earnings per common share before
cumulative effect of change in accounting
principle(1)
Basic.................................... $ 0.41 $ 0.29 $ 1.34 $ 0.81 $ 0.91 $ 0.80 $ 0.76
Diluted.................................. 0.41 0.29 1.33 0.80 0.91 0.80 0.76
Average common shares outstanding(2)
Basic.................................... 195.7 194.0 194.5 193.7 193.6 193.6 193.6
Diluted.................................. 198.0 195.7 196.8 194.3 193.6 193.6 193.6
BALANCE SHEET DATA
Total assets............................... $ 979 $ 859 $ 745 $ 597 $ 606 $ 579
Due to former parent....................... -- -- -- 144 41 50
Short-term debt............................ 77 157 150 -- -- --
Long-term debt............................. -- -- 214 -- -- --
Other long-term obligations................ 93 92 79 5 4 3
Stockholders' equity....................... 543 366 79 N/A N/A N/A
</Table>

- ---------------

(1) Pro forma net earnings for the three months ended March 31, 2003 are before
the cumulative effect of an accounting change of $55 million and for the
three months ended March 31, 2002 and for each of the years in the five year
period ended December 31, 2002 reflect the retroactive application of a new
accounting method for instruments. Effective January 1, 2003, Zimmer changed
its method of accounting for instruments which are owned by Zimmer and used
by orthopaedic surgeons during total joint replacement and other surgical
procedures. Instruments are recognized as long-lived assets and are included
in property, plant and equipment and are depreciated using the straight-line
method based on estimated useful lives, determined principally in reference
to associated product life cycles, with the majority over five years. In
prior periods, undeployed instruments were carried as a prepaid expense at
cost and recognized in selling, general and administrative expense in the
year in which the instruments were placed into service. Net earnings for
2001 include $70 million ($50 million net of tax) in costs relating to the
separation of Zimmer from its former parent, which reduce basic and diluted
earnings per share by $0.26. Net earnings for 2001 also include $7 million
($5 million net of tax) of interest expense

for the period from the effective date of the separation of Zimmer from its
former parent to December 31, 2001.

(2) For periods ended prior to August 6, 2001, average common shares reflect the
number of shares of Zimmer common stock outstanding on August 6, 2001, the
date all of the shares of Zimmer common stock were distributed to the
stockholders of Zimmer's former parent. For periods subsequent to August 6,
2001, average common shares reflect any new issuances of common stock and
the dilutive effect of outstanding common stock equivalents, where
appropriate.

References to "N/A" mean not applicable.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CENTERPULSE

The following table sets forth selected historical consolidated financial
data of Centerpulse for each of the years in the five year period ended December
31, 2002 and for each of the quarters ended March 31, 2003 and March 31, 2002.
This information is derived from, and should be read in conjunction with, the
audited consolidated financial statements of Centerpulse and the unaudited
consolidated interim financial statements of Centerpulse. Certain of these
financial statements also are included elsewhere in this prospectus. The
operating results for the quarter ended March 31, 2003 are not necessarily
indicative of the results for the remainder of the fiscal year or any future
period. See the section captioned "WHERE YOU CAN FIND MORE INFORMATION."

The selected historical consolidated financial data for each of the years
in the five year period ended December 31, 2002 and each of the quarters ended
March 31, 2003 and 2002 were prepared in Swiss francs. Centerpulse's
consolidated financial statements are prepared in accordance with IFRS, which
differ in certain material respects from U.S. GAAP. See the section captioned
"NOTE ON CENTERPULSE INFORMATION" and note 31 to the 2002 audited consolidated
financial statements of Centerpulse for a discussion of the significant
differences between IFRS and U.S. GAAP.

<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------- -----------------------------------------
2003 2002 2002 2001 2000 1999 1998
------ ----- ------ ------- ------ ----- -----
(IN MILLIONS CHF, EXCEPT PER SHARE AND PER ADS AMOUNTS)

INCOME STATEMENT DATA
Net sales......................... 318 321 1,470 1,418 1,347 1,182 1,541
Net income/Net loss............... 44 44 337 (1,193) 190 483 143
Income/loss per share............. 3.72 4.42 33.10 (119.62) 19.01 48.37 14.32
Diluted income/loss per share..... 3.71 4.41 32.82 (119.62) 18.98 48.37 14.20
Weighted average number of shares
adjusted for dilutive share
options (in thousands)......... 11,825 9,945 10,268 9,973 10,012 9,986 9,988
Income/loss per ADS............... 0.37 0.44 3.31 (11.96) 1.90 4.84 1.43
Diluted income/loss per ADS....... 0.37 0.44 3.28 (11.96) 1.90 4.84 1.42
BALANCE SHEET DATA
Total assets...................... 2,220 2,338 2,871 2,525 2,396 2,299
Current provisions................ 82 92 223 54 52 29
Short-term debt................... 72 70 75 86 105 480
Other non-current provisions...... 159 159 1,468 144 151 49
Long-term debt.................... 353 487 20 19 31 288
Stockholders' equity.............. 1,314 1,270 784 1,993 1,844 1,227
</Table>

Exceptional operating items reflected in Net income/Net loss above for the
periods presented included:

<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------- ----------------------------------
2003 2002 2002 2001 2000 1999 1998
----- ----- ---- ------ ---- ---- ----
(IN MILLIONS CHF)

Hip and knee settlement........................ -- -- -- (1,476) -- -- --
Impairment of intangible assets................ -- -- 28 (91) -- (240) --
Other exceptional expenses..................... -- -- (40) (107) (1) (14) --
Operating income from discontinued
operations(1)................................ -- 4 -- -- -- -- --
Gain on sale of discontinued operations(2)..... 18 -- 200 -- -- 579 --
Total exceptional operating items.............. -- -- 188 (1,674) (1) 325 --
</Table>

- ---------------

(1)Discontinued operations:

On June 3, 1998 Centerpulse announced its intention to exit the
electrophysiology business. This business was sold on February 1, 1999 for
US$802 million (including cash on hand of CHF 19 million).
On June 12, 2002, Centerpulse announced its plans to divest of the
cardiovascular division and to focus on its core businesses orthopedics, spine
and dental. On November 7, 2002, Centerpulse announced the closing of the sale
of IntraTherapeutics, Inc. to ev3 Inc., a portfolio company of private equity
firms Warburg Pincus LLC and The Vertical Group. On November 18, 2002,
Centerpulse announced the closing of the sale of Vascutek Ltd. to Terumo
Corporation of Japan. On January 21, 2003, Centerpulse announced the closing of
the sale of Carbomedics, Inc. and Mitroflow Corp. to Italian medical device
company Snia S.p.A. With the sale of Carbomedics and Mitroflow the divestiture
of the cardiovascular division was completed.
The impact of the business divested in January 2003 on the consolidated
financial statements for the three month period ended March 31, 2003 was as
follows: Sales CHF 7 million, Operating income CHF 0 million, Taxes CHF 1
million, Assets CHF 92 million, thereof Cash 1 million, Liabilities CHF 26
million.
(2) Gain on sale of discontinued operations:
The pre-tax gain on the sale of the Cardiac Care business in January 2003
amounts to CHF 18 million. The US$36 million subordinated loan which was part of
the purchase price remains in the balance sheet in other accounts receivable and
prepaid expenses.
The pre-tax gain on the sale of the business unit Vascular Care, consisting
of Centerpulse's grafts and stents business amounted to CHF 200 million. This
division represented 19% of Centerpulse's consolidated revenues in 2001 with
operations primarily in the European Union and North America.
The pre-tax gain on the sale of the Electrophysiology business amounted to
CHF 579 million. The transactions of the discontinuing operations from January
1, 1999, to the date of sale are not considered significant and are included in
the gain on sale of discontinued operations.

SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following table sets forth selected pro forma condensed combined
financial data (i) derived from the audited consolidated financial statements of
Zimmer for the fiscal year ended December 31, 2002 and the unaudited
consolidated interim financial statements of Zimmer for the period ended March
31, 2003 and (ii) derived from the audited consolidated financial statements of
Centerpulse for the fiscal year ended December 31, 2002 and the unaudited
consolidated interim financial statements of Centerpulse for the period ended
March 31, 2003, in each case included elsewhere in this prospectus, and is
qualified in its entirety by such statements.

The following pro forma financial information is presented for illustrative
purposes only and is not necessarily indicative of (i) results of operations and
financial position that would have been achieved had the consummation of our
offer and our InCentive offer taken place on the dates indicated or (ii) the
future operations of the combined company. The following table should be relied
on only for the limited purpose of presenting what the results of operations and
financial position of the combined businesses of Zimmer and Centerpulse might
have looked like had our offer and our InCentive offer taken place at an earlier
date. For a discussion of the assumptions and adjustments made in the
preparation of the pro forma financial information presented in this prospectus,
see the section captioned "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS." You can find more information about our offer in the section
captioned "OUR OFFER" and our InCentive offer in the section captioned "THE
INCENTIVE OFFER."

The following pro forma financial information should be read in conjunction
with:

- the Unaudited Pro Forma Condensed Combined Financial Statements and the
accompanying notes in the section captioned "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS;"

- financial statements of Zimmer for the year ended December 31, 2002 and
for the three-month period ended March 31, 2003 and the notes relating
thereto, included elsewhere in this prospectus; and

- financial statements of Centerpulse for the fiscal year ended December
31, 2002 and for the three-month period ended March 31, 2003 and the
notes relating thereto, included elsewhere in this prospectus.

<Table>
<Caption>
THREE MONTHS YEAR
ENDED ENDED
MARCH 31, DECEMBER 31,
2003 2002
------------ ------------
(IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)

STATEMENT OF EARNINGS DATA
Net sales.................................................. $ 622 $2,168
Net earnings before cumulative effect of change in
accounting principle..................................... 98 287
Earnings per common share
Basic................................................. $ 0.41 $ 1.20
Diluted............................................... 0.40 1.19
Average common shares outstanding
Basic................................................. 239.5 238.3
Diluted............................................... 242.7 241.5
</Table>

<Table>
<Caption>
MARCH 31,
2003
-------------
(IN MILLIONS)

BALANCE SHEET DATA
Total assets................................................ $ 5,118
Short-term debt............................................. 217
Long-term debt.............................................. 1,350
Other long-term obligations................................. 209
Stockholders' equity........................................ 2,535
</Table>

RISK FACTORS
In deciding whether to tender your Centerpulse registered shares or
Centerpulse ADSs pursuant to our offer, you should carefully consider the risks
set forth below in addition to the other information contained in this
prospectus. Please also refer to the additional risk factors identified in the
periodic reports and other documents of Zimmer and Centerpulse incorporated by
reference into this prospectus and listed in the section captioned "WHERE YOU
CAN FIND MORE INFORMATION."
As used below, "we" or "us" refers to Zimmer or, after the consummation of
our offer and our InCentive offer as described in this prospectus, Zimmer,
Centerpulse and InCentive, as the context requires.

RISKS RELATING TO OUR PROPOSED OFFER

MARKET FLUCTUATIONS MAY REDUCE THE MARKET VALUE OF THE CONSIDERATION WE ARE
OFFERING TO YOU BECAUSE THE EXCHANGE RATIO CONTEMPLATED BY OUR OFFER IS FIXED.
The consideration in our offer consists in part of a specified number of
shares, or a fraction of a share, of Zimmer common stock, subject to election
procedures, rather than a number of shares, or a fraction of a share, of Zimmer
common stock with a specified value. The exchange ratio is based on US$48.28,
which is the closing price of a share of Zimmer common stock on May 19, 2003,
the day immediately prior to the announcement of our offer. The value of the
shares of Zimmer common stock you receive will fluctuate, based on changes in
the market price for Zimmer common stock. Any fluctuation in the market price of
Zimmer common stock between now and the closing of our offer will change the
value of the shares of Zimmer common stock that you will receive. Therefore, the
value of the shares of Zimmer common stock that you will receive could be higher
or lower than the price on which the exchange ratio was based. In addition,
although Zimmer believes that after the acquisitions of Centerpulse and
InCentive are consummated Zimmer's common stock will trade on a comparable basis
to its historical trading performance prior the consummation of our offer, this
may not be the case. For information regarding the range of trading prices of
Zimmer common stock on the New York Stock Exchange, please refer to the section
captioned "MARKET PRICE AND DIVIDEND MATTERS."
IF YOU ELECT THE MIX AND MATCH FEATURE, YOU MAY NOT RECEIVE ALL CONSIDERATION
IN THE FORM YOU HAVE ELECTED.
Our offer will contain a mix and match election feature, whereby tendering
holders of Centerpulse registered shares or Centerpulse ADSs may elect to
receive either more shares of Zimmer common stock or more cash than the standard
entitlement. However, this election will be available to holders of Centerpulse
registered shares or Centerpulse ADSs only to the extent that off-setting
elections have been made by other tendering securityholders in our offer or the
InCentive offer. Elections made in our offer will be taken together with
elections made under a similar mix and match election feature included in our
InCentive offer (described in the section captioned "THE INCENTIVE OFFER") in
determining whether mix and match elections under our offer will be fulfilled.
In other words, in order for a holder of Centerpulse registered shares or
Centerpulse ADSs to receive a higher proportion of cash, other securityholders
will have to elect to receive a higher proportion of shares of Zimmer common
stock, and vice versa. To the extent that elections cannot be satisfied as a
result of a lack of such off-setting elections, entitlements to shares of Zimmer
common stock and cash in excess of the standard entitlement will be reduced on a
pro rata basis. Once the share allocations have been determined, the cash
element of the consideration will be reduced or increased (as the case may be)
for each holder of Centerpulse registered shares or Centerpulse ADSs who has
been allocated an increased or reduced number of shares of Zimmer common stock.
All calculations will be made by reference to the number of acceptances and
elections as of the last day of the subsequent offering period and, for the
purposes of these calculations, the assumed value per share of Zimmer common
stock shall be US$48.28, the same as the closing price of a share of Zimmer
common stock on May 19, 2003, the day immediately prior to the announcement of
our offer and our InCentive offer. We describe our procedures for election and
proration in the section captioned "OUR OFFER -- Mix and Match Election."

THIS TRANSACTION MAY ADVERSELY AFFECT THE LIQUIDITY AND VALUE OF NON-TENDERED
CENTERPULSE REGISTERED SHARES AND CENTERPULSE ADSS.
In the event that not all of the Centerpulse registered shares and
Centerpulse ADSs are tendered, the number of securityholders and the number of
Centerpulse registered shares and Centerpulse ADSs held by individual holders
will be greatly reduced. As a result, the closing of our offer would adversely
affect the liquidity and may adversely affect the market value of the remaining
Centerpulse registered shares and Centerpulse ADSs held by the public. Subject
to SWX Swiss Exchange and the New York Stock Exchange delisting rules, we may
delist the Centerpulse registered shares on the SWX Swiss Exchange and delist
the Centerpulse ADSs on the New York Stock Exchange. As a result of the
delisting, Centerpulse registered shares and Centerpulse ADSs not tendered
pursuant to our offer may become illiquid and may be of reduced value. See the
section captioned "OUR OFFER -- Purpose of Our Offer; Plans for Centerpulse" and
"-- Effect of Our Offer on the Market For Centerpulse Registered Shares and
Centerpulse ADSs; Registration Under the Exchange Act."
UPON YOUR RECEIPT OF SHARES OF ZIMMER COMMON STOCK IN OUR OFFER, YOU WILL
BECOME A STOCKHOLDER IN A DELAWARE CORPORATION, WHICH MAY CHANGE CERTAIN
SHAREHOLDER RIGHTS AND PRIVILEGES YOU HOLD AS A SHAREHOLDER OF A SWISS
CORPORATION.

Zimmer is governed by the laws of the United States, the State of Delaware
and by its certificate of incorporation and restated by-laws. The Delaware
General Corporation Law, referred to in this prospectus as the DGCL, extends to
stockholders certain rights and privileges that may not exist under Swiss law
and, conversely, does not extend certain rights and privileges that you may have
as a shareholder of a company governed by Swiss law. In addition to our existing
rights agreement, or poison pill, the directors of a Delaware corporation may
elect to adopt certain provisions that have the effect of discouraging a third
party from acquiring control of the corporation. Such provisions could limit the
price that some investors might be willing to pay in the future for shares of
Zimmer common stock. These Delaware provisions may also have the effect of
discouraging or preventing certain types of transactions involving an actual or
a threatened change in control of Zimmer, including unsolicited takeover
attempts, even though such a transaction may offer Zimmer stockholders the
opportunity to sell their shares of Zimmer common stock at a price above the
prevailing market price. For a detailed discussion of the rights of Zimmer
stockholders versus the rights of holders of Centerpulse registered shares or
Centerpulse ADSs, see our discussion in the section captioned "COMPARATIVE
RIGHTS OF CENTERPULSE SHAREHOLDERS AND ZIMMER STOCKHOLDERS IN GENERAL."

OUR INDEBTEDNESS FOLLOWING OUR OFFER AND OUR INCENTIVE OFFER WILL BE HIGHER
THAN OUR EXISTING INDEBTEDNESS.

Our indebtedness as of March 31, 2003 was approximately US$77 million. Our
pro forma total and net indebtedness as of March 31, 2003, after giving effect
to the acquisition of 100% of the outstanding shares of Centerpulse and
InCentive, as described in the section captioned "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS," are approximately US$1,567 million and US$1,423
million, respectively. As a result of the increase in debt, demands on our cash
resources will increase after the consummation of our offer and our InCentive
offer, which could have important effects on an investment in our common stock.
For example, the increased levels of indebtedness could:

- reduce funds available for investment in research and development and
capital expenditures; or
- create competitive disadvantages compared to other companies with lower
debt levels.

Moreover, if one or more rating agencies downgrades our credit rating to
below investment grade as a result of the debt incurred to finance our offer and
our InCentive offer, we may have difficulty obtaining additional financing and
our cost of obtaining additional financing or refinancing existing debt may be
increased significantly.

WE HAVE ONLY CONDUCTED A LIMITED DUE DILIGENCE REVIEW OF THE NON-PUBLIC RECORDS
OF CENTERPULSE AND INCENTIVE. THEREFORE, WE MAY BE SUBJECT TO UNKNOWN
LIABILITIES OF CENTERPULSE OR INCENTIVE WHICH MAY HAVE A MATERIAL ADVERSE
EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.

To date, we have only conducted a limited due diligence review of
Centerpulse and InCentive. As a result, after the consummation of our offer and
our InCentive offer, we may be subject to unknown liabilities of Centerpulse or
InCentive, which may have a material adverse effect on our profitability and
results of operations, which we might have otherwise discovered if we had been
permitted by Centerpulse and InCentive to conduct a complete due diligence
review.

THE MARKET PRICE OF ZIMMER COMMON STOCK MAY DECLINE AS A RESULT OF OUR OFFER
AND OUR INCENTIVE OFFER.

The market price of Zimmer common stock may decline as a result of our
offer if:

- the integration of Centerpulse's business is unsuccessful;

- we do not achieve the expected benefits of our acquisitions of
Centerpulse and InCentive as rapidly or to the extent anticipated by
financial analysts or investors; or

- the effect of our acquisitions of Centerpulse and InCentive on our
financial results is not consistent with the expectations of financial
analysts or investors.

In connection with our offer and our InCentive offer, we estimate that we
will issue approximately 43.8 million shares of Zimmer common stock. The
increase in the number of shares of our common stock issued may lead to sales of
such shares or the perception that such sales may occur, either of which may
adversely affect the market for, and the market price of, our common stock.

Upon consummation of our offer, holders of Centerpulse registered shares
and Centerpulse ADSs will become holders of shares of our common stock. Our
results of operations, as well as the trading price of our common stock, may be
affected by factors different from those affecting Centerpulse's results of
operations and the price of Centerpulse registered shares and Centerpulse ADSs.
See the section captioned "COMPARATIVE RIGHTS OF CENTERPULSE SHAREHOLDERS AND
ZIMMER STOCKHOLDERS IN GENERAL."

UNCERTAINTIES EXIST IN INTEGRATING THE BUSINESS OPERATIONS OF ZIMMER AND
CENTERPULSE.

We intend, to the extent possible, to integrate our operations with those
of Centerpulse. Our goal in integrating these operations is to increase earnings
and achieve cost savings by taking advantage of the anticipated synergies of
consolidation and enhanced growth opportunities. We believe that the combination
of Zimmer and Centerpulse will generate approximately US$70 to US$90 million in
annual operational efficiencies and cost savings by 2006. Retention payments and
other employee related costs, costs for lease terminations, meetings, trainings,
rebranding, integration of information technology systems, and other cash costs
are anticipated in connection with the integration of Zimmer and Centerpulse.
Such costs are preliminarily estimated to amount to $160 million within the
twelve months succeeding the transaction. Actual costs may vary from the
preliminary estimates. Although we believe that the integration of Centerpulse's
operations into ours will not present any significant difficulties, there can be
no assurance that we will not encounter substantial difficulties integrating our
operations with Centerpulse's operations, resulting in a delay or the failure to
achieve the anticipated synergies and, therefore, the expected increases in
earnings and cost savings. The difficulties of combining the operations of the
companies include, among other things:

- possible inconsistencies in standards, controls, procedures and policies,
business cultures and compensation structures between Zimmer and
Centerpulse;

- coordinating and consolidating ongoing and future research and
development efforts;

- consolidating sales and marketing operations;

- retaining existing customers and attracting new customers;

- retaining strategic partners and attracting new strategic partners;

- retaining key employees;
17

- retaining and integrating distributors and key sales representatives;

- consolidating corporate and administrative infrastructures;

- integrating and managing the technologies and products of the two
companies, including consolidating and integrating computer information
systems;

- identifying and eliminating redundant and underperforming operations and
assets;

- using capital assets efficiently to develop the business of the combined
company;

- minimizing the diversion of management's attention from ongoing business
concerns;

- coordinating geographically separate organizations;

- possible tax costs or inefficiencies associated with integrating the
operations of the combined company;

- possible modification of operating control standards in order to comply
with the Sarbanes-Oxley Act and the rules and regulations promulgated
thereunder;

- retaining and attracting new designers and surgeons to support new
products and new technology development; and

- limitations on existing plant capacity.

For these reasons, we may fail to complete successfully the necessary
integration of Zimmer and Centerpulse, or to realize any of the anticipated
benefits of the integration of the two companies. Actual cost savings and
synergies may be lower than we currently expect and may take a longer time to
achieve than we currently anticipate.

FULL INTEGRATION OF OUR OPERATIONS WITH CENTERPULSE'S OPERATIONS MAY NOT BE
ACHIEVED IF WE CANNOT COMPULSORILY ACQUIRE ALL OF THE ISSUED AND OUTSTANDING
CENTERPULSE REGISTERED SHARES, INCLUDING REGISTERED SHARES REPRESENTED BY
CENTERPULSE ADSs.

Our offer is subject to a condition that, before the end of our offer
period, there having been validly tendered and not properly withdrawn at least
66 2/3% of the Centerpulse registered shares, including registered shares
represented by Centerpulse ADSs, on a fully diluted basis. To effect the
compulsory acquisition of all of the Centerpulse registered shares, including
registered shares represented by Centerpulse ADSs, under Swiss law, we are
required to have a beneficial interest in at least 98% of all of the registered
shares of Centerpulse, including registered shares represented by Centerpulse
ADSs. It is possible that, at the end of our offer period, we will not hold a
sufficient number of Centerpulse registered shares, including registered shares
represented by Centerpulse ADSs, to effect a compulsory acquisition of the
remaining outstanding Centerpulse registered shares, including registered shares
represented by Centerpulse ADSs. This could prevent or delay us from realizing
some or all of the anticipated benefits from the integration of our operations
with Centerpulse's operations.

WE WILL BE SUBJECT TO THE LIABILITIES RESULTING FROM CENTERPULSE'S IMPLANT
LITIGATION AFTER THE CONSUMMATION OF OUR OFFER.

According to publicly available information concerning Centerpulse,
Centerpulse is currently party to various litigation related to alleged defects
in certain of its hip and knee implant devices. Following Centerpulse's December
5, 2000 recall of various Inter-Op(TM) shells and May 17, 2001 notification
regarding various tibial base plates, lawsuits were filed in numerous courts
throughout the United States and elsewhere in the world against Centerpulse,
alleging defective design, marketing and manufacture of these products.
Plaintiffs also alleged breach of express and implied warranties associated with
these devices.

On May 8, 2002, the U.S. District Court for the Northern District of Ohio
granted final approval of a class action settlement agreement that resolved all
claims related to the affected products subject to the above-mentioned recall
and notification in the United States. The final settlement agreement
established a settlement trust to pay claims in accordance with the terms of the
settlement agreement. Similar litigation was commenced in Canada. On May 7,
2002, Centerpulse agreed to a class action settlement in a lawsuit pending in
Quebec Superior Court. Final approval of the settlement was issued on March 28,
2003. Prior thereto,

Centerpulse concluded individual settlements with a number of other patients in
Canada. Outside the United States and Canada, approximately 140 persons received
affected hip or knee implants, not all of these individuals have brought claims,
but those that have, have been settled. Notwithstanding the settlement of the
matters covered by the settlement agreements in the United States and Canada,
Centerpulse may have further liability to plaintiffs who opted out of those
settlements or who may otherwise assert claims against Centerpulse arising out
of alleged defective hip and knee devices.

After consummation of our offer, Centerpulse will be a subsidiary of Zimmer
and, therefore, the financial position, results of operations and cash flows of
Zimmer may be affected by any liabilities of Centerpulse relating to the
Inter-Op(TM) shells or tibial base plates. For a more complete discussion of
this matter, please refer to the discussion in the section captioned "THE
COMPANIES -- Centerpulse AG -- Litigation Matters."

OUR OFFER COULD TRIGGER CERTAIN CHANGE OF CONTROL PAYMENTS IN THE EMPLOYMENT
AGREEMENTS OF CERTAIN MEMBERS OF CENTERPULSE'S SENIOR MANAGEMENT.

The employment agreements of certain members of the Centerpulse senior
management may contain change of control clauses providing for compensation,
plus, in each case, applicable social security system payments on behalf of such
individuals, to be granted in the event the employment agreements of these
employees are terminated following the consummation of our offer, either by
Centerpulse or by those employees, should their respective positions with
Centerpulse be materially changed. If successful, our offer would effect such a
change of control, thereby giving rise to potential change of control payments.

CENTERPULSE RECENTLY DIVESTED SEVERAL BUSINESSES AND OPERATIONS. ZIMMER WILL
BE SUBJECT TO CENTERPULSE'S VARIOUS ONGOING OBLIGATIONS RELATING TO THESE
RECENT DIVESTITURES.

As part of its strategy to focus on core businesses, Centerpulse recently
divested several businesses and operations, including its cardiovascular
division. In connection with these transactions, Centerpulse gave
representations, warranties and indemnities relating to the divested businesses
to the purchasers, some of which remain in force. Centerpulse has also assumed
or retained ongoing potential liabilities with respect to many of these divested
businesses. After the consummation of our offer, Centerpulse will be a
subsidiary of Zimmer and, therefore, our financial position, results of
operations and cash flows may be affected by these ongoing potential
liabilities.

ANTITRUST AND COMPETITION AUTHORITIES IN VARIOUS JURISDICTIONS MAY ATTEMPT TO
DELAY OR PREVENT OUR ACQUISITION OF VOTING AND CONTROL RIGHTS OR MAY REQUIRE
DIVESTITURES.

We are unaware of any antitrust filings or approvals that are required with
respect to our InCentive offer. However, we and Centerpulse conduct operations
in a number of jurisdictions where antitrust filings or approvals may be
required in connection with our offer. We have made or will make antitrust
filings with the relevant authorities in the United States, the Czech Republic,
Austria, France, Germany, Italy and Spain. Until the applicable waiting period
in the United States under the HSR Act expires or is terminated and we receive
the required clearances from other governmental authorities with respect to our
offer, either we may not purchase Centerpulse securities under our offer or we
may be entitled to acquire the Centerpulse securities but not to exercise the
voting or other rights attaching to those securities. We are currently in the
process of reviewing whether any other filings will be required or advisable in
other jurisdictions, and we intend to make the appropriate regulatory filings
and applications if we decide that such filings are necessary or advisable. We
cannot provide any assurance that the necessary approvals will be obtained or
that there will not be any adverse consequences to our or Centerpulse's business
resulting from the failure to obtain these regulatory approvals or from
conditions that could be imposed in connection with obtaining these approvals,
including divestitures or other operating restrictions upon Centerpulse or the
combined company. Our offer is conditioned upon the receipt from all European,
U.S. and other foreign authorities of approval and/or clearance of our
acquisition of Centerpulse without Zimmer, Centerpulse or any of our
subsidiaries being required to meet any condition or requirement giving rise to
specified adverse financial effects and no court or other authority prohibiting
the consummation of our offer and our InCentive offer. You should be aware

that all required regulatory approvals may not be obtained in time and could
result in a significant delay in the consummation of our offer and our InCentive
offer.

OUR VERIFICATION OF THE RELIABILITY OF THE CENTERPULSE INFORMATION INCLUDED
IN, OR OMITTED FROM, THIS PROSPECTUS, PURSUANT TO OUR DUE DILIGENCE REVIEW OF
CENTERPULSE, HAS BEEN LIMITED BY CENTERPULSE'S FAILURE TO PROVIDE US WITH THE
ACCOUNTING RECORDS NECESSARY FOR US TO FULLY ASSESS THE FINANCIAL CONDITION OF
CENTERPULSE.

In respect of information relating to Centerpulse's business, operations
and management presented in, or omitted from, this prospectus, we have relied
upon publicly available information, including information publicly filed by
Centerpulse with the SEC, and documentation provided to us by Centerpulse over
the course of our due diligence review of Centerpulse. However, Centerpulse has
omitted from the due diligence materials provided to us all the financial
information necessary for us to fully assess the financial condition of
Centerpulse. To date, Centerpulse has provided our representatives with only
limited access to Centerpulse's accounting records and has not permitted its
independent public accountants to provide us with all of the information we
require, including an independent public accountants' consent. Although we have
no knowledge that would indicate that any statements contained herein regarding
Centerpulse's financial condition based upon such publicly filed reports and
documents are inaccurate, incomplete or untrue, we were not involved in the
preparation of such information and statements. As a result, we have made
adjustments and assumptions in preparing the pro forma financial information
presented in this prospectus which have necessarily involved our estimates with
respect to Centerpulse's financial information. Any financial information
regarding Centerpulse that may be detrimental to us following our acquisitions
of Centerpulse and InCentive that has not been publicly disclosed by
Centerpulse, or errors in our estimates due to the lack of cooperation from
Centerpulse, may have an adverse effect on the benefits we expect to achieve
through the consummation of our offer.

THE CASH PORTION OF THE CONSIDERATION TO BE PAID IN OUR OFFER AND OUR
INCENTIVE OFFER TO TENDERING SECURITYHOLDERS IS BASED ON A FIXED AMOUNT OF
SWISS FRANCS AND, THEREFORE, ZIMMER IS SUBJECT TO CURRENCY FLUCTUATIONS
THROUGH THE PAYMENT DATE.

Because Zimmer will pay all holders of Centerpulse registered shares and
InCentive bearer shares in Swiss francs, Zimmer must buy Swiss francs with U.S.
dollars at the prevailing exchange rate on the payment date. As a result, the
actual amount of U.S. dollars required to buy a sufficient amount of Swiss
francs to pay the cash portion of the consideration to such holders will depend
upon the exchange rate prevailing on the business day on which the funds are
made available by Zimmer to the Swiss offer manager. Additionally, the actual
amount of U.S. dollars into which the cash portion of the consideration payable
into our offer for the Centerpulse ADSs, which is a fixed amount of Swiss
francs, is convertible will depend upon the exchange rate prevailing on the
business day on which the funds are made available by Zimmer to the U.S.
exchange agent. Therefore, Zimmer is subject to the risk of fluctuations in the
U.S. dollar/Swiss franc exchange rate.

WE COULD INCUR SUBSTANTIAL LIABILITY IF THE ISSUANCE OF ZIMMER COMMON STOCK
PURSUANT TO OUR OFFER, OR ANY OTHER FACTOR, CAUSES THE SPIN-OFF OF ZIMMER BY
ZIMMER'S FORMER PARENT TO BE TAXABLE FOR U.S. FEDERAL INCOME TAX PURPOSES.

In connection with the spin-off of Zimmer from Zimmer's former parent on
August 6, 2001, Zimmer's former parent received a private letter ruling from the
Internal Revenue Service, or IRS, to the effect that the transfer of the
orthopaedic business to Zimmer and the subsequent spin-off of Zimmer common
stock to Zimmer's former parent stockholders qualified as a tax-free transaction
under sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as
amended. The private letter ruling is based on the accuracy of representations
as to numerous factual matters, the inaccuracy of which could cause the IRS to
revoke all or any part of the private letter ruling retroactively. If the
spin-off were to fail to qualify for tax-free treatment, then, in general,
additional tax would be payable by the consolidated group of which Zimmer's
former parent is the common parent. Each member of Zimmer's former parent's
consolidated group at the time of the spin-off, including Zimmer, would be
jointly and severally liable for this tax. In addition, we entered into a tax

sharing agreement with Zimmer's former parent that prohibits us from taking
certain actions that might jeopardize the tax treatment of the spin-off and
related transactions, and requires us to indemnify Zimmer's former parent for
any taxes that result from such actions. If we are required to make any
indemnity payments, or are otherwise liable for additional taxes relating to the
spin-off, the amount of such payments or liability could be substantial and our
results of operations could be materially adversely affected. In accordance with
the tax sharing agreement, we have obtained an opinion of counsel to the effect
that the consummation of our offers for Centerpulse and InCentive will not cause
the spin-off or related transactions to be taxable to Zimmer's former parent or
its stockholders.

CENTERPULSE COULD INCUR SUBSTANTIAL LIABILITY IF THE ACQUISITION OF
CENTERPULSE CAUSES THE SEPARATION OF CENTERPULSE FROM SULZER AG TO BE TAXABLE
FOR SWISS TAX PURPOSES.

In connection with the separation of Centerpulse from Sulzer AG on July 10,
2001, Sulzer AG received private rulings from the applicable Swiss tax
authorities regarding the tax-free nature of the separation, including rulings
dated February 28, 2001 (Federal Tax Administration/Division Federal District
Tax, Withholding Tax and Stamp Duty) and March 2, 2001 (Tax Administration of
the Canton of Zurich). Centerpulse entered into a Separation Agreement with
Sulzer AG that requires Centerpulse to indemnify Sulzer AG for tax liabilities
that result from Centerpulse's noncompliance with the covenants and conditions
contained in the tax rulings or deviation from the factual descriptions on which
the tax rulings were based. If Centerpulse is required to make any indemnity
payments, or is otherwise liable for additional taxes relating to the
separation, the amount of such payments or liabilities could be substantial and
Centerpulse's results of operations could be materially adversely affected. We
have obtained a ruling by the competent tax authorities to the effect that, on
the basis of certain factual representations by us, the spin-off of Centerpulse
from Sulzer AG on July 10, 2001 will not be subject to Swiss corporate income
tax as a result of the consummation of our offers for Centerpulse and InCentive.

RISKS RELATING TO OUR INDUSTRY

WE FACE INTENSE COMPETITION AND OUR FAILURE TO COMPETE EFFECTIVELY COULD HAVE
A MATERIAL ADVERSE EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.

The orthopaedics industry is highly competitive. We compete with many
companies ranging from small start-up enterprises to multinational companies
that are larger and have access to greater financial, marketing, technical and
other resources. Our present or future products could be rendered obsolete or
uneconomical by technological advances by one or more of our present or future
competitors or by other therapies, including biological therapies. To remain
competitive, therefore, we must continue to develop and acquire new products and
technologies.

The orthopaedics industry has undergone significant consolidation over the
past few years, as the leading players have sought to build complete product
lines and gain economies of scale. Because we only produce and market products
in selected product categories of the orthopaedics industry, we may not be able
to compete successfully with our competitors in the future, especially those
that offer customers a broader range of orthopaedic, as well as other medical
equipment and supplies.

In the global markets for reconstructive implants, trauma products and
orthopaedic products, a handful of competitors, including Smith & Nephew plc,
Biomet, Inc., J&J DePuy Orthopaedics (a subsidiary of Johnson & Johnson),
Stryker Corp. and Synthes-Stratec compete with us for the majority of product
sales, particularly in the Americas and the Asia-Pacific region, primarily on
the basis of technology, quality, reputation, customer relationships and
service. In local markets outside of the United States, other factors, including
local distribution systems, complex regulatory environments and differing
medical philosophies and product preferences, influence competition as well.
Some of our competitors have, and in the future these and other competitors may
have, significantly greater financial, marketing and other resources than us.
Our competitors may be in a stronger position to respond quickly to new or
emerging technologies, may be able to undertake more extensive marketing
campaigns, may adopt more aggressive pricing policies and may be more successful
in attracting potential customers, employees and strategic partners.

WE ARE SUBJECT TO COST-CONTAINMENT EFFORTS OF MANAGED CARE AND HOSPITAL BUYING
GROUPS IN THE UNITED STATES AND GOVERNMENT ORGANIZATIONS IN EUROPE AND THE
ASIA PACIFIC REGION, WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR
PROFITABILITY AND RESULTS OF OPERATIONS.

The development of managed care programs in which health care providers
contract to provide comprehensive health care to a patient population at a fixed
cost per person has caused, and we expect will continue to cause, pressures on
health care providers to lower costs. For example, managed care programs often
prescribe only those orthopaedic recovery products that match a patient as to
age, need for mobility and other parameters in an effort to provide more
cost-effective care. We cannot assure you that such policies will not have a
material adverse effect on our operating results.

Many existing and potential customers for our products have combined to
form group purchasing organizations in an effort to lower costs as well. Group
purchasing organizations negotiate pricing arrangements with medical supply
manufacturers and distributors, and these negotiated prices are made available
to a group purchasing organization's affiliated hospitals and other members.
Strict compliance arrangements require the affiliated hospitals and other
members of the group purchasing organization to purchase specified products from
a given manufacturer or distributor. In contrast, voluntary compliance
arrangements allow members to choose between the products covered by the
arrangement and another manufacturer's products, whether or not purchased under
a negotiated arrangement. If we are not one of the providers selected by a group
purchasing organization, affiliated hospitals and other members may be less
likely to purchase our products, and if the group purchasing organization has
negotiated a strict compliance contract for another manufacturer's products, we
may be precluded from making sales to members of the group purchasing
organization for the duration of the contractual arrangement. Even if we are one
of the selected providers, because we only compete in selected product
categories of the orthopaedics industry, we may be at a disadvantage relative to
other providers that are able to offer volume discounts based on purchases of a
broader range of medical equipment and supplies, including from more
orthopaedics industry product categories. Further, our failure to offer reduced
prices to group purchasing organizations may cause us to lose market share to
our competitors and could have a material adverse effect on our sales, business,
financial condition and results of operations.

In international markets, where the movement toward health care reform and
the development of managed care is generally not as advanced as in the United
States, we have experienced downward pressure on product pricing and other
effects of health care reform similar to what we have experienced in the United
States. In Japan, for example, in both 1998 and 2000, the Japanese Ministry of
Health, Labor and Welfare implemented plans to reduce reconstructive implant and
fracture management product prices. We expect health care reform and managed
care to continue to develop in our primary international markets, including the
Asia Pacific region and Europe, which may result in further downward pressure in
product pricing. The timing and the effects on us of health care reform and the
development of managed care in international markets cannot currently be
predicted.

IF THIRD-PARTY PAYORS DECLINE TO REIMBURSE OUR CUSTOMERS FOR OUR PRODUCTS OR
REDUCE REIMBURSEMENT LEVELS, OUR ABILITY TO SELL OUR PRODUCTS PROFITABLY WILL
BE HARMED.

We sell our products and services to hospitals, doctors and other health
care providers, all of which receive reimbursement for the health care services
provided to their patients from third-party payors, such as domestic and
international government programs, private insurance plans and managed care
programs. These third-party payors may deny reimbursement if they determine that
a device used in a procedure was not in accordance with cost-effective treatment
methods, as determined by the third-party payor, or was used for an unapproved
indication. Third-party payors may also decline to reimburse for experimental
procedures and devices. If our products are not considered cost-effective by
third-party payors, our customers may not be reimbursed for our products.

In addition, third-party payors are increasingly attempting to contain
health care costs by limiting both coverage and the level of reimbursement for
medical products and services. We cannot assure you that levels of
reimbursement, if any, will not be decreased in the future, or that future
legislation, regulation or

reimbursement policies of third-party payors will not otherwise adversely affect
the demand for and price levels of our products.

WE AND OUR CUSTOMERS ARE SUBJECT TO VARIOUS GOVERNMENTAL REGULATIONS AND WE
MAY INCUR SIGNIFICANT EXPENSES TO COMPLY WITH THESE REGULATIONS AND DEVELOP
PRODUCTS COMPATIBLE WITH THESE REGULATIONS.

The medical devices we design, develop, manufacture and market are subject
to rigorous regulation by the U.S. Food and Drug Administration and numerous
other U.S. federal and state and foreign governmental authorities. In the United
States, multiple regulations govern the development, testing, manufacturing and
marketing of medical devices, including among others, the Federal Food, Drug and
Cosmetic Act and regulations issued or proposed thereunder. The process of
obtaining regulatory approvals to market a medical device, particularly from the
U.S. Food and Drug Administration and certain foreign governmental authorities,
can be costly and time consuming and approvals might not be granted for future
products on a timely basis, if at all. A few of the devices developed and
marketed by us are in a category for which the U.S. Food and Drug Administration
has implemented stringent clinical investigation and pre-market approval
requirements. The U.S. Food and Drug Administration has the authority to halt
the distribution of certain medical devices, detain or seize adulterated or
misbranded medical devices or order the repair, replacement or refund of the
costs of such devices. Delays in receipt of, or failure to obtain, approvals for
future products could result in delayed realization of product revenues or in
substantial additional costs which could have a material adverse effect on our
business or results of operations.

In addition, we cannot assure you that we will be or will continue to be in
compliance with applicable U.S. Food and Drug Administration and other material
regulatory requirements once we have obtained clearance or approval for a
product. These requirements include, among other things, the Quality System
Regulation, recordkeeping regulations, labeling requirements and adverse event
reporting regulations. Failure to comply with applicable U.S. Food and Drug
Administration medical device regulatory requirements could result in, among
other things, warning letters, fines, injunctions, civil penalties, repairs,
replacements, refunds, recalls or seizures of products, total or partial
suspension of production, the U.S. Food and Drug Administration's refusal to
grant future premarket clearances or approvals, withdrawals or suspensions of
current product applications and criminal prosecution. Any of these actions, in
combination or alone, could have a material adverse effect on our business,
financial condition and results of operations.

In many of the foreign countries in which we market our products, we are
subject to regulations affecting, among other things, product standards,
packaging requirements, labeling requirements, import/export restrictions,
tariff regulations, duties and tax requirements. Many of the regulations
applicable to our devices and products in such countries, such as the European
Medical Device Directives (which create a single set of medical device
regulations for all European Union member states), are similar to those of the
U.S. Food and Drug Administration. In addition, in many countries the national
health or social security organizations require our products to be qualified
before they can be marketed with the benefit of reimbursement eligibility.
Failure to receive, or delays in the receipt of, relevant foreign qualifications
also could have a material adverse effect on our business, financial condition
and results of operations. Due to the movement towards harmonization of
standards in the European Union, we expect a changing regulatory environment in
Europe characterized by a continuing shift from a country-by-country regulatory
system to a single European Union regulatory system. Under the European Medical
Device Directives, companies that wish to manufacture and distribute medical
devices in European Union member states must obtain European Community marks for
their products. These marks indicate compliance with European standards for
safety, allowing such products to be marked in Europe. The timing of this
harmonization and its effect on us cannot currently be predicted. However, any
such developments could have a material adverse effect on our business,
financial condition and results of operations.

As both the U.S. Food and Drug Administration and foreign government
regulators have become increasingly stringent, we may be subject to more
rigorous regulation by governmental authorities in the future. Our products and
operations are also often subject to the rules of industrial standards bodies,
such as the International Standards Organization. If we fail to adequately
address any of these regulations, our business will be harmed.

WE ARE SUBJECT TO HEALTH CARE FRAUD AND ABUSE REGULATIONS THAT COULD REQUIRE
US TO CHANGE OUR BUSINESS PRACTICES AND RESTRICT OUR OPERATIONS IN THE FUTURE.

Our industry is subject to various U.S. federal and state laws pertaining
to health care fraud and abuse, including anti-kickback laws and physician
self-referral laws. Violations of these laws are punishable by criminal and/or
civil sanctions, including, in some instances, imprisonment and exclusion from
participation in U.S. federal and state health care programs, including
Medicare, Medicaid, Veterans Administration health programs and Civilian Health
and Medical Program Uniformed Service (TRICARE/CHAMPUS). The scope and
enforcement of these laws and regulations are uncertain and subject to rapid
change, especially in light of the lack of applicable precedent and regulations.
We believe that our operations are in material compliance with these laws.
However, because of the far-reaching and uncertain nature of these laws, we may
be required to alter one or more of our practices to be in compliance with these
laws. In addition, we cannot assure you that the occurrence of one or more
violations of these laws would not result in a material adverse effect on our
business, financial condition and results of operations. If there is a change in
law, regulation or administrative or judicial interpretations, some of our
existing business practices could be challenged as unlawful and, as a result, we
may have to change those practices, which could have a material adverse effect
on our business, financial condition and results of operations.

WE MAY INCUR PRODUCT LIABILITY LOSSES, AND INSURANCE COVERAGE MAY BE
INADEQUATE OR UNAVAILABLE TO COVER THESE LOSSES.

Our business is subject to potential product liability risks that are
inherent in the design, development, manufacture and marketing of medical
devices. Our products are often used in surgical and intensive care settings. In
addition, some of the medical devices we manufacture and sell are designed to be
implanted in the human body for long periods of time. In the ordinary course of
business, we are the subject of product liability suits alleging that component
failures, manufacturing flaws, design defects or inadequate disclosure of
product-related risks or product-related information could result in an unsafe
condition or injury to patients. Product liability lawsuits and claims, safety
alerts or product recalls, regardless of their ultimate outcome, could have a
material adverse effect on our business, financial condition and results of
operations.

As part of our risk management policy, we maintain insurance, subject to
self-insured retention limits. We establish accruals for product liability and
other claims in conjunction with outside counsel based on current and historical
settlement information for open claims, related fees and for claims incurred but
not reported. However, product liability claims against us may exceed the
coverage limits of any insurance policies or cause us to record a self-insured
loss. Even if any product liability loss is covered by an insurance policy,
these policies may have substantial retentions or deductibles that provide that
we will not receive insurance proceeds until the losses incurred exceed the
amount of those retentions or deductibles. To the extent that any losses are
below these retentions or deductibles, we will be responsible for paying these
losses. A product liability claim in excess of applicable insurance could have a
material adverse effect on our business, financial position and results of
operations.

RISKS RELATING TO OUR BUSINESS

AS A RESULT OF THE CONSUMMATION OF OUR OFFER, WE WILL BE A LARGER AND BROADER
ORGANIZATION, AND IF OUR MANAGEMENT IS UNABLE TO MANAGE THE COMBINED
BUSINESSES OF ZIMMER AND CENTERPULSE, OUR OPERATING RESULTS WILL SUFFER.

As a result of the consummation of our offer, Zimmer will acquire
approximately 2,800 employees of Centerpulse worldwide. Consequently, we will
face challenges inherent in efficiently managing an increased number of
employees over large geographic distances, including the need to implement
appropriate systems, policies, benefits and compliance programs. The inability
to manage successfully the geographically more diverse and substantially larger
combined organization, or any significant delay in achieving successful
management, could have a material adverse effect on us after our offer is
consummated and, as a result, on the market price of our common stock.

OUR EXPOSURE TO THE EUROPEAN REGULATORY REGIME WILL INCREASE FOLLOWING THE
CONSUMMATION OF OUR OFFER

In 2002, we derived approximately US$480 million, or 35%, of our total
revenue from sales of our products outside of the United States. The European
region accounted for approximately 12% of our 2002 sales. After consummation of
our offer, approximately 41% of our total revenue will be derived from sales
outside the United States. Approximately 25% of such total revenue will be
derived from sales in the European region. Our international operations are, and
will continue to be, subject to a number of risks and potential costs. We are
required to obtain various licenses and permits from foreign governments and to
comply with significant regulations that vary by country in order to market our
products in such jurisdictions. There can be no assurance that we will be able
to obtain and maintain any necessary licenses, permits and certifications or
comply with applicable regulations of foreign governments. The failure by us to
obtain or maintain the required licenses, permits or certifications, or comply
with those regulations, could have a material adverse effect on our business and
financial results.

EXPOSURE TO FOREIGN MARKET RISK WILL BE INCREASED FOLLOWING THE CONSUMMATION
OF OUR OFFER

Centerpulse's largest division is orthopaedics, which focuses on joint care
and includes a traditionally strong hip and knee implant business. Centerpulse
estimates that it has a leading share of the European implant market, with an
approximate 25% market share. Centerpulse's spine-tech division offers a full
range of spinal implant systems primarily in the United States. Centerpulse
estimates that it has a global market share of 5%. Centerpulse's dental
division, producing mainly dental implants, serves primarily the United States
and European markets. The Americas are Zimmer's largest marketing region,
accounting for approximately 68% of 2002 sales, with the United States
accounting for the vast majority of sales in the region. The European region
accounted for approximately 12% of Zimmer's 2002 sales. The Asia-Pacific region
accounted for approximately 20% of Zimmer's 2002 sales. Certain risks are
inherent in international operations, including exposure to currency
fluctuations, political and economic conditions and unexpected changes in
regulatory requirements. For example, in Japan, in both 1998 and 2000, the
Japanese Ministry of Health, Labor and Welfare implemented plans to reduce
reconstructive implant and fracture management product prices. We expect health
care reform and managed care to continue to develop in our primary international
markets including the Asia-Pacific region, which may result in further downward
pressure in product pricing. There can be no assurance that such factors will
not have a greater adverse effect on Zimmer than on Centerpulse.

IF WE FAIL TO ATTRACT, HIRE AND RETAIN QUALIFIED PERSONNEL, WE MAY NOT BE ABLE
TO DESIGN, DEVELOP, MARKET OR SELL OUR PRODUCTS OR SUCCESSFULLY MANAGE OUR
BUSINESS.

Our ability to attract new customers, retain existing customers and pursue
our strategic objectives depends on the continued services of our current
management, sales, product development and technical personnel and our ability
to identify, attract, train and retain similar personnel. Competition for top
management personnel is intense and we may not be able to recruit and retain the
personnel we need if we are unable to offer competitive salaries and benefits,
or if our stock does not perform well. The loss of any one of our management
personnel, or our inability to identify, attract, train, retain and integrate
additional qualified management personnel, could make it difficult for us to
manage our business successfully and pursue our strategic objectives. We do not
carry key person life insurance on any of our employees. Similarly, competition
for skilled sales, product development and technical personnel is intense and we
may not be able to recruit and retain the personnel we need. The loss of the
services of any key sales, product development and technical personnel, or our
inability to hire new personnel with the requisite skills, could restrict our
ability to develop new products or enhance existing products in a timely manner,
sell products to our customers or manage our business effectively.

IF WE FAIL TO MAINTAIN OUR RELATIONSHIPS WITH, AND THE SUPPORT OF, ORTHOPAEDIC
SURGEONS, CUSTOMERS MAY NOT BUY OUR PRODUCTS AND OUR REVENUE AND PROFITABILITY
MAY DECLINE.

We have developed and maintain close relationships with a number of widely
recognized orthopaedic surgeons who assist in product research and development
and advise us on how to satisfy the full range of

surgeon and patient needs. These professionals often become product "champions,"
speaking about our products at medical seminars, assisting in the training of
other professionals in the use of our products and providing us with feedback on
the industry's acceptance of our new products. The failure of our products to
retain the support of orthopaedic surgeons, who frequently recommend products or
influence product selection decisions, or the failure of our new products to
secure and retain similar support from leading surgeons, could have a material
adverse effect on our business, financial condition and results of operations.

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.

Our marketing success in the United States and abroad depends largely upon
our agents' and distributors' sales and service expertise and relationships with
the customers in the marketplace. Many of these agents have developed strong
ties to existing and potential customers because of their detailed knowledge of
products and instruments and commonly provide operating room personnel with
implant and instrument product training as well as product support in the
operating room. A significant loss of these agents could have a material adverse
effect on our business, financial condition and results of operations.

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.

Demand for our products may change, in certain cases, in ways we may not
anticipate because of:

- evolving customer needs;

- the introduction of new products and technologies;

- evolving surgical philosophies; and

- evolving industry standards.

Without the timely introduction of new products and enhancements, our
products may become obsolete over time, in which case our revenue and operating
results would suffer. The success of our new product offerings will depend on
several factors, including our ability to:

- properly identify and anticipate customer needs;

- commercialize new products in a timely manner;

- manufacture and deliver instrumentation and products in sufficient
volumes on time;

- differentiate our offerings from competitors' offerings;

- achieve positive clinical outcomes for new products;

- satisfy the increased demands by healthcare payors, providers and
patients for shorter hospital stays, faster post-operative recovery and
lower-cost procedures;

- innovate and develop new materials, product designs and surgical
techniques; and

- provide adequate medical education relating to new products and attract
key surgeons to advocate these new products.

In addition, new materials, product designs and surgical techniques that we
develop may not be accepted quickly, in some or all markets, because of, among
other factors:

- entrenched patterns of clinical practice;

- the need for regulatory clearance; and

- uncertainty with respect to third-party reimbursement.

Moreover, innovations generally will require a substantial investment in
research and development before we can determine the commercial viability of
these innovations and we may not have the financial resources necessary to fund
these innovations. In addition, even if we are able to successfully develop
enhancements or new generations of our products, these enhancements or new
generations of products may not produce revenue in excess of the costs of
development and they may be quickly rendered obsolete by changing

customer preferences or the introduction by our competitors of products
embodying new technologies or features.

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.

Because we sell our products in a number of foreign countries, our business
is subject to risks associated with doing business internationally. In 2002, we
derived approximately US$480 million, or 35% of our total revenue, from sales of
our products outside of the United States. We intend to continue to pursue
growth opportunities in sales internationally, which could expose us to greater
risks associated with international sales and operations. In addition, after
consummation of our offer, approximately 41% of our total revenue will be
derived from sales outside the United States. Our international operations are,
and will continue to be, subject to a number of risks and potential costs,
including:

- changes in foreign medical reimbursement policies and programs;

- unexpected changes in foreign regulatory requirements;

- differing local product preferences and product requirements;

- fluctuations in foreign currency exchange rates;

- diminished protection of intellectual property in some countries outside
of the United States;

- trade protection measures and import or export licensing requirements;

- difficulty in staffing and managing foreign operations;

- differing labor regulations;

- potentially negative consequences from changes in tax laws; and

- political and economic instability.

As we expand our international operations, including through the
acquisitions of Centerpulse and InCentive, we may encounter new risks. For
example, as we focus on building our international sales and distribution
networks in new geographic regions, we must continue to develop relationships
with qualified local distributors and trading companies. If we are not
successful in developing these relationships, we may not be able to grow sales
in these geographic regions.

Any of these factors may, individually or as a group, have a material
adverse effect on our business, financial condition and results of operations.

WE ARE SUBJECT TO RISKS ARISING FROM CURRENCY EXCHANGE RATE FLUCTUATIONS,
WHICH COULD INCREASE OUR COSTS AND MAY CAUSE OUR PROFITABILITY TO DECLINE.

In 2002, we derived approximately US$480 million, or 35% of our total
revenues, from sales of our products outside of the United States. In addition,
after consummation of our offer, approximately 41% of our total revenue will be
derived from sales outside the United States. Measured in local currency, a
substantial portion of our business' foreign generated revenues were generated
in Japan and in Europe. The United States dollar value of our foreign-generated
revenues varies with currency exchange rate fluctuations. Significant increases
in the value of the United States dollar relative to the Japanese yen or the
euro, as well as other currencies, could have a material adverse effect on our
results of operations. We address currency risk management through regular
operating and financing activities, and on a limited basis, through the use of
derivative financial instruments. The derivative financial instruments we enter
into are in the form of foreign exchange forward contracts with major financial
institutions. The forward contracts are designed to hedge anticipated foreign
currency transactions, primarily intercompany sale and purchase transactions,
for periods consistent with commitments. Realized and unrealized gains and
losses on these contracts that qualify as cash flow hedges are temporarily
recorded in other comprehensive income, then recognized in earnings when the
hedged item affects net earnings.

WE MAY ACQUIRE OTHER BUSINESSES OR FORM JOINT VENTURES THAT COULD NEGATIVELY
AFFECT OUR PROFITABILITY, DILUTE YOUR OWNERSHIP OF OUR COMPANY, INCREASE OUR
DEBT OR CAUSE US TO INCUR SIGNIFICANT EXPENSE.

As part of our business strategy, we occasionally pursue acquisitions of
other complementary businesses and technology licensing arrangements. We also
occasionally intend to pursue strategic alliances that leverage our brand name
and salesforce to expand our product offerings and geographic presence. As a
result, we may enter markets in which we have no or limited prior experience. If
we were to make any acquisitions, we may not be able to integrate these
acquisitions successfully into our existing business and we could assume unknown
or contingent liabilities or experience negative effects on our reported results
of operations from acquisition-related charges and the amortization of acquired
technology, goodwill and other intangibles. Integration of an acquired company
also may require management resources that otherwise would be available for
ongoing development of our existing business. We may not identify or complete
these transactions in a timely manner, on a cost-effective basis or at all, and
we may not realize the benefits of any acquisition, technology license or
strategic alliance. In addition, to finance any acquisitions, it may be
necessary for us to raise additional funds through public or private financings.
Additional funds may not be available on terms that are favorable to us and, in
the case of equity financings, may result in dilution to our stockholders.
Furthermore, we may be limited in our ability to issue stock as consideration
for future acquisitions in order to ensure the tax-free treatment of the
distribution of our stock from our former parent. Any future acquisitions by us
could also result in large and immediate write-offs, the incurrence of debt and
contingent liabilities or amortization of expenses related to goodwill and other
intangibles, any of which could harm our operating results.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR BUSINESS AND
PROSPECTS MAY BE HARMED.

Our failure to protect our intellectual property could seriously harm our
business and prospects because we believe that developing new products and
technologies that are unique is critical to our success. We will incur
substantial costs in obtaining patents and, if necessary, defending our
intellectual propriety rights. The patent positions of orthopaedic
reconstructive implant and fracture management product companies, including
ours, can be highly uncertain and involve complex and evolving legal and factual
questions. We do not know whether we will obtain the patent protection we seek,
or that the protection we do obtain will be found valid and enforceable if
challenged. Our efforts to protect our intellectual property through patents,
trademarks, service marks, domain names, trade secrets, copyrights,
confidentiality and nondisclosure agreements and other measures may not be
adequate to protect our proprietary rights. Patent filings by third parties,
whether made before or after the date of our filings, could render our
intellectual property less valuable. Disputes may arise as to ownership of our
intellectual property or as to whether products designed by our competitors
infringe our intellectual property rights. Employees, consultants and others who
participate in developing our products may breach their agreements with us
regarding our intellectual property, and we may not have adequate remedies for
the breach. In addition, intellectual property rights may be unavailable or
limited in some foreign countries, which could make it easier for competitors to
capture market position. Competitors may also capture market share from us by
designing products that mirror the capabilities of our products or technology
without infringing our intellectual property rights. If we do not obtain
sufficient international protection for our intellectual property, our
competitiveness in international markets could be impaired, which would limit
our growth and future revenue.

PUBLIC ANNOUNCEMENTS OF LITIGATION EVENTS MAY CAUSE OUR STOCK PRICE TO
DECLINE.

During the course of our administrative proceedings and/or lawsuits, there
may be public announcements of the results of hearings, motions, and other
interim proceedings or developments in the litigation. If securities analysts or
investors perceive these results to be negative, it could have a substantial
negative effect on the trading price of our common stock.

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.

A successful claim of patent or other intellectual property infringement
against us could adversely affect our growth and profitability, in some cases
materially. We cannot assure you that others will not claim that

our proprietary or licensed products are infringing their intellectual property
rights or that we do not in fact infringe those intellectual property rights.
From time to time, we receive notices from third parties of potential
infringement and receive claims of potential infringement. We may be unaware of
intellectual property rights of others that may cover some of our technology. If
someone claims that our products infringed their intellectual property rights,
any resulting litigation could be costly and time consuming and would divert the
attention of management and key personnel from other business issues. The
complexity of the technology involved and the uncertainty of intellectual
property litigation increase these risks. Claims of intellectual property
infringement also might require us to enter into costly royalty or license
agreements. However, we may be unable to obtain royalty or license agreements on
terms acceptable to us or at all. We also may be subject to significant damages
or an injunction preventing us from manufacturing, selling or using some of our
products in the event of a successful claim of patent or other intellectual
property infringement. Any of these adverse consequences could have a material
adverse effect on our business, financial condition and results of operations.

WE MAY NOT HAVE FINANCING FOR FUTURE CAPITAL REQUIREMENTS, WHICH MAY PREVENT
US FROM ADDRESSING GAPS IN OUR PRODUCT OFFERINGS, IMPROVING OUR TECHNOLOGY OR
INCREASING OUR MANUFACTURING CAPACITY.

If we cannot incur additional debt or issue equity or are limited with
respect to incurring additional debt or issuing equity, we may be unable to
address gaps in our product offerings, improve our technology or increase our
manufacturing capacity, particularly through strategic acquisitions or
investments. Although historically our cash flow from operations has been
sufficient to satisfy working capital, capital expenditure and research and
development requirements, in the future we may need to incur additional debt or
issue equity in order to fund these requirements as well as to make acquisitions
and other investments. We cannot assure you that debt or equity financing will
be available to us on acceptable terms or at all. If we raise funds through the
issuance of debt or equity, any debt securities or preferred stock issued will
have rights and preferences and privileges senior to those of holders of our
common stock in the event of a liquidation. The terms of the debt securities may
impose restrictions on our operations. If we raised funds through the issuance
of equity, this issuance would dilute your ownership of us.

If the price of our equity is low or volatile, we may not be able to issue
additional equity to fund future acquisitions. Also, regardless of the
volatility of the price of our equity, we may be limited in our ability to issue
stock as consideration for future acquisitions in order to ensure the tax-free
treatment of the distribution of our stock from our former parent.

Our ability to make payments on and to refinance our indebtedness,
including the debt to be incurred under the credit agreements dated June 12,
2003 among Zimmer, the lenders and the other parties thereto, and future
indebtedness, and to fund working capital, capital expenditures and strategic
acquisitions and investments, will depend on our ability to generate cash in the
future. Our ability to generate cash is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.

WE MAY BE AFFECTED BY ENVIRONMENTAL LAWS AND REGULATIONS.

We are subject to a variety of laws, rules and regulations in the United
States relating to discharges of substances in the air, water and land, the
handling, storage and disposal of wastes and the cleanup of properties
necessitated by pollutants. Any of those regulations could require us to acquire
expensive equipment or to incur substantial other expenses to comply with them.
If we incur substantial additional expenses, product costs could significantly
increase. Also, if we fail to comply with present or future environmental laws,
rules and regulations, such failure could result in fines, suspension of
production or cessation of operations.

THE COMPANIES
ZIMMER HOLDINGS, INC.
GENERAL
Zimmer Holdings, Inc. is a company incorporated in Delaware with its shares
listed on the New York Stock Exchange under the symbol "ZMH." An additional
listing application will be submitted to the New York Stock Exchange and a
supplemental listing application will be submitted to the SWX Swiss Exchange in
order to list the shares issued in connection with our offer and our InCentive
offer.
Zimmer was incorporated on January 12, 2001 as a wholly owned subsidiary of
our former parent as part of a previously announced plan by our former parent to
create a separate company relating to the design, development, manufacture and
marketing of orthopaedic reconstructive implants, trauma products and other
products used for orthopaedic and general surgery. Zimmer, Inc., our predecessor
founded in 1927, was acquired by our former parent in 1972 and along with its
wholly owned subsidiaries and certain other of our former parent's operations
comprised the orthopaedics business of our former parent until Zimmer's
incorporation. Unless the context requires otherwise, the term "Zimmer" as used
herein refers to Zimmer and all of its subsidiaries and the predecessor
orthopaedics business operated thereunder.
On July 25, 2001, our former parent transferred the assets and liabilities
of its orthopaedics business to us. On August 6, 2001, our former parent
distributed all of the shares of our common stock to our former parent
stockholders in the form of a dividend of one share of our common stock, and the
associated preferred stock purchase right, for every ten shares of our former
parent common stock, referred to as the distribution or separation. Our former
parent received a ruling from the IRS that the transfer of the orthopaedics
business to us and the subsequent distribution of all our common stock to our
former parent's stockholders qualified as a tax free transaction.
GEOGRAPHIC SEGMENTS

We have operations in 20 countries and market our products in more than 70
countries, with headquarters in Warsaw, Indiana, and manufacturing, distribution
and warehousing and/or office facilities in more than 50 locations worldwide.
Our operations are divided into three major geographic areas -- the Americas,
which is comprised principally of the United States (accounting for
approximately 96% of 2002 Americas net sales) and includes other North, Central
and South American markets; Asia-Pacific, which is comprised primarily of Japan
(accounting for approximately 71% of 2002 Asia-Pacific net sales) and includes
other Asian and Pacific markets; and Europe, which is comprised principally of
Europe and includes the Middle East and Africa.

Our products are distributed in these regions primarily through networks of
agents and distributors who market and sell to orthopaedic surgeons, third party
distributors, hospitals and surgery centers, among others.
Our primary customers include orthopaedic surgeons, hospitals and
healthcare purchasing organizations or buying groups. These customers range from
large multinational enterprises to independent surgeons. A majority of U.S.
hospitals and surgeons belong to at least one group purchasing organization. No
individual end user accounted for more than 1.0% of net sales.
We utilize more than 1,300 sales associates, sales managers and support
personnel, some of whom are employed by independent distributors. We invest a
significant amount of time and expense in providing training in such areas as
product features and benefits, how to use specific products and how to best
assist surgeons. The presence of sales representatives is deemed by surgeons and
hospitals to be necessary in a high number of procedures and the extensive sales
training provided by us enables representatives, when requested, to make
meaningful contributions during surgeries. Sales force representatives rely
heavily on strong technical selling skills, medical education and in-surgery
staff technical support.
In response to the different healthcare systems throughout the world, our
sales and marketing strategies and organizational structures differ by region.
We have, however, carefully integrated a global approach to salesforce training,
marketing and medical education into each locality to provide consistent, high
quality

service. We sponsor more than 300 medical education events each year for and
with orthopaedic surgeons around the world.
The Americas is the largest region, accounting for approximately 68% of
2002 sales, with the United States accounting for the vast majority of sales in
this region. The U.S. salesforce consists of 26 independent distributors with
more than 700 sales associates, sales managers and sales support personnel, all
of whom sell our products exclusively. Also, we have concentrated on negotiating
contracts with buying groups and managed care accounts and have increased unit
growth by linking the level of discount received to sales growth.
The Asia-Pacific region accounted for approximately 20% of 2002 sales, with
Japan being the largest foreign market and accounting for the majority of sales
in that region. In Japan and most countries in the Asia-Pacific region, we
maintain a network of dealers and approximately 400 sales associates and sales
support personnel who build and maintain strong relationships with leading
orthopaedic surgeons in their markets.

The European region accounted for approximately 12% of 2002 sales, with
France, Germany, Italy, Spain and the United Kingdom accounting for
approximately 75% of sales in that region. In addition, we also operate in other
key markets such as the Benelux, Nordic, Switzerland and emerging regions such
as Russia, Central Europe, and the Mediterranean. Our salesforce in this region
is also comprised of independent distributors, commissioned agents, and
approximately 200 direct sales associates and sales support personnel.

PRODUCTS
We are a global leader in the design, development, manufacture and
marketing of reconstructive orthopaedic implants and trauma products.
Orthopaedic reconstruction implants restore joint function lost due to disease
or trauma in joints such as knees, hips, shoulders and elbows. Trauma products
are devices used primarily to reattach or stabilize damaged bone and tissue to
support the body's natural healing process. Zimmer also manufactures and markets
other products related to orthopaedic and general surgery. For the year 2002,
Zimmer recorded worldwide revenues of approximately US$1.4 billion.
Our principal executive offices are located at 345 East Main Street,
Warsaw, Indiana, 46580 and our telephone number is (574) 267-6131.
CENTERPULSE AG

Centerpulse AG, formerly Sulzer Medica AG, is a leading medical technology
group employing over 2,800 employees globally, which serves the reconstructive
joint, spinal and dental implant markets. Following the divestiture of its
cardiovascular division, which was concluded in January 2003, Centerpulse is
organized into three divisions: orthopaedics, spine-tech and dental.
Centerpulse, which is organized and headquartered in Switzerland, has five
production facilities in Switzerland, the United States and France. For the year
2002, Centerpulse recorded worldwide revenues from continuing operations of
approximately CHF 1.2 billion. Under its articles of association, Centerpulse
has three legal names, each of which identifies the same legal entity:
Centerpulse AG, Centerpulse Ltd. and Centerpulse SA.

Centerpulse's largest division is orthopaedics, which focuses on joint care
and includes the traditionally strong hip and knee implant businesses.
Centerpulse estimates that it has a leading share of the European implant
market, with an approximate 25% market share. In 2002, the orthopaedics division
reported total sales of CHF 923 million, of which CHF 542 million was in Europe.
The currency adjusted underlying sales growth for 2002 was 14%.

Centerpulse's spine-tech division offers a full range of spinal implant
systems primarily in the United States. Centerpulse estimates that it has a
global market share of approximately 5%. In 2002, the spine-tech division had
sales of CHF 179 million, a currency adjusted growth of approximately 12% for
2002.
Centerpulse's dental division, producing mainly dental implants, serves
primarily the United States and European markets. Centerpulse estimates that it
occupies the No. 4 position globally, with a market share of

approximately 13%. In 2002, the dental division had sales of CHF 131 million, a
currency adjusted increase of approximately 18% for 2002.

The address of Centerpulse's principal place of business is Andreasstrasse
15, CH-8050, Zurich, Switzerland, and Centerpulse's telephone number is + 41 1
306 96 96.

FINANCIAL FORECASTS

During the course of our due diligence review of documentation provided to
us by Centerpulse, conducted during May and June 2003, Centerpulse provided us
with information regarding its anticipated future results for the years ending
December 31, 2003, 2004, 2005, 2006 and 2007. The projected total sales and the
projected net income, calculated in accordance with IFRS, included in such
information for each of those years was as follows:

<Table>
<Caption>
PROJECTED TOTAL SALES PROJECTED NET INCOME
YEAR ENDING DECEMBER 31, (IN MILLIONS CHF) (IN MILLIONS CHF)
- ------------------------ --------------------- --------------------

2003.............................................. 1,337 120
2004.............................................. 1,502 169
2005.............................................. 1,681 213
2006.............................................. 1,888 259
2007.............................................. 2,110 306
</Table>

The information in the preceding paragraph was prepared by Centerpulse
solely for internal use and not for publication or public disclosure. Zimmer is
not including this information in this prospectus to influence your decision
whether to tender your Centerpulse registered shares or Centerpulse ADSs in our
offer, but because this information was made available by Centerpulse to Zimmer,
and you should not rely on this information in making your decision whether to
tender your Centerpulse registered shares or Centerpulse ADSs in our offer. This
information was based on numerous variables and assumptions that are inherently
uncertain and may be beyond the control of Centerpulse's management. In
particular, this information may be affected by Centerpulse's ability to achieve
strategic goals, objectives and targets over the applicable period. These
assumptions necessarily involve judgments with respect to, among other things,
future economic, competitive and regulatory conditions and financial market
conditions, all of which are difficult or impossible to predict accurately and
many of which are beyond Centerpulse's control. Accordingly, actual results may
vary significantly from those set forth in this information. In addition, this
information was not prepared with a view toward compliance with published
guidelines of the SEC, the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of financial
forecasts or U.S. GAAP. Moreover, this information was not reconciled to U.S.
GAAP. None of Centerpulse, the Centerpulse board of directors, Centerpulse's
advisors, agents, representatives or independent consultants and none of Zimmer,
its board of directors, advisors, agents, representatives or independent
consultants assume any responsibility for the accuracy of this information, nor
do they assume any obligation to update or revise this information.
Centerpulse's independent accountant has neither examined nor compiled the
accompanying prospective financial information and did not express any opinion
or any other form of assurance with respect thereto. Neither Centerpulse nor
Zimmer intends to make publicly available any update or other revisions to any
of the information to reflect circumstances existing after the date of
preparation of this information or the occurrence of unanticipated events, even
if experience or future changes in assumed conditions make it clear that this
information is inaccurate. The inclusion of this information in this prospectus
should not be regarded as a representation by Centerpulse, Zimmer or any other
person that the forecasted results will be achieved.

LITIGATION MATTERS

According to publicly available information concerning Centerpulse,
Centerpulse is currently party to various litigation related to alleged defects
in certain of its products, specifically, Inter-Op(TM) shell and tibial base
plates. Following Centerpulse's December 5, 2000 recall of various Inter-Op(TM)
shells and May 17, 2001 notification regarding the tibial base plates, lawsuits
were filed in both state and federal courts throughout the United States against
Centerpulse, alleging defective design, marketing and manufacture of these
products. Plaintiffs also alleged claims against Centerpulse for breach of
express and implied warranties associated with these devises.

Between June and September 2001, the Judicial Panel on Multi-District
Litigation consolidated and transferred all pending federal litigation relating
to the Inter-Op(TM) shell and the tibial base plate to the U.S. District Court
for the Northern District of Ohio. In addition to the multi-district litigation
proceeding in the federal court, a substantial number of lawsuits were filed in
state courts around the country. In August 2001, in Nueces County, Texas,
Centerpulse defended the only recall-related lawsuit ever to go to trial. The
jury in that lawsuit awarded the three patients and their spouses a total of
approximately US$15 million. Centerpulse subsequently appealed the judgment and
later settled the lawsuit for a substantially reduced amount.

Also in August 2001, the district court conditionally certified a class of
affected product recipients and preliminarily approved a class action settlement
agreement that resolved all claims related to the affected products. This
initial settlement agreement was modified in extensive negotiations over the
succeeding seven months culminating in a final agreement reached through the
combined efforts of attorneys for Centerpulse and attorneys representing
patients in both federal and state courts. The district court granted
preliminary approval of the modified settlement agreement on March 13, 2002 and
final approval on May 8, 2002. Following the end of the appeal period on July 5,
2002 (by which time no appeals were filed), there should be no further
challenges to the settlement agreement.

The final settlement agreement established a settlement trust in order to
pay claims in accordance with the terms of the settlement agreement. The
settlement trust was funded with approximately US$1.1 billion, of which
Centerpulse contributed US$725 million in cash on November 4, 2002.
Centerpulse's insurers and Sulzer AG, Centerpulse's former parent company,
funded the balance. The settlement trust is divided into five separate funds:
the Medical Research and Monitoring Fund (US$1.0 million); the Unrevised
Affected Product Recipient Fund (US$28 million), from which class members who
have not undergone a revision surgery are entitled to receive US$1,000; the
Affected Product Revision Surgery Fund (US$622.5 million), from which class
members who have undergone a revision surgery are entitled to receive US$160,000
for each affected product that has been revised; the Extraordinary Injury Fund
(US$100 million), from which a class member who has experienced any of several
specified complications related to an affected product may apply for benefits;
and the Professional Services Fund (US$244 million), which includes two
sub-funds: the Subrogation and Uninsured Expenses Sub-Fund (US$60 million), from
which third-party payors and uninsured patients may be reimbursed their expenses
up to US$15,000 per affected product revision surgery; and the Plaintiffs'
Counsel Sub-Fund (US$184 million), from which contingent-fee attorneys
representing class members are entitled to receive up to US$46,000 per revision
and from which participating attorneys are eligible to be compensated.

Centerpulse has entered into separate agreements with the Centers for
Medicare and Medicaid Services, or Medicare, and approximately 200 private
insurers implementing a process for validating and paying claims for
reimbursement of expenses from the Subrogation and Uninsured Expenses Sub-Fund.
Pursuant to these agreements, Medicare and the private insurers receive a lump
sum of no more than US$15,000 for each patient for whom they are the primary
payor.

The settlement agreement specifies certain cut-off dates after which class
members who undergo a revision surgery for an affected product are no longer
eligible to receive benefits as a consequence of that revision surgery. These
dates are June 5, 2003 for class members implanted with an affected Inter-Op(TM)
shell; November 17, 2003 for class members implanted with an affected tibial
base plate; and September 8, 2004 for class members implanted with a reprocessed
Inter-Op(TM) shell. Patients whose reprocessed Inter-Op(TM) shell, a shell
recovered in the voluntary recall and subjected to a newly validated cleaning
and Inter-Op(TM) process prior to implantation, is revised prior to the cut-off
date are entitled to class revision surgery benefits.

Notwithstanding the settlement of the matters covered by the settlement
agreement, Centerpulse may still have certain further liability in respect
thereof because those class plaintiffs who opted out of the settlement agreement
class action are entitled to assert, and may continue to assert, their
individual claims against Centerpulse. As of April 11, 2003, 36 opt outs had not
resolved their individual claims against Centerpulse. One of these is known to
have undergone revision surgery, 31 do not appear to have undergone revision
surgery and the status of four is unknown.

In addition, pursuant to the settlement agreement, Centerpulse agreed to
fund 50% of the cost of providing benefits for each validated claim for revision
surgery benefits in excess of 4,000 and 100% of the cost of providing benefits
for each validated claim for reprocessed Inter-Op(TM) shell revision surgery
benefits in excess of 64. As of April 11, 2003, the claims administrator for the
settlement trust had received 4,362 claim forms in relation to hip implant and
tibial base plate revision surgery and 150 claim forms for reprocessed hip
implant revision surgery. The claims administrator has determined that for these
classes of claims, 3,795 and 119 respectively are likely to be valid. It is not
known at present how many more claims will be made or whether the remaining and
future claims are valid and hence how many will qualify for settlement. Claims
processing will continue throughout 2003, 2004 and 2005. In addition, in the
event that the US$60 million Subrogation and Uninsured Expense Sub-Fund is
depleted, the settlement agreement provides that the settlement trust can apply
to Centerpulse for additional funding.

Outside of the United States, the other main litigation associated with the
recalls has taken place in Canada. Approximately 780 Inter-Op(TM) shells and 453
reprocessed shells were sold in Canada, all of which were sold in Quebec and all
plaintiffs are believed to be residents of Quebec. The total number of cases of
revision surgery is approximately 110. On May 7, 2002, Centerpulse agreed to a
class action settlement in a lawsuit pending in Quebec Superior Court. The
Quebec court granted preliminary approval of the class action settlement on
December 20, 2002 and final approval on March 28, 2003, subject to the entry of
a written order. The settlement calls for Centerpulse to pay US$1,000 to each
class member who has not undergone a revision surgery, US$75,000 to each class
member who has undergone a single revision of an affected product, US$100,000 to
each class member who has undergone two revisions of an affected product and
US$150,000 to each class member who has undergone three or more revisions of an
affected product or who experienced any of several specified complications.
Following final approval of the settlement, class members have 30 days during
which to opt out of the class if they so choose. Prior to preliminary approval
of the class settlement, Centerpulse concluded individual settlements with 70
patients, representing what Centerpulse believes is the majority of Canadian
patients whose recalled Inter-Op(TM) shell required a revision surgery.

Outside of the United States and Canada, approximately 140 affected
recipients in Australia, Austria, Belgium, France, Germany, Italy, Japan, Korea,
Sweden and Switzerland had to undergo revision surgery. In some instances, the
patients who received affected hip or knee implants have brought claims against
Centerpulse. Several of these claims have already been settled.

BACKGROUND AND REASONS FOR OUR OFFER

BACKGROUND OF OUR OFFER

Our strategic objective has been to become the leader in the design,
development, manufacturing and marketing of orthopaedic reconstructive implants
and fracture management products with future growth emphasis on spine,
orthobiologics and minimally invasive surgeries. In this regard, we have
attempted to increase our market share and presence worldwide in the
geographical areas in which we principally compete, namely the Americas,
Asia-Pacific and with a special emphasis on European strategic growth. As a key
element of our execution of this strategy, we have from time to time explored
possible acquisitions of complementary businesses and technologies to expand our
product and service offerings and leverage our brand name and salesforce,
including the acquisition of Centerpulse.

On March 10, 2002, Mr. J. Raymond Elliott, Zimmer's Chairman, President and
Chief Executive Officer, and Dr. Max Link, the Chairman of Centerpulse, met in
New York to discuss a potential business combination between Zimmer and
Centerpulse.

On March 12, 2002, Zimmer formally engaged Credit Suisse First Boston to
act as its exclusive financial advisor in connection with its potential interest
in the acquisition of Centerpulse.

Between March 12, 2002 and June 26, 2002, representatives of Credit Suisse
First Boston met several times with representatives of Zimmer to discuss the
financial and strategic merits of a potential combination of Zimmer and
Centerpulse.

At a June 26, 2002 meeting of our board of directors, representatives of
Credit Suisse First Boston reviewed with the board of directors the relative
merits of a business combination with Centerpulse as compared to other available
acquisition alternatives in the global orthopaedic sector, and the unique
strategic fit of a potential business combination with Centerpulse, including
complimentary geographic markets and product lines. At the conclusion of this
meeting, the board of directors determined to further consider a possible
business combination between Zimmer and Centerpulse and authorized the
management of Zimmer and its financial advisor to contact the management of
Centerpulse regarding a possible transaction.

On June 30, 2002, Mr. Elliott and Mr. Sam R. Leno, the Senior Vice
President and Chief Financial Officer of Zimmer, met in Madrid, Spain with Dr.
Link to discuss the potential of a business combination between Zimmer and
Centerpulse, including the merits of such a combination, potential structure and
timing and general views as to valuation.

In early July 2002, Mr. Elliott and Dr. Link, at the conclusion of a
telephone conversation regarding a potential business combination of Zimmer and
Centerpulse, determined to discontinue talks regarding combining the two
companies because of significant differences between the parties regarding the
relative valuations of Zimmer and Centerpulse. On July 15, 2002, Dr. Link
assumed the added responsibility of Chief Executive Officer of Centerpulse.

On August 20, 2002, Mr. Rene Braginsky, Chief Executive Officer of
InCentive, and a representative of Credit Suisse First Boston met in Zurich for
purposes of a general business discussion. Among other matters, the subject of a
potential business combination between Zimmer and Centerpulse was discussed.

Subsequent to the August 20 meeting, the parties agreed to schedule another
meeting between representatives of Zimmer and Centerpulse.

On September 5, 2002, a representative of Credit Suisse First Boston
contacted Prof. Dr. Rolf Watter, a member of Centerpulse's board of directors,
to discuss a potential re-initiation of discussions between Zimmer and
Centerpulse.

On September 7, 2002, Dr. Watter communicated to the Credit Suisse First
Boston representative that certain members of Centerpulse's board, including Dr.
Link, Dr. Watter and Dr. Johannes Randegger, would be willing to meet Mr.
Elliott and Mr. Leno in Zurich on September 22, 2002.

On September 22, 2002, Mr. Elliott and Mr. Leno met in Zurich, Switzerland
with Dr. Link, Mr. Urs Kamber, the Chief Financial Officer of Centerpulse, Dr.
Randegger and Dr. Watter to discuss the strategic compatibility of Zimmer and
Centerpulse. At the conclusion of the meeting, the parties agreed to re-initiate

discussions regarding a potential business combination of Zimmer and Centerpulse
after Centerpulse had completed a rights offering to its existing shareholders,
which offering funded the settlement trust with respect to U.S. litigation
related to Inter-Op(TM) shell and tibial base plates.

On October 9, 2002, after Centerpulse had completed its rights offering,
representatives of Zimmer and Centerpulse met in New York City to discuss the
terms of a potential transaction between Zimmer and Centerpulse. At this
meeting, Dr. Link requested that Zimmer submit a written offer to Centerpulse
regarding its interest in a business combination with Centerpulse.

On October 17, 2002, Zimmer sent the following letter to the Centerpulse
board:

[LETTERHEAD OF ZIMMER HOLDINGS, INC.]

October 17, 2002

Centerpulse AG
Board of Directors
Andreasstrasse 15
CH-8050 Zurich, Switzerland

Attn: Dr. Max Link
Chairman of the Board and Chief Executive Officer

Gentlemen:

On behalf of Zimmer Holdings, Inc. ("Zimmer"), I am pleased to submit this
preliminary proposal with respect to a strategic transaction between Zimmer and
Centerpulse AG ("Centerpulse").

As we have discussed, the combination of our companies would create a leading
global reconstructive company with over $2 billion in revenues. Zimmer and
Centerpulse have complementary strengths and market positions across the global
orthopaedic industry, and our respective strategies are consistent with the
objective of becoming the leader in terms of innovation, growth and value. As a
result, we believe that our companies are a compelling fit and such a
combination would be favorably received by investors and in the best interest of
the shareholders of both companies.

Proposed Transaction Structure -- Based on our analysis of the information
available to us to date, we would be willing to pursue a transaction whereby
Centerpulse shareholders would receive, for each outstanding Centerpulse share,
a combination of 3.77 shares of Zimmer common stock and CHF 25 in cash. Based on
Zimmer's closing stock price of $40.00 as of October 16th, 2002, and based on
the CHF/US$ exchange rate as of the same date, this represents consideration per
Centerpulse share of approximately 250 CHF. This consideration represents a
meaningful premium to Centerpulse's recent trading levels, and is in line with
premiums received in historical comparable transactions. The transaction would
result in Centerpulse shareholders owning nearly 20% of the combined company's
share capital. Our intention would be to structure a transaction in the form of
a public exchange offer. We have noted the recent volatility in Centerpulse's
stock price since the announcement of the rights offering, and have developed
our proposal based on average trading values over the past several weeks and
months.

Our proposal is necessarily based on our current understanding of Centerpulse,
without the benefit of due diligence. In determining the terms of this proposal,
we have taken into account Centerpulse's financial results published through the
second quarter of 2002, Centerpulse's recent rights offering and capital
increase completed October 8, 2002 and the resulting financial impact on
Centerpulse's per share value, and our understanding of the status of
Centerpulse's ongoing litigation, asset sales and overall strategic objectives.
Our proposal could have additional limited upside if we are provided with new,
positive information.

Conditions -- This preliminary proposal is subject to: (i) satisfactory
completion of comprehensive due diligence, (ii) Zimmer and Centerpulse Board
approvals, (iii) receipt of all necessary regulatory and other approvals, (iv)
the negotiation of mutually acceptable definitive documentation, which we expect
would include customary representations, covenants and conditions, (v) an
undertaking from InCentive Capital in support of the transaction and agreed upon
price prior to the initiation of due diligence, and (vii) confirmation

of our assumption that there would be no material adverse tax consequences in a
transaction. Any final transaction will be subject to any applicable shareholder
approval.

Proposed Process -- We are prepared to pursue an expeditious process in order
to, among other things, minimize the disruption to our respective businesses.
Our plan would be to engage in mutual due diligence, while simultaneously
negotiating the definitive documentation.

We would initially expect to hold meetings with our respective management teams
(Chairman/CEO, CFO, and other senior level executives) to discuss Centerpulse's
and Zimmer's businesses, prospects, financial information including projections,
and areas for potential synergies. Concurrent with these meetings, we would
envision a period for in-depth, confirmatory due diligence. We would expect to
work with you, your legal and financial advisors to negotiate definitive
documentation, prepare regulatory filings, draft joint press releases, etc. with
the goal of announcing a transaction by mid-December 2002. We would anticipate
launching a formal public offer as soon as practicable after the announcement of
a transaction.

Exclusivity -- Because of the substantial management time and expense required
in order to fully evaluate a potential transaction and formulate definitive
terms, our willingness to proceed with the proposed transaction is based on
Centerpulse's commitment to pursue a transaction exclusively with Zimmer. We
intend to commence our due diligence after the execution of a mutually
satisfactory exclusivity agreement, which we believe can and will be achieved
rapidly.

Confidentiality -- This letter is being delivered based on our understanding
that, unless otherwise mutually agreed by us in writing, its submission and its
contents will not be disclosed to any other person other than mutually agreed
upon advisors and will otherwise be treated as strictly confidential.

This letter is not intended to be, and is not, a binding contract between us and
nothing in this letter should be considered to constitute a binding obligation
of Zimmer or Centerpulse with respect to the subject matter of this letter,
other than the obligations specified in the paragraph entitled
"Confidentiality", but is intended merely as an indication of our continued
interest to proceed with the transaction on the terms outlined in this letter.

The proposal provided herein will terminate on the earlier of the close of
business on Wednesday, November 6, 2002, or such time that any of the contents
of this letter (or its existence) are disclosed to a third party by Centerpulse
or its representatives.

Should you wish to discuss this letter or our indication of interest, please do
not hesitate to contact me at (574) 372-4313, or, in my absence, Sam Leno at
(574) 372-4790.

We are excited about this opportunity and are prepared to pursue it
enthusiastically. We have sent the sole copy of this expression of interest to
you and assume you will be responsible for distributing it to your Board. We
look forward to working with you toward the completion of a successful
transaction.

Sincerely,

/s/ RAY ELLIOTT
Chairman, President and Chief Executive Officer
Zimmer Holdings, Inc.

* * * *

In late October 2002, Dr. Link informed Mr. Elliott that the Centerpulse
board of directors had reviewed Zimmer's indication of interest, deemed Zimmer's
proposal inadequate and was not prepared at that time to pursue further
discussions with Zimmer regarding a potential business combination between
Zimmer and Centerpulse. In addition, Dr. Link informed Mr. Elliott that the
Centerpulse board of directors had decided to operate their business
independently.

Subsequent to that date, several investment bankers contacted Zimmer's
senior executives inquiring about Zimmer's interest in making a proposal to
acquire Centerpulse. None of these investment bankers indicated to the senior
executives of Zimmer that a confidential memorandum relating to Centerpulse
would be made available to parties who executed confidentiality agreements.
Thereafter, Zimmer senior executives had no other contact from Centerpulse or
its representatives.

On March 20, 2003, Centerpulse and Smith & Nephew announced they had
entered into a transaction agreement pursuant to which the two companies would
combine their businesses through two simultaneous exchange offers, one with
respect to Centerpulse and one with respect to InCentive, to be commenced by
Smith & Nephew Group. The Smith & Nephew Group offers are more fully described
in the section captioned "SMITH & NEPHEW GROUP OFFERS FOR CENTERPULSE AND
INCENTIVE."

Between March 20, 2003 and mid-April 2003, our board of directors met
several times, joined by members of management, to consider making an
unsolicited competing offer to acquire all issued and outstanding share capital
of Centerpulse. During this time, the management of Zimmer held discussions with
its financial and legal advisors regarding a possible acquisition of
Centerpulse.

At a board of directors meeting held on April 22, 2003 to discuss a
potential acquisition of Centerpulse, Credit Suisse First Boston reviewed with
the board of directors the financial aspects of such a business combination. At
the conclusion of this meeting, the board of directors approved continuing to
proceed with the consideration of an offer for all of the issued and outstanding
Centerpulse registered shares, including registered shares represented by
Centerpulse ADSs, and InCentive bearer shares.

On April 25, 2003, Smith & Nephew Group commenced its exchange offers for
Centerpulse and InCentive.

On May 13, 2003, Zimmer management provided an update to Zimmer's board of
directors regarding the strategic implications of a combination with
Centerpulse, including the potential for global expansion in the reconstructive
implant, spine, trauma and dental markets, operational efficiencies, and
technological advances through research and development.

On May 19, 2003, our board of directors met to discuss the potential
acquisition of Centerpulse, the amount and type of consideration to be offered
and other matters related to the transaction. Also at this meeting,
representatives of Credit Suisse First Boston reviewed financial aspects of our
proposed exchange offers with the board of directors, and representatives of
Dewey Ballantine LLP reviewed legal aspects of the proposed offer. At the
conclusion of this meeting, our board of directors approved our offer and our
InCentive offer and the delivery of a proposal to Dr. Link and the boards of
directors of Centerpulse and InCentive to acquire Centerpulse and InCentive.

On May 20, 2003, we delivered the following letter, which was publicly
released, to Dr. Link, Centerpulse's board of directors and InCentive's board of
directors, setting forth the material terms of our exchange offers for all of
the issued and outstanding Centerpulse registered shares and Centerpulse ADSs,
pursuant to which we offered 3.68 shares of Zimmer common stock and CHF 120 per
Centerpulse registered share and 0.368 of a share of Zimmer common stock and CHF
12 per Centerpulse ADS:

[LETTERHEAD OF ZIMMER HOLDINGS, INC.]

May 20, 2003

Dr. Max Link
Chairman of the Board
and Chief Executive Officer
Centerpulse AG
Andreasstrasse 15
CH-8050 Zurich, Switzerland

Dear Max:

Over the past few weeks, I have been thinking carefully about the future of
our two companies. My colleagues and I are impressed with the business that you,
your management team, and the Centerpulse workforce have developed. You will
remember that we discussed a potential business combination between Centerpulse
and Zimmer several times last year, as recently as October. We discussed the
unique, complementary nature of our geographic strengths and product lines. We
discussed the compelling strategic benefits of being the #1 global orthopaedics
company with our shared vision for the future. We confirmed the geographic fit
of our businesses by continent, country, and state, and our long-term commitment
to Winterthur. We mutually agreed Centerpulse is the ideal partner for Zimmer
and, just as important, that Zimmer is the ideal partner for Centerpulse. We
provided you with a preliminary written offer in October that indicated we were
prepared to increase our offer based upon new information. We are increasing our
offer now.

I realize that you have already started down the road toward a combination
with Smith & Nephew plc. As I am sure you can understand, we were disappointed
by that announcement in light of our friendly discussions. We were surprised
that your advisors did not give Zimmer the opportunity to receive the
confidential memorandum, which would have enabled us to make a superior offer,
before proceeding with an agreement with Smith & Nephew. Since October, you have
clarified and financed your product liability issues, you successfully divested
your cardiovascular businesses, and you have improved your continuing
operations. Therefore, we are pleased to make the following offer, which
Zimmer's Board of Directors has authorized, regarding a combination between our
two companies. One of our goals is to meet with you as soon as possible so that
we can discuss the superior merits of our offer.

We are offering to acquire all of Centerpulse's outstanding registered
shares and ADSs in an exchange offer pursuant to which holders of Centerpulse
registered shares will receive CHF 120 in cash and 3.68 shares of Zimmer common
stock per Centerpulse share. Based on the closing price of Zimmer common stock
and the USD/CHF exchange rate as of May 19, 2003, this offer represents
approximately CHF 350 per Centerpulse share. Our price is based upon our review
of publicly available information regarding Centerpulse, including recent
filings by Smith & Nephew.

We also intend to commence a separate offer to acquire all of the
outstanding bearer shares of InCentive Capital AG, which currently has a
beneficial interest in approximately 18.9% of the outstanding Centerpulse
registered shares. The terms of the InCentive offer will be substantially the
same as the offer for Centerpulse registered shares.

The Centerpulse and InCentive offers will allow shareholders to elect to
vary the proportions of the shares of Zimmer common stock and cash received in
the offer, subject to offsetting elections of other tendering shareholders.

We believe our offer is both financially and strategically superior to
Smith & Nephew's offer, both immediately and over the long term. It will combine
Centerpulse's leadership position in European orthopaedics and platforms in
spine and dental with Zimmer's leading positions in the U.S. and Japan in
reconstructive products and Minimally Invasive Solutions. Together, Centerpulse
and Zimmer will operate as the world's largest and most profitable
reconstructive company, providing products to address the complete
osteoarthritis "continuum of care" required by an aging but increasingly active
population. Moreover, this transaction is clearly in the best interests of your
shareholders, employees and surgeons.

- It will provide the opportunity for your shareholders to realize
significantly greater value for their shares than that presented by the
current, competing offer. Zimmer's offer represents a 26% premium over
the closing price per Centerpulse share on March 19, 2003, the trading
day immediately prior to announcement of the Centerpulse-Smith & Nephew
transaction, and a 19% premium over the proposed Smith & Nephew
transaction, based on the closing share price for Smith & Nephew ordinary
shares on May 19, 2003. Our October preliminary offer represented a 26%
premium over the one month average share price immediately prior to
October 17, 2002. The offer contained in this letter represents a 33%
premium over the one month average share price immediately prior to the
Smith & Nephew offer of March 20, 2003. These premia are consistent with
transactions completed on the SWX Swiss Exchange over the past five
years. The current Zimmer offer has a 63% greater cash component than
Smith & Nephew's offer. Centerpulse shareholders will receive both
greater immediate and long-term value through continuing investment in
the best performing company in our industry.

- It will allow Centerpulse's employees to become part of a fast-growing
industry leader with a strong commitment to R&D and significant financial
and operational strength. Zimmer has consistently reported superior
operating results compared to Smith & Nephew as measured by sales growth,
EBITDA growth, and EBITDA margins. In addition, your employees will find
that Zimmer's corporate culture is supportive of their individual and
collective goals. We encourage a performance-based culture and management
by local nationals. Upon our spin-off from our former parent in 2001, we
became a focused, independent company with a highly entrepreneurial
culture in which all employees can excel.

- It will allow the surgeons with whom you have established loyal
relationships to work with a company dedicated solely to orthopaedics,
with the best R&D pipeline in the industry. We are both equally proud of
our award-winning sales forces. Partnering with key academic centers
around the world, surgeons can take advantage of both of our new,
state-of-the-art medical education initiatives. They will benefit from
the research of a combined company focused on developing advanced
surgical techniques that put confidence in the surgeon's hands. We both
invest at the top of our class in R&D as a percentage of sales. Zimmer
has been in business for more than 75 years and has a history of
innovation -- as does Centerpulse.

In conclusion, the strategic merit of a Centerpulse/Zimmer combination is
compelling. As the #1 pure-play orthopaedics company, we will have leading
market positions in every critical product and geographic
market -- reconstructive, including hips and knees, as well as Europe, the U.S.,
and Japan. We will possess leading technologies, including minimally invasive
surgery, alternate materials, and biologics. We will have leading global scale,
with more than $2 billion in sales, 2,000 sales people, and 1,000 issued
patents. Finally, we expect to drive superior sales growth and EBITDA margins in
excess of 30%. We will create dual listings on both the New York Stock Exchange
and the SWX Swiss Exchange. This is a vision worth realizing!

Since another offer was commenced for Centerpulse and InCentive Capital, we
are advised that, in order to preserve our rights as a competing bidder under
Swiss law, we must make our proposal by pre-announcement filings with the Swiss
Takeover Board. However, we strongly prefer to work together with you and your
Board of Directors to complete this transaction and we are prepared to commit
all the necessary resources to do so. We are prepared to begin due diligence
immediately as provided by Swiss law.
40

I look forward to contacting you in the next few days to discuss our offer.

With personal regards,

/s/ RAY ELLIOTT
Chairman of the Board, President
and Chief Executive Officer

cc: The Board of Directors of Centerpulse
The Board of Directors of InCentive Capital
The Swiss Takeover Board

* * * *

In addition, as indicated in Mr. Elliott's letter, on May 20, 2003, Zimmer
made a pre-announcement of its offers for Centerpulse and InCentive shares in
accordance with Swiss law.

On May 21, 2003, Mr. Elliott and other Zimmer representatives met with Dr.
Randegger and Dr. Watter to discuss, among other things, the pre-announcement of
Zimmer's planned exchange offer for Centerpulse registered shares and the
process for the due diligence to be conducted by Zimmer.

In connection with each party's proposed due diligence review of the other
party, on May 26, 2003, Zimmer and Centerpulse executed a confidentiality
agreement relating to information to be provided to Zimmer and its
representatives, and on June 9, 2003, Zimmer and Centerpulse executed a
confidentiality agreement relating to information to be provided to Centerpulse
and its representatives. Following these dates, the parties provided each other
with access to information and personnel for due diligence purposes. On June 11,
2003, Zimmer and InCentive executed confidentiality agreements relating to due
diligence information to be provided to each party. Thereafter, Zimmer and
InCentive conducted due diligence reviews of one another.

On June [--], 2003, Zimmer commenced parallel exchange offers for all the
issued and outstanding registered shares and ADSs of Centerpulse and all the
bearer shares of InCentive.

REASONS FOR OUR OFFER

In reaching its decision to pursue a combination of Zimmer and Centerpulse,
our board of directors consulted with senior management and our financial and
legal advisors and considered a number of factors, including those set forth
below. We believe that a combination of Zimmer and Centerpulse represents a
compelling opportunity to increase value for stockholders of Zimmer, Centerpulse
and InCentive by combining Zimmer with a long-term strategic partner that will
allow us to realize myriad strategic advantages resulting in growth
opportunities within the medical devices industry.

We believe that the combination will create a global leader in the design,
development, manufacture and marketing of orthopaedic reconstructive implants,
spine, trauma and dental products. For the fiscal year ended December 31, 2002,
the pro forma net earnings of the combined company were estimated at US$287
million. We believe that the combination of Zimmer and Centerpulse will (i)
generate approximately US$70 to US$90 million in annual operational efficiencies
and cost savings by 2006 and (ii) be accretive in 2004 to the consensus earnings
per share estimate of US$1.91 as of June 13, 2003, excluding one-time
transaction and integration costs. The strategic compatibility of the products
and technologies of Zimmer and Centerpulse expected to provide the combined
company with significant earnings power and a strong platform from which it can
actively pursue growth opportunities in the industry. For Zimmer, Centerpulse
provides a unique platform for growth and diversification in Europe as well as
in the spine and dental segments of the medical devices industry.

MARKET DYNAMICS

The market for orthopaedic reconstructive implants, trauma products and
general orthopaedic surgical products continues to enjoy growth on a global
scale. According to publicly available research analyst reports, from 1998 to
2002, the industry grew at annual rates from approximately 6% to 17%, and is
forecasted to continue to grow at approximately 12% over the next several years
through sales to orthopaedic surgeons, hospitals and healthcare purchasing
organizations. Market growth for reconstructive implants, representing
approximately 40% of worldwide orthopaedic sales, has been attributed to several
factors:

- An aging population in the United States and around the world: the U.S.
Census Bureau estimates that the total number of people age 65 and over
in the United States will increase by 4.9 million to 39.7 million between
2000 and 2010, and further estimates that the percentage of the world's
population age 65 and over will grow from approximately 6.9% of the total
population to approximately 9.5% during the period from 2000 to 2020;

- Continued technological advances (i) in biological applications, such as
bone graft substitutes and bone replacements, and (ii) that make joint
replacement a more attractive option for patients and physicians;

- The use of new implant materials;

- Reduction in hospitalization, decreased procedural costs and shorter
rehabilitation processes resulting from improvements in implant fixation,
surgical technique and pre- and post- surgical pathways and care;

- Increasing incidence of the replacement, repair or enhancement of an
existing implant product or component (revision);

- The general increase in active lifestyles and high-impact recreational
activities and sports by the young and old alike;

- Increases in selling and strategic brand marketing programs, target
direct-to-consumer advertising and an overall advancement in patient
education and knowledge due to innovations in global dissemination of
information via the Internet; and

- Improved average implant pricing.

GLOBAL SCALE AND INCREASED GEOGRAPHIC MARKET OF OUR PRODUCTS

The combination of Zimmer and Centerpulse is expected to significantly
expand Zimmer's global reach and enhance its market-leading position in
reconstructive implants and trauma products. We believe that the combination
will create the opportunity for deeper market and customer penetration in the
geographic segments in which Zimmer already operates and expansion into
geographic segments in which Zimmer does not possess significant operations, in
either case, to the extent the existing customer relationships of the two
companies can be leveraged for the benefit of the combined company. The
companies have insignificant overlap in virtually all key geographic segments on
a by-country basis and have corresponding strengths in each geographic segment.

For example, we believe Zimmer's sales and marketing efforts in the
Americas, Asia-Pacific and Europe will benefit from the addition of
Centerpulse's distribution pipeline and customer base in Europe. While the
greatest percentage of Zimmer's global sales is in the Americas, principally the
United States, accounting for approximately 68% of its 2002 sales and 74% of
segment operating profit before global operations and corporate expenses,
Centerpulse's particular geographic strength and market position in Europe,
based on its reputation and long-term customer relationships developed over many
years with surgeons, hospitals and healthcare organizations, will give the
combined company an important expanded outlet. Specifically, in Europe, a region
that accounted for 12% of our 2002 sales and 6% of Zimmer's segment operating
profit before global operations and corporate expenses, the reconstructive
implant and trauma products markets are highly fragmented. For example, surgeons
hold differing philosophies regarding hip reconstruction and product type. We
believe that the combination of Zimmer and Centerpulse will have positive
results for sales of products such as the knee prosthesis NexGen Legacy(TM), due
to Centerpulse's market position and product mix.

The combination will further advance Zimmer's presence in the lucrative
Japanese market. In 2002, the Asia-Pacific region accounted for approximately
20% of our sales and 20% of our segment operating profit before global
operations and corporate expenses. Japan is the largest market for us in
Asia-Pacific, accounting for the majority of sales in the region. We have more
than 25 years of experience in the Japanese market and have long been a market
leader in hips, knees and trauma devices. We believe that Centerpulse's
distribution pipeline for its reconstructive implants, together with an expanded
product range sold through a larger sales force, will increase the customer base
in the region.

COMPLEMENTARY PRODUCT LINES

We believe the acquisition of Centerpulse and its extensive product line
will complement our current orthopaedic and reconstructive product offerings.
For example, Zimmer's leading market position with respect to knee implant
devices and Centerpulse's leading market position in hip implant devices
complement the overall product line and offer significant customer synergies. We
also believe that the combination will allow us to more easily pursue such
technologies as highly cross-linked polyethylene, minimally invasive solutions,
high flexion knees, alternate bearing materials, computer assisted surgeries,
biologics and open cell metal technologies. We believe that a combination of the
technological resources of both companies will allow us to develop more quickly
new materials, products and procedures through economies of scale with increased
functionality. Consolidation of efforts in the spinal segment and Europe is
expected to allow us to capitalize on high growth opportunities. In addition,
the combination also provides a unique diversification into dental products. The
combination of Zimmer's and Centerpulse's research and development,
"sales/distribution" staff, marketing, financial resources and compatible
cultures will, we believe, create a business platform upon which new orthopaedic
devices can be brought to the market on a more expedited basis and at lower
cost.

FINANCIAL BENEFITS

We believe that a combination of Zimmer and Centerpulse will enhance our
long-term growth prospects and maximize stockholder value. For the past 20
months, our common stock has consistently outperformed the FTSE 100, S&P 500 and
an orthopaedics index comprised of Synthes-Stratec, Biomet, Johnson & Johnson,
Medtronic and Stryker. Between January 1, 2002 and June [--], 2003, the per
share price of our common stock has increased approximately [--]% and
outperformed Smith & Nephew and the orthopaedics index by approximately [--]%
and [--]%, respectively. We believe that our stock price performance is due
primarily to Zimmer's focus of strategically investing in inventory and
instruments to support strong sales growth in the Americas and Europe, and to
support new products launched in 2002 and expected to be launched in 2003. We
believe that the combined company's earnings will enable it to more readily
invest in and develop new products.

Zimmer's product sales grew worldwide by approximately 13% and 16% in 2001
and 2002, respectively, with an operating profit margin of approximately 29% for
the fiscal year ended December 31, 2002. Specifically, Zimmer's sales in Europe
grew by 28% in 2002. The price of Zimmer's common stock increased 36% in 2002
and [--]% in 2003, through June [--] 2003. Growth in earnings per share was 70%
in 2002. Although past performance is not a guarantee of future results, we have
consistently achieved superior profitability, market growth, operating results
and stockholder returns.

We believe that the combination of production abilities of Centerpulse with
Zimmer's developmental capabilities will result in a combined company with
greater profitability and a better position in the medical devices industry. For
the fiscal year ended December 31, 2002, the pro forma net revenue of the
combined company was approximately US$2.2 billion. The estimated market share
and 2002 pro forma sales of the combined company are:

- #1 pure play orthopaedic company, with pro forma sales of US$2.2 billion;

- #1 in served global orthopaedic market, with pro forma sales of US$2.0
billion*;

- #1 in the reconstructive implants market, with pro forma sales of US$1.73
billion:

-- #1 in hip implants, with pro forma sales of US$753 million,

-- #1 in knee implants, with pro forma sales of US$811 million, and

-- #1 in extremities implants, with pro forma sales of US$84 million;

- #5 in the trauma products market, with pro forma sales of US$140 million;
and

- #6 in the spinal implants market, with pro forma sales of US$115 million.
- ---------------

* Served orthopaedic market is comprised of hips, knees, shoulders, elbows,
spine, trauma and dental markets.

OTHER CONSIDERATIONS

Our board of directors also considered potential adverse consequences and
negative factors, primarily consisting of the following:

- A significant portion of our debt has been allocated to funding the
consideration for Zimmer's proposed acquisitions of Centerpulse and
InCentive. As a result of this allocation, Zimmer will be more leveraged
than it has historically been.

- The significant degree of difficulty and management distraction that is
inherent in the process of integrating Centerpulse and Zimmer and the
risk that operational efficiencies and cost savings sought in the
proposed acquisitions of Centerpulse and InCentive might not be fully
achieved or that achieving these benefits may take longer than expected.

- The dependence of the value of shares of Zimmer common stock on the
successful integration of the businesses of Centerpulse and InCentive if
our offer and our InCentive offer are successful.

- The risk that our offer and our InCentive offer might not be consummated
despite Zimmer's efforts, even if the issuance of shares of Zimmer common
stock relating to such offers is approved by Zimmer stockholders.

- Other risks described under the section captioned "RISK FACTORS."

Our board of directors believes that these risks are outweighed by the potential
benefits of the acquisitions of Centerpulse and InCentive.

OUR OFFER

OFFER DOCUMENTATION

This prospectus and the related documents are being used to make our offer
to all holders of Centerpulse registered shares and all holders of Centerpulse
ADSs. A separate Swiss exchange offer prospectus, to which this prospectus is
being attached as Exhibit I, also is being delivered to holders of Centerpulse
registered shares and holders of Centerpulse ADSs located anywhere outside the
U.S. in accordance with applicable Swiss law.

Holders of Centerpulse registered shares and holders of Centerpulse ADSs
located in the United States must follow the procedures set forth in this
prospectus to tender Centerpulse registered shares and Centerpulse ADSs pursuant
to our offer. Holders of Centerpulse registered shares and holders of
Centerpulse ADSs located anywhere outside the United States must follow the
procedures set forth in the Swiss exchange offer prospectus to tender
Centerpulse registered shares.

THE DISTRIBUTION OF THIS PROSPECTUS AND THE MAKING OF OUR OFFER MAY, IN
SOME JURISDICTIONS, BE RESTRICTED BY LAW. OUR OFFER IS NOT BEING MADE, DIRECTLY
OR INDIRECTLY, IN OR INTO, AND MAY NOT BE ACCEPTED FROM WITHIN, ANY JURISDICTION
WHERE THE MAKING OF OUR OFFER OR THE ACCEPTANCE THEREOF WOULD BE CONSIDERED
ILLEGAL OR OTHERWISE VIOLATE ANY APPLICABLE LAW OR REGULATION OR WHERE WE WOULD
BE OBLIGATED TO CHANGE THE TERMS OF OUR OFFER, TO FILE AN ADDITIONAL APPLICATION
WITH ANY AUTHORITIES OR OTHER INSTITUTIONS OR TO UNDERTAKE ADDITIONAL MEASURES
IN RELATION TO OUR OFFER. THIS PROSPECTUS AND THE RELATED DOCUMENTS MUST NOT BE
DISTRIBUTED IN SUCH JURISDICTIONS OR SENT TO SUCH JURISDICTIONS. PERSONS IN SUCH
JURISDICTIONS MUST NOT USE THESE DOCUMENTS FOR MARKETING PURPOSES FOR SALE OF
SHARES OF OUR COMMON STOCK. WE DO NOT ASSUME ANY RESPONSIBILITY FOR ANY
VIOLATION BY ANY PERSON OF ANY OF THESE RESTRICTIONS.

TERMS OF OUR OFFER; EXPIRATION DATE

Subject to the terms and conditions set forth in this prospectus,
Centerpulse securityholders who tender their Centerpulse registered shares or
Centerpulse ADSs in our offer will receive:

- 3.68 shares of Zimmer common stock and CHF 120 in cash, without interest,
for each Centerpulse registered share that is validly tendered and not
withdrawn prior to the expiration of our offer; and

- 0.368 of a share of Zimmer common stock and the U.S. dollar equivalent of
CHF 12 in cash, without interest, for each Centerpulse ADS that is
validly tendered and not withdrawn prior to the expiration of our offer.

The offer price paid in our offer will be adjusted for any dilutive effects
in respect of the Centerpulse registered shares, Centerpulse ADSs or Zimmer
common stock (except for shares issued for management options under Centerpulse
or Zimmer benefit plans and disclosed in Centerpulse's or Zimmer's financial
statements for the fiscal year ended December 31, 2002), including dividend
payments, capital increases below market value, or the issuance of options
(except for management options issued under Centerpulse or Zimmer benefit plans
in the normal course consistent with past practice), warrants, convertible
securities and other rights of any kind to acquire Centerpulse registered
shares, Centerpulse ADSs or shares of Zimmer common stock, as the case may be,
or any other transaction having a dilutive effect on the value of our offer.

The number of shares of Zimmer common stock to be issued in exchange for
each Centerpulse registered share or Centerpulse ADS, known as the "exchange
ratio", is fixed and will not change between now and the time our offer is
consummated, subject to the mix and match election feature described below in
the section captioned "-- Mix and Match Election." The exchange ratio is based
on US$48.28, which is the closing price of a share of Zimmer common stock on May
19, 2003, the day immediately prior to the announcement of our offer. The value
of the shares of Zimmer common stock you will receive will fluctuate, based on
changes in the market price for Zimmer common stock. Fluctuations in the market
price of Zimmer common stock between now and the consummation of our offer will
change the value of the shares of Zimmer common stock that you will receive and
will depend upon any number of reasons, including those specific to Zimmer as
well as those that influence the trading prices of equity securities generally.
Therefore, the value of the shares of Zimmer common stock that you will receive
could be higher or lower than the

price on which the exchange ratio was based. For information regarding the range
of trading prices of Zimmer common stock on the New York Stock Exchange, please
see the table in the section captioned "MARKET PRICE AND DIVIDEND MATTERS."

Therefore, the total value of the consideration that you will receive in
exchange for each Centerpulse registered share is equal to (i) CHF 120 plus (ii)
3.68 shares of Zimmer common stock multiplied by the per share market value of
Zimmer common stock at the closing of our offer. Based on the closing price for
Zimmer common stock reported on the New York Stock Exchange on May 19, 2003 of
US$48.28 and the noon buying rate for the Swiss francs on such date of CHF
1.2945 = US$1.00, the total value of the consideration you would have received
for each Centerpulse registered share on that date is approximately CHF 350.
Based on the closing price for Zimmer common stock reported on the New York
Stock Exchange on June [--], 2003 of US$[--] and the noon buying rate for Swiss
francs on such date of CHF [--] = US$1.00, the total value of the consideration
you would have received for each Centerpulse registered share on that date is
approximately CHF [--]. The total value of the consideration you will receive in
our offer will fluctuate with the market value of Zimmer common stock as
described above.

Fractional entitlements to shares of Zimmer common stock will not be
delivered to holders of Centerpulse registered shares or Centerpulse ADSs
validly tendered in our offer. Instead, fractional entitlements to shares of
Zimmer common stock will subsequently be combined and sold on the New York Stock
Exchange and the net proceeds of the sales will be distributed pro rata to the
Centerpulse securityholders entitled to fractional entitlements. See the section
captioned "-- Cash Instead of Fractional Shares of Zimmer Common Stock."

Under Swiss law, our offer is subject to a "cooling-off" period of 10 Swiss
trading days at the beginning of our offer during which tenders of Centerpulse
registered shares and Centerpulse ADSs will not be recognized as valid tenders
under our offer. Therefore, July [--], 2003 is the first date upon which tenders
of Centerpulse registered shares and Centerpulse ADSs will be recognized as
valid tenders under our offer. Our offer will expire at 4:00 p.m., Central
European time, 10:00 a.m. New York City time, on [--], August [--], 2003, unless
we shall have extended the period of time for which our offer is open. When we
make reference to the "expiration of our offer" anywhere in this prospectus,
this is the time we are referring to, including, when applicable, any extension
period that may apply. When we make reference to the "expiration date" anywhere
in this prospectus, we are referring to the latest time and date on which our
offer, as may be so extended, expires.

Our offer is also subject to the conditions set forth in the section
captioned "-- Conditions of Our Offer." If any of these conditions is not
satisfied, we may terminate our offer and return all tendered Centerpulse
registered shares and Centerpulse ADSs to tendering holders, extend our offer
and, subject to withdrawal rights as set forth in the section captioned
"-- Withdrawal Rights," retain all such Centerpulse registered shares and
Centerpulse ADSs until the expiration of our offer as so extended, waive such
conditions and, subject to any requirement to extend the period of time during
which our offer is open, accept all Centerpulse registered shares and
Centerpulse ADSs validly tendered by the expiration date and not withdrawn, or
delay acceptance of Centerpulse registered shares and Centerpulse ADSs, subject
to applicable law, until the satisfaction or waiver of the conditions of our
offer. For a description of our right to extend the period of time during which
our offer is open and to amend, delay or terminate our offer, see the
description in the sections captioned "-- Extension, Termination and Amendment"
and "-- Certain Legal Matters; Regulatory Approvals."

MIX AND MATCH ELECTION

Our offer will contain a mix and match election feature, whereby holders of
Centerpulse registered shares and Centerpulse ADSs may elect to receive either
more shares of Zimmer common stock or more cash than the standard entitlement.
However, this election will be available to Centerpulse securityholders only to

the extent that off-setting elections have been made by other tendering
securityholders in our offer or our InCentive offer. Elections made in our offer
will be taken together with elections made under a similar mix and match
election feature included in our InCentive offer (described in the section
captioned "THE INCENTIVE OFFER") in determining whether mix and match elections
under our offer will be fulfilled. In other words, in order for you to receive a
higher proportion of cash, other securityholders will have to elect to receive a
higher proportion of shares of Zimmer common stock, and vice versa. To the
extent that elections cannot be satisfied as a result of the lack of such
off-setting elections, entitlements to shares of Zimmer common stock and cash in
excess of the standard entitlement will be reduced on a pro rata basis. Once the
share allocations have been determined, the cash element of the consideration
will be reduced or increased (as the case may be) for each holder of Centerpulse
registered shares or Centerpulse ADSs who has been allocated an increased or
reduced number of shares of Zimmer common stock. All calculations will be made
by reference to the number of acceptances and elections as of the last day of
the subsequent offering period and, for the purposes of these calculations, the
assumed value per share of Zimmer common stock shall be US$48.28, the same as
the closing price of a share of Zimmer common stock on May 19, 2003, the day
immediately prior to the announcement of our offer and our InCentive offer.

If you validly tender your Centerpulse registered shares or Centerpulse
ADSs in our offer, you may elect to receive for each Centerpulse registered
share or Centerpulse ADS:

- the standard entitlement, describe above, in "--Terms of Our Offer;
Expiration Date;"

- as many shares of Zimmer common stock as possible; or

- as much cash as possible.

Tendering holders of Centerpulse registered shares or Centerpulse ADSs may
submit their mix and match election to your bank, broker or custodian or the
U.S. exchange agent, as applicable, until the end of the subsequent offering
period applicable to our offer. Tendering holders of Centerpulse registered
shares or Centerpulse ADSs who have not submitted a mix and match election prior
to that time will be deemed to have elected the standard entitlement. Holders of
Centerpulse registered shares or Centerpulse ADSs who make mix and match
elections will not know the exact number of shares of Zimmer common stock or the
amount of cash they will receive until settlement of the consideration under our
offer.

IF YOU HOLD YOUR CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS IN YOUR
OWN NAME IN CERTIFICATED FORM, YOU SHOULD READ CAREFULLY THE INSTRUCTIONS
ACCOMPANYING THE FORM OF DECLARATION OF ACCEPTANCE AND ASSIGNMENT OR ADS LETTER
OF TRANSMITTAL, AS THE CASE MAY BE.

IF YOU HOLD YOUR CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS IN
BOOK-ENTRY (OR UNCERTIFICATED) FORM THROUGH A BROKER, YOU SHOULD INSTRUCT YOUR
BROKER TO MAKE A HOLDER ELECTION FOR YOU.

We will determine all questions as to the validity of any mix and match
election, in our sole discretion, which determination will be final and binding
on all parties. We also reserve the absolute right to waive any defect or
irregularity in any election, whether or not similar defects or irregularities
are waived in the case of other holders of Centerpulse registered shares or
Centerpulse ADSs. No election will be validly made until all defects or
irregularities have been cured or waived. Neither we nor the dealer manager, the
Swiss offer manager, the U.S. exchange agent nor the information agent will have
any obligation to notify you of any defects or irregularities in elections or
incur any liability for failure to notify you.

YOUR MIX AND MATCH ELECTION WILL NOT BE VALID UNLESS YOU VALIDLY TENDER
YOUR CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS PURSUANT TO THE TERMS OF
OUR OFFER AND MAKE A VALID ELECTION AS DESCRIBED IN THE INSTRUCTIONS TO THE FORM
OF DECLARATION OF ACCEPTANCE AND ASSIGNMENT OR ADS LETTER OF TRANSMITTAL, AS THE
CASE MAY BE, YOU RECEIVED WITH THIS PROSPECTUS. Please read the discussion in
the section captioned "-- Procedures for Tendering Centerpulse Registered
Shares" and "-- Procedures for Tendering Centerpulse ADSs."

EXTENSION, TERMINATION AND AMENDMENT

We reserve the right, at any time prior to the expiration of our offer,
until all of the conditions specified in the section captioned "-- Conditions of
Our Offer" shall have been satisfied, to extend the period of time

during which our offer is open and to amend our offer by giving oral or written
notice of such extension or amendment to the Swiss offer manager and the U.S.
exchange agent followed by public announcement thereof, subject, in all cases,
to applicable Swiss law and the Exchange Act. All conditions to our offer must
be satisfied or waived before the expiration of our offer. In the case of an
extension, any such announcement will be issued no later than the fourth Swiss
trading day following the previously scheduled expiration date. During any such
extension, all Centerpulse registered shares and Centerpulse ADSs previously
validly tendered and not withdrawn will remain subject to our offer, including
the rights of a tendering holder to withdraw its tendered securities in
accordance with the procedures set forth in the section captioned "-- Withdrawal
Rights."

Subject to Swiss tender offer regulations and the rules and regulations of
the SEC, we also reserve the right, at any time or from time to time,

- if any of the conditions of our offer are not satisfied, (i) to delay
acceptance for exchange of or exchange of any Centerpulse registered
shares or Centerpulse ADSs tendered pursuant to our offer or (ii) to
terminate our offer and not accept for exchange or exchange any
Centerpulse registered shares or Centerpulse ADSs not previously accepted
for exchange or exchanged, and

- to waive any condition or otherwise amend our offer in any respect, by
giving oral or written notice of such delay, termination or amendment to
the Swiss offer manager and U.S. exchange agent and followed as promptly
as practicable by public announcement thereof.

In accordance with Swiss tender offer regulations, Zimmer will not be
permitted to extend our offer beyond the date that is 40 Swiss trading days
after the commencement of our offer unless Zimmer receives the approval of the
Swiss Takeover Board. If Zimmer is required by the rules and regulations of the
SEC to extend the expiration date of our offer beyond the date that the
expiration date of our offer is permitted to be extended without Swiss Takeover
Board approval, including as a result of the waiver of a condition to our offer,
Zimmer will seek the approval of the Swiss Takeover Board to allow an extension
of our offer in order to comply with the rules and regulations of the SEC.

Subject to applicable law, and without limiting the manner in which we may
choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service, Bloomberg, Reuters Economic
Services and TeleKurs/AWP News. Zimmer expects to announce by release to the Dow
Jones News Service and Reuters Economic Services within four Swiss trading days
following the expiration date of our offer the percentage of outstanding
Centerpulse registered shares and Centerpulse ADSs that have been validly
tendered pursuant to our offer and whether our offer will be completed, extended
or abandoned.

If we make a material change in the terms of our offer or the information
concerning our offer, or if we waive a condition of our offer, we will extend
our offer to the extent required under applicable Swiss law or the Exchange Act.
If, prior to the expiration date, we change the type or amount of consideration
offered to you, that change will apply to all holders whose Centerpulse
registered shares or Centerpulse ADSs, as the case may be, are validly tendered
and accepted for exchange pursuant to our offer. If, at the time notice of that
change is first published, sent or given to you, our offer is scheduled to
expire at any time earlier than the tenth business day from and including the
date that such notice is first so published, sent or given, we will extend our
offer until the expiration of that ten business-day period.

SUBSEQUENT OFFERING PERIOD

If all of the conditions to our offer are satisfied or waived, and Zimmer
accepts for exchange Centerpulse registered shares and Centerpulse ADSs tendered
pursuant to our offer, holders of Centerpulse registered shares and Centerpulse
ADSs who do not accept our offer prior to its expiration will have an
opportunity to accept our offer on the same terms during a ten Swiss trading day
period after the announcement by Zimmer that our offer will be consummated.
There will be no withdrawal rights during the subsequent offer period.

EXCHANGE OF CENTERPULSE REGISTERED SHARES AND CENTERPULSE ADSS; DELIVERY OF
ZIMMER COMMON STOCK AND CASH CONSIDERATION

Upon the terms and subject to the conditions of our offer, including, if
our offer is extended or amended, the terms and conditions of any such extension
or amendment no later than four Swiss trading days after the expiration of our
offer, we will accept for exchange all Centerpulse registered shares and
Centerpulse ADSs validly tendered and not withdrawn pursuant to the terms of our
offer with respect to Centerpulse registered shares and Centerpulse ADSs
tendered prior to the expiration of our offer, and upon the expiration of the
subsequent offering period, with respect to Centerpulse registered shares and
Centerpulse ADSs tendered during the subsequent offering period. In addition, we
reserve the right, subject to applicable law, to delay the acceptance for
exchange or the exchange of Centerpulse registered shares and Centerpulse ADSs
in order to comply in whole or in part with any applicable law. For a
description of our right to terminate our offer and not accept the Centerpulse
registered shares and Centerpulse ADSs for exchange or to delay acceptance of
Centerpulse registered shares and Centerpulse ADSs for exchange, see the section
captioned "-- Extension, Termination and Amendment."

For purposes of our offer, we shall be deemed to have accepted for exchange
tendered Centerpulse registered shares and Centerpulse ADSs when, as and if we
shall give oral or written notice to the Swiss offer manager and the U.S.
exchange agent of our acceptance of the tender of such Centerpulse registered
shares and Centerpulse ADSs. We expect to exchange Zimmer common stock and pay
the applicable cash proceeds and cash instead of fractional shares for the
Centerpulse registered shares and Centerpulse ADSs tendered in our offer to the
Swiss offer manager and U.S. exchange agent no later than 10 Swiss trading days
after the expiration of the subsequent offering period. The Swiss offer manager
and the U.S. exchange agent will act as agents for the tendering holders for the
purpose of receiving shares of Zimmer common stock and cash and cash to be paid
instead of fractional shares of Zimmer common stock from us and transmitting
such shares and cash to tendering holders of Centerpulse registered shares and
Centerpulse ADSs. Subject to the timely receipt by the Swiss offer manager of
certificates representing Centerpulse registered shares (or of a confirmation if
a book-entry transfer of such Centerpulse registered shares into the Swiss offer
manager's account at SIS SegaInterSettle AG, or SIS) or by the U.S. exchange
agent of Centerpulse American depositary receipts, or ADRs, for such Centerpulse
ADSs (or of a confirmation of a book-entry transfer of such Centerpulse ADSs
into the U.S. exchange agent's account at DTC), in each case, as described in
the sections captioned "-- Procedures for Tendering Centerpulse Registered
Shares," and "-- Procedures for Tendering Centerpulse ADSs" and a properly
completed and duly executed Form of Declaration of Acceptance and Assignment or
ADS Letter of Transmittal, as the case may be, or facsimiles thereof, and all
other required documents, within 10 Swiss trading days after the expiration of
the subsequent offering period applicable to our offer, the Swiss offer manager
or U.S. exchange agent, as the case may be, will deliver the applicable number
of shares of Zimmer common stock, together with the applicable cash
consideration (including cash payments to be made instead of issuing fractional
shares of Zimmer common stock) to shareholders who validly tendered their
Centerpulse registered shares or Centerpulse ADSs pursuant to our offer.

UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY US ON THE CASH PAID FOR
YOUR CENTERPULSE REGISTERED SHARES OR CENTERPULSE ADSS (INCLUDING CASH PAYMENTS
WE MAKE INSTEAD OF ISSUING FRACTIONAL SHARES OF ZIMMER COMMON STOCK) EVEN IF
THERE IS A DELAY IN MAKING THE EXCHANGE AND PAYMENTS.

Holders who tender their Centerpulse registered shares or Centerpulse ADSs
in our offer may elect in the Form of Declaration of Acceptance and Assignment
or ADS Letter of Transmittal, as the case may be, to have their shares of Zimmer
common stock registered in the name of a nominee or registered in their own name
in the share register of Zimmer.

Subject to the terms and conditions of our offer, upon Zimmer's acceptance
of Centerpulse ADSs tendered in our offer and confirmation from the U.S.
exchange agent of Zimmer's deposit of the applicable number of shares of Zimmer
common stock to be issued in our offer, the U.S. exchange agent will deliver the
applicable whole number of shares of Zimmer common stock, together with the
applicable cash purchase

price, and any cash in respect of fractional shares, to the tendering holders of
Centerpulse ADSs in the following manner:

- if you tendered your Centerpulse ADSs to the U.S. exchange agent by means
of delivery of an ADS Letter of Transmittal together with the Centerpulse
ADR certificate(s) evidencing your Centerpulse ADSs, the U.S. exchange
agent will deliver a single Zimmer common stock certificate evidencing
the applicable number of shares of Zimmer common stock together with a
check for the applicable cash purchase price, and any cash instead of
fractional shares according to the issuance and delivery instructions of
the tendering Centerpulse ADS holder provided in the ADS Letter of
Transmittal; or

- if you tendered your Centerpulse ADSs by means of DTC's book-entry
confirmation system, the U.S. exchange agent will deliver the applicable
whole number of shares of Zimmer common stock, together with the
applicable cash purchase price and any cash instead of fractional shares,
to the account of the DTC participant who tendered the Centerpulse ADSs
on your behalf. For a description of cash payments in this circumstance,
see the section captioned "-- Cash Payments to Holders of Centerpulse
Registered Shares and Centerpulse ADSs."

If we increase the value of the consideration to be paid for Centerpulse
registered shares and Centerpulse ADSs pursuant to our offer, we will pay such
increased consideration for all Centerpulse registered shares and Centerpulse
ADSs exchanged pursuant to our offer.

If any tendered Centerpulse registered shares and Centerpulse ADSs are not
accepted for exchange pursuant to our offer for any reason, or if certificates
are submitted for more Centerpulse registered shares or Centerpulse ADSs than
are tendered, certificates for such unexchanged or untendered Centerpulse
registered shares and Centerpulse ADSs will be returned (or, in the case of
Centerpulse registered shares and Centerpulse ADSs tendered by book-entry
transfer, such Centerpulse registered shares and Centerpulse ADSs will be
credited to an account maintained at the book-entry transfer facility), without
expense to the tendering shareholder, as promptly as practicable following the
expiration or termination of our offer.

CASH INSTEAD OF FRACTIONAL SHARES OF ZIMMER COMMON STOCK

Fractional entitlements to shares of Zimmer common stock will not be
delivered to holders of Centerpulse securities validly tendered in our offer. To
the extent that holders of Centerpulse securities are entitled to receive
fractions of shares of Zimmer common stock in exchange for their Centerpulse
securities, those fractional entitlements will be combined with the other
holders' fractional entitlements and subsequently sold on behalf of such holders
on the New York Stock Exchange. Each such holder of Centerpulse securities who
would not receive full consideration as shares of Zimmer common stock will
receive cash consideration corresponding to the fraction of the price of the
share of Zimmer common stock, which price shall be based on the net per-share
sale price (after deduction of related fees and expenses) of all of the shares
of Zimmer common stock combined from the fractional entitlements and sold on
behalf of those tendering holders.

By the acceptance of our offer, a tendering Centerpulse shareholder
authorizes the Swiss offer manager or the U.S. exchange agent, as the case may
be, to combine such holder's fractional entitlement to a share of Zimmer common
stock with other entitlements and sell them on the New York Stock Exchange.

YOU WILL NOT RECEIVE ANY INTEREST ON THE CASH TO BE GIVEN FOR FRACTIONAL
SHARES OF ZIMMER COMMON STOCK, EVEN IF THERE IS A DELAY IN MAKING THE EXCHANGE
AND PAYMENT.

CASH PAYMENTS TO HOLDERS OF CENTERPULSE REGISTERED SHARES AND CENTERPULSE ADSS

Holders of Centerpulse registered shares will receive their cash
consideration, including any cash we pay instead of issuing fractional shares of
our common stock, in Swiss francs. Holders of Centerpulse ADSs will receive
their cash consideration, including any cash we pay instead of issuing
fractional shares of our common stock, in U.S. dollars. If you are tendering
Centerpulse ADSs, we will convert the Swiss franc sum into U.S. dollars using
the noon buying rate, as published by the Federal Reserve Bank of New York, on
the day on which the funds are made available by Zimmer to the U.S. exchange
agent. Payment of the cash consideration, including any cash we pay instead of
issuing fractional shares of our common stock, will be made according to the
information provided in your Form of Declaration of Acceptance and Assignment if

you are a holder of Centerpulse registered shares, or your ADS Letter of
Transmittal if you are a holder of Centerpulse ADSs.

The actual amount of U.S. dollars received will depend upon the exchange
rate prevailing on the business day on which the funds are made available by
Zimmer to the U.S. exchange agent. Holders of Centerpulse ADSs should be aware
that the U.S. dollar/Swiss franc exchange rate which is prevailing on the date
on which an election is made or deemed to be made to receive more or less cash
and on the dates of dispatch and receipt of payment may be different from that
prevailing on the business day on which funds are made available by Zimmer to
the U.S. exchange agent. In all cases, fluctuations in the U.S. dollar/Swiss
franc exchange rate are at the risk of the accepting holder of Centerpulse ADSs
who elect or are treated as having elected to more or less cash in respect of
their tendered Centerpulse ADSs. Neither Zimmer nor any of its advisors or
agents shall have any responsibility with respect to the actual amount of cash
consideration payable other than in Swiss francs.

WITHDRAWAL RIGHTS

Your tender of Centerpulse registered shares and Centerpulse ADSs pursuant
to our offer is irrevocable, except that Centerpulse registered shares or
Centerpulse ADSs tendered pursuant to our offer may be withdrawn at any time
prior to the expiration of our offer and, unless we previously accepted them
pursuant to our offer, may also be withdrawn at any time after [--], [--], 2003,
except during the subsequent offering period. If we (i) extend the period of
time during which our offer is open, (ii) are delayed in accepting for exchange
the Centerpulse registered shares or Centerpulse ADSs, or (iii) are unable to
exchange the Centerpulse registered shares or Centerpulse ADSs pursuant to our
offer for any reason, then, without prejudice to our rights under our offer, the
Swiss offer manager and the U.S. exchange agent may, on our behalf, retain all
Centerpulse registered shares and Centerpulse ADSs tendered and such Centerpulse
registered shares and Centerpulse ADSs may not be withdrawn except as otherwise
provided in this section. Any such delay will be considered an extension of our
offer to the extent required by law.

The Swiss offer manager will make arrangements on the SWX Swiss Exchange to
allow holders of Centerpulse registered shares, not including Centerpulse ADSs,
who have tendered such shares pursuant to our offer, to withdraw such
Centerpulse registered shares from our offer and sell those shares pursuant to a
separate trading line on the SWX Swiss Exchange only to purchasers who wish to,
and simultaneously with such purchase will, tender such shares in our offer.
Holders of Centerpulse registered shares, not including Centerpulse ADSs, who
are interested in selling their Centerpulse registered shares in this manner
should contact their bank, broker or other custodial institution or the Swiss
offer manager. In the alternative, holders of Centerpulse registered shares may
withdraw such shares as set forth below and hold such shares or sell such shares
without restriction.

For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by your
bank, broker or custodian, in the case of Centerpulse registered shares, or the
U.S. exchange agent, in the case of Centerpulse ADSs, at their respective
addresses set forth on the back cover of this prospectus, and must specify the
name of the person who tendered the Centerpulse registered shares or Centerpulse
ADSs to be withdrawn and the number of Centerpulse registered shares or
Centerpulse ADSs to be withdrawn and the name of the registered holder of the
Centerpulse registered shares or Centerpulse ADSs, as the case may be, if
different from that of the person who tendered such Centerpulse registered
shares or Centerpulse ADSs. If ADRs representing Centerpulse ADSs have been
delivered or otherwise identified to the U.S. exchange agent, then, before the
release of these ADRs, the withdrawing holder must also submit the serial
numbers of the particular ADRs to be withdrawn. If the Centerpulse registered
shares or Centerpulse ADSs have been tendered pursuant to the procedures for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at SIS or DTC to be credited with the withdrawn Centerpulse
registered shares or Centerpulse ADSs, as the case may be, and otherwise comply
with the procedures of such companies. Withdrawals may not be rescinded, and
Centerpulse registered shares or Centerpulse ADSs withdrawn will thereafter be
deemed not validly tendered for purposes of our offer. However, withdrawn
Centerpulse registered shares or Centerpulse ADSs may be tendered again by
following one of the procedures described in the sections captioned
"-- Procedures for Tendering

Centerpulse Registered Shares" or "-- Procedures for Tendering Centerpulse ADSs"
at any time prior to the expiration of our offer.

All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by us, in our sole discretion, which
determination shall be final and binding. Neither we, the dealer manager, the
Swiss offer manager, the U.S. exchange agent, the information agent nor any
other person will be under any duty to give notification of any defect or
irregularity in any notice of withdrawal or incur any liability for failure to
give any such notification.

PROCEDURES FOR TENDERING CENTERPULSE REGISTERED SHARES

Zimmer has retained Credit Suisse First Boston to act as Swiss offer
manager in connection with our offer made to holders of Centerpulse registered
shares.

VALID TENDER OF CENTERPULSE REGISTERED SHARES

To validly tender Centerpulse registered shares pursuant to our offer, you
must complete the following procedures:

- If your Centerpulse registered shares are directly registered in your
name in Centerpulse's shareholders register, you must comply with the
instructions to transfer and deliver your shares as described in the
Form of Declaration of Acceptance and Assignment and return the form to
your bank, broker or custodian before the expiration of our offer.

- If your Centerpulse registered shares are registered in the name of a
financial institution, you must comply with the instructions for
acceptance of our offer and delivery of your tendered Centerpulse
registered shares that you will receive directly from the financial
institution or intermediary with which your securities are deposited. If
you have not received any instructions from your financial institution
or intermediary, you should contact your financial institution or
intermediary. Your acceptance of our offer should be received by your
financial institution or intermediary, in accordance with its
instructions, before the date indicated in its instructions.

- If you are a holder of options issued by Centerpulse under one of its
stock option plans, you may only accept our offer if you exercise those
options prior to the expiration of our offer in accordance with their
terms. You may then accept our offer in relation to Centerpulse
registered shares issued upon exercise of your Centerpulse options
during the offer period so long as (i) you have validly exercised your
Centerpulse options, (ii) you have completed the payments required upon
the exercise of your Centerpulse options, and (iii) tender your
Centerpulse registered shares issued upon exercise of your Centerpulse
options prior to the expiration of our offer and comply with all other
applicable procedures set forth in this prospectus and the instructions
on the Form of Declaration of Acceptance and Assignment.

BOOK-ENTRY TRANSFER

The Swiss offer manager will establish an account through SIS, to hold the
Centerpulse registered shares to be tendered into our offer. Any financial
intermediary or institution that is a participant in SIS's systems may make a
book-entry transfer of registered shares by causing SIS to transfer such
registered shares into the SIS account in favor of the Swiss offer manager in
accordance with their procedures for transfer. You should, thus, instruct your
financial institution or intermediary to tender the number of registered shares
you wish to tender by book-entry transfer to the Swiss offer manager's account.

If you validly tender your Centerpulse registered shares and they are
accepted by Zimmer, there will be a binding agreement between you and Zimmer on
the terms and subject to the conditions set forth in this prospectus and in the
Form of Declaration of Acceptance and Assignment and the instructions to such
form.

Do not send Forms of Declaration of Acceptance and Assignment or other
offer documents to Zimmer, Centerpulse or the information agent. These materials
must be submitted to your bank, broker or custodian following the procedures
described above and in the instructions to the Form of Declaration of Acceptance
and Assignment in order for you to participate in our offer.

IT IS UP TO YOU TO DECIDE HOW TO DELIVER YOUR CENTERPULSE REGISTERED SHARES
AND ALL OTHER REQUIRED DOCUMENTS TO YOUR BANK, BROKER OR CUSTODIAN. IT IS YOUR
RESPONSIBILITY TO ENSURE THAT ALL NECESSARY MATERIALS IN THE PROPER FORM ARE
RECEIVED BY YOUR BANK, BROKER OR CUSTODIAN BEFORE THE EXPIRATION DATE. WE
RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED,
INSTEAD OF MAIL. IF DELIVERY IS BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED
MAIL, WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO YOUR BANK, BROKER OR CUSTODIAN
BEFORE THE EXPIRATION OF OUR OFFER. IF YOUR BANK, BROKER OR CUSTODIAN DOES NOT
RECEIVE ALL OF THE MATERIALS IN THE PROPER FORM REQUIRED BY THIS SECTION BEFORE
THE EXPIRATION DATE, YOUR CENTERPULSE REGISTERED SHARES WILL NOT BE VALIDLY
TENDERED IN OUR OFFER.

OTHER REQUIREMENTS

Notwithstanding any other provision, the exchange of Centerpulse registered
shares accepted pursuant to our offer will in all cases be made only after
proper and timely delivery to, and receipt by, your bank, broker or custodian of
the tendered Centerpulse registered shares, in accordance with the instructions
in the Form of Declaration of Acceptance and Assignment or that you receive from
your financial intermediary or institution, as the case may be. If you wish to
accept our offer, you have to complete, sign and return the Form of Declaration
of Acceptance and Assignment on or before 4:00 p.m., Central European time,
10:00 a.m., New York City time, [--], August [--], 2003 or, if our offer has
been extended, before the expiration of our offer, as extended.

EFFECT OF TENDER

If you tender your Centerpulse registered shares in our offer, you agree to
sell, assign and transfer to Zimmer all right, title and interest in and to all
of the Centerpulse registered shares tendered and any and all cash dividends,
distributions, rights, other shares or other securities issued or issuable in
respect of such registered shares on or after the date of this prospectus.

By tendering your Centerpulse registered shares, you represent and warrant
that you have the full power and authority to validly tender, exchange, assign
and transfer the registered shares of Centerpulse tendered and to acquire shares
of Zimmer common stock and receive payment of cash issuable or payable upon the
exchange of such tendered Centerpulse registered shares, and that, when and if
the tendered Centerpulse registered shares are accepted for exchange, Zimmer
will acquire good, marketable and unencumbered title to the tendered registered
shares, free and clear of all liens, restrictions, charges and encumbrances, and
not subject to any adverse claim or right. You also warrant that you will, upon
request, execute and deliver any additional documents deemed by Zimmer or the
Swiss offer manager to be necessary or desirable to complete the exchange, sale,
assignment and transfer of the tendered Centerpulse registered shares.

The tendering holder irrevocably appoints designees of Zimmer as the
holder's proxies, each with full power of substitution, to the full extent of
the holder's rights with respect to the Centerpulse registered shares tendered
by the holder and accepted for exchange by Zimmer and with respect to any and
all distributions in respect of the tendered Centerpulse registered shares on or
after the date of this prospectus. All such proxies will be considered coupled
with an interest in the tendered Centerpulse registered shares. This appointment
is effective when, and only to the extent that, Zimmer accepts for exchange
Centerpulse registered shares tendered by the holder as provided in this
prospectus. Upon the effectiveness of the appointment, all prior powers of
attorney, proxies and consents given by the holder with respect to the tendered
Centerpulse registered shares (and with respect to any and all distributions)
will be revoked, and no subsequent powers of attorney, proxies or consents may
be given (and, if given, will not be deemed effective). Zimmer's designees will,
with respect to the Centerpulse registered shares and related distributions for
which the appointment is effective, be empowered to exercise all voting and
other rights of the holder as they, in their sole discretion, may deem proper.
Zimmer reserves the right to require that, in order for the Centerpulse
registered shares to be deemed validly tendered, immediately upon Zimmer's
exchange of Zimmer common stock and payment of cash for the tendered Centerpulse
registered shares, Zimmer must be able to exercise full voting, consent and
other rights to the extent permitted under applicable law with respect to the
tendered Centerpulse registered shares and distributions, including voting at
any meeting of Centerpulse shareholders.

PROCEDURES FOR TENDERING CENTERPULSE ADSS

Zimmer has retained Mellon Investor Services LLC to act as the U.S.
exchange agent in connection with our offer made to holders of Centerpulse ADSs.

VALID TENDER OF CENTERPULSE ADSS

To validly tender your outstanding Centerpulse ADSs, you must complete the
procedures described below so that your tender is received by the U.S. exchange
agent before the expiration of our offer.

If you have ADRs evidencing ADSs, you should send the following documents
to the U.S. exchange agent by one of the mailing methods described in the ADS
Letter of Transmittal, at the applicable address set forth on the back cover of
this prospectus, sufficiently in advance of the expiration of our offer for them
to be received by the U.S. exchange agent before the expiration of our offer:

- a properly completed and executed ADS Letter of Transmittal indicating
the number of Centerpulse ADSs to be tendered, along with any other
documents required by the instructions to the ADS Letter of Transmittal;
and

- the ADRs evidencing the ADSs to be tendered.

In addition, the ADRs evidencing ADSs to be tendered must be endorsed or
you must enclose an appropriate instrument of transfer relating to the delivery
of Centerpulse ADSs if:

- the ADRs delivered is registered in the name of a person other than the
signer of an ADS Letter of Transmittal;

- delivery of the Centerpulse ADSs is to be made to the U.S. exchange agent
on behalf of a person other than the registered owner of the Centerpulse
ADSs being tendered; or

- in the event that the Centerpulse ADSs are not accepted for exchange,
they are to be delivered to Centerpulse's transfer agent on behalf of a
person other than the registered owner.

The signature on the ADS Letter of Transmittal must be guaranteed by an
eligible institution unless the Centerpulse ADSs tendered under the ADS Letter
of Transmittal are tendered in one of the following ways:

- by the registered holder of Centerpulse securities if the holder has not
requested special issuance or special delivery instructions on the ADS
Letter of Transmittal; or

- for the account of an Eligible Institution.

An "Eligible Institution" is a financial institution which is a participant
in the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Program or the Stock Exchange Medallion Program. Most commercial
banks, savings and loan associations and brokerage houses are eligible
institutions.

If your ADR has been lost, destroyed, mutilated or stolen, please refer to
the section of the prospectus entitled "-- Lost, Destroyed, Mutilated or Stolen
ADRs" for information regarding special procedures that must be followed.

If you have ADSs held through a bank or broker in book-entry form, such
ADSs may be delivered pursuant to the procedures for book-entry transfer
described below. In addition, if you wish to tender your Centerpulse ADSs but
such ADSs are not immediately available, you may comply with the "-- Guaranteed
Delivery Procedures" described below.

BOOK-ENTRY TRANSFER

If you hold your Centerpulse ADSs through a bank or broker, you should
follow the instructions sent to you separately by your bank or broker. You
should not use the ADS Letter of Transmittal to direct the tender of your
Centerpulse ADSs. Your bank or broker must notify DTC and cause it to transfer
the securities into the U.S. exchange agent's account in accordance with DTC's
procedures. The bank or broker must also ensure that the U.S. exchange agent
receives an agent's message from DTC confirming the book-entry transfer of your
Centerpulse ADSs. An agent's message is a message, transmitted by DTC and
received by the U.S. exchange agent, that forms a part of a book-entry
confirmation, which states that DTC has received

an express acknowledgment from the participant in DTC tendering the securities,
that the participant has received and agrees to be bound by the terms of the ADS
Letter of Transmittal and the instructions to the ADS Letter of Transmittal.

If you are an institution that is a participant in DTC's book-entry
transfer facility, you should follow the same procedures that are applicable to
persons holding Centerpulse ADSs through a bank or broker as described in the
immediately preceding paragraph.

Trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity who
sign an ADS Letter of Transmittal, ADS Notice of Guaranteed Delivery, ADRs
evidencing ADSs to be tendered or other instruments of transfer must indicate
the capacity in which they are signing, and must submit evidence, which is
current as of a date within 180 days before the date that the applicable ADS
Letter of Transmittal is delivered to the U.S. exchange agent, of their power to
act in that capacity, unless this requirement is waived by Zimmer.

A person who tenders ADSs for their own account violates U.S. federal
securities laws unless the person owns:

- those securities;

- other securities convertible into or exchangeable for those securities
and intends to acquire the securities for tender by conversion or
exchange of those securities; or

- an option, warrant or right to purchase those securities and intends to
acquire the securities for tender by exercise of that option, warrant or
right.

U.S. federal securities laws provide a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person.

If you validly tender your Centerpulse ADSs and they are accepted by
Zimmer, there will be a binding agreement between you and Zimmer on the terms
and subject to the conditions set forth in this prospectus and in the ADS Letter
of Transmittal and the instructions to the ADS Letter of Transmittal.

Do not send ADS letters of transmittal or ADRs or other exchange offer
documents to Zimmer, Centerpulse or the information agent. These materials must
be submitted to the U.S. exchange agent at the address set forth on the back
cover of this prospectus following the procedures described above and in the
instructions to the applicable ADS Letter of Transmittal in order for you to
participate in our offer.

IT IS UP TO YOU TO DECIDE HOW TO DELIVER YOUR CENTERPULSE ADSS AND ALL
OTHER REQUIRED DOCUMENTS TO THE U.S. EXCHANGE AGENT. IT IS YOUR RESPONSIBILITY
TO ENSURE THAT ALL NECESSARY MATERIALS ARE RECEIVED BY THE U.S. EXCHANGE AGENT
BEFORE THE EXPIRATION DATE OF OUR OFFER. WE RECOMMEND THAT YOU USE AN OVERNIGHT
OR HAND DELIVERY SERVICE, PROPERLY INSURED, INSTEAD OF MAIL. IF DELIVERY IS BY
MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE U.S. EXCHANGE AGENT, AS THE CASE MAY BE, BEFORE THE EXPIRATION
OF OUR OFFER. IF THE U.S. EXCHANGE AGENT DOES NOT RECEIVE ALL OF THE MATERIALS
REQUIRED BY THIS SECTION AT ONE OF THE ADDRESSES SET FORTH ON THE BACK COVER OF
THIS PROSPECTUS BEFORE THE EXPIRATION DATE OF OUR OFFER, YOUR CENTERPULSE ADSS
WILL NOT BE VALIDLY TENDERED IN OUR OFFER.

GUARANTEED DELIVERY PROCEDURES

If you wish to tender your Centerpulse ADSs but the ADSs are not
immediately available, or the procedures for book-entry transfer cannot be
completed on a timely basis or time will not permit the securities or other
required documentation to reach the U.S. exchange agent before the expiration
date of our offer, you may still tender your outstanding securities if:

- the tender is made through an Eligible Institution;

- the U.S. exchange agent receives from the Eligible Institution, before
the expiration date of our offer, a properly completed and duly executed
ADS Notice of Guaranteed Delivery, substantially in the form provided by
Zimmer; and

- the U.S. exchange agent receives the tendered ADRs (or in the case of
securities held in book-entry form, timely confirmation of the book-entry
transfer of such securities into the exchange agent's account at DTC) in
proper form for transfer and a properly completed ADS Letter of
Transmittal, or a facsimile of the ADS Letter of Transmittal and all
other documents required by the ADS Letter of Transmittal, within three
New York Stock Exchange trading days after the date of execution of the
ADS Notice Guaranteed Delivery.

You may deliver the ADS Notice Guaranteed Delivery by hand, facsimile
transmission or mail to the U.S. exchange agent at the applicable address set
forth on the back cover of this prospectus and you must include a guarantee by
an Eligible Institution in the form set forth in the ADS Notice Guaranteed
Delivery. In the case of Centerpulse ADSs held through the book-entry transfer
system of DTC, the ADS Notice Guaranteed Delivery must be delivered to the U.S.
exchange agent by a DTC participant by means of the DTC book-transfer
confirmation system.

LOST, DESTROYED, MUTILATED OR STOLEN ADRS

If any ADR evidencing Centerpulse ADSs has been lost, destroyed, mutilated
or stolen, you should call Deutsche Bank ADR Shareholder Services at
1-866-249-2593 for instructions as to the procedures for replacing such ADR.
Your tenders cannot be processed until the procedures for replacing lost,
destroyed, mutilated or stolen ADRs representing Centerpulse ADSs have been
completed.

OTHER REQUIREMENTS

Notwithstanding any other provision, the exchange of Centerpulse ADSs
accepted pursuant to our offer will in all cases be made only after proper and
timely delivery to, and receipt by, the U.S. exchange agent of:

- ADRs evidencing (or a book-entry confirmation of) the tendered
Centerpulse ADSs;

- an ADS Letter of Transmittal (or a manually executed copy thereof),
properly completed and duly executed with any required signature
guarantees (or in the case of a book-entry transfer, an agent's message
instead of the ADS Letter of Transmittal); and

- any other documents required by the ADS Letter of Transmittal.

ADS Letters of Transmittal properly completed and duly executed, together
with the corresponding certificates, must be received by the U.S. exchange agent
before 10:00 a.m., New York City time, August [--], 2003 or, if our offer has
been extended, before the expiration of our offer, as extended.

EFFECT OF TENDER

If you tender your Centerpulse ADSs in our offer, you agree to sell, assign
and transfer to Zimmer all right, title and interest in and to all the
Centerpulse ADSs tendered and any and all cash dividends, distributions, rights,
other shares or other securities issued or issuable in respect of such ADSs on
or after the date of this prospectus.

By tendering your Centerpulse ADSs, you represent and warrant that you have
the full power and authority to tender, exchange, assign and transfer the
Centerpulse ADSs tendered and to acquire the Zimmer common stock and cash
issuable or payable upon the exchange of such tendered Centerpulse ADSs, and
that, when and if the tendered Centerpulse ADSs are accepted for exchange,
Zimmer will acquire good, marketable and unencumbered title to the tendered
Centerpulse ADSs, free and clear of all liens, restrictions, charges and
encumbrances, and not subject to any adverse claim or right. You also warrant
that you will, upon request, execute and deliver any additional documents deemed
by Zimmer or the U.S. exchange agent to be necessary or desirable to complete
the exchange, sale, assignment and transfer of the tendered Centerpulse ADSs.

By executing and delivering an ADS Letter of Transmittal as set forth
above, the tendering holder irrevocably appoints designees of Zimmer as such
holder's proxies, each with full power of substitution, to the full extent of
such holder's rights with respect to the Centerpulse ADSs tendered by the holder
and accepted for exchange by Zimmer and with respect to any and all
distributions in respect of the tendered Centerpulse ADSs on or after the date
of this prospectus. All such proxies will be considered coupled with an interest
in the tendered Centerpulse ADSs. This appointment is effective when, and only
to the extent that,

Zimmer accepts for exchange Centerpulse ADSs tendered by the holder as provided
in this prospectus. Upon the effectiveness of this appointment, all prior powers
of attorney, proxies and consents given by the holder with respect to the
tendered Centerpulse ADSs (and with respect to any and all distributions) will
be revoked, and no subsequent powers of attorney, proxies or consents may be
given (and, if given, will not be deemed effective). Zimmer's designees will,
with respect to the Centerpulse ADSs and related distributions for which the
appointment is effective, be empowered to exercise all voting and other rights
of the holder as they, in their sole discretion, may deem proper. Zimmer
reserves the right to require that, in order for Centerpulse ADSs to be deemed
validly tendered, immediately upon Zimmer's exchange of Zimmer common stock and
payment of cash for the tendered Centerpulse ADSs, Zimmer must be able to
exercise full voting, consent and other rights to the extent permitted under
applicable law with respect to the tendered Centerpulse ADSs and distributions,
including voting at any meeting of Centerpulse shareholders.

TRANSFER AND WITHHOLDING TAXES

SWISS TRANSFER AND WITHHOLDING TAXES

In the case of a tendering holder that is a Swiss holder, a Swiss federal
securities transfer tax is payable with respect to the exchange of Centerpulse
registered shares or Centerpulse ADSs pursuant to our offer if such holder is a
securities dealer as defined under the Swiss stamp tax act, referred to as a
Swiss securities dealer, or if a Swiss securities dealer acts as an intermediary
to the transaction. In the case of a tendering holder that is not a Swiss
holder, there is no Swiss securities transfer tax consequence of our offer
unless a Swiss securities dealer acts as an intermediary to the transaction.
Zimmer will pay or reimburse any applicable Swiss federal securities transfer
tax with respect to the exchange of Centerpulse registered shares or Centerpulse
ADSs pursuant to our offer. Neither the exchange of Centerpulse registered
shares of Centerpulse ADSs for Zimmer common stock nor the entitlement for cash
pursuant to our offer is subject to Swiss withholding tax or Swiss value added
tax ("VAT") with respect to any tendering holder. For a more complete discussion
of Swiss transfer and withholding taxes, see the discussion in the section
captioned "-- OUR OFFER -- Taxation -- Material Swiss Tax Consequences" below.

U.K. TRANSFER AND WITHHOLDING TAXES

There should be no U.K. stamp duty or stamp duty reserve tax implications
arising with respect to the exchange of Centerpulse registered shares or
Centerpulse ADSs pursuant to our offer. The exchange of Centerpulse registered
shares or Centerpulse ADSs for Zimmer common stock and/or cash pursuant to our
offer is not subject to U.K. withholding tax or U.K. VAT. For a more complete
discussion of U.K. transfer and withholding taxes, see the discussion in the
section captioned "-- OUR OFFER-- Taxation -- Material U.K. Tax Consequences"
below.

U.S. FEDERAL TRANSFER AND WITHHOLDING TAXES

There is no U.S. federal transfer tax or VAT. Tendering U.S. holders, and
in some cases, tendering non-U.S. holders, may be subject to U.S. federal backup
withholding tax with respect to proceeds from the exchange of Centerpulse ADSs
or Centerpulse registered shares pursuant to our offer unless such holders
comply with certain certification procedures or otherwise establish an exemption
from backup withholding. For a more complete discussion of U.S. federal
withholding taxes, see the discussion in the section captioned "-- OUR
OFFER -- Taxation -- Material U.S. Federal Tax Consequences" below.

MATTERS CONCERNING VALIDITY AND ELIGIBILITY

We will determine all questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for exchange of
any tender of Centerpulse registered shares or Centerpulse ADSs in our sole
discretion. All our determinations in these matters will be final and binding.
We reserve the absolute right to reject any or all tenders of Centerpulse
registered shares or Centerpulse ADSs determined by us not to be in proper form
or the acceptance for exchange of or exchange for which may, in the opinion of
our counsel, be unlawful. We also reserve the absolute right to waive any defect
or irregularity in any tender of Centerpulse registered shares or Centerpulse
ADSs. Neither we, the dealer manager, the Swiss offer manager, the U.S. exchange
agent, the information agent nor any other person will be under any duty to give

notification of any defect or irregularity in tenders or incur any liability for
failure to give any such notification. Any Centerpulse registered shares or
Centerpulse ADSs withdrawn will be deemed not to have been validly tendered for
purposes of our offer. However, at any time prior to expiration of our offer,
you may re-tender withdrawn Centerpulse registered shares or Centerpulse ADSs by
following the procedures discussed above in the section captioned "-- Procedures
for Tendering Centerpulse Registered Shares" and "-- Procedures for Tendering
Centerpulse ADSs."

IF YOU HAVE ANY QUESTIONS ABOUT THE PROCEDURE FOR TENDERING CENTERPULSE
REGISTERED SHARES OR CENTERPULSE ADSS, PLEASE CONTACT THE INFORMATION AGENT OR
THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH
ON THE BACK COVER OF THIS PROSPECTUS.

ANNOUNCEMENT OF RESULTS OF OUR OFFER

We will announce the final results of our offer and whether all of the
conditions to our offer have been fulfilled or waived and whether Zimmer will
accept the tendered Centerpulse registered shares and Centerpulse ADSs for
exchange no later than four Swiss trading days after expiration of our offer.
The announcement will be made by a release to the Dow Jones News Service,
Bloomberg, Reuters Economic Services and Telekurs/AWP News.

OWNERSHIP OF ZIMMER AFTER OUR OFFER AND OUR INCENTIVE OFFER

Based on the estimated per share consideration payable in the connection
with our offer and our InCentive offer, we estimate that, we will issue
approximately 43.8 million shares of Zimmer common stock and that, upon the
consummation of our offer and our InCentive offer, current holders of Zimmer
common stock will own approximately 82%, former holders of Centerpulse
registered shares, including holders of Centerpulse ADSs will own approximately
14.6%, and former InCentive shareholders collectively will own approximately
3.4% of the then outstanding shares of Zimmer common stock.

CURRENCY EXCHANGE RATES

The following table sets forth, for the periods indicated, certain
historical exchange rates between U.S. dollars and Swiss francs based on the
Federal Reserve Bank of New York noon buying rate:

<Table>
<Caption>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------- -------------------------------------
2003 2002 2002 2001 2000 1999 1998
------ ------ ----- ----- ----- ----- -----
(CHF=US$1.00)

High.............................................. 1.40 1.72 1.72 1.82 1.83 1.60 1.54
Low............................................... 1.33 1.64 1.38 1.59 1.55 1.36 1.29
Average(1)........................................ 1.36 1.70 1.55 1.69 1.69 1.51 1.45
Period Ended...................................... 1.35 1.68 1.38 1.66 1.62 1.59 1.37
</Table>

- ---------------

(1) The average of the noon buying rates on the last day of each month during
the period.

No representation is made that the Swiss franc or U.S. dollar amounts could have
been or could in the future be so converted at any particular rate.

TAXATION

The following is a general summary of material U.S. federal, Swiss, and
U.K. tax consequences of our offer and the ownership of Zimmer common stock
received pursuant to our offer. Dewey Ballantine LLP, special U.S. tax counsel
to Zimmer, has delivered an opinion to Zimmer to the effect that the discussion
under the caption "OUR OFFER -- Taxation -- Material U.S. Federal Tax
Consequences," to the extent it states matters of law or legal conclusions and
subject to the qualifications and limitations stated therein, is accurate in all
material respects. Pestalozzi Lachenal & Patry, special Swiss tax counsel to
Zimmer, has delivered an opinion to Zimmer to the effect that the discussion
under the caption "OUR OFFER -- Taxation -- Material Swiss Tax Consequences," to
the extent it states matters of law or legal conclusions and subject to the
qualifications and limitations stated therein, is accurate in all material
respects. Bird & Bird, special U.K. tax counsel to Zimmer, has delivered an
opinion to Zimmer to the effect that the discussion under the caption "OUR
OFFER -- Taxation -- Material U.K. Tax Consequences," to the extent it states

matters of law or legal conclusions and subject to the qualifications and
limitations stated therein, is accurate in all material respects. Beneficial
owners of Centerpulse registered shares or Centerpulse ADSs that are subject to
tax in jurisdictions other than the United States, Switzerland and the United
Kingdom should consult their own tax advisors regarding the tax consequences to
them of our offer and the ownership of Zimmer common stock received pursuant to
our offer.

THIS SUMMARY IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED TO BE,
LEGAL OR TAX ADVICE TO ANY PARTICULAR BENEFICIAL OWNER OF CENTERPULSE REGISTERED
SHARES OR CENTERPULSE ADSS. ALL BENEFICIAL OWNERS OF CENTERPULSE REGISTERED
SHARES OR CENTERPULSE ADSS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE SPECIFIC U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO THEM OF
OUR OFFER AND THE OWNERSHIP OF ZIMMER COMMON STOCK RECEIVED PURSUANT TO OUR
OFFER.

MATERIAL U.S. FEDERAL TAX CONSEQUENCES

The following is a summary of material U.S. federal income tax consequences
to "U.S. holders," as defined below, and the material U.S. federal income and
estate tax consequences to "non-U.S. holders," as defined below, of our offer
and the ownership of Zimmer common stock received pursuant to our offer. This
summary is based on currently existing provisions of the Internal Revenue Code
of 1986, as amended, referred to as the Code, treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as in
effect on the date of this prospectus and all of which are subject to change,
possibly with retroactive effect. This discussion does not address any aspect of
state or local tax law.

This summary is limited to beneficial owners that hold Centerpulse
registered shares or Centerpulse ADSs, and that will hold Zimmer common stock
received pursuant to our offer, as "capital assets" (generally, property held
for investment). Moreover, this summary does not discuss all aspects of U.S.
federal taxation that may be important to beneficial owners in light of their
particular circumstances or the U.S. federal tax consequences to beneficial
owners subject to special treatment under U.S. federal tax law, such as banks
and other financial institutions, insurance companies, dealers in securities,
traders who have elected mark-to-market accounting, tax-exempt organizations,
certain former citizens or former long-term residents of the United States,
partnerships or other pass-through entities, persons that hold or will hold
Centerpulse registered shares, Centerpulse ADSs, or Zimmer common stock as part
of a "straddle," "hedging," "conversion," or other risk reduction transaction
for U.S. federal income tax purposes, persons who acquired their Centerpulse
registered shares or Centerpulse ADSs upon the exercise of employee stock
options or otherwise as compensation, persons that actually or constructively
own 10% of more of the voting shares of Centerpulse or Zimmer, or U.S. holders
that have a functional currency other than the U.S. dollar, all of whom may be
subject to tax rules that differ significantly from those summarized below.

As used herein, the term "U.S. holder" means a person that beneficially
owns Centerpulse registered shares or Centerpulse ADSs, or that will
beneficially own Zimmer common stock received pursuant to our offer, and that
is, for U.S. federal income tax purposes:

- an individual who is a citizen or resident of the United States;

- a corporation (or other entity taxable as a corporation for U.S. federal
income tax purposes) created or organized in or under the laws of the
United States, any state thereof, or the District of Columbia;

- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or

- a trust (a) if a court within the United States is able to exercise
primary jurisdiction over its administration and one or more U.S. persons
have authority to control all of its substantial decisions, or (b) if, in
general, it was in existence on August 20, 1996, was treated as a U.S.
person under the Code on the previous day, and elected under applicable
treasury regulations to continue to so be treated.

As used herein, the term "non-U.S. holder" means a beneficial owner that is
not a partnership for U.S. federal income tax purposes and is not a U.S. holder.

If a partnership is a beneficial owner of Centerpulse registered shares or
Centerpulse ADSs, or of Zimmer common stock received pursuant to our offer, the
U.S. federal tax treatment of a partner in the partnership generally will depend
upon the status of the partner and the activities of the partnership. A
partnership that is a beneficial owner of Centerpulse registered shares or
Centerpulse ADSs, or of Zimmer

common stock received pursuant to our offer, and partners in such a partnership,
should consult their own tax advisors regarding the U.S. federal, state, local
and non-U.S. tax consequences to them of our offer and the ownership of Zimmer
common stock received pursuant to our offer.

For U.S. federal tax purposes, a beneficial owner of ADSs is treated as the
beneficial owner of the underlying shares represented by the ADSs.

U.S. HOLDERS

Exchange of Centerpulse Registered Shares or Centerpulse ADSs for Zimmer
Common Stock and/or Cash Pursuant to Our Offer

A U.S. holder that exchanges Centerpulse registered shares or Centerpulse
ADSs for Zimmer common stock and/or cash (including cash instead of fractional
shares) pursuant to our offer generally will recognize taxable gain or loss
equal to the difference between (1) the amount of cash plus the fair market
value of Zimmer common stock received pursuant to our offer (referred to as a
holder's amount realized) and (2) such U.S. holder's adjusted tax basis in the
Centerpulse registered shares or Centerpulse ADSs exchanged therefor. For
purposes of determining a U.S. holder's amount realized, it appears that the
fair market value of the Zimmer common stock should be determined as of the date
we accept such U.S. holder's tender of Centerpulse registered shares or
Centerpulse ADSs (referred to as the acceptance date), and that the amount of
cash should be determined, depending on the U.S. holder's method of accounting
and foreign currency elections in effect, by reference to the U.S. dollar value
of the Swiss franc portion of the consideration on either the acceptance date or
the date the Swiss francs (or U.S. dollars, as applicable) are received by or on
behalf of the U.S. holder. Each U.S. holder is urged to consult its own tax
advisor as to the determination of its amount realized in its particular
circumstances. Gain or loss recognized generally will be capital gain or loss,
and will be long-term capital gain or loss if the U.S. holder held its
Centerpulse registered shares or Centerpulse ADSs for more than one year.
Long-term capital gains of a non-corporate U.S. holder generally are subject to
a reduced rate of U.S. federal income tax. The deduction of capital loss is
subject to limitations.

A U.S. holder's tax basis in Zimmer common stock received pursuant to our
offer should be equal to the fair market value of such stock, as taken into
account in determining the U.S. holder's amount realized, and the U.S. holder's
holding period for such Zimmer common stock should begin on the day following
the day the Zimmer common stock is so taken into account.

Special U.S. federal income tax rules would apply to U.S. holders if
Centerpulse were a passive foreign investment company, or PFIC. Centerpulse will
be a PFIC if 75% or more of its gross income in a taxable year, including the
pro rata share of the gross income of any company (U.S. or non-U.S.) in which
Centerpulse is considered to own 25% or more of the shares by value, is passive
income. Alternatively, Centerpulse will be a PFIC if 50% or more of its assets
in a taxable year, averaged over the year (determined by averaging the
percentages at the end of each quarter of the taxable year) and ordinarily
determined based on fair market value and including the pro rata share of the
assets of any company (U.S. or non-U.S.) in which Centerpulse is considered to
own 25% or more of the shares by value, are held for the production of, or
produce, passive income. Centerpulse has publicly stated that it believes it was
not a PFIC for 2002 and that it will not become a PFIC in future years based on
its anticipated income and assets. If, however, Centerpulse were a PFIC in prior
years or were to become a PFIC prior to the consummation of our offer, U.S.
holders could become subject to adverse U.S. federal income tax consequences,
including, depending on the situation, being subject to a special tax plus an
interest charge on any gain recognized upon exchange of Centerpulse registered
shares or Centerpulse ADSs for Zimmer common stock and/or cash. Accordingly,
U.S. holders are urged to consult their own tax advisors regarding the PFIC
rules.

Currency Exchange Gain or Loss

If the U.S. dollar value of Swiss francs taken into account by a U.S.
holder in determining its amount realized as a result of our offer differs from
the U.S. dollar value of the Swiss francs (or the amount of U.S. dollars)
received by the U.S. holder, such U.S. holder will recognize ordinary income or
loss, as the case may be, measured by or on behalf of the difference between the
amount so taken into account and the U.S. dollar value of the Swiss francs (or
the amount of U.S. dollars) received. If a U.S. holder receives Swiss francs,
the

U.S. holder may recognize additional ordinary income or loss, as the case may
be, when the Swiss francs are converted into U.S. dollars or otherwise disposed
of, to the extent there has been a change in the exchange rate between the Swiss
franc and the U.S. dollar during the period the U.S. holder holds the Swiss
francs. Each U.S. holder is urged to consult its own tax advisor regarding the
application of currency exchange gain and loss rules in its particular
circumstances.

Distributions on Zimmer Common Stock

We do not currently anticipate making distributions on our common stock.
If, however, after consummation of our offer, we do make distributions on our
common stock, such distributions will constitute dividends for U.S. federal
income tax purposes to the extent paid from our current or accumulated earnings
and profits, as determined under U.S. federal income tax principles.
Distributions in excess of earnings and profits will constitute a return of
capital that is applied against and reduces the U.S. holder's adjusted tax basis
in our common stock. Any remaining excess will be treated as gain realized on
the sale or other disposition of the common stock and will be treated as
described in the section captioned "-- OUR OFFER -- Taxation -- U.S.
Holders -- Disposition of Zimmer Common Stock" below.

Disposition of Zimmer Common Stock

A U.S. holder that sells or otherwise disposes of Zimmer common stock
received pursuant to our offer generally will recognize taxable gain or loss
equal to the difference between (i) the holder's amount realized (generally, the
sum of the cash plus the fair market value of any property received) and (ii)
the holder's adjusted tax basis in such Zimmer common stock. Gain or loss
recognized generally will be capital gain or loss, and will be long-term capital
gain or loss if the U.S. holder held the Zimmer common stock for more than one
year on the date of disposition. Long-term capital gains of a non-corporate U.S.
holder generally are subject to a reduced rate of U.S. federal income tax. The
deduction of capital loss is subject to limitations.

Jobs and Growth Tax Relief Reconciliation Act of 2003

Under the recently enacted Jobs and Growth Tax Relief Reconciliation Act of
2003, dividends and long-term capital gains earned by individual U.S. holders
after May 5, 2003 and before January 1, 2009 generally are subject to U.S.
federal income tax at a reduced maximum tax rate of 15%. This rate reduction
does not apply to dividends received in respect of certain short-term or hedged
positions, or to dividends or capital gains received in certain other
situations. Holders are urged to consult their own tax advisors regarding the
implications of the new tax legislation in their particular circumstances.

Information Reporting and Backup Withholding

Proceeds from the exchange of Centerpulse registered shares or Centerpulse
ADSs pursuant to our offer, the sale or other disposition of Zimmer common
stock, and distributions on Zimmer common stock that are paid to a U.S. holder
(other than certain exempt recipients, such as corporations) generally are
subject to information reporting, and to backup withholding at the applicable
rate (currently 28%) if the U.S. holder fails to provide a valid taxpayer
identification number to the paying agent and comply with certain certification
procedures or otherwise establish an exemption from backup withholding.

Backup withholding is not an additional tax. The amount of any backup
withholding from a payment to a U.S. holder will be allowed as a credit against
such holder's U.S. federal income tax liability and may entitle such holder to a
refund, provided the holder furnishes certain required information to the IRS in
a timely manner.

NON-U.S. HOLDERS

Exchange of Centerpulse Registered Shares or Centerpulse ADSs for Zimmer
Common Stock and/or Cash Pursuant to Our Offer

A non-U.S. holder generally will not be subject to U.S. federal income tax
on any gain recognized upon the exchange of Centerpulse registered shares or
Centerpulse ADSs for Zimmer common stock and/or cash pursuant to our offer,
unless (i) such gain is effectively connected with a trade or business of the
non-U.S. holder in the United States and, if a tax treaty applies, is
attributable to a permanent establishment maintained by the non-U.S. holder in
the United States, or (ii) the non-U.S. holder is an individual who is

present in the United States for a period or periods aggregating 183 or more
days in the taxable year of the exchange and certain other conditions are met.

The potential application of information reporting and backup withholding
with respect to the consideration payable to a non-U.S. holder pursuant to our
offer is described in the section captioned "-- OUR
OFFER -- Taxation -- Material U.S. Federal Tax Consequences -- Non-U.S.
Holders -- Information Reporting and Backup Withholding," below.

Distributions on Zimmer Common Stock

We do not currently anticipate making distributions on our common stock.
If, however, after consummation of our offer we do make distributions on our
common stock, such distributions will constitute dividends for U.S. federal
income tax purposes to the extent paid from our current or accumulated earnings
and profits, as determined under U.S. federal income tax principles.
Distributions in excess of earnings and profits will constitute a return of
capital that is applied against and reduces the non-U.S. holder's adjusted tax
basis in our common stock. Any remaining excess will be treated as gain realized
on the sale or other disposition of the common stock and will be treated as
described in the section captioned "-- OUR OFFER -- Taxation -- Material U.S.
Federal Tax Consequences -- Non-U.S. Holders -- Disposition of Zimmer Common
Stock" below.

Dividends that are not effectively connected with a non-U.S. holder's
conduct of a trade or business in the United States generally will be subject to
withholding of U.S. federal income tax at the rate of 30%, or if a tax treaty
applies, a lower rate specified by the treaty. Non-U.S. holders are urged to
consult their own tax advisors regarding their entitlement to benefits under a
relevant income tax treaty.

Dividends that are effectively connected with a non-U.S. holder's conduct
of a trade or business in the United States and, if a tax treaty applies,
attributable to a permanent establishment maintained by the non-U.S. holder in
the United States, generally will not be subject to withholding (provided
certain certification requirements are met) but will be subject to U.S. federal
income tax imposed on net income at the regular graduated U.S. federal income
tax rates and in the manner generally applicable to U.S. persons, and, for
corporate holders, under certain circumstances, will be subject to the U.S.
"branch profits tax" at the rate of 30%, or if a tax treaty applies, a lower
rate specified by the treaty.

Disposition of Zimmer Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax
on gain recognized on a sale or other disposition of Zimmer common stock
received pursuant to our offer unless any one of the following is true:

- such gain is effectively connected with the non-U.S. holder's conduct of
a trade or business in the United States and, if a tax treaty applies,
attributable to a permanent establishment maintained by such non-U.S.
holder in the United States;

- the non-U.S. holder is a nonresident alien individual present in the
United States for 183 or more days in the taxable year of the disposition
and certain other requirements are met; or

- the Zimmer common stock constitutes a "U.S. real property interest" by
reason of our status as a "U.S. real property holding corporation," or a
USRPHC, for U.S. federal income tax purposes at any time during the
shorter of (i) the period during which the non-U.S. holder holds its
Zimmer common stock or (ii) the 5-year period ending on the date the
non-U.S. holder disposes of its Zimmer common stock. In general, we would
be a USRPHC if interests in U.S. real estate comprised the majority of
our assets. We believe that we are not currently and will not become a
USRPHC. However, because the determination of whether we are a USRPHC
depends on the fair market value of our U.S. real property interests
relative to the fair market value of our other business assets, there can
be no assurance that we are not or will not become a USRPHC in the
future. Even if we are or were to become a USRPHC, so long as the Zimmer
common stock is "regularly traded on an established securities market"
within the meaning of Section 897(c)(3) of the Code, such common stock
will be treated as U.S. real property interests only in the hands of a
non-U.S. holder that owns, or has owned, directly or indirectly, within
the five years preceding the sale or disposition of such common stock,
more than 5% of the Zimmer common stock outstanding. If we are or were to
become a USRPHC

and a non-U.S. holder owned directly or indirectly more than 5% of the Zimmer
common stock outstanding during the period described above or the Zimmer common
stock were not "regularly traded on an established securities market," the
non-U.S. holder generally would be subject to U.S. federal income tax on
its net gain derived from the disposition of its Zimmer common stock as
though the non-U.S. holder was engaged in a business in the United States
and the gain or loss was effectively connected with such business.

U.S. Federal Estate Tax

Zimmer common stock that is owned or treated as owned by an individual who
at the time of death is a non-U.S. person (as specifically defined for U.S.
federal estate tax purposes) will be included in his or her gross estate for
U.S. federal estate tax purposes unless an applicable estate tax treaty provides
otherwise and, therefore, may be subject to U.S. federal estate tax.

Information Reporting and Backup Withholding

A non-U.S. holder may be subject to information reporting and backup
withholding at the applicable rate (currently 28%) with respect to proceeds from
the exchange of Centerpulse registered shares or Centerpulse ADSs pursuant to
our offer or with respect to proceeds from the sale or other disposition of
Zimmer common stock received pursuant to our offer. If a non-U.S. holder
exchanges its Centerpulse registered shares or Centerpulse ADS or disposes of
its Zimmer common stock outside the United States through a non-U.S. office of a
broker, then the backup withholding and information reporting requirements
generally will not apply to the proceeds. However, information reporting, but
not backup withholding, will apply to the payment of proceeds if a non-U.S.
holder exchanges its Centerpulse registered shares or Centerpulse ADS or sells
its Zimmer common stock through a non-U.S. office of a broker that is, for U.S.
federal income tax purposes, a U.S. person or has certain other enumerated
connections with the United States unless the broker has documentary evidence in
its files that such holder is a non-U.S. person and certain other conditions are
met or the non-U.S. holder otherwise establishes an exemption.

If a non-U.S. holder receives proceeds from the exchange of Centerpulse
registered shares or Centerpulse ADSs pursuant to our offer or receives proceeds
from the sale or other disposition of Zimmer common stock through a U.S. office
of a broker, such payment is subject to both backup withholding and information
reporting unless such holder properly provides an IRS Form W-8BEN certifying
that it is a non-U.S. person or otherwise establishes an exemption.

If we make distributions on our common stock, we and other payors will be
required to report such distributions to the IRS on IRS Form 1042-S even if the
payments are not otherwise subject to information reporting. The portion of a
distribution that constitutes a dividend may be subject to backup withholding
and additional information reporting unless the non-U.S. holder provides an IRS
Form W-8BEN certifying that it is a non-U.S. holder (or otherwise meets the
documentary evidence requirements for establishing that it is a non-U.S. holder)
or otherwise establishes an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the non-U.S.
holder's U.S. federal income tax liability if certain required information is
furnished to the IRS in a timely manner. Non-U.S. holders are urged to consult
their own tax advisors regarding the application of backup withholding in their
particular circumstances and the availability of and procedure for obtaining an
exemption from backup withholding under current treasury regulations.

MATERIAL SWISS TAX CONSEQUENCES

This discussion summarizes the material Swiss tax consequences of our offer
and the ownership of Zimmer common stock received pursuant to our offer. This
discussion is not exhaustive and is intended only as a general guide for
beneficial owners that hold their Centerpulse registered shares or Centerpulse
ADSs (and that will hold Zimmer common stock received pursuant to our offer) as
investments and that are not subject to special rules under Swiss tax law.
Beneficial owners are urged to consult their own tax advisors regarding the
Swiss tax consequences of our offer and the ownership of Zimmer common stock
received pursuant to our offer in light of their particular circumstances.

As used herein, the term "Swiss holder" means a person that beneficially
owns Centerpulse registered shares or Centerpulse ADSs, or that will
beneficially own Zimmer common stock received pursuant to our offer, and that
is, for Swiss tax purposes, (a) a resident or domiciliary of Switzerland, or (b)
a non-resident and non-domiciliary of Switzerland that holds Centerpulse
registered shares, Centerpulse ADSs or Zimmer common stock in connection with
the conduct of a trade or business in Switzerland through a permanent
establishment or a fixed place of business maintained by such person within
Switzerland. A "non-Swiss holder" is a person (including an offshore vehicle)
that beneficially owns Centerpulse registered shares or Centerpulse ADSs, or
that will beneficially own Zimmer common stock received pursuant to our offer,
and that is not a Swiss holder.

This summary is based on current law and practice, which is subject to
change possibly with retroactive effect.

SWISS HOLDERS

Exchange of Centerpulse Registered Shares or Centerpulse ADSs for Zimmer
Common Stock and/or Cash Pursuant to Our Offer

A Swiss resident individual who holds Centerpulse registered shares or
Centerpulse ADSs as part of such holder's private assets generally will not be
subject to any Swiss income taxation on gains realized upon the exchange of
Centerpulse registered shares or Centerpulse ADSs for Zimmer common stock and/or
cash pursuant to our offer.

For Swiss holders other than Swiss resident individuals who hold their
Centerpulse registered shares or Centerpulse ADSs as part of their private
assets, the practice adopted by the Swiss Federal Tax Administration provides
that the exchange of Centerpulse registered shares or Centerpulse ADSs for
Zimmer common stock and/or cash pursuant to our cross-border offer generally
will give rise to a taxable gain or allocable loss for purposes of the Swiss
taxation on capital gains. Such gain or loss will be equal to the difference
between (a) the fair market value of Zimmer common stock plus the amount of cash
received by a holder pursuant to our offer and (b) the book value of the
Centerpulse registered shares or Centerpulse ADSs exchanged therefor. However,
it is possible that the Swiss Federal Tax Administration, in anticipation of the
new Swiss merger law, might accept a deferral of the Swiss federal income tax. A
Swiss holder that is a corporation may, under certain circumstances, be eligible
for relief from taxation with respect to capital gains.

Swiss federal securities transfer tax is payable if a Swiss securities
dealer exchanges Centerpulse registered shares or Centerpulse ADSs for Zimmer
common stock or if a Swiss securities dealer acts as an intermediary to the
transaction. Zimmer will pay or reimburse any applicable Swiss federal
securities transfer tax with respect to the exchange of Centerpulse registered
shares or Centerpulse ADSs pursuant to our offer.

Neither the exchange of Centerpulse registered shares or Centerpulse ADSs
for Zimmer common stock nor the entitlement for cash pursuant to our offer is
subject to Swiss withholding tax or VAT.

Distributions on Zimmer Common Stock

We do not currently anticipate making distributions on our common stock.
If, however, after consummation of our offer, we do make distributions on our
common stock, such distributions will be treated as dividends and subject to
Swiss income tax on the gross amount of such distributions, to the extent paid
out of our current or accumulated earnings and profits. Dividends paid on Zimmer
common stock will be subject to U.S. withholding taxes, at a reduced rate under
the U.S.-Switzerland income tax treaty, if applicable. Part of such U.S.
withholding tax may be refunded to a Swiss holder if the dividend income is duly
declared in such holder's income tax return and in its books, respectively, and
part may, to a certain extent, be credited against the holder's Swiss income tax
liability.

Disposition of Zimmer Common Stock

A Swiss resident individual who holds Zimmer common stock as a private
asset generally will not be subject to Swiss income taxation on gains realized
upon a disposition of Zimmer common stock. A disposition of Zimmer common stock
by a Swiss holder other than a Swiss resident individual holding

Zimmer common stock as a private asset may give rise to a taxable gain or
allowable loss for purposes of Swiss taxation on capital gains, subject to any
available exemption or relief.

A disposition of Zimmer common stock will be subject to Swiss federal
securities transfer tax if either of the parties to the transaction qualifies as
a Swiss securities dealer or if a Swiss securities dealer acts as an
intermediary to the transaction.

NON-SWISS HOLDERS

In general, there will be no Swiss tax consequences of our offer to
non-Swiss holders of Centerpulse registered shares or Centerpulse ADSs unless a
Swiss securities dealer acts as an intermediary to the transaction, in which
case Swiss federal securities transfer tax will be payable by the Swiss
securities dealer and may be charged to the holder. Zimmer will pay or reimburse
any applicable Swiss federal securities transfer tax with respect to the
exchange of Centerpulse registered shares or Centerpulse ADSs pursuant to our
offer. There generally will be no Swiss tax consequences to non-Swiss holders of
owning Zimmer common stock received pursuant to our offer. However, if a holder
of Zimmer common stock disposes of such stock to a Swiss securities dealer, or
if a Swiss securities dealer acts as an intermediary to the transaction, Swiss
federal securities transfer tax will be payable by the Swiss securities dealer
and may be charged to the holder.

MATERIAL U.K. TAX CONSEQUENCES

This discussion summarizes the material U.K. tax consequences of our offer
and the ownership of Zimmer common stock received pursuant to our offer. This
discussion is not exhaustive and is intended only as a general guide for
beneficial owners that hold their Centerpulse registered shares or Centerpulse
ADSs (and that will hold Zimmer common stock received pursuant to our offer) as
investments and that are not subject to special rules under U.K. tax law. For
example, this prospectus does not summarize the U.K. tax consequences for U.K.
Pension Funds, U.K. Authorized Units Trusts (Mutual Funds) or certain
non-domiciled individuals. Beneficial owners are urged to consult their own tax
advisors regarding the U.K. tax consequences of our offer and the ownership of
Zimmer common stock received pursuant to our offer in light of their particular
circumstances.

As used herein, the term "U.K. holder" means a person that beneficially
owns Centerpulse registered shares or Centerpulse ADSs, or that will
beneficially own Zimmer common stock received pursuant to our offer, and that
is, for U.K. tax purposes, (a) a resident of the United Kingdom, or (b) a
non-resident that holds Centerpulse registered shares, Centerpulse ADSs or
Zimmer common stock in connection with the conduct of a trade in the United
Kingdom through a branch, agency or permanent establishment maintained by such
person within the United Kingdom.

This summary is based on current law, which is subject to change possibly
with retroactive effect.

U.K. HOLDERS

Exchange of Centerpulse Registered Shares or Centerpulse ADSs for Zimmer Common
Stock and/or Cash Pursuant to Our Offer

In general, a U.K. holder that does not hold more than 5% of the
Centerpulse registered shares or any other class of shares in Centerpulse will
not recognize a chargeable gain or allowable loss for U.K. tax purposes upon the
exchange of Centerpulse registered shares pursuant to our offer, except to the
extent of cash received in exchange therefor. Any chargeable gain or allowable
loss that otherwise would have arisen on a disposal by the U.K. holder of
Centerpulse registered shares will be "rolled-over" into the Zimmer common stock
received pursuant to our offer. The U.K. holder will take the same base cost in
the Zimmer common stock received pursuant to our offer as such holder had in the
Centerpulse registered shares exchanged therefor. For these purposes, the base
cost of a U.K. holder's Centerpulse registered shares will be allocated between
the Zimmer common stock and cash received pursuant to our offer by reference to
the market value of the Zimmer common stock and the sterling equivalent of the
cash received on the date of the disposal. The U.K. holder's holding period
(where relevant) for Zimmer common stock received pursuant to our offer will
include the period such holder held the Centerpulse registered shares exchanged
therefor.

A U.K. holder that holds (either alone or together with persons connected
with such holder) more than 5% of the Centerpulse registered shares or any other
class of shares in Centerpulse is advised that an application for clearance
(that the transaction is for a bona fide commercial purpose) has been made to
the Inland Revenue under Section 138 of the Taxation of Chargeable Gains Act
1992 in respect of the exchange, although receipt of such clearance is not a
condition of our offer. Provided such clearance is given, any such U.K. holder
will be treated in the manner described above with respect to U.K. holders who
do not hold more than 5% of the Centerpulse registered shares.

A U.K. holder that receives cash (including cash in respect of fractional
entitlements to Zimmer common stock) pursuant to our offer generally will be
treated as effecting a disposal or part disposal of Centerpulse registered
shares to the extent of the cash received and may, depending on the U.K.
holder's particular circumstances, incur a liability to U.K. tax on capital
gains. For these purposes, the base cost of a U.K. holder's Centerpulse
registered shares will be allocated between the Zimmer common stock and cash
received pursuant to our offer by reference to the market value of the Zimmer
common stock and the sterling equivalent of the cash received on the date of the
disposal. Any cash received in Swiss francs or US dollars will be converted into
sterling by reference to the exchange rate prevailing at the date of disposal,
from which the relevant proportion of a U.K. holder's base cost will be deducted
to determine the amount of any chargeable gain or allowable loss. No charge to
U.K. tax will arise in relation to any exchange movements arising after this
date in respect of the cash received and its subsequent conversion into sterling
except where the shareholder is within the charge to U.K. corporation tax.

A U.K. holder of Centerpulse ADSs will be treated in the same manner as
described above. In particular, to the extent that cash is received in exchange
for the Centerpulse ADSs pursuant to our offer, the U.K. holder may, depending
on the U.K. holder's circumstances, incur a liability to U.K. tax on capital
gains and to the extent the U.K. holder receives Zimmer common stock pursuant to
the offer, any chargeable gain or allowable loss which would have otherwise
arisen may be entitled to be "rolled-over."

To the extent that a U.K. holder who is an individual higher rate taxpayer
receives cash, such holder will be chargeable to U.K. tax on capital gains at
40%, subject to U.K. taper relief. The latter can reduce the tax rate on
chargeable gains, depending on the period of ownership of the shares. For a U.K.
holder who is also an employee of Centerpulse, taper relief may apply to reduce
the tax rate on chargeable gains to 10% after 2 years of qualifying ownership.
For a U.K. holder who is not an employee of Centerpulse, taper relief may apply
to reduce the tax rate on chargeable gains to 24% after 10 years of qualifying
ownership.

Special rules apply for the purposes of U.K. tax on capital gains where a
U.K. holder that receives cash (including cash in respect of fractional
entitlements to Zimmer common stock) pursuant to our offer also receives Zimmer
common stock and the amount of cash received is "small" compared with the value
of the Centerpulse registered shares or Centerpulse ADSs exchanged therefor. For
these purposes, the receipt of an amount of cash equal to 5% or less of the
market value of the U.K. holder's Centerpulse registered shares or Centerpulse
ADSs will be treated as "small." The Inland Revenue will also accept that an
amount in cash is "small" if its equivalent is equal to or less than 3,000
British pounds even if the amount of such cash exceeds 5% of the market value of
the U.K. holder's Centerpulse registered shares or Centerpulse ADSs in respect
of which it is received. In such cases, there generally will be no disposal or
part disposal of the U.K. holder's Centerpulse registered shares or Centerpulse
ADSs in respect of the receipt of cash. The amount of the cash received will
instead be deducted from the U.K. holder's allowable expenditure in computing
the U.K. tax on capital gains or any allowable loss on a subsequent disposal of
the Zimmer common stock received in the exchange.

U.K. corporations that own more than 10% of the shares in Centerpulse may
be entitled to a full capital gains tax exemption under the U.K. substantial
shareholders regime. However, we are not aware of any corporate holders that own
more than 10% of the shares in Centerpulse registered shares or Centerpulse
ADSs.

Distributions on Zimmer Common Stock

We do not currently anticipate making distributions on our common stock.
If, however, after consummation of our offer, we do make distributions on our
common stock, U.K. holders will, in general, be

subject to U.K. income tax or corporation tax on the gross amount of the
dividends paid on the Zimmer common stock. A U.K. holder who is an individual
generally will be chargeable to income tax in the U.K. on such dividends at the
Schedule F ordinary rate (currently 10%) or, to the extent that his or her
income exceeds the threshold for higher rate tax, at the Schedule F upper rate
(currently 32.5%). Dividends paid on Zimmer common stock will be subject to U.S.
withholding taxes, at a reduced rate under the U.S.-U.K. income tax treaty, if
applicable. Credit should be available against U.K. income tax or corporation
tax for any U.S. withholding tax, provided that such credit will not exceed the
credit which would have been allowed had all reasonable steps been taken
(including any claims which could be made by the holder under the terms of the
U.S.-U.K. income tax treaty) to minimize such U.S. tax.

A U.K. holder that is a corporation generally will be charged corporation
tax on dividends received from Zimmer under Schedule D Case V at the U.K.
corporation tax rate of 30% (subject to credit for any U.S. withholding tax). In
addition, it should be possible for U.K. corporate holders that own more than
10% of the voting rights in Zimmer to claim tax credits for underlying tax
(deemed paid credits) on the relevant profits out of which the dividends were
paid.

Disposition of Zimmer Common Stock

A U.K. holder generally will recognize a chargeable gain or allowable loss
upon the disposition of Zimmer common stock received pursuant to our offer. The
gain or loss, as the case may be, will be for an amount equal to the difference
between (a) the sum of the fair market value of any cash and property received
upon disposition of the Zimmer common stock and (b) the U.K. holder's base cost
in the Zimmer common stock.

Stamp Duty

The sale of shares in a non-U.K. company, including the exchange of
Centerpulse registered shares or Centerpulse ADSs pursuant to our offer or the
disposition of Zimmer common stock received pursuant to our offer, will not be
subject to U.K. stamp duty reserve tax, and generally will not be subject to
stamp duty provided the transfer is not executed in the United Kingdom.
Accordingly, there will, in general, be no U.K. stamp duty or stamp duty reserve
tax implications arising from our offer. Stamp duty may apply to a disposition
of Zimmer common stock received pursuant to our offer if the transfer is
executed in the United Kingdom.

VAT

The sale of shares is an exempt supply for U.K. VAT purposes. Accordingly,
there will be no material U.K. VAT implications to holders as a result of our
offer or a holder's subsequent disposition of Zimmer common stock received
pursuant to our offer.

NON-U.K. HOLDERS

In general, there will be no U.K. tax consequences of our offer or the
ownership of Zimmer common stock to non-U.K. holders of Centerpulse registered
shares, Centerpulse ADSs or Zimmer common stock. However, stamp duty may apply
to a disposition of Zimmer common stock received pursuant to our offer if the
transfer is executed in the United Kingdom.

PURPOSE OF OUR OFFER; PLANS FOR CENTERPULSE

We are making our offer in order to acquire control of, and ultimately the
entire common equity interest in, Centerpulse. Promptly following our offer, if
Zimmer acquires that number of registered shares (including registered shares
represented by Centerpulse ADSs) representing more than 98% of the voting power
of Centerpulse, Zimmer intends to request the cancellation of the remaining
share certificates in accordance with the compulsory process under Swiss law.
You will not have appraisal rights as a result of the consummation of our offer.

If we gain control of Centerpulse but are not entitled to acquire
compulsorily all of the outstanding Centerpulse registered shares (including
registered shares represented by ADSs), then we currently intend to, subject to
applicable Swiss law and constitution documents of Centerpulse, reconstitute the
board of directors of Centerpulse to reflect our majority ownership interest in
Centerpulse. Replacement board members have

not yet been identified and their number and identity will depend on the
circumstances at the relevant time. We also currently intend to, subject to the
SWX Swiss Exchange listing rules and the New York Stock Exchange listing rules,
request that the board of directors of Centerpulse review whether the
Centerpulse registered shares should continue to be listed on the SWX Swiss
Exchange and whether the Centerpulse ADSs should continue to be listed on the
New York Stock Exchange and, to the extent possible, implement the intentions
outlined above, which are consistent with gaining control of Centerpulse.

We would only make decisions on these courses of action following receipt
of legal, taxation and financial advice, and our intentions must be read as
subject to the legal obligation of the Centerpulse board of directors to comply
with all legal and regulatory requirements and their fiduciary and statutory
duties.

EFFECT OF OUR OFFER ON THE MARKET FOR CENTERPULSE REGISTERED SHARES AND
CENTERPULSE ADSS; REGISTRATION UNDER THE EXCHANGE ACT

REDUCED LIQUIDITY; POSSIBLE DELISTING

The tender of Centerpulse registered shares and Centerpulse ADSs pursuant
to our offer will reduce the number of holders of Centerpulse registered shares
and Centerpulse ADSs and the number of Centerpulse registered shares and
Centerpulse ADSs that might otherwise trade publicly and may adversely affect
the liquidity and market value of the remaining Centerpulse registered shares
and Centerpulse ADSs held by the public. Centerpulse registered shares are
listed and principally traded on the SWX Swiss Exchange, and Centerpulse ADSs
are listed and traded on the New York Stock Exchange. Depending on the number of
Centerpulse registered shares and Centerpulse ADSs acquired pursuant to our
offer, following consummation of our offer, Centerpulse registered shares and
Centerpulse ADSs may no longer meet the requirements of the SWX Swiss Exchange
and the New York Stock Exchange for continued listing. We do not believe that
the New York Stock Exchange listing for Centerpulse ADSs will be maintained
following the purchase of Centerpulse ADSs pursuant to our offer. For example,
published guidelines of the New York Stock Exchange indicate that the New York
Stock Exchange would consider delisting the outstanding Centerpulse ADSs if,
among other things, (i) the number of publicly held Centerpulse ADSs (exclusive
of holdings of officers, directors and members of their immediate families and
other concentrated holdings of 10% or more) should fall below 600,000, (ii) the
number of record holders of 100 or more Centerpulse ADSs should fall below 1,200
or (iii) the aggregate market value of publicly held shares should fall below
US$5 million.

If the SWX Swiss Exchange were to delist Centerpulse registered shares or
the New York Stock Exchange were to delist Centerpulse ADSs following the
exchange of those securities in our offer, the market for them may be adversely
affected. It is possible that Centerpulse registered shares or Centerpulse ADSs
would be traded on other securities exchanges or in the over-the-counter market,
and that price quotations would be reported by such exchanges, or through The
Nasdaq Stock Market (which we refer to as "NASDAQ") or by other sources. The
extent of the public market for the Centerpulse registered shares or Centerpulse
ADSs and the availability of such quotations would, however, depend upon the
number of holders and/or the aggregate market value of the Centerpulse
registered shares or Centerpulse ADSs remaining at such time, the interest in
maintaining a market in the Centerpulse registered shares or Centerpulse ADSs on
the part of securities firms, the intended termination of the deposit agreement
for the Centerpulse ADSs and the resulting cancellation of Centerpulse ADSs in
accordance with the termination provisions of that deposit agreement as
described below and the possible termination of registration of Centerpulse ADSs
under the Exchange Act, as described below, and other factors.

If, after the consummation of our offer, Zimmer holds more than 98% of the
Centerpulse registered shares and Centerpulse ADSs, then Zimmer intends to seek
cancellation of the remaining Centerpulse registered share certificates in
accordance with the compulsory process under Swiss law. Holders of Centerpulse
registered shares and Centerpulse ADSs cancelled in such a proceeding will
receive the offer consideration for their shares.

TERMINATION OF THE CENTERPULSE ADS DEPOSIT AGREEMENT

After the consummation of our offer, we intend to instruct Centerpulse to
terminate the Centerpulse ADS deposit agreement with Deutsche Bank Trust Company
Americas in accordance with the provisions of such

agreement. Centerpulse has the right to direct the depositary bank to terminate
the deposit agreement upon giving holders of Centerpulse ADSs at least 30
calendar days' notice prior to termination.

In accordance with the deposit agreement, upon termination and for a period
of six months following such termination, holders of Centerpulse ADSs will be
able to request the cancellation of their Centerpulse ADSs and the withdrawal of
the Centerpulse registered shares represented by their Centerpulse ADSs and the
delivery of all other property held by the depositary bank in respect of those
shares on the same terms as prior to the termination. During such six month
period, the depositary bank will continue to collect all distributions received
on the shares on deposit (e.g., dividends) but will not distribute any such
property to holders of Centerpulse ADSs until such holders request the
cancellation of their Centerpulse ADSs. Following the expiration of such six
month period, the depositary bank may sell the securities held on deposit. The
depositary bank will hold the proceeds from such sale and any other funds then
held for the holders of Centerpulse ADSs in a non-interest-bearing account. At
that point, the depositary bank will have no further obligation to holders other
than to account for the funds then held for the holders of Centerpulse ADSs
still outstanding.

STATUS AS "MARGIN SECURITIES"

The Centerpulse registered shares and Centerpulse ADSs are presently
"margin securities" under the regulations of the Federal Reserve Board, which
has the effect, among other things, of allowing brokers to extend credit on the
collateral of Centerpulse registered shares and Centerpulse ADSs. Depending on
the factors similar to those described above with respect to listing and market
quotations, following consummation of our offer, Centerpulse registered shares
and Centerpulse ADSs may no longer constitute "margin securities" for the
purposes of the Federal Reserve Board's margin regulations, in which event the
Centerpulse registered shares and Centerpulse ADSs would be ineligible as
collateral for margin loans made by brokers.

REGISTRATION UNDER THE EXCHANGE ACT

Centerpulse ADSs are currently registered under the Exchange Act.
Centerpulse can terminate that registration upon application to the SEC if the
outstanding shares are not listed on a national securities exchange and if there
are fewer than 300 holders of record of Centerpulse ADSs resident in the United
States. Termination of the registration of the Centerpulse ADSs under the
Exchange Act would substantially reduce the information required to be furnished
by Centerpulse to holders of Centerpulse ADSs and to the SEC and would make
certain of the provisions of the Exchange Act, such as the requirements of Rules
13e-3 and 13e-4 under the Exchange Act with respect to "going private"
transactions, no longer applicable to the Centerpulse ADSs. Furthermore,
"affiliates" of Centerpulse and persons holding restricted securities of
Centerpulse may be deprived of the ability to dispose of such securities
pursuant to Rule 144 promulgated under the Securities Act. If, as a result of
our offer, Centerpulse is no longer required to maintain registration of the
Centerpulse ADSs, we expect to seek to terminate such registration.

Following the exchange of Centerpulse registered shares and Centerpulse
ADSs pursuant to our offer, Centerpulse shareholders who have not tendered their
Centerpulse registered shares pursuant to our offer will continue to receive the
same financial and other information from Centerpulse that Centerpulse is
presently required by the rules of the SWX Swiss Exchange or by Swiss law to
send to Centerpulse securityholders.

CONDITIONS OF OUR OFFER

Notwithstanding any other provisions of our offer, we will not be required
to accept for exchange and, subject to any applicable Swiss law and rules and
regulations of the SEC, we may postpone the acceptance for exchange of, or
exchange for, tendered Centerpulse registered shares and Centerpulse ADSs, and
may, in our reasonable judgment, extend, terminate or amend our offer as to any
Centerpulse registered shares or Centerpulse ADSs not then accepted for exchange
if in our reasonable judgment the following conditions have not been satisfied
on or before the date of expiration of our offer.

STOCKHOLDER APPROVAL CONDITION

Zimmer must have received the requisite vote of its stockholders to approve
the issuance of the shares of Zimmer common stock pursuant to our offer and our
InCentive offer.

STOCK EXCHANGE LISTING CONDITION

The shares of Zimmer common stock issuable upon the consummation of our
offer and our InCentive offer having been approved for listing on the New York
Stock Exchange.

ANTITRUST CONDITION

All competent European Union, U.S. and other foreign authorities having
approved and/or granted clearance of the acquisition of Centerpulse without a
party being required to meet any condition or requirement giving rise to: (i)
costs and/or loss of earnings before interest, tax and amortization, or EBITA,
in excess of CHF 23 million in the aggregate; or (ii) a decrease in consolidated
turnover of CHF 75 million in the aggregate of Zimmer, after giving effect to
our offer and our InCentive offer. In addition, no other orders or directions by
any court or other authority prohibiting the consummation of our offer and our
InCentive offer having been issued.

REGISTRATION EFFECTIVENESS CONDITION

The registration statement on Form S-4 filed by Zimmer with the SEC in
connection with our offer, having become effective in accordance with the
provisions of the Securities Act of 1933; no stop order suspending the
effectiveness of the registration statement having been issued by the SEC and no
proceedings for that purpose having been initiated by the SEC and not concluded
or withdrawn.

MINIMUM TENDER CONDITION

Zimmer must have received valid acceptances for at least 66 2/3% of the
total number of the Centerpulse registered shares outstanding (including
Centerpulse registered shares represented by Centerpulse ADSs and, provided our
InCentive offer has become unconditional, Centerpulse registered shares held by
InCentive) on a fully diluted basis at the expiration of the (possibly extended)
offer period.

REMOVAL OF CENTERPULSE BOARD CONDITION

Either (i) an extraordinary shareholders' meeting to be called by the
Centerpulse board of directors having resolved that contingent upon our offer
having been declared unconditional, all incumbent Centerpulse directors be
removed and be replaced by the individuals proposed by Zimmer, or (ii) all
Centerpulse directors having agreed to resign as of the date our offer is
declared unconditional (provided that at least one director shall not have
resigned and shall have entered into a mandate agreement prior to our offer
having been declared unconditional) or having entered into a mandate agreement
with Zimmer for the period from the date our offer has been declared
unconditional until the shareholders' meeting of Centerpulse at which the
persons proposed by Zimmer shall have been elected as members of the Centerpulse
board of directors.

For purposes of this condition, the term "declared unconditional" shall
mean that Zimmer shall have announced that all conditions to our offer are
satisfied or have been waived.

NO MATERIAL ADVERSE CHANGE CONDITION

Centerpulse, until the end of the (possibly extended) offer period, not
having:

- become subject to a mandated recall for a product, the consolidated
turnover of which product family exceeded CHF 75 million in Centerpulse's
consolidated prior year results and such recall having resulted, or,
according to the opinion of an investment bank or accounting firm of
international repute to be appointed by Zimmer, referred to as the
expert, likely to result, in costs and/or loss of EBITA (after insurance
payable to Centerpulse) in excess of CHF 23 million; or

- suffered a disablement of its manufacturing facilities in Winterthur,
Switzerland or Austin, Texas, having resulted, or, according to the
opinion of the expert, likely to result, in costs and/or loss of EBITA
(after insurance payable to Centerpulse) in excess of CHF 23 million.

We reserve the right to waive one or more of the conditions set forth
above, either in whole or in part, and to withdraw our offer if one or more of
the above conditions is not met.

CERTAIN LEGAL MATTERS; REGULATORY APPROVALS

We expect that we will be required to file antitrust notifications and
reports in connection with our offer in certain jurisdictions. Based on an
examination of publicly available information relating to the businesses in
which Zimmer and Centerpulse and our respective subsidiaries are engaged, we
believe that the consummation of our offer and our InCentive offer should not
violate the applicable antitrust and competition laws. Nevertheless, we cannot
be certain that a challenge to our offer and our InCentive offer on antitrust or
competition grounds will not be made, or, if such a challenge is made, what the
result will be.

In addition, antitrust enforcement and other regulatory agencies frequently
scrutinize transactions such as our offer. At any time before or after we
acquire Centerpulse registered shares and Centerpulse ADSs, any antitrust or
other regulatory enforcement agency in a jurisdiction where we have not filed
documentation could take whatever action under the applicable law of the
jurisdiction as it deems necessary or desirable in the public interest,
including seeking to enjoin our acquisition of Centerpulse registered shares and
Centerpulse ADSs pursuant to our offer or our ability to vote or otherwise
exercise rights of ownership over the Centerpulse registered shares and
Centerpulse ADSs that we acquire under our offer, seeking divestiture of
Centerpulse registered shares and Centerpulse ADSs acquired by us or divestiture
of assets of us or Centerpulse, or seeking to impose conditions on the operation
of our or Centerpulse's businesses. Private parties and, in the United States,
state attorneys general, may also bring legal action under the antitrust laws
under some circumstances.

HART-SCOTT-RODINO

Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission, or the FTC, a share exchange offer may not be completed until
notification has been filed with the FTC and the Antitrust Division of the
Department of Justice and a thirty (30) day waiting period has been observed.
This waiting period may be terminated by the FTC and the Antitrust Division
before its expiration. Zimmer filed a notification and report form under the HSR
Act with the FTC and the Antitrust Division on June [--], 2003. Accordingly, it
is anticipated that the waiting period under the HSR Act applicable to our offer
will expire at 11:59 p.m., New York City time, on July [--], 2003, unless such
waiting period is earlier terminated by the FTC and the Antitrust Division or
extended by a request from the FTC or the Antitrust Division for additional
information and documentary material prior to the expiration of the waiting
period. Pursuant to the HSR Act, we have requested early termination of the
waiting period applicable to our offer. There can be no assurance, however, that
the 30-day HSR Act waiting period will be terminated early.

ANTITRUST LAWS IN SWITZERLAND

Under Swiss antitrust laws, mergers or acquisitions involving parties with
certain aggregate sales and with individual sales within Switzerland exceeding
certain thresholds require notification to, and approval by, the Swiss
authorities before such mergers or acquisitions are implemented. In this case,
no notification to, or approval by, the Swiss antitrust authorities is required.

ANTITRUST LAWS IN EUROPEAN UNION COUNTRIES

Zimmer and Centerpulse each conduct business in member states of the
European Union, or EU. Council Regulation 4064/89, as amended, requires that the
European Commission be notified and approve certain mergers or acquisitions
involving parties with aggregate worldwide sales and individual EU sales
exceeding certain thresholds before such mergers or acquisitions are
implemented. No notification to, or approval by, the European Commission is
required in connection with our offer, as the parties' aggregate worldwide sales
do not exceed the thresholds specified in EU Council Regulation 4064/89, as
amended.

Accordingly, the antitrust authorities of certain EU member states may have
jurisdiction to review our proposed acquisition of Centerpulse. Based upon our
examination of publicly available information concerning Centerpulse, we believe
that, within the EU, the antitrust authorities in Austria, France, Germany,
Italy and Spain have jurisdiction to examine our proposed acquisition of
Centerpulse. In Austria, France and

Germany, notice of mergers or acquisitions must be given to the relevant
national authorities when the parties have worldwide and national sales
exceeding specified thresholds. In Spain, notice of mergers or acquisitions must
be given to the relevant national authorities when the parties have national
sales or market shares exceeding specified thresholds. In Italy, notice of
mergers or acquisitions must be given to the competent national authority when
the parties, alone and together, have sales in Italy exceeding specified
thresholds. In these five countries, the relevant thresholds for the proposed
transaction have been met and the appropriate notifications have been or will be
filed.

Austria

Transactions subject to antitrust notification in Austria must obtain
approval from the Cartel Court before the merger can be implemented. There is no
deadline for filing a merger, but parties generally file as soon as they have a
clear intention to proceed with the transaction. In general, merger review in
Phase I takes between five and seven weeks. It takes the Cartel Court
approximately one week to forward the filed documents to the statutory
interveners, namely the Federal Competition Authority and the Federal Cartel
Attorney, by mail. Only the statutory interveners can request an in-depth
investigation by the Cartel Court. They must do so within four weeks after the
receipt of the notification. If they do not request further investigation, the
Cartel Court must clear the transaction without delay after the four-week period
has elapsed. It will take the Cartel Court approximately a further week to issue
the clearance decision and to send it to the notifying party. If the statutory
interveners request a Phase II review, the Cartel Court has five months from the
date of the original filing to issue a decision. If it fails to do so within
that period, the merger is deemed to be cleared. The Cartel Court may prohibit
mergers and acquisitions that create or strengthen a dominant position on the
relevant market. However, expected improvements in competitive conditions that
outweigh the disadvantages of the merger, an enhancement of the international
competitiveness of the undertakings concerned, and general national economic
considerations may weigh in the balance in favor of an otherwise problematic
merger. The Cartel Court may also attach conditions or restrictions to its
clearance decision. Our offer was notified to the Cartel Court on June 2, 2003.

France

As a general rule, transactions subject to antitrust notification in France
are suspended automatically and may not be put into effect until they have been
approved by the national antitrust authorities. The national antitrust
authorities of France have five weeks from the date they receive a complete
notification to approve the proposed transaction or to refer the case for
further review. The five week deadline may be extended by up to three weeks in
cases where the parties offer commitments to address competition concerns
identified by the French authorities, with a view to securing the antitrust
authorities' approval of the proposed transaction. In the event that the case is
referred for further review, a final decision on the proposed transaction must
be made within 19 to 20 weeks following referral of the case for further review.
The national antitrust authorities in France examine notified transactions and
may prohibit mergers and acquisitions that create or strengthen a dominant
position and therefore impede effective competition in the relevant market in
France. As part of this examination, the national antitrust authorities consider
whether any contribution to economic progress outweighs the negative effects of
the merger or acquisition on competition. The French antitrust authorities were
notified of our proposed acquisition of Centerpulse on June 11, 2003.

Germany

Transactions subject to antitrust notification in Germany are suspended
automatically and may not be put into effect until they have been approved by
the national antitrust authority. The national antitrust authority in Germany
has one month from the receipt of notification to approve the proposed
transaction or to indicate to the parties that the proposed transaction requires
further review. In cases requiring further review, the national antitrust
authority has three additional months to make a final decision. At the request
of the national antitrust authority and with the parties' consent, the one month
and four month deadlines provided by German antitrust law may be extended by
short periods of time. The national antitrust authority in Germany examines
notified transactions and has the power to prohibit mergers or acquisitions that
create or strengthen a dominant position, unless the parties can demonstrate
that the merger or acquisition also will result in an

improvement in market conditions that outweighs the disadvantages of market
dominance. The German antitrust authorities were notified of our proposed
acquisition of Centerpulse on May 30, 2003 and the acquisition was cleared on
June 11, 2003.

Italy

There is no obligation to suspend a transaction subject to notification in
Italy, provided that notice of the proposed transaction has first been given to
the national antitrust authority. If a transaction that is subject to
notification in Italy is implemented and the transaction is later prohibited,
the national antitrust authorities may require that measures be taken in order
to restore conditions of effective competition (including, for example, the sale
of shares in the target and the sale of businesses owned and operated by the
target). In Italy, the national antitrust authority has 30 days from the date of
its receipt of a complete notification to approve the proposed transaction or to
initiate a second-phase review. In the case of a second-phase review, the
national antitrust authority has 45 days to make a final decision. This 45-day
period may be extended by up to 30 days if the parties fail to supply data and
information in their possession upon the national antitrust authority's request.
In the event that the national antitrust authority decides to initiate a
second-phase review, it also has power to order the parties not to proceed with
the merger or acquisition until such time as the second-phase review is
completed.

The national antitrust authority in Italy examines notified transactions
and has power to prohibit mergers or acquisitions that create or strengthen a
dominant position on the Italian market with the effect of eliminating or
restricting competition appreciably and on a lasting basis.

SPAIN

Transactions meeting the Spanish thresholds must obtain approval from the
Service for the Defence of Competition, or SDC, prior to implementation. The
Minister of Economy acting through the SDC has one month from notification to
decide whether to refer the transaction to the Court for the Defence of
Competition, or CDC, for a second-stage in-depth investigation. If it does not
do so, the transaction is deemed to be approved, unless the transaction has not
been notified by the parties but is the subject of proceedings initiated by the
SDC on its own initiative. If the CDC conducts a second-stage in-depth
investigation, it has two months from the referral from the Minister to issue a
non-binding report for the Council of Ministers which is the final decision
making body. Once the report is sent to the Council of Ministers, it has one
additional month to take a final decision. If the Council of Ministers does not
issue a decision within the one month period, the transaction is deemed to be
approved. If the Council of Ministers issues a decision, it can be an
unconditional clearance, an approval subject to conditions which contribute to
economic and social progress in a manner which outweighs the restrictive effects
on competition or a prohibition decision where the Council of Ministers rules
that the transaction prevents the maintenance of effective competition in the
market.

OTHER JURISDICTIONS

Based upon our examination of publicly available information concerning
Centerpulse, it appears that Zimmer and Centerpulse and their subsidiaries own
property and/or conduct business in a number of foreign countries (including
other countries in the EU) in addition to those described above. In connection
with the acquisition of Centerpulse securities pursuant to our offer, the laws
of certain of these foreign countries require or advise the filing of
information with, or the obtaining of approval of, their respective governmental
authorities. In this regard, Zimmer intends to make filings with the national
competition authorities in the Czech Republic.

Czech Republic

Under Czech antitrust laws, in the case of a public bid, it is lawful to
acquire shares in the target before a final decision approving the transaction
is made. It is unlawful, however, for the purchaser to determine or influence
the competitive behavior of the target, in particular by exercising voting
rights attaching to any shares acquired before the transaction has been approved
by the national antitrust authority. In the Czech Republic, in the case of a
public bid, the notification must be filed before the offer is published. The
national antitrust authority has 30 days from its receipt of the notification to
approve the proposed transaction or to
73

initiate a second-phase inquiry. In the event that a second-phase inquiry is
initiated, and in the case of a public bid, a final decision must be made within
two months of receipt of the original notification. The national antitrust
authority in the Czech Republic examines notified transactions and may prohibit
mergers or acquisitions that significantly impede competition in the relevant
market.

GENERAL

Based on our examination of publicly available information filed by
Centerpulse with the SEC and other publicly available information concerning
Centerpulse, except as discussed in this section and elsewhere in this
prospectus, we are not aware of:

- any governmental license or regulatory permit that appears to be material
to Centerpulse's business that might be adversely affected by our
acquisition of Centerpulse registered shares or Centerpulse ADSs as
contemplated in our offer;

- any approval or other action by any government or governmental
administrative or regulatory authority or agency, domestic or foreign,
that would be required for the acquisition or ownership of Centerpulse
registered shares or Centerpulse ADSs by us as contemplated in our offer;
or

- any approval or other action by any government or governmental
administrative regulatory authority or agency, domestic or foreign, or
any consent, waiver or other approval that would be required as a result
of or in connection with our offer.

Should any such approval or other action be required, we currently intend
to seek such approval or take such other action. However, any such required
approval or other action could impose conditions on the consummation of our
offer or otherwise require changes to the terms of our offer, which could result
in conditions to our offer not being satisfied. For more information about the
conditions to our offer, see the section captioned "-- Conditions of Our Offer."
We cannot predict whether we would be required to delay the acceptance for
payment of, or payment for, Centerpulse registered shares or Centerpulse ADSs
tendered pursuant to our offer pending the outcome of any such matter. We can
give no assurance that we would be able to obtain any such approval or take
other action, if needed.

ACTIONS OF ZIMMER STOCKHOLDERS

The issuance of shares of our common stock in connection with our offer and
our InCentive offer is subject to the approval of our stockholders. A special
meeting of our stockholders is scheduled to be held on or about [--], 2003 to
vote on this matter. Our stockholder approval on this matter is a condition to
our obligation to consummate our offer. See the section captioned "-- Conditions
of Our Offer -- Stockholder Approval Condition." There can be no assurance that
this approval will be obtained. If our stockholders approve the issuance of our
common stock, no further stockholder approval will be required in relation to
our offer or our InCentive offer.

RELATIONSHIPS WITH CENTERPULSE

Except as set forth in this prospectus, neither we nor, to the best of our
knowledge, any of our directors, executive officers or other affiliates has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of Centerpulse, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities, joint ventures, loan or option arrangements, puts
or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as described in this prospectus, there have been
no contacts, negotiations or transactions since June [--], 2001 between us or,
to the best of our knowledge, any of our directors, executive officers or other
affiliates on the one hand, and Centerpulse or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets. Neither we, nor, to the best of our knowledge,
any of our directors, executive officers or other affiliates has since June
[--], 2001 had any transaction with

Centerpulse or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the SEC applicable to our
offer.

As of the date of this prospectus, we beneficially own 10 Centerpulse ADSs,
which were purchased on May 12, 2003 on the New York Stock Exchange at a
purchase price of US$21.87 per ADS. We do not otherwise beneficially own any
Centerpulse registered shares or Centerpulse ADSs and, to the best of our
knowledge, no director or executive officer of Zimmer owns any Centerpulse
registered shares or Centerpulse ADSs.

SOURCE AND AMOUNT OF FUNDS

In connection with the cash portion of the consideration payable pursuant
to our offer and our InCentive offer, Zimmer has entered into the following
credit agreements: (i) a 364-day revolving credit agreement dated June 12, 2003
by and among Zimmer, JPMorgan Chase Bank, as general administrative agent, the
lenders and certain other parties thereto, collectively referred to as the
credit facility parties, and (ii) a revolving credit and term loan agreement
dated June 12, 2003 by and among the credit facility parties. Pursuant to the
credit agreements, the lenders are providing Zimmer with senior unsecured credit
facilities, or the facilities, in an aggregate principal amount of up to
US$1,750 million. The facilities are comprised of (i) a 364-day revolving credit
facility in an aggregate principal amount of US$400 million, (ii) a three-year
revolving credit and competitive advance facility in an aggregate principal
amount of US$800 million and (iii) a five-year term loan facility in an
aggregate principal amount of US$550 million.

The lenders' commitments under the 364-day facility will expire and the
borrowings thereunder will mature 364 days after the date of the signing of such
facility. Zimmer may elect to convert revolving credit loans outstanding under
the 364-day facility on the termination thereof to a term loan which will be
repayable in a single payment one year after the termination of the 364-day
facility. The lenders' commitments under the three-year facility expire and the
borrowings thereunder will mature on the third anniversary of the signing
thereof. The full amount of the five-year term facility must be drawn in a
single drawing on the date of the initial borrowing thereunder. The five-year
term facility matures on the fifth anniversary of the signing of such facility
and amortizes in equal quarterly installments in aggregate annual amounts equal
to US$50 million, US$150 million and US$350 million, payable in the third,
fourth and fifth years of the term, respectively.

The proceeds of loans under the facilities will be used by Zimmer, on the
date of the initial borrowing thereunder, to pay the cash consideration payable
in our offer and our InCentive offer, to refinance the existing debt of
Centerpulse, to repay in full all amounts under the existing Zimmer credit
agreement and to pay transaction costs. Thereafter, the proceeds of loans under
the revolving credit facilities may be used for working capital and other
general corporate purposes.

FEES AND EXPENSES

Except as set forth in this section, we will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Centerpulse registered shares or Centerpulse ADSs pursuant to our offer.

Credit Suisse First Boston LLC is acting as dealer manager in connection
with our offer and as financial advisor to us in connection with our proposed
acquisitions of Centerpulse and InCentive. Credit Suisse First Boston, a Swiss
bank and indirect parent of Credit Suisse First Boston LLC, is acting as Swiss
offer manager in connection with our offer and our InCentive offer. Credit
Suisse First Boston, acting through its Cayman Islands branch, also is acting as
a lender to Zimmer in connection with the financing of the cash portion of the
consideration to be paid in our offer and our InCentive offer. Credit Suisse
First Boston and Credit Suisse First Boston LLC will receive customary
compensation for acting in the foregoing capacities. We also have agreed to
reimburse Credit Suisse First Boston and Credit Suisse First Boston LLC for
their out-of-pocket expenses, including the fees and expenses of legal counsel
and other advisors, incurred in connection with their respective engagements,
and to indemnify Credit Suisse First Boston, Credit Suisse First Boston LLC and
certain related persons against certain liabilities and expenses in connection
with their respective

engagements, including certain liabilities under U.S. federal securities laws.
In the ordinary course of business, Credit Suisse First Boston and its
affiliates may actively trade the securities of Centerpulse for their own
account and for the accounts of customers, and accordingly, may at any time hold
a long or short position in such securities.

We have retained Mellon Investor Services LLC to act as the U.S. exchange
agent and Credit Suisse First Boston to act as the Swiss offer manager in
connection with our offer. The Swiss offer manager and the U.S. exchange agent
will receive reasonable and customary compensation for their services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities in connection therewith, including certain
liabilities under the U.S. federal securities laws.

We have retained Innisfree M&A Incorporated to act as the information agent
in connection with our offer. The information agent may contact holders of
Centerpulse registered shares or Centerpulse ADSs by mail, telephone, telex,
telegraph and personal interviews and may request brokers, dealers and other
nominee shareholders to forward materials relating to our offer to beneficial
owners. The information agent will receive reasonable and customary compensation
for its services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities in connection
therewith, including certain liabilities under U.S. federal securities laws.

ACCOUNTING TREATMENT

The acquisition of Centerpulse registered shares and Centerpulse ADSs
acquired in our offer will be accounted for under the purchase method of
accounting under U.S. GAAP, which means that Centerpulse's results of operations
will be included with ours from the closing date and its consolidated assets and
liabilities will be recorded at their fair values at the same time (except for
the minority interest, if any, in the assets and liabilities which will remain
at historical cost) with the excess, if any, allocated to goodwill.

STOCK EXCHANGE LISTING

Shares of Zimmer common stock are listed on the New York Stock Exchange. We
intend to make applications to list the shares of Zimmer common stock we will
issue in our offer and our InCentive offer on the SWX Swiss Exchange and on the
New York Stock Exchange.

THE INCENTIVE OFFER

TERMS OF OUR INCENTIVE OFFER

InCentive, an investment company listed on the SWX Swiss Exchange,
beneficially owns approximately 18.9% of the outstanding Centerpulse registered
shares. We are making a separate exchange offer for all of the publicly held
bearer shares in InCentive, having a nominal value of CHF 20 per share,
contemporaneously with our offer. In connection with a competing offer by Smith
& Nephew Group for InCentive bearer shares, InCentive has agreed to divest all
of its assets other than Centerpulse registered shares, so that InCentive's
assets will only consist of Centerpulse registered shares and cash prior to the
scheduled expiration date of Smith & Nephew's offer.

As a condition of our InCentive offer, InCentive and the major shareholders
of InCentive must enter into agreements with us which are substantially similar
to the agreements entered into with Smith & Nephew, including an agreement
requiring InCentive to divest all of its assets, other than Centerpulse
registered shares. Assuming InCentive has taken these actions, our offer price
for each InCentive bearer share in our InCentive offer will be calculated by
reference to the formula (A+B)/C where:

A = the total number of shares of Zimmer common stock and the amount of
cash that would be payable under our offer for the Centerpulse
registered shares held by InCentive;

B = the adjusted net asset value (positive or negative) of InCentive
calculated as at the last day of our InCentive offer period but
excluding the calculation in "A" above and attributing no value to any
InCentive bearer shares held by InCentive or its subsidiaries, as
confirmed by InCentive's auditor; and

C = the total number of InCentive bearer shares outstanding on the last day
of our InCentive offer period less the number of InCentive bearer
shares held by InCentive or its subsidiaries on that date.

As a result, the consideration for each InCentive bearer share will consist
of an amount of Zimmer common stock and a portion of cash payable in Swiss
francs which will mirror what InCentive would have received if it had tendered
its Centerpulse registered shares in our offer, plus or minus the cash
attributable to the adjusted net asset value of InCentive excluding its
Centerpulse holdings. If the adjusted net asset value is negative, then the cash
portion attributable to the consideration received by InCentive in relation to
its Centerpulse holdings shall be reduced, by a proportionate degree, and if
after such reduction there is still a negative balance, the number of shares of
Zimmer common stock to be issued shall be reduced by a corresponding amount
calculated by reference to the average closing price of Zimmer common stock from
the fifth to the third Swiss trading days prior to the settlement date of our
InCentive offer.

The number of shares of Zimmer common stock issued in exchange for each
InCentive bearer share is fixed and will not change between now and the time our
InCentive offer is consummated, subject to a mix and match feature in our
InCentive offer that is identical to that offered in our offer, whereby
InCentive shareholders may elect to receive more or fewer shares of Zimmer
common stock to the extent that other InCentive shareholders or holders of
Centerpulse registered shares and Centerpulse ADSs have made off-setting
elections.

CONDITIONS OF OUR INCENTIVE OFFER

Notwithstanding any other provisions of our InCentive offer, we will not be
required to accept for exchange and, subject to any applicable Swiss law and
rules and regulations of the SEC, we may postpone the acceptance for exchange
of, or exchange for, tendered InCentive bearer shares, and may, in our
reasonable judgment, extend, terminate or amend our InCentive offer as to any
InCentive bearer share not then accepted for exchange if in our reasonable
judgment the following conditions have not been satisfied on or before the date
of expiration of our InCentive offer.

CENTERPULSE OFFER CONDITIONS SATISFIED CONDITION

All conditions of our offer having been satisfied or waived by Zimmer.

REMOVAL OF INCENTIVE BOARD CONDITION

Either (i) an extraordinary shareholders meeting to be called by the
InCentive board of directors having resolved that contingent upon our InCentive
offer having been declared unconditional, all incumbent

InCentive directors be removed and be replaced by the individuals proposed by
Zimmer, or (ii) all InCentive directors having agreed to resign as of the date
our InCentive offer is declared unconditional (provided that at least one
director shall not have resigned and shall have entered into a mandate agreement
prior to our InCentive offer having been declared unconditional) or having
entered into a mandate agreement with Zimmer for the period from the date our
InCentive offer has been declared unconditional until the shareholders' meeting
of InCentive at which the persons proposed by Zimmer shall have been elected as
members of the InCentive board of directors.

For purposes of this condition, the term "declared unconditional" shall
mean that Zimmer shall have announced that all conditions to our InCentive offer
are satisfied or have been waived.

ZIMMER AGREEMENT CONDITION

Zimmer and certain shareholders of InCentive having entered into an
agreement, which we refer to as the Zimmer-InCentive Shareholder Agreement, on
substantially the same terms and conditions as the Tender Agreement, dated March
20, 2003, between certain shareholders of InCentive, Smith & Nephew and Smith &
Nephew Group, and all of the material terms and conditions of the
Zimmer-InCentive Shareholder Agreement having been complied with. Zimmer and
InCentive having entered into an agreement, which we refer to as the
Zimmer-InCentive Agreement, on substantially the same terms and conditions as
the Transaction Agreement, dated March 20, 2003, between InCentive, Smith &
Nephew and Smith & Nephew Group and all of the material terms and conditions of
the Zimmer-InCentive Agreement having been complied with.

SHAREHOLDER APPROVAL CONDITION

To the extent required, an extraordinary shareholders' meeting of InCentive
having been held approving, contingent to its execution, the Zimmer-InCentive
Agreement.

REGISTRATION EFFECTIVENESS CONDITION

The registration statement on Form S-4 filed by Zimmer with the SEC in
connection with our InCentive offer having become effective in accordance with
the provisions of the Securities Act, no stop order suspending the effectiveness
of the registration statement having been issued by the SEC and no proceedings
for that purpose having been initiated by the SEC and not concluded or
withdrawn.

MINIMUM TENDER CONDITION

Zimmer having received valid acceptances for at least 80% of the total
number of the InCentive bearer shares outstanding on a fully diluted basis at
the expiration of the (possibly extended) offer period for our InCentive offer.

NO REGULATORY AUTHORITY PROHIBITION CONDITION

No court or regulatory authority having issued a decision or an order which
prohibits our InCentive offer or its consummation or renders our InCentive offer
or its consummation unlawful.

NON-DISPOSAL OF CENTERPULSE REGISTERED SHARES CONDITION

InCentive or any of its subsidiaries not having disposed, or agreed to
dispose (including acceptance of any offer), of any Centerpulse registered
shares held by it or its subsidiaries and not having become obliged to do so,
except for any such transfer within the InCentive group.

LITIGATION CONDITION

Until the end of our (possibly extended) offer period for our InCentive
offer, no litigation proceedings having been initiated against InCentive and its
subsidiaries which have not been made public prior to the date of the
registration statement filed by Zimmer with the SEC in connection with our
InCentive offer and which are neither insured nor provisioned for in the
consolidated balance sheet of InCentive for the fiscal year ended December 31,
2002 and whose amount in dispute is in excess of CHF 35 million in the
aggregate.

We reserve the right to waive one or more of the conditions set forth
above, either in whole or in part, and to withdraw our InCentive offer if one or
more of the above conditions is not met.

SMITH & NEPHEW GROUP OFFERS FOR CENTERPULSE AND INCENTIVE

On April 25, 2003, Smith & Nephew Group plc, parent of Smith & Nephew plc,
a company incorporated under the laws of England and Wales, commenced exchange
offers to acquire all of the outstanding share capital of Centerpulse and
InCentive, referred to as the Smith & Nephew Group offers. Our offer and our
InCentive offer constitute competing offers. The terms of the Smith & Nephew
Group offers permit holders of Centerpulse registered shares, Centerpulse ADSs
and InCentive bearer shares to withdraw their shares or ADSs from the Smith &
Nephew Group offers, if already tendered, and tender into our offer and our
InCentive offer, as the case may be. Pursuant to agreements relating to the
Smith & Nephew Group offers, under certain circumstances, including if our offer
and our Centerpulse offer are successful, Centerpulse and InCentive could be
obligated to pay Smith & Nephew Group CHF 20.0 million and CHF 4.0 million,
respectively. In connection with its parallel offers, Smith & Nephew entered
into the following agreements:

COMBINATION AGREEMENT

On March 20, 2003, Smith & Nephew Group and Smith & Nephew entered into a
combination agreement with Centerpulse whereby the parties made certain
arrangements in connection with the Smith & Nephew Group offer for all
outstanding registered shares of Centerpulse. Pursuant to the terms of the
combination agreement, Centerpulse agreed to, among other things, immediately
cease, and not to solicit or initiate, any discussions or negotiations with any
entity (other than Smith & Nephew or its affiliates) concerning any merger,
consolidation, business combination, liquidation, reorganization or sale of
assets or shares or similar transaction involving Centerpulse or any subsidiary
of Centerpulse, other than the taking of a position by Centerpulse's board of
directors and disclosing such position to its shareholders, third parties or
governmental or regulatory bodies in respect of transactions initiated by third
parties or such disclosure to Centerpulse's shareholders or any third party or
governmental or regulatory bodies which, as advised by outside counsel, is
advisable under applicable law.

TRANSACTION AGREEMENT

On March 20, 2003, InCentive entered into a transaction agreement with
Smith & Nephew Group and Smith & Nephew. Under the terms of that transaction
agreement, InCentive is obligated to dispose of its investments other than
Centerpulse registered shares, so that, were Smith & Nephew Group's offer for
InCentive bearer shares to reach completion, InCentive's assets at that time
would consist only of Centerpulse registered shares and cash. Pursuant to the
terms of the transaction agreement, InCentive agreed to, among other things,
immediately cease, and not to solicit or initiate, any discussions or
negotiations with any entity (other than Smith & Nephew or its affiliates)
concerning any merger, consolidation, business combination, liquidation,
reorganization or sale of assets or shares or similar transaction involving
InCentive or any subsidiary of InCentive, other than the taking of a position by
InCentive's board of directors and disclosing such position to its shareholders,
third parties or governmental or regulatory bodies in respect of transactions
initiated by third parties or such disclosures to InCentive's shareholders or
any third party or governmental or regulatory bodies which, as advised by
outside counsel, is advisable under applicable law.

TENDER AGREEMENT

On March 20, 2003, Smith & Nephew Group and Smith & Nephew also entered
into a tender agreement with Rene Braginsky, Hans Kaiser, "Zurich"
Versicherungs-Gesellschaft and III Institutional Investors International Corp.,
who collectively hold approximately 77% of InCentive's issued share capital.
Pursuant to that tender agreement, InCentive shareholders party to the tender
agreement agreed, among other things:

- not to acquire any Smith & Nephew Group shares or Smith & Nephew shares
or rights to acquire Smith & Nephew Group shares or Smith & Nephew shares
until six months after the end of the subsequent offering period without
Smith & Nephew Group or Smith & Nephew's consent, unless Smith & Nephew
Group's offer for InCentive bearer shares has previously failed, except
that acquisitions or sales on account of third parties in respect of
asset management agreements shall be permitted;

- to cease, and not to solicit or initiate, any discussions or negotiations
with any entity (other than Smith & Nephew or its affiliates) concerning
any merger, consolidation, business combination, liquidation,
reorganization or sale of assets or shares or similar transaction
involving InCentive or any subsidiary of InCentive other than the taking
of a position by InCentive's board of directors and disclosing such
position to its shareholders, third parties or governmental or regulatory
bodies in respect of transactions initiated by third parties or such
disclosures to InCentive's shareholders or any third party or
governmental or regulatory bodies which, as advised by outside counsel,
is advisable under applicable law;

- to indemnify Smith & Nephew Group or Smith & Nephew for any loss
resulting from an acquisition by InCentive shareholders party to the
tender agreement of InCentive bearer shares or Centerpulse registered
shares which would cause Smith & Nephew Group or Smith & Nephew to be
obligated under Swiss law to increase the offer price under Smith &
Nephew Group's offer for InCentive bearer shares or its offer for
Centerpulse registered shares and Centerpulse ADSs; and

- to not be entitled to withdraw any InCentive bearer shares tendered by
them in Smith & Nephew Group's offer for InCentive bearer shares, unless
Smith & Nephew Group announces its offer for InCentive bearer shares or
Centerpulse registered shares and Centerpulse ADSs has failed for reasons
other than a competing offer for InCentive bearer shares or Centerpulse
registered shares and Centerpulse ADSs.

The tender agreement further provides in the event that a competing offer
for InCentive bearer shares and/or Centerpulse registered shares and Centerpulse
ADSs is made which has a higher economic value than the consideration offered by
Smith & Nephew, and the competing offer has become or been declared
unconditional, the tender agreement provides that Smith & Nephew may (i) declare
its exchange offer for InCentive unconditional (in which case InCentive's net
asset value shall be calculated on the basis of the consideration offered by the
competing offer) or (ii) permit InCentive to tender its Centerpulse registered
shares into the competing offer for Centerpulse registered shares and
Centerpulse ADSs during the statutory extension period. On June 11, 2003, the
Swiss Takeover Board issued recommendations in connection with our offer and our
InCentive offer which, among other things, held that the limitations on
withdrawal rights of the InCentive shareholders party to the tender agreement
were invalid.

COMMENCEMENT OF SMITH & NEPHEW GROUP OFFERS

On April 25, 2003, Smith & Nephew Group commenced a public tender offer for
all of the outstanding Centerpulse registered shares and Centerpulse ADSs
pursuant to which Smith & Nephew Group has offered 25.15 new Smith & Nephew
Group shares and CHF 73.42 in cash in respect of each Centerpulse registered
share, or 0.2515 new Smith & Nephew Group ADSs and the U.S. dollar equivalent of
CHF 7.34 in cash for each Centerpulse ADS. Based on the closing prices of Smith
& Nephew ordinary shares on the London Stock Exchange on March 19, 2003 of [--],
the date immediately prior to the announcement of the Smith & Nephew Group
offer, and May 19, 2003 of [--] and the exchange rates on such dates of CHF
2.1756 = L1.00 and CHF 2.1168 = L1.00, respectively, the Smith & Nephew Group
exchange offer values each Centerpulse registered share at CHF 282.37 and CHF
293.02, respectively. Based on the closing price of Smith & Nephew ordinary
shares on the London Stock Exchange on June [--], 2003 of [--] and the exchange
rate on such date of CHF [--] = L1.00, the Smith & Nephew Group exchange offer
values each Centerpulse registered share at CHF [--]. In parallel, Smith &
Nephew Group commenced a public tender offer for all outstanding bearer shares
of InCentive whereby Smith & Nephew Group offered that fraction of consideration
equal to the corresponding economic value that one InCentive bearer share
represents relative to one Centerpulse registered share, plus or minus the per
share value of net cash left in InCentive.

MARKET PRICE AND DIVIDEND MATTERS

MARKET PRICE HISTORY

Zimmer common stock is listed and traded on the New York Stock Exchange and
is quoted under the symbol "ZMH," Centerpulse registered shares are listed and
traded on the SWX Swiss Exchange and are quoted under the symbol "CEPN" and
Centerpulse ADSs are listed and traded on the New York Stock Exchange and are
quoted under the symbol "CEP." The following table sets forth, for the periods
indicated, as reported by the New York Stock Exchange and SWX Swiss Exchange,
the high and low last reported closing prices per share of each company's
security as reported and the per share cash dividends declared for such
securities.

<Table>
<Caption>
CENTERPULSE REGISTERED
ZIMMER COMMON STOCK SHARES CENTERPULSE ADSS
SALES PRICE SALES PRICE SALES PRICE
--------------------------- ------------------------- ---------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------ ------ --------- ---- ------ --------- ------ ------ ---------
US$ US$ US$ CHF CHF CHF US$ US$ US$

2001
First Quarter......... N/A N/A -- 447 320 -- 28.50 20.10 --
Second Quarter........ N/A N/A -- 343 94 -- 20.20 5.75 --
Third Quarter......... 30.50 24.70 -- 138 64 -- 8.98 4.05 --
Fourth Quarter........ 33.30 27.50 -- 84 31 -- 5.40 2.30 --
2002
First Quarter......... 36.36 29.55 -- 152 66 -- 9.80 4.35 --
Second Quarter........ 36.34 30.90 -- 243 131 -- 16.70 9.16 --
Third Quarter......... 39.46 29.37 -- 237 153 -- 16.60 11.05 --
Fourth Quarter........ 42.60 37.46 -- 259 164 -- 17.90 11.90 --
2003
First Quarter......... 49.90 38.02 -- 292 205 -- 21.95 15.50 --
Second Quarter
(through June [--],
2003)............... [--] [--] -- [--] [--] -- [--] [--] --
</Table>

On May 19, 2003, which was the last trading day in the United States prior
to our announcement of our intention to commence with our offer, the per share
closing price of our common stock was US$48.28 per share, the per share closing
price of Centerpulse registered shares was CHF 292 per share and the per share
closing price of Centerpulse ADSs was US$22.37 per share. On June [--], 2003,
the most recent practicable date prior to the mailing of this prospectus to you,
the per share closing price of our common stock was US$[--] per share, the per
share closing price of Centerpulse registered shares was CHF [--] per share and
the per share closing price of Centerpulse ADSs was US$[--] per share.

We encourage you to obtain current market quotations for Zimmer common
stock, Centerpulse registered shares and Centerpulse ADSs. For information about
U.S. dollar/Swiss franc exchange rates, please see the section captioned "OUR
OFFER -- Currency Exchange Rates."

AVERAGE TRADING VOLUME

(IN THOUSANDS)

<Table>
<Caption>
ZIMMER CENTERPULSE
COMMON STOCK REGISTERED SHARES CENTERPULSE ADSS
------------ ----------------- ----------------

2001
First Quarter..................... NA 29 4
Second Quarter.................... NA 51 17
Third Quarter..................... 2,150 95 83
Fourth Quarter.................... 901 72 63
</Table>

<Table>
<Caption>
ZIMMER CENTERPULSE
COMMON STOCK REGISTERED SHARES CENTERPULSE ADSS
------------ ----------------- ----------------

2002
First Quarter..................... 765 52 50
Second Quarter.................... 660 93 51
Third Quarter..................... 1,164 38 24
Fourth Quarter.................... 1,273 85 27
2003
First Quarter..................... 1,211 60 35
Second Quarter (through June [--],
2003)........................... [--] [--] [--]
</Table>

We intend to make applications to list on the SWX Swiss Exchange and New
York Stock Exchange the shares that we will issue and exchange pursuant to our
offer and our InCentive offer.

DIVIDEND INFORMATION

ZIMMER

Zimmer has not declared or paid dividends on its common stock since
becoming a public company on August 6, 2001. Currently, Zimmer does not
anticipate paying any cash dividends on its common stock in the foreseeable
future. The credit facilities Zimmer entered into on June 12, 2003 described in
this prospectus contain restrictions on Zimmer's ability to make dividend
payments under certain circumstances. On June [--], 2003, there were
approximately [--] holders of record of Zimmer common stock, including brokerage
firms holding Zimmer common stock in "street name" and other nominees.

CENTERPULSE

Centerpulse registered shares and Centerpulse ADSs began trading on July
14, 1997 on the SWX Swiss Exchange and New York Stock Exchange, respectively.
Centerpulse has paid dividends on its registered shares and ADSs every year from
1997 to 2000. The level of dividends in each year depends upon general business
conditions, Centerpulse's current and expected future financial performance,
developments with respect to legal proceedings against Centerpulse, and other
relevant factors. The distribution of dividends proposed by the directors of
Centerpulse requires the approval of the shareholders of Centerpulse at an
annual general meeting. In addition, Centerpulse's statutory auditors are
required to declare that the dividend proposal is in accordance with Swiss law.
Dividends will be payable following the end of the relevant financial year, if
approved at Centerpulse's annual general meeting, which is held in April or May.

Dividends paid in respect of shares are subject to the Swiss Anticipatory
Tax at the rate of 35%, and Centerpulse is required to withhold tax at such rate
from any dividend payments made to a holder of registered shares. Dividend
payments may qualify for reduction, or refund, of the Swiss Anticipatory Tax
because of the provisions of a double tax treaty between Switzerland and the
country of residence or incorporation of a holder. In such cases, the holder
will be entitled to claim a refund of all, or a portion, of such tax in
accordance with such treaty. The treaty provides for a mechanism where a U.S.
resident or U.S. corporation can generally seek a refund of the Swiss
Anticipatory Tax paid on dividends in respect of Centerpulse registered shares,
to the extent the withholding exceeds 15%.

The following table shows the ordinary dividends on each Centerpulse
registered shares and Centerpulse ADSs for the fiscal years 1997 through 2002.
Centerpulse paid no dividends for the fiscal years ended December 31, 2001 and
2002. Cash dividends are translated into U.S. dollars at the spot rate on the
payment

date. Because dividends are paid by Centerpulse in Swiss francs, exchange rate
fluctuations have affected the U.S. dollar amounts received by the holders of
Centerpulse ADSs.

<Table>
<Caption>
MONTH AND YEAR TOTAL DIVIDEND TOTAL DIVIDEND TOTAL DIVIDEND
YEAR ENDED DECEMBER 31,: PAID PER SHARE PER SHARE PER ADS
- ------------------------ -------------- -------------- -------------- --------------
CHF US$ US$

1997.................................. April 1998 4.50 3.03 0.30
1998.................................. April 1999 4.50 2.95 0.29
1999.................................. April 2000 5.00 2.87 0.29
2000.................................. April 2001 6.00 3.43 0.34
2001.................................. * * * *
2002.................................. * * * *
</Table>

- ---------------

* No dividends were declared by Centerpulse in the years ended December 31, 2001
and 2002.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following sets forth pro forma condensed combined financial information
(i) derived from the audited consolidated financial statements of Zimmer for the
fiscal year ended December 31, 2002 and the unaudited consolidated financial
statements of Zimmer for the period ended March 31, 2003 and (ii) derived from
the audited consolidated financial statements of Centerpulse for the fiscal year
ended December 31, 2002 and the unaudited interim consolidated financial
statements of Centerpulse for the period ended March 31, 2003, in each case
included elsewhere in this prospectus and is qualified in its entirety by such
documents. Certain amounts in Centerpulse's financial statements have been
reclassified to conform to the presentation in Zimmer's financial statements.

Centerpulse's consolidated financial statements from which these pro forma
financial statements are derived are prepared in accordance with IFRS, which
differ in certain material respects from U.S. GAAP. In preparing the pro forma
information for the year ended December 31, 2002, Zimmer relied upon the
reconciliation from IFRS to U.S. GAAP that was included in note 31 of
Centerpulse's 2002 audited consolidated financial statements. Centerpulse issued
financial information for the period ended March 31, 2003 under IFRS, which was
included on Form 6-K. However, this quarterly information did not include
information relating to U.S. GAAP. To present pro forma information as of and
for the period ended March 31, 2003, Zimmer obtained the necessary adjustments
to convert the financial information of Centerpulse from IFRS to U.S. GAAP from
information obtained from Centerpulse as part of our due diligence review.

The following pro forma financial information is presented for illustrative
purposes only and is not necessarily indicative of (i) results of operations and
financial position that would have been achieved had the consummation of our
offer and our InCentive offer taken place on the dates indicated or (ii) the
future operations of the combined company. The following table should be relied
on only for the limited purpose of presenting what the results of operations and
financial position of the combined businesses of Zimmer and Centerpulse might
have looked like had our offer and our InCentive offer taken place at an earlier
date. You can find more information about our offer and our Incentive offer
under the sections captioned "OUR OFFER" and "THE INCENTIVE OFFER."

The acquisition of Centerpulse will be accounted for as a purchase under
U.S. GAAP. Cost will be determined on the basis of cash paid plus the fair value
of Zimmer shares exchanged and stock options assumed. With respect to the
latter, this will be determined on the acquisition date. For the purpose of
determining cost for the pro forma information below, we have used the closing
price of Zimmer common stock on the NYSE on June [--], 2003 of US$[--] and the
noon buying rate for Swiss francs on such date of CHF [--] = US$1.00.

The cost of an acquired entity in a purchase business combination is
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition under U.S. GAAP. The following
pro forma financial information includes a preliminary allocation of the
estimated purchase price to the net assets of Centerpulse based on publicly
available information and management's general knowledge of Centerpulse's
business and the orthopaedic market. Actual amounts, determined on the basis of
more detailed information, will differ from the amounts reflected below.

The costs and related synergistic effect of integrating Zimmer and
Centerpulse's businesses are not reflected in the pro forma financial
information below. The timing and effect of actions associated with integration
are as yet uncertain. However, costs as further described in the Notes to the
Unaudited Pro Forma Condensed Combined Statement of Earnings and related savings
are expected to be significant.

Operating results for InCentive for the year ended December 31, 2002 and
for the three months ended March 31, 2003 and its net assets at that date have
been excluded from the pro forma financial information. The purchase price for
InCentive is inclusive of an offer for Centerpulse registered shares held by
InCentive equivalent in all respects to our offer for Centerpulse shares plus
cash for the value of InCentive's other holdings, which are expected to be
monetized prior to completion of our tender for InCentive. Accordingly, at the
time of the acquisition, it is expected that the InCentive balance sheet will
consist of Centerpulse registered shares already contemplated by our offer and
the incremental purchase price to be paid for

InCentive will be equal to the cash acquired with InCentive and there will be no
net effect on the net assets of the combined company.

The following pro forma financial information should be read in conjunction
with:

- the accompanying notes to the Unaudited Pro Forma Condensed Combined
Financial Statements;

- financial statements of Zimmer for the year ended December 31, 2002 and
for the three-month period ended March 31, 2003 and the notes relating
thereto, included elsewhere in this prospectus; and

- financial statements of Centerpulse for the fiscal year ended December
31, 2002 and for the three-month period ended March 31, 2003, and the
notes relating thereto, included elsewhere in this prospectus.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2002
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
ZIMMER AND CENTERPULSE
-------------------------
PRO FORMA
ZIMMER CENTERPULSE(A) ADJUSTMENTS COMBINED(G)
------ -------------- ----------- -----------

NET SALES...................................... $1,372 $796 $ -- $2,168
Cost of products sold.......................... 344 236 32(b) 612
------ ---- ----- ------
GROSS PROFIT................................... 1,028 560 (32) 1,556
Research and development....................... 81 47 -- 128
Selling, general and administrative............ 546 402 (5)(c) 943
------ ---- ----- ------
Operating expenses............................. 627 449 (5) 1,071
OPERATING PROFIT............................... 401 111 (27) 485
Interest expense, net.......................... 12 16 44(d) 72
------ ---- ----- ------
Earnings before income taxes and minority
interests.................................... 389 95 (71) 413
Provision for income taxes..................... 131 17 (23)(e) 125
------ ---- ----- ------
Net earnings before minority interests......... 258 78 (48) 288
Minority interests............................. -- 1 -- 1
------ ---- ----- ------
NET EARNINGS................................... $ 258 $ 77 $ (48) $ 287
====== ==== ===== ======
EARNINGS PER COMMON SHARE
Basic........................................ $1.33 $ 1.20
Diluted...................................... $1.31 $ 1.19
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic........................................ 194.5 43.8(f) 238.3
Diluted...................................... 196.8 44.7(f) 241.5
</Table>

See notes to unaudited pro forma condensed combined financial statements.
86

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2002

Centerpulse amounts have been translated into U.S. dollars at a rate of CHF 1.56
= US$1.00, the average exchange rate for the year ended December 31, 2002, as
disclosed in the explanatory notes to Centerpulse's Annual Report on Form 20-F
for the fiscal year ended December 31, 2002.

U.S. GAAP AND CONFORMING ACCOUNTING POLICY ADJUSTMENTS

(a) Centerpulse's consolidated financial statements are prepared in
accordance with IFRS, which differ, in certain material respects from U.S. GAAP.
In addition, Centerpulse has adopted certain accounting policies that differ
from Zimmer. The following schedule summarizes the necessary adjustments which
were estimated based upon information obtained from the audited consolidated
financial statements of Centerpulse contained in the Annual Report on Form 20-F
for the fiscal year ended December 31, 2002 and other publicly available
information. See the section captioned "NOTE ON CENTERPULSE INFORMATION" and
note 31 to the audited consolidated 2002 financial statements of Centerpulse for
a discussion of the significant differences between IFRS and U.S. GAAP. Certain
of the conforming reclassification adjustments were derived from Centerpulse's
disclosure of significant accounting policies, related notes, transcripts of
quarterly conference calls and information obtained during due diligence. Other
conforming adjustments may be necessary after Zimmer is able to gain additional
access to the detailed accounting records of Centerpulse.

<Table>
<Caption>
CENTERPULSE
CONFORMING
CENTERPULSE ACCOUNTING
CONTINUING AND U.S. GAAP CENTERPULSE CENTERPULSE
OPERATIONS(I) ADJUSTMENTS ADJUSTED ADJUSTED
----------------------------------------------- --------------------
(IN MILLIONS CHF) (IN MILLIONS US$)

Net sales............................ 1,241 -- 1,241 $796
Cost of product sold................. 402 (34)(ii) 368 236
----- --- ----- ----
Gross profit......................... 839 34 873 560
Research and development............. 73 -- 73 47
Selling, general and
administrative..................... 539 88 (iii 627 402
Other operating income............... 1 (1)(iii) -- --
Goodwill amortization................ 43 (43)(iii) -- --
Exceptional operating items.......... 9 (9)(iii) -- --
----- --- ----- ----
Operating income..................... 176 (3) 173 111
Interest expense, net................ 24 1(iv) 25 16
Other non-operating expense.......... 1 (1)(iv) -- --
----- --- ----- ----
Income before taxes.................. 151 (3) 148 95
Income taxes......................... 27 --(v) 27 17
----- --- ----- ----
Net income before minority
interests.......................... 124 (3) 121 78
Minority interests................... 2 -- 2 1
----- --- ----- ----
Net income........................... 122 (3) 119 $ 77
===== === ===== ====
</Table>

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2002

- ---------------

Unless otherwise indicated, the following adjustments were extracted from note
31 of Centerpulse's 2002 audited consolidated financial statements.

(i) Centerpulse consolidated net income from continuing operations obtained from
note 11 of Centerpulse's 2002 audited consolidated financial statements.
<Caption>
(IN MILLIONS CHF)
-----------------

(ii) Approximately one-half employee benefit expense U.S. GAAP
adjustment (allocation based on estimated headcount
split)...................................................... 12
Approximately one-half option re-pricing expense U.S. GAAP
adjustment (allocation based on estimated headcount
split)...................................................... 8
Re-classification of insurance expense to SG&A to conform
with Zimmer statement of earnings classification (based upon
information obtained during due diligence).................. (20)
Re-classification of instrument expense to SG&A to conform
with Zimmer statement of earnings classification (based upon
information obtained during due diligence).................. (34)
---
(34)
===
(iii) Reduce goodwill amortization to reflect U.S. GAAP write-off
of in-process research and development...................... (11)
Eliminate remaining non-U.S. GAAP goodwill amortization..... (43)
Approximately one-half employee benefit expense U.S. GAAP
adjustment (allocation based on estimated headcount
split)...................................................... 12
Approximately one-half option re-pricing expense U.S. GAAP
adjustment (allocation based on estimated headcount
split)...................................................... 9
Re-classification of insurance expense to SG&A to conform
with Zimmer statement of earnings classification (based upon
information obtained during due diligence).................. 20
Re-classification of instrument expense to SG&A to conform
with Zimmer statement of earnings classification (based upon
information obtained during due diligence).................. 34
U.S. GAAP adjustment for impairment charge on intangible
assets...................................................... 3
Reversal of non-U.S. GAAP impairment recovery on
investments................................................. 13
Goodwill amortization reclassified to SG&A to conform to
Zimmer statement of earnings presentation................... 43
Exceptional operating items reclassified to SG&A to conform
to Zimmer statement of earnings presentation................ 9
Other operating income reclassified to SG&A to conform to
Zimmer statement of earnings presentation................... (1)
---
88
===
(iv) Other non-operating expense reclassified to interest
expense, net................................................ 1
(v) Income tax effect on U.S. GAAP adjustments (less than $1
million).................................................... --
</Table>

OTHER ADJUSTMENTS

(b) Reflects an increase of $3 million in depreciation expense resulting
from the step-up of property, plant and equipment to their respective fair
values, as required by Statement of Financial Accounting Standards No. 141,
assuming estimated remaining useful lives of ten years. Also reflects an
estimated $29 million of amortization expense related to technology-based
intangible assets over periods ranging from seven to twenty years. Valuation of
specific identifiable intangible assets requires knowledge of certain product
revenue and cash flow projections and other information to which Zimmer has not
had access. In the absence of specific knowledge, the amount of purchase price
allocated to technology-based intangibles represents Zimmer estimates based on
standard valuation methodologies and management's general

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2002

knowledge of Centerpulse's business and the orthopaedic market. Actual amounts,
determined on the basis of more detailed information, will differ from the
preliminary amounts.

(c) Effective January 1, 2003 Zimmer changed its accounting policy for
loaner instruments from an expense based method to an asset based method. See
note 2 to Zimmer's March 31, 2003 Quarterly Report on Form 10-Q for a detailed
discussion of the accounting change. The adjustment reflects Zimmer's instrument
expense assuming the new asset-based accounting policy had been applied from the
beginning of the period.

(d) Reflects the elimination of interest expense on existing borrowings
replaced by estimated interest expense on approximately $1,567 million in total
debt we expect to incur under the facilities described in the section captioned
"OUR OFFER -- Source and Amount of Funds." Based on our current investment grade
rating from Standard and Poor's and from Moody's, the applicable interest rate
under the revolving facilities is expected to be the applicable LIBOR rate plus
125 basis points, and under the term loan, is expected to be the applicable
LIBOR rate plus 150 basis points. Interest expense was calculated using an
estimated weighted average annual interest rate of 4.0%, calculated on constant
debt levels throughout the year and also includes estimated amortization of debt
issuance cost. Our annual interest expense may be lower or higher if LIBOR rates
or our credit rating changes. A 1/8% change in the annual interest rate would
increase or decrease interest expense by approximately $2 million. A summary of
the various elements comprising the interest adjustment follows:

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

Elimination of net interest expense on existing Centerpulse
borrowings to be replaced by Zimmer borrowings under the
facilities................................................ $(16)
Elimination of net interest expense on existing Zimmer
borrowings to be replaced by Zimmer borrowings under the
facilities................................................ (12)
Interest expense under the facilities on the basis described
above..................................................... 63
Amortization of debt issuance costs over the life of the
facilities (calculated on a straight-line basis in
proportion to the value of the respective one, three and
five year facilities)..................................... 9
----
$ 44
====
</Table>

(e) Reflects the income tax effects of adjustments based upon the average
of the respective company's effective tax rates for the year ended December 31,
2002.

(f) The increase in weighted average common shares outstanding for the
basic earnings per share calculation reflects the issuance of 3.68 shares of
Zimmer common stock for each of the 11,892,518 outstanding registered shares of
Centerpulse, as of March 26, 2003 as disclosed in Centerpulse's 2002 Form 20-F,
while the increase for the diluted earnings per share calculation also includes
an additional 0.9 million shares to account for the dilutive effect of
outstanding Centerpulse stock options expected to be converted into Zimmer stock
options. The increase in dilutive shares was calculated on the basis of an
estimated 347,000 outstanding Centerpulse stock options, as disclosed in note 2
to the Smith & Nephew pro forma financial statements included in Smith &
Nephew's registration statement on Form F-4 filed on April 25, 2003, converted
based on the ratio of the Centerpulse offer price (translated into U.S. dollars
at the June [--], 2003 noon buying rate for Swiss francs of CHF [--] = US$1.00)
to Zimmer's closing stock price of US$[--] as quoted on the NYSE on such date.

(g) The pro forma statement of net earnings assumes a 100% tender of
Centerpulse registered shares, the maximum amount of shares subject to tender.
However, the transaction could be consummated with less than a 100% tender of
Centerpulse registered shares. Assuming a 66.7% tender of Centerpulse registered
shares,

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2002

the minimum amount that must be tendered for Zimmer to obtain control pursuant
to Swiss law, pro forma net earnings would differ from the reported pro forma
net earnings as follows:

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

Net earnings assuming a 100% tender of Centerpulse shares... $ 287
Adjustments:
Record 33.3% minority interest in earnings of
Centerpulse............................................ (26)
Record lower depreciation and amortization expense to
account for differences in basis of PP&E and intangible
assets................................................. 11
Record lower interest expense to account for reduced
debt................................................... 15
Tax effect of adjustments................................. (9)
-----
Net earnings assuming a 66.7% tender of Centerpulse
shares.................................................... $ 278
=====
Earnings per common share assuming a 66.7% tender of
Centerpulse shares:
Basic..................................................... $1.24
Diluted................................................... $1.23
Weighted Average Common Shares Outstanding
</Table>

<Table>
<Caption>
HISTORICAL ADJUSTED PRO FORMA
---------- -------- ---------

Basic.......................................... 194.5 29.2 223.7
Diluted........................................ 196.8 30.1 226.9
</Table>

The increase in weighted average common shares outstanding for the basic
earnings per share calculation reflects the issuance of 3.68 shares of Zimmer
common stock for each of the 7,932,309 tendered registered shares of Centerpulse
(representing 66.7% of the outstanding Centerpulse registered shares as of March
26, 2003) while the increase for the diluted earnings per share calculation also
includes an additional 0.9 million shares to account for the dilutive effect of
outstanding Centerpulse stock options expected to be converted into Zimmer stock
options. The increase in dilutive shares was calculated on the basis of an
estimated 347,000 outstanding Centerpulse stock options, as disclosed in note 2
to the Smith & Nephew pro forma financial statements, converted based on the
ratio of the Centerpulse offer price (translated into U.S. dollars at the June
[--], 2003 noon buying rate for Swiss francs of CHF [--] = US$1.00) to Zimmer's
closing stock price of US$[--] as quoted on the NYSE on such date.

NONRECURRING

The objective of the pro forma information provided herein is to provide
information about the continuing impact of the proposed transaction by showing
how it might have affected historical operating results if the transaction had
been consummated at the beginning of the most recent full fiscal year. As such,
nonrecurring charges are necessarily excluded from the unaudited pro forma
condensed combined statement of earnings. Zimmer expects to incur nonrecurring
charges as of and within the twelve month period succeeding the transaction,
estimated as follows:

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

In-process research and development......................... $166
Inventory step-up........................................... 80
----
Total non-cash charges.................................... $246
====
</Table>

Refer to note (k) under Notes to Unaudited Pro Forma Condensed Combined
Balance Sheet for further description of in-process research and development.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2002

The step-up of inventories to their respective fair values, as required by
Statement of Financial Accounting Standards No. 141, results in an increase in
cost of products sold as the inventory is sold to third party customers, which
is expected to occur within the twelve month period succeeding the transaction.

Retention payments and other employee related costs, costs for lease
terminations, meetings, training, re-branding, integration of information
technology systems, and other cash costs are anticipated in connection with the
integration of Zimmer and Centerpulse. Such costs are preliminarily estimated to
amount to US$160 million within the twelve months succeeding the transaction.
Actual costs may vary from the preliminary estimates.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2003
(DOLLARS IN MILLIONS)

<Table>
<Caption>
ZIMMER AND CENTERPULSE
-----------------------------
PRO FORMA
ZIMMER CENTERPULSE(A) ADJUSTMENTS COMBINED(L)
------ -------------- ----------- ---------------

ASSETS
CURRENT ASSETS:
Cash and equivalents......................... $ 33 $ 111 $ -- $ 144
Accounts receivable, less allowance for
doubtful accounts.......................... 237 222 -- 459
Inventories, net............................. 266 222 80(b) 568
Prepaid expenses............................. 18 82 (6)(c) 94
Deferred income taxes........................ 21 3 -- 24
---- ------ ------ ------
Total Current Assets....................... 575 640 74 1,289
Property, Plant and Equipment, net........... 311 133 30(d) 474
Intangible Assets............................ -- -- 960(e) 960
Goodwill..................................... -- 481 1,517(f) 1,998
Investments.................................. -- 35 -- 35
Deferred Income Taxes........................ 75 389 (132)(g) 332
Other Assets................................. 18 -- 12(c) 30
---- ------ ------ ------
TOTAL ASSETS................................. $979 $1,678 $2,461 $5,118
==== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................. $ 65 $ 38 $ -- $ 103
Income taxes payable......................... 42 22 -- 64
Other current liabilities.................... 159 153 -- 312
Short term debt.............................. 77 52 88(h) 217
---- ------ ------ ------
Total Current Liabilities.................. 343 265 88 696
Other Long-term Liabilities.................. 93 116 -- 209
Deferred Income Taxes........................ -- 13 309(g) 322
Long-Term Debt............................... -- 256 1,094(h) 1,350
---- ------ ------ ------
TOTAL LIABILITIES.......................... 436 650 1,491 2,577
---- ------ ------ ------
Commitments and Contingencies(m)
Minority Interest............................ -- 6 -- 6
STOCKHOLDERS' EQUITY
Common stock................................. 2 259 (259)(i) 2
Paid in capital.............................. 76 694 1,464(j) 2,234
Retained earnings (deficit).................. 449 36 (202)(k) 283
Accumulated other comprehensive income....... 16 45 (45)(i) 16
Treasury stock............................... -- (12) 12(i) --
---- ------ ------ ------
TOTAL STOCKHOLDERS' EQUITY................... 543 1,022 970 2,535
---- ------ ------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $979 $1,678 $2,461 $5,118
==== ====== ====== ======
</Table>

See notes to unaudited pro forma condensed combined financial statements.
92

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
MARCH 31, 2003

Centerpulse amounts have been translated into U.S. dollars at a rate of CHF 1.38
= US$1.00, the exchange rate as disclosed in the overview to Centerpulse's First
Quarter 2003 Interim Report filed on Form 6-K.

U.S. GAAP AND CONFORMING ACCOUNTING POLICY ADJUSTMENTS

(a) Centerpulse's consolidated financial statements from which these pro
forma financial statements are derived are prepared in accordance with IFRS,
which differ in certain material respects from U.S. GAAP. Centerpulse issued
financial information for the period ended March 31, 2003 under IFRS, which was
included on Form 6-K. However, this quarterly information did not include
information relating to U.S. GAAP. To present pro forma information as of and
for the period ended March 31, 2003, Zimmer obtained the necessary adjustments
to convert the financial information of Centerpulse from IFRS to U.S. GAAP
during due diligence. With respect to the reclassification adjustments to
conform the Centerpulse accounts to the Zimmer basis of presentation, certain of
these adjustments were derived from the disclosure of significant accounting
policies and related notes, plus information obtained during due diligence.
Other conforming adjustments may be necessary after Zimmer is able to gain
additional access to the detailed accounting records of Centerpulse.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET -- (CONTINUED)

MARCH 31, 2003

<Table>
<Caption>
CENTERPULSE
CONFORMING
ACCOUNTING AND
U.S. GAAP CENTERPULSE CENTERPULSE
CENTERPULSE(I) ADJUSTMENTS ADJUSTED ADJUSTED
-------------------------------------------- ---------------
(IN MILLIONS CHF) (IN MILLIONS US$)

ASSETS
CURRENT ASSETS:
Cash and equivalents.............................. 153 -- 153 $ 111
Accounts receivable, less allowance for doubtful
accounts........................................ 306 -- 306 222
Inventories, net.................................. 306 -- 306 222
Prepaid expenses.................................. 113 -- 113 82
Deferred income taxes............................. -- 5(ii) 5 3
----- ----- ----- ------
Total Current Assets............................ 878 5 883 640
Property, Plant and Equipment, net................ 184 -- 184 133
Intangible Assets................................. 562 (562)(iii) -- --
Goodwill.......................................... -- 664(iii) 664 481
Investments....................................... 59 (11)(iv) 48 35
Deferred Income Taxes............................. 537 -- 537 389
----- ----- ----- ------
TOTAL ASSETS...................................... 2,220 96 2,316 $1,678
===== ===== ===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................. 52 -- 52 $ 38
Income taxes payable.............................. -- 31(v) 31 22
Current provisions................................ 82 (82)(v) -- --
Other current liabilities......................... 160 51(v) 211 153
Short term debt................................... 72 -- 72 52
----- ----- ----- ------
Total Current Liabilities....................... 366 -- 366 265
Other Long-term Liabilities....................... 1 159(v) 160 116
Other Non-current Provisions...................... 159 (159)(v) -- --
Deferred Income Taxes............................. 18 -- 18 13
Long-term Debt.................................... 353 -- 353 256
----- ----- ----- ------
TOTAL LIABILITIES............................... 897 -- 897 650
Minority Interest................................. 9 -- 9 6
STOCKHOLDERS' EQUITY
Common stock...................................... 357 -- 357 259
Paid-in capital................................... 957 -- 957 694
Retained earnings (deficit)....................... (46) 96(vi) 50 36
Currency translation adjustments.................. 62 (62)(v) -- --
Accumulated other comprehensive income............ -- 62(v) 62 45
Treasury stock.................................... (16) -- (16) (12)
----- ----- ----- ------
TOTAL STOCKHOLDERS' EQUITY........................ 1,314 96 1,410 1,022
----- ----- ----- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ 2,220 96 2,316 $1,678
===== ===== ===== ======
</Table>

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET -- (CONTINUED)

MARCH 31, 2003

Unless otherwise indicated, the following adjustments were obtained from
information obtained during due diligence.

<Table>
<Caption>
(IN MILLIONS CHF)
-----------------

(i) Amounts obtained from Centerpulse's First Quarter 2003
Interim Report filed on Form 6-K
(ii) Income tax effects on U.S. GAAP adjustments................. 5
(iii) Reduce goodwill to reflect the U.S. GAAP write-off of
in-process research and development (IPR&D)............... (134)
Reverse non-U.S. GAAP intangible impairment charge.......... 182
Eliminate non-U.S. GAAP goodwill amortization............... 54
Goodwill reclassified from intangibles to a separate balance
sheet line item to conform to Zimmer balance sheet
presentation.............................................. 562
----
664
====
(iv) Reversal of non-U.S. GAAP impairment recovery on
investments............................................... (11)
(v) Reclassify various line items to conform to Zimmer balance
sheet presentation
(vi) Effect of above adjustments on stockholders' equity......... 96
</Table>

OTHER ADJUSTMENTS

(b) Inventory is adjusted to record its estimated fair market value as of
the acquisition date based on Centerpulse's historical margins less estimated
selling and distribution cost and an allowance for a distributor profit, assumed
as one-half of the remaining profit.

(c) Reflects the capitalization of an estimated $20 million of financing
costs ($8 million current and $12 million non-current) that will be amortized
over the life of the new credit facilities offset by the write-off of $(14)
million of unamortized debt issuance costs for Centerpulse's credit facilities,
which are expected to be refinanced as part of the transaction.

(d) Property, plant and equipment is adjusted to record its estimated fair
market value as of the acquisition date based on replacement cost, which is
assumed to equate to "Fire insurance value" disclosed in note 16 to
Centerpulse's 2002 audited consolidated financial statements less estimated
accumulated depreciation.

(e) Intangible assets are adjusted to reflect the allocation of: (i) $690
million to brand assets encompassing the trade names, long standing reputation,
know-how and base technology of Centerpulse which are considered to have an
indefinite useful life and, (ii) $270 million to technology assets comprised of
current product technology with an expected useful life of seven years and other
technology-based assets that are expected to have useful lives of twenty years.
Valuation of specific identifiable intangible assets requires knowledge of
certain product revenue and cash flow projections and other information to which
Zimmer has not had access. In the absence of specific knowledge, the amount of
purchase price allocated to brand and technology-based intangibles represents
Zimmer estimates based on standard valuation methodologies and management's
general knowledge of Centerpulse's business and the orthopaedic market. Actual
amounts, determined on the basis of more detailed information, will differ from
the preliminary amounts.

(f) These amounts reflect the preliminary estimates of the adjustments
necessary to record the Centerpulse assets acquired and liabilities assumed at
their respective fair values. The allocation is based on publicly available
information and limited information obtained during due diligence, and
necessarily involved

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET -- (CONTINUED)

MARCH 31, 2003

our estimates. Actual amounts, determined on the basis of more detailed
information, will differ from the preliminary amounts. The total purchase price
was determined and allocated as follows:

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

Cash to be paid in exchange for 11,892,518 Centerpulse
shares at CHF 120 per Centerpulse share translated at CHF
[--] = US$1.00, the noon buying rate for Swiss francs on
June [--], 2003........................................... $1,102
Zimmer shares to be exchanged for 11,892,518 Centerpulse
shares at an exchange ratio of 3.68 shares of Zimmer
common stock at a market price of US$[--] per share, the
NYSE closing price on June [--], 2003..................... 2,113
Fair value of an estimated 347,000 outstanding Centerpulse
stock options, as disclosed in note 2 to the Smith &
Nephew pro forma financial statements, with an average
intrinsic value of CHF 169 per share, based on a weighted
average exercise price of CHF 181 per share as reported by
Centerpulse in note 30 to its consolidated 2002 financial
statements, which are assumed to have no service
requirement beyond the transaction date, translated at CHF
[--] = US$1.00, the noon buying rate for Swiss francs on
June [--], 2003........................................... 45
Plus direct acquisition costs ($20 million Smith & Nephew
break up fee and $40 million transaction fees)............ 60
------
Total purchase price........................................ $3,320
======
Purchase price allocated to:
Net assets of Centerpulse adjusted to U.S. GAAP at March
31, 2003............................................... 1,022
Less elimination of historical goodwill................... (481)
Less elimination of unamortized debt issuance costs....... (14)
Less elimination of certain NOL deferred tax assets....... (107)
Add (subtract) fair value adjustments:
Inventory step-up......................................... 80
Property, plant and equipment step-up..................... 30
Brand -- indefinite life intangible asset................. 690
Technology -- intangible asset............................ 270
In-process research and development....................... 166
Deferred taxes............................................ (334)
Goodwill.................................................. 1,998
------
$3,320
======
</Table>

(g) Reflects the income tax effects of the purchase price allocation to
certain tangible and intangible assets, as follows:

<Table>
<Caption>
(IN MILLIONS US$)

Deferred tax liability related to PP&E step-up.............. $ 9
Deferred tax liability related to inventory step-up......... 25
Write off certain NOL deferred tax assets................... 107
Deferred tax liability related to brand and technology
intangible assets......................................... 300
----
Total....................................................... $441
====
</Table>

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET -- (CONTINUED)

MARCH 31, 2003

The Centerpulse deferred tax asset relating to net operating losses in the
U.S. has been reduced to reflect Zimmer estimates of its use taking into account
the statutory limitation that will apply to the acquisition of Centerpulse
stock. Deferred tax liabilities have been estimated related to the difference in
book and tax basis in assets created or re-valued in relation to the acquisition
of Centerpulse. A blended statutory tax rate was used based on a historic split
of sales and assets among specific geographic markets, as reported by
Centerpulse. Actual amounts, determined on the basis of more detailed
information, will differ from the preliminary amounts.

(h) Reflects the following sources and uses of funds:

<Table>
<Caption>
(IN MILLIONS US$)

Sources:
Borrowings under term loan.................................. $ 550
Borrowings under three-year revolving facility.............. 800
Borrowings under 364-day revolving facility................. 217
------
Total borrowings............................................ $1,567
======
Uses:
Cash to be paid in exchange for 11,892,518 Centerpulse
shares at CHF 120
per Centerpulse share translated at CHF [--] = US$1.00,
the noon buying rate for Swiss francs on June [--],
2003...................................................... $1,102
Acquisition costs ($20 million Smith & Nephew break up fee
and $40 million transaction fees)......................... 60
Financing fees.............................................. 20
Repayment of existing Centerpulse borrowings................ 308
Repayment of existing Zimmer borrowings..................... 77
------
$1,567
======
</Table>

(i) Reflects the elimination of shareholders' equity in Centerpulse.

(j) Reflects an increase in equity of $2,158 million for Zimmer shares
issued in exchange for Centerpulse shares, offset by the elimination of $(694)
of Centerpulse paid in capital.

(k) Reflects the elimination of Centerpulse's retained earnings of $(36)
million and the allocation of $(166) million to in-process research and
development, defined as the value assigned to projects for which the related
products have not received regulatory approval and have no alternative future
use. The amount was determined assuming a certain percentage of estimated future
cash flows would pertain to projects in development. Estimated cash flows are
discounted back to their present value using a discount rate that takes into
account an assumed level of risk of projects not being developed to a stage of
commercial feasibility.

(l) The unaudited pro forma condensed combined balance sheet assumes a 100%
tender of Centerpulse shares, the maximum amount of shares subject to tender.
However, the transaction could be consummated with less than a 100% tender of
Centerpulse shares. Assuming a 66.7% tender of Centerpulse shares, the

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET -- (CONTINUED)

MARCH 31, 2003

minimum amount that must be tendered for Zimmer to obtain control pursuant to
Swiss law, pro forma net assets would differ from reported pro forma net assets
as follows:

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

Net assets assuming a 100% tender of Centerpulse shares..... $2,535
Adjustments to reduce fair value attributed to net assets of
Centerpulse on a pro rata basis (33.3%):
Inventory step-up........................................... (27)
PP&E step-up................................................ (10)
Intangible assets including brand and technology assets..... (320)
Goodwill.................................................... (432)
Less debt required to finance acquisition................... 367
Record minority interest in book value of Centerpulse net
assets.................................................... (337)
Tax effect of adjustments................................... 111
------
Net assets assuming a 66.7% tender of Centerpulse shares.... $1,887
======
</Table>

In the event of a 66.7% tender of Centerpulse shares, the purchase price
and estimated purchase price allocation would be as follows:

<Table>

Cash to be paid in exchange for 7,932,309 Centerpulse shares
at CHF 120 per Centerpulse share translated at CHF [--] =
US$1.00, the noon buying rate for Swiss francs on June
[--], 2003................................................ $ 735
Zimmer shares to be exchanged for 7,932,309 Centerpulse
shares at an exchange ratio of 3.68 shares of Zimmer
common stock at a market price of US$[--] per share, the
NYSE closing price on June [--], 2003..................... 1,409
Fair value of an estimated 347,000 outstanding Centerpulse
stock options, based upon note 2 to the Smith & Nephew pro
forma financial statements, with an average intrinsic
value of CHF 169 per share, based on a weighted average
exercise price of CHF 181 per share as reported by
Centerpulse in note 30 to its consolidated 2002 financial
statements, which are assumed to have no service
requirement beyond the transaction date, translated at CHF
[--] = US$1.00, the noon buying rate for Swiss francs on
June [--], 2003........................................... 45
Plus direct acquisition costs ($20 million Smith & Nephew
break up fee and $40 million transaction fees)............ 60
------
Total purchase price........................................ $2,249
======
Purchase price allocated to:
Net assets of Centerpulse adjusted to U.S. GAAP at March
31, 2003............................................... $ 685
Less elimination of historical goodwill................... (481)
Less elimination of unamortized debt issuance costs....... (14)
Less elimination of certain NOL deferred tax assets....... (107)
</Table>

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET -- (CONTINUED)

MARCH 31, 2003

<Table>

Add (subtract) fair value adjustments:
Inventory step up..................................................................... 53
Property, plant and equipment step-up................................................. 20
Brand -- indefinite life intangible asset............................................. 460
Technology -- intangible asset........................................................ 180
In-process research and development................................................... 110
Deferred taxes........................................................................ (223)
Goodwill.............................................................................. 1,566
---------
$ 2,249
=========
</Table>

The following reflects sources and uses of funds assuming a 66.7% tender of
Centerpulse shares:

<Table>

Sources:
Borrowings under term loan................................ $ 550
Borrowings under three-year revolving facility............ 650
------
Total Borrowings............................................ $1,200
======
Uses:
Cash to be paid in exchange for 7,932,309 Centerpulse shares
at CHF 120 per Centerpulse share translated at CHF [--] =
US$1.00, the noon buying rate for Swiss francs on June
[--], 2003................................................ $ 735
------
Acquisition costs ($20 million Smith & Nephew break up fee
and $40 million transaction fees)......................... 60
Financing fees.............................................. 20
Repayment of existing Centerpulse borrowings................ 308
Repayment of existing Zimmer borrowings..................... 77
------
$1,200
======
</Table>

(m) Centerpulse is subject to a variety of claims, including product liability,
intellectual property, tax and contract related claims arising in the
ordinary course of business. On the basis of the limited due diligence
performed by the Company, certain matters, including those described in note
9 to the audited consolidated 2002 financial statements of Centerpulse, are
significant. While it is not possible to predict with certainty the outcome
of these matters, with the passage of time and the availability, in some
cases, of more detailed information, more probable estimates may become
available which could require recognition in the Centerpulse balance sheet.
We believe that cash flow from operations, together with available
borrowings under the facilities, will be sufficient to meet foreseeable cash
obligations that may arise in connection with these matters.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
ZIMMER AND CENTERPULSE
-------------------------
PRO FORMA
ZIMMER CENTERPULSE(A) ADJUSTMENTS COMBINED(F)
------ -------------- ----------- -----------

NET SALES....................................... $ 390 $232 $ -- $ 622
Cost of products sold........................... 97 60 8(b) 165
------ ---- ----- -----
GROSS PROFIT.................................... 293 172 (8) 457
Research and development........................ 21 14 -- 35
Selling, general and administrative............. 150 113 -- 263
------ ---- ----- -----
Operating expenses.............................. 171 127 -- 298
OPERATING PROFIT................................ 122 45 (8) 159
Interest expense, net........................... 1 6 10(c) 17
------ ---- ----- -----
Earnings before income taxes, minority interests
and cumulative effect of a change in
accounting principle.......................... 121 39 (18) 142
Provision for income taxes...................... 40 8 (5)(d) 43
------ ---- ----- -----
Net earnings before minority interests and
cumulative effect of a change in accounting
principle..................................... 81 31 (13) 99
Minority interests.............................. -- 1 -- 1
------ ---- ----- -----
NET EARNINGS BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE................ $ 81 $ 30 $ (13) $ 98
====== ==== ===== =====
EARNINGS PER COMMON SHARE BEFORE CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
Basic......................................... $ 0.41 $0.41
Diluted....................................... $ 0.41 $0.40
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic......................................... 195.7 43.8(e) 239.5
Diluted....................................... 198.0 44.7(e) 242.7
</Table>

See notes to unaudited pro forma condensed combined financial statements.
100

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2003

Centerpulse amounts have been translated into U.S. dollars at a rate of CHF 1.37
= US$1.00, the average exchange rate for the quarter ended March 31, 2003 as
disclosed in the overview to Centerpulse's First Quarter 2003 Interim Report
filed on Form 6-K.

U.S. GAAP AND CONFORMING ACCOUNTING POLICY ADJUSTMENTS

(a) Centerpulse's consolidated financial statements from which these pro
forma financial statements are derived are prepared in accordance with IFRS,
which differ in certain material respects from U.S. GAAP. Centerpulse issued
financial information for the period ended March 31, 2003 under IFRS, which was
included on Form 6-K. However, this quarterly information did not include
information relating to U.S. GAAP. To present pro forma information as of and
for the period ended March 31, 2003, Zimmer obtained the necessary adjustments
to convert the financial information of Centerpulse from IFRS to U.S. GAAP
during due diligence. With respect to the reclassification adjustments to
conform the Centerpulse accounts to the Zimmer basis of presentation, certain of
these adjustments were derived from the disclosure of significant accounting
policies, related notes, transcripts of quarterly conference calls and
information obtained during due diligence. Other conforming adjustments may be
necessary after the Company is able to gain additional access to the detailed
accounting records of Centerpulse.

<Table>
<Caption>
CENTERPULSE
CENTERPULSE CONFORMING AND
CONTINUING U.S. GAAP CENTERPULSE CENTERPULSE
OPERATIONS(I) ADJUSTMENTS ADJUSTED ADJUSTED
--------------------------------------------- ------------------
(IN MILLIONS CHF) (IN MILLIONS US$)

Net sales........................... 318 -- 318 $232
Cost of product sold................ 104 (22)(ii) 82 60
--- ---- --- ----
Gross profit........................ 214 22 236 172
Research and development............ 19 -- 19 14
Selling, general and
administrative.................... 131 25(iii) 156 113
Other operating income.............. 1 (1)(iii) -- --
Goodwill amortization............... 10 (10)(iii) -- --
--- ---- --- ----
Operating income.................... 55 6 61 45
Interest expense.................... 9 -- 9 6
Other non-operating expense......... 5 (5)(iii) -- --
--- ---- --- ----
Income before taxes................. 41 11 52 39
Income taxes........................ 10 -- 10 8
--- ---- --- ----
Net income before minority
interests......................... 31 11 42 31
Minority interests.................. 1 -- 1 1
--- ---- --- ----
Net income.......................... 30 11 41 $ 30
=== ==== === ====
</Table>

101

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS -- (CONTINUED)

FOR THE THREE MONTHS ENDED MARCH 31, 2003

Unless otherwise indicated, the following adjustments were based upon
information obtained during due diligence.

<Table>

(i) Centerpulse statement of earnings obtained from
Centerpulse's interim quarterly report on Form 6-K for the
period ended March 31, 2003 (excludes CHF 18 million gain on
sale of discontinued operations less estimated tax effect of
CHF 4 million).
</Table>

<Table>
<Caption>
(IN MILLIONS CHF)
-----------------

(ii) Re-classification of insurance expense to SG&A to conform
with Zimmer statement of earnings classification (based
upon information obtained during due diligence)........... (13)
Re-classification of instrument expense to SG&A to conform
with Zimmer statement of earnings classification (based
upon information obtained during due diligence)........... (9)
---
(22)
===
(iii) Reduce goodwill amortization to reflect U.S. GAAP write-off
of in-process research and development.................... (2)
Eliminate remaining non-U.S. GAAP goodwill amortization..... (10)
Re-classification of insurance expense to SG&A to conform
with Zimmer statement of earnings classification (based
upon information obtained during due diligence)........... 13
Re-classification of instrument expense to SG&A to conform
with Zimmer statement of earnings classification (based
upon information obtained during due diligence)........... 9
Goodwill amortization, other operating income and other
non-operating expense reclassified to SG&A to conform to
Zimmer statement of earnings presentation................. 14
U.S. GAAP adjustment for impairment charge on intangible
assets.................................................... 1
---
25
===
</Table>

OTHER ADJUSTMENTS

(b) Reflects an increase of $1 million in depreciation expense resulting
from the step-up of property, plant and equipment to their respective fair
values, as required by Statement of Financial Accounting Standards No. 141,
assuming estimated remaining useful lives of ten years. Also reflects an
estimated $7 million of amortization expense related to technology-based
intangible assets over periods ranging from seven to twenty years.

(c) Reflects the elimination of interest expense on existing borrowings
replaced by estimated interest expense on approximately $1,567 million in debt
under the facilities described in the section captioned "OUR OFFER -- Source and
Amount of Funds." Based on our current investment grade rating from Standard and
Poor's and from Moody's, the applicable interest rate under the revolving
facilities is expected to be the applicable LIBOR rate plus 125 basis points,
and under the term loan, is expected to be the applicable LIBOR rate plus 150
basis points. Interest expense was calculated using an estimated weighted
average annual interest rate of 4.0%, calculated on constant debt levels
throughout the year and also includes amortization of debt issuance cost. Our
annual interest expense may be lower or higher if LIBOR rates or our credit
rating changes. A 1/8% change in the annual interest rate would increase or
decrease interest expense by

102

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS -- (CONTINUED)

FOR THE THREE MONTHS ENDED MARCH 31, 2003

approximately $2 million. A summary of the various elements comprising the
interest expense adjustment follows:

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

Elimination of interest expense on Centerpulse borrowings to
be replaced by Zimmer borrowings.......................... $(6)
Elimination of interest expense on existing Zimmer
borrowings to be replaced by Zimmer borrowings under the
facilities................................................ (1)
Interest expense under the facilities on the basis described
above..................................................... 15
Amortization of debt issuance costs over the life of the
facilities (calculated on a straight-line basis in
proportion to the value of the respective one, three and
five year facilities)..................................... 2
---
$10
===
</Table>

(d) Reflects the income tax effects of adjustments based upon the average
of the respective company's effective tax rates for the quarter ended March 31,
2003.

(e) The increase in weighted average common shares outstanding for the
basic earnings per share calculation reflects the issuance of 3.68 shares of
Zimmer common stock for each of the 11,892,518 outstanding registered shares of
Centerpulse while the increase for the diluted earnings per share calculation
also includes an additional 0.9 million shares to account for the dilutive
effect of outstanding Centerpulse stock options expected to be converted into
Zimmer stock options. The increase in dilutive shares was calculated on the
basis of an estimated 347,000 outstanding Centerpulse stock options, as
disclosed in note 2 to the Smith & Nephew pro forma financial statements,
converted based on the ratio of the Centerpulse offer price (translated into
U.S. dollars at the June [--], 2003 noon buying rate for Swiss francs of CHF
[--] = US$1.00) to Zimmer's closing stock price of US$[--] as quoted on the NYSE
on such date.

(f) The pro forma statement of net earnings assumes a 100% tender of
Centerpulse shares, the maximum amount of shares subject to tender. However, the
transaction could be consummated with less than a 100% tender of Centerpulse
shares. Assuming a 66.7% tender of Centerpulse shares, the minimum amount that
must be tendered for Zimmer to obtain control pursuant to Swiss law, pro forma
net earnings would differ from the reported pro forma net earnings as follows:

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

Net earnings assuming a 100% tender of Centerpulse shares... $ 98
Adjustments:
Record 33.3% minority interest in earnings of
Centerpulse............................................ (10)
Record lower depreciation and amortization expense to
account for difference in basis of PP&E and intangible
assets................................................. 2
Record lower interest expense to account for reduced
debt................................................... 3
Tax effect of adjustments................................... (1)
-----
Net earnings assuming a 66.7% tender of Centerpulse
shares.................................................... $ 92
=====
Earnings per common share assuming a 66.7% tender of
Centerpulse shares:
Basic.................................................. $0.41
Diluted................................................ $0.40
Weighted Average Common Shares Outstanding
</Table>

<Table>
<Caption>
HISTORICAL ADJUSTED PRO FORMA
---------- -------- ---------

Basic.................................................. 195.7 29.2 224.9
Diluted................................................ 198.0 30.1 228.1
</Table>

103

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS -- (CONTINUED)

FOR THE THREE MONTHS ENDED MARCH 31, 2003

The increase in weighted average common shares outstanding for the basic
earnings per share calculation reflects the issuance of 3.68 shares of Zimmer
common stock for each of the 7,932,309 tendered Centerpulse registered shares
(66.7% of total Centerpulse registered shares) while the increase for the
diluted earnings per share calculation also includes an additional 0.9 million
shares to account for the dilutive effect of outstanding Centerpulse stock
options expected to be converted into Zimmer stock options. The increase in
dilutive share equivalents was calculated on the basis of an estimated 347,000
outstanding Centerpulse stock options, as disclosed in note 2 to the Smith &
Nephew pro forma financial statements, converted based on the ratio of the
Centerpulse offer price (translated into U.S. dollars at the June [--], 2003
noon buying rate for Swiss francs of CHF [--] = US$1.00) to Zimmer's closing
stock price of US$[--] as quoted on the NYSE on such date.

NONRECURRING

<Table>
<Caption>
(IN MILLIONS US$)
-----------------

Refer to note (k) under Notes to Unaudited Pro Forma Condensed Combined
Balance Sheet for further description of in-process research and development.

Retention payments and other employee related costs, costs for lease
terminations, meetings, training, re-branding, integration of information
technology systems, and other cash costs are anticipated in connection with the
integration of Zimmer and Centerpulse. Such costs are preliminarily estimated to
amount to $160 million within the twelve months succeeding the transaction.
Actual costs may vary from the preliminary estimates.

104

DESCRIPTION OF ZIMMER CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Under our restated certificate of incorporation and restated by-laws, each,
as amended, we are authorized to issue 1,250,000,000 shares of capital stock, of
which 1,000,000,000 shares are common stock, US$0.01 par value per share, and
250,000,000 shares are preferred stock, US$0.01 par value per share.

COMMON STOCK

As of June [--], 2003, there were [--] shares of common stock outstanding.
The holders of our common stock are entitled to one vote per share on all
matters presented to the stockholders, including elections of directors, and,
except as otherwise required by law or provided in any resolution adopted by our
board with respect to any series of preferred stock, the holders of such shares
will possess all voting power afforded to holders of common stock. Our restated
certificate of incorporation does not provide for cumulative voting in the
election of directors. Subject to any preferential rights of any outstanding
series of our preferred stock created by our board from time to time, the
holders of common stock will be entitled to receive ratably dividends as may be
declared from time to time by our board from funds legally available therefor.
If the corporation liquidates its business, the holders of common stock are
entitled to share ratably in all assets available for distribution to such
holders after the corporation pays its liabilities and the liquidation
preference of any outstanding preferred stock. The common stock has no
preemptive or conversion rights or other subscription rights. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future. All outstanding
shares of common stock are fully paid and non-assessable.

PREFERRED STOCK

Our restated certificate of incorporation authorizes our board of directors
to establish one or more series of our preferred stock and to determine, with
respect to any series of our preferred stock, the terms and rights of such
series, including:

- the designation of the series;

- the number of shares of the series, which number our board may
thereafter, except where otherwise provided in the applicable certificate
of designation, increase or decrease, but not below the number of shares
thereof then outstanding;

- whether dividends, if any, will be cumulative or noncumulative, and, in
the case of shares of any series having cumulative dividend rights, the
date or dates or method of determining the date or dates from which
dividends on the shares of such series shall be cumulative;

- the rate of any dividends, or method of determining such dividends,
payable to the holders of the shares of such series, any conditions upon
which such dividends will be paid and the date or dates or the method for
determining the date or dates upon which such dividends will be payable;

- the redemption rights and price or prices, if any, for shares of the
series;

- the terms and amounts of any sinking fund provided for the purchase or
redemption of shares of the series;

- the amounts payable on and the preferences, if any, of shares of the
series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of corporate affairs;

- the provisions, if any, for the conversion or exchange of the shares, at
any time at the option of the holder or the corporation or upon the
happening of a specified event, into shares of any other class or series,
or any other security, of the corporation or any other corporation, and
the specification of such other class or the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the

105

date or dates as of which such shares will be convertible or exchangeable
and all other terms and conditions upon which such conversion or exchange
may be made;

- restrictions on the issuance of shares of the same series or of any other
class or series, if any; and

- the voting rights, if any, of the holders of the shares of the series.

We believe that the ability of our board of directors to issue one or more
series of our preferred stock will provide us with flexibility in structuring
possible future financings and acquisitions and in meeting other corporate needs
which might arise. The authorized shares of our common stock, as well as shares
of our preferred stock, will be available for issuance without further action by
our stockholders, unless such action is required by applicable law or the rules
of any stock exchange or automated quotation system on which our securities may
be listed or traded. The New York Stock Exchange currently requires stockholder
approval as a prerequisite to listing shares in several instances, including the
issuance of common stock or securities convertible into or exercisable for
common stock if the common stock has or will have voting power equal to, or the
number of shares to be issued is or will be, at least 20% of the voting power or
number of shares of common stock outstanding prior to issuance. If the approval
of our stockholders is not required for the issuance of shares of our preferred
stock or our common stock, our board may determine not to seek stockholder
approval.

SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK

As of June [--], 2003, 2,000,000 shares of our Series A Participating
Cumulative Preferred Stock have been reserved for issuance upon exercise of
rights under our rights agreement. For a more detailed discussion of our rights
agreement and our Series A Participating Cumulative Preferred Stock, see the
section captioned "-- Rights Agreement."

CERTAIN ANTI-TAKEOVER PROVISIONS OF OUR RESTATED CERTIFICATE OF INCORPORATION
AND RESTATED BY-LAWS

BOARD OF DIRECTORS

Our restated certificate of incorporation provides that, except as
otherwise fixed by or pursuant to the provisions of a certificate of
designations setting forth the rights of the holders of any class or series of
our preferred stock, the number of our directors will be fixed from time to time
exclusively pursuant to a resolution adopted by a majority of the total number
of directors which we would have if there were no vacancies or unfilled
newly-created directorships, but shall not be less than three. Our board of
directors is divided into three classes. Our directors, other than those who may
be elected by the holders of our preferred stock, are elected by classes to
three year terms, with each class being as nearly equal in number as possible,
so that approximately one-third of the directors are elected at each annual
meeting of stockholders.

Our restated certificate of incorporation provides that, except as
otherwise provided for, fixed by or pursuant to a certificate of designations
setting forth the rights of the holders of any class or series of our preferred
stock, newly created directorships resulting from any increase in the number of
directors and any vacancies on our board resulting from death, resignation,
disqualification, removal or other cause will be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of our board, and not by the stockholders. Any director elected in
accordance with the preceding sentence will hold office for the remainder of the
term and until such director's successor shall have been duly elected and
qualified. No decrease in the number of directors constituting our board will
shorten the term of any incumbent director. Subject to the rights of holders of
our preferred stock, any director may be removed from office only for cause and
only by the affirmative vote of the holders of at least 80% of the voting power
of all our voting stock then outstanding, voting together as a single class.

These provisions would preclude a third party from removing incumbent
directors and simultaneously gaining control of our board by filling the
vacancies created by removal with its own nominees. Under the classified board
provisions described above, it would take at least two elections of directors
for any individual or group to gain control of our board. Accordingly, these
provisions could discourage a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of us.

106

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

Our restated certificate of incorporation provides that any action required
or permitted to be taken by our stockholders must be effected at a duly called
annual or special meeting of such stockholders and may not be effected by any
consent in writing by such stockholders. Except as otherwise required by law and
subject to the rights of the holders of any of our preferred stock, special
meetings of our stockholders for any purpose or purposes may be called only by
our board pursuant to a resolution stating the purpose or purposes thereof
approved by a majority of the total number of directors which we would have if
there were no vacancies or unfilled newly-created directorships or by our
chairman of the board. Any power of stockholders to call a special meeting is
specifically denied. No business other than that stated in the notice shall be
transacted at any special meeting. These provisions may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting
unless a special meeting is called by our board or the chairman of the board.

ADVANCE NOTICE PROCEDURES

Our restated by-laws establish an advance notice procedure which requires
us to provide notice to each stockholder of record entitled to vote at such
meeting stating the place, day and hour of an annual or special meeting of our
stockholders and the purpose or purposes for which the meeting is called. We
must deliver notice not less than 10 calendar days nor more than 60 calendar
days before the date of such meeting, either personally, by mail or by other
lawful means, except where further notice may be required by law. If mailed,
such notice will be deemed delivered when deposited in the United States mail
with postage paid and addressed to the stockholder at such person's address as
appears on our stock transfer books. Meetings may be held without notice if all
of the stockholders entitled to vote are present, except in certain
circumstances, or if notice has been effectively waived by those stockholders
not present in accordance with our restated by-laws. Any scheduled meeting may
be postponed and any special meeting cancelled by resolution of our board of
directors, upon public notice given prior to the date of the scheduled meeting.
Only such business shall be conducted at a special meeting of the stockholders
as shall have been brought before the meeting pursuant to our notice
requirement.

Our advance notice procedure further provides for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting. Our stockholder notice procedure provides that only
persons who are nominated by, or at the direction of, our chairman of the board,
or by a stockholder who has given timely written notice to our secretary prior
to the meeting at which directors are to be elected, will be eligible for
election as our directors. Our stockholder notice procedure also provides that
at an annual meeting only such business may be conducted as has been brought
before the meeting by, or at the direction of, our chairman of the board, or by
a stockholder who has given timely written notice to our secretary of such
stockholder's intention to bring such business before such meeting. Under our
stockholder notice procedure, for notice of stockholder nominations to be timely
made at an annual meeting, such written notice must be received by our secretary
at our principal executive offices not later than the close of business on the
90th calendar day nor earlier than the close of business on the 120th calendar
day prior to the first anniversary of the preceding year's annual meeting,
provided, that in the event that the date of the annual meeting is more than 30
calendar days before or more than 60 calendar days after such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
close of business on the 120th calendar day prior to such annual meeting and not
later than the close of business on the later of the 90th calendar day prior to
such annual meeting or the 10th calendar day following the day on which public
announcement of a meeting date is first made by us. In no event will the public
announcement of an adjournment or postponement of an annual meeting commence a
new time period or extend any time period for the giving of notice as described
above.

Notwithstanding the foregoing, in the event that the number of directors to
be elected to our board is increased and there is no public announcement by us
naming all of the nominees for director or specifying the size of our increased
board at least 100 calendar days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice also will be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to our secretary at our principal executive
offices not later than the close of business on the 10th calendar day following
the day on which such public
107

announcement is first made by us. Under our stockholder notice procedure, for
notice of a stockholder nomination to be timely made at a special meeting which
may be called, except as otherwise required by law or the holders of preferred
stock, by our board of directors or chairman of the board, at which directors
are to be elected, such notice must be received by our secretary at our
principal executive offices not earlier than the close of business on the 120th
calendar day prior to such special meeting and not later than the close of
business on the later of the 90th calendar day prior to such special meeting or
the 10th calendar day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by our
board to be elected at such meeting. In no event will the public announcement of
an adjournment or postponement of a special meeting commence a new time period
or extend any time period for the giving of notice as described above.

In addition, under our stockholder notice procedure, a stockholder's notice
to us proposing to nominate a person for election as a director or relating to
the conduct of business other than the nomination of directors must contain the
information required by our restated certificate of incorporation and restated
by-laws. Except as provided by law, our restated certificate of incorporation or
restated by-laws, if the chairman of a meeting determines that an individual was
not nominated, or other business was not brought before the meeting, in
accordance with our stockholder notice procedure, such individual will not be
eligible for election as a director, or such business will not be conducted at
such meeting, as the case may be. Notwithstanding the foregoing, if the
stockholder or qualified representative does not appear at the meeting to
present a nomination or business, such nomination will be disregarded and such
business will not be transacted.

AMENDMENT OF ZIMMER RESTATED CERTIFICATE OF INCORPORATION AND RESTATED BY-LAWS

Our restated certificate of incorporation provides that the certificate
generally may be amended by a majority of the outstanding shares of Zimmer
common stock; provided, however, that the affirmative vote of the holders of at
least 80% of our voting stock then outstanding, voting together as a single
class, is required to remove directors (which can only be done for cause) and to
amend provisions of the restated certificate of incorporation relating to the
inability of stockholders to act by written consent or call a special meeting,
the number, election, removal and term of our directors and the filling of
vacancies. Our restated certificate of incorporation further provides that the
restated by-laws may be altered, repealed and adopted by (i) an affirmative vote
of the majority of stockholders entitled to vote, voting as a single case;
provided, however, that the amendment of provisions of the restated by-laws
relating to the ability to call a special meeting and notice of stockholder
business and nominations shall require the affirmative vote of the holders of at
least 80% of the voting power of the outstanding shares of voting stock, voting
together as a single class, or (ii) an affirmative vote of the majority of the
whole board of directors.

INDEMNIFICATION

Our restated certificate of incorporation requires indemnification of our
past and present directors, officers, employees and agents to the fullest extent
permitted under Delaware law. Under Delaware law, a corporation may indemnify
any director, officer, employee or agent involved in a third party action by
reason of his agreeing to serve, serving or formerly serving as an officer,
director, employee or agent of the corporation, against all expenses, judgments,
fines and settlement amounts paid in the third party action, if the director,
officer, employee or agent acted in good faith and reasonably believed that his
actions were in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe that
his conduct was unlawful. In addition, a corporation may indemnify any director,
officer, employee or agent involved in a derivative action brought by or on
behalf of the corporation against expenses incurred in the derivative action, if
the director, officer, employee or agent acted in good faith and reasonably
believed that his actions were in, or not opposed to, the best interests of the
corporation. If a person has been successful in defending a third party or
derivative action, indemnification for expenses incurred is mandatory under
Delaware law.

any action upon receipt of an undertaking by the person to repay the amount
advanced if it is ultimately determined that such person is not entitled to
indemnification.

In addition, under our restated certificate of incorporation, we may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of our corporation or of another
corporation against any liability arising out of the person's status as a
director, officer, employee or agent of our corporation whether or not we would
have the power to indemnify such person against such expense, liability or loss
under the Delaware law.

RIGHTS AGREEMENT

On July 30, 2001, we entered into a Rights Agreement with Mellon Investor
Services LLC, referred to throughout this prospectus as the rights agreement,
which was amended on June 15, 2002. For information regarding how to receive the
rights agreement and amendment, see the section captioned "WHERE YOU CAN FIND
MORE INFORMATION."

ANTI-TAKEOVER EFFECTS

The rights are intended to have anti-takeover effects. If the rights become
exercisable, the rights will cause substantial dilution to a person or group
that attempts to acquire or merge with us in most cases. Accordingly, the
existence of the rights may deter a potential acquiror from making a takeover
proposal or tender offer. The rights should not interfere with any merger or
other business combination approved by our board of directors because we may
redeem the rights as described below and because our board of directors can
amend the rights agreement to exempt a transaction approved by our board of
directors so as to cause the rights to not become exercisable.

EXERCISABILITY OF RIGHTS

Under the rights agreement, one right attaches to each share of our common
stock outstanding and, when exercisable, entitles the registered holder to
purchase from us one one-thousandth of a share of Series A Participating
Cumulative Preferred Stock, par value US$0.01 per share, issuable in fractions,
at an initial purchase price of US$140.

The rights will not become exercisable until the earlier of:

- such time as we learn that a person or group acquired, or obtained the
right to acquire, beneficial ownership of securities representing more
than 20% of the shares of our common stock then outstanding; and

- such date, if any, as may be designated by our board of directors
following the commencement of, or first public disclosure of an intention
to commence, a tender offer or exchange offer for shares of our common
stock then outstanding that could result in a person or group acquiring,
or obtaining the right to acquire, beneficial ownership of securities
representing more than 20% of the shares of our common stock then
outstanding.

Additionally, at any time a person or a group acquires, or obtains the
right to acquire, beneficial ownership of securities representing more than 20%
of the shares of our common stock then outstanding, the flip-in or flip-over
features of the rights or, at the discretion of our board of directors, the
exchange features of the rights, may be exercised by any holder, except for such
person or group. Until a right is exercised, the holder thereof will have no
rights as a stockholder of our company, including, but not limited to, the right
to vote or receive dividends.

"FLIP IN" FEATURE

In the event a person or group acquires, or obtains the right to acquire,
beneficial ownership of securities representing more than 20% of the shares of
our common stock then outstanding, the holder of each right, except for such
person or group, will have the right to receive, upon exercise of the right,
that number of one

109

one-thousandths of a share of our Series A Participating Cumulative Preferred
Stock equal to the number of our shares of common stock which at the time of
such transaction would have a market value of twice the exercise price of the
right. For example, if we assume that the initial purchase price of US$140 is
still in effect on the date that the flip-in feature of the right is exercised,
any holder of a right, except for the person or group that acquired, or obtained
the right to acquire, beneficial ownership of securities representing more than
20% of the shares of our common stock then outstanding, can exercise his or her
right by paying us US$140 in order to receive from us shares of Series A
Participating Cumulative Preferred Stock having a value equal to US$280.

"EXCHANGE" FEATURE

At any time after a person or group acquires, or obtains the right to
acquire, beneficial ownership of securities representing more than 20%, but less
than 50%, of the shares of our common stock then outstanding, our board of
directors may, at its option, exchange all or some of the rights, except for
those held by such person or group, for:

- shares of our Series A Participating Cumulative Preferred Stock, shares
of our common stock or a combination of cash, stock and debt securities
having an aggregate value equal to one half the value of the Series A
Participating Cumulative Preferred Stock issuable upon exercise of a
right, or

- cash equal to the exercise price of a right.

Use of this exchange feature means that eligible rights holders would not have
to pay a purchase price to receive the cash, stock or debt securities we
distribute to them.

"FLIP OVER" FEATURE

In the event we are acquired in a merger or other business combination
transaction by a publicly traded company or 50% or more of our assets or our
earning power and our subsidiaries, taken as a whole, are sold or otherwise
transferred to a publicly traded company, each holder of a right, except for a
person or group that acquires, or obtains the right to acquire, beneficial
ownership of securities representing more than 20% of the shares of our common
stock then outstanding, will have the right to receive, upon exercise of the
right, that number of shares of common stock of such acquiring company which at
the time of such transaction would have a market value of twice the exercise
price of the right. In the event we are acquired in a merger or other business
combination transaction by a company that is not publicly traded or 50% or more
of our assets or our earning power and our subsidiaries, taken as a whole, are
sold or otherwise transferred to a company that is not publicly traded, each
holder of a right, except for a person or group that acquires, or obtains the
right to acquire, beneficial ownership of securities representing more than 20%
of the shares of our common stock then outstanding will have the right to
receive, upon exercise of the right, at the holders option, that number of
shares of the acquiring company or common stock of the surviving company which
at the time of such transaction would have a book value of twice the exercise
price of the right, or if the acquiring company has an affiliate which has
publicly traded common shares, that number of common shares of such affiliate
which at the time of the transaction would have a market value equal to twice
the exercise price of the right.

REDEMPTION OF RIGHTS

At any time before the earlier to occur of:

- the time that a person or group acquires, or obtains the right to
acquire, beneficial ownership of securities representing more than 20% of
the shares of our common stock then outstanding, or

- August 5, 2011,

our board of directors may redeem all of the rights at a redemption price of
US$0.01 per right, subject to certain adjustments. The right to exercise the
rights, as described above under "Exercisability of Rights," will

110

terminate upon the action of our board of directors electing to redeem the
rights, and at such time, the holders of the rights will have the right to
receive only the redemption price for each right held.

ADJUSTMENT AND AMENDMENT OF RIGHTS

The number of preferred shares or other securities issuable upon exercise
of the rights is subject to adjustment by our board of directors in the event of
any change in our capital stock, whether by reason of changes in capitalization,
any distribution, evidences of indebtedness, options or warrants to holders of
capital stock or otherwise. The purchase price and the number of preferred
shares or other securities issuable upon exercise of the rights are subject to
adjustment in the event of a declaration of a stock dividend on the common
shares or a subdivision or combination of the common shares prior to an exchange
of the rights. At any time before a person or group acquires, or obtains the
right to acquire, beneficial ownership of securities representing more than 20%
of the shares of our common stock then outstanding, our board of directors may,
without the approval of any holders of the rights, amend or supplement the terms
of the existing rights agreement, except that no amendment or supplement may be
made that reduces the redemption price of the rights. However, if at any time
after a person or group acquires, or obtains the right to acquire, beneficial
ownership of securities representing more than 20%, or such lower percentage as
may be amended in the existing rights agreement, of the shares of our common
stock then outstanding, our board of directors may not adopt amendments to the
existing rights agreement that adversely affect the interests of holders of the
rights.

TERMINATION OF RIGHTS

If not previously exercised, the rights will expire at August 5, 2011,
unless we earlier redeem or exchange the rights or extend the final expiration
date.

SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK

In connection with the creation of the rights, as described above, our
board of directors has authorized the issuance of shares of Series A
Participating Cumulative Preferred Stock.

We have designed the dividend, liquidation, voting and redemption features
of our Series A Participating Cumulative Preferred Stock so that the value of
one one-thousandth of a share of our Series A Participating Cumulative Preferred
Stock approximates the value of one share of our common stock. Shares of our
Series A Participating Cumulative Preferred Stock may only be purchased after
the rights have become exercisable, and each share of the Series A Participating
Cumulative Preferred Stock:

- will be neither redeemable nor entitled to the operation of a retirement
or sinking fund and will rank junior to all other series of preferred
stock, unless otherwise provided in the terms of those series of
preferred stock;

- will have a preferential quarterly dividend in an amount equal to the
greater of:

-- 1,000 times any dividend declared on each share of common stock, such
number to adjusted pursuant to the certificate of designations if our
company makes certain stock distributions, or

-- US$0.05 per share less any amounts paid as a result of dividends on our
common stock since the end of the last fiscal quarter;

- in the event of liquidation, will entitle its holder to receive a
preferred liquidation payment equal to the greater of US$1,000 per share
and 1,000 times, as adjustable pursuant to the certificate of
designations, the payment made per share of common stock, in addition to
any accrued and unpaid dividends or distributions on the preferred stock;

- will have 1,000 votes, as adjustable pursuant to the certificate of
designations, for each share of Series A Participating Cumulative
Preferred Stock held of record, voting together as one class with the
common stock and any other capital stock with general voting rights, and
if at the time of an annual meeting for the election of directors, six
quarterly dividends payable on the Series A Participating
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Cumulative Preferred Stock are in default, the number of directors
constituting the board will be increased by two which seats will be voted
on by the holders of Series A Participating Cumulative Preferred Stock
voting as a separate class; and

- in the event of any merger, consolidation or other transaction in which
shares of common stock are converted or exchanged, will be entitled to
receive 1,000 times, as adjustable pursuant to the certificate of
designations, the amount and type of consideration received per share of
common stock.

The rights of our Series A Participating Cumulative Preferred Stock as to
dividends, liquidation and voting, and in the event of mergers and
consolidations, are protected by certain antidilution provisions. Whenever
dividends payable on the Series A Participating Cumulative Preferred Stock are
in default, until all accrued and unpaid dividends and distributions have been
paid in full, we will not, and will not permit any subsidiary to:

- declare or pay any dividend, make any distribution on, or redeem or
purchase any common stock;

- declare or pay any dividend or make any distribution on any stock ranking
equal to the Series A Participating Cumulative Preferred Stock except
dividends paid ratably on such stock;

- redeem or purchase or otherwise acquire for consideration any stock
ranking equal to the Series A Participating Cumulative Preferred Stock
except for a redemption or acquisition by us of such stock in exchange
for capital stock ranking junior to the Series A Participating Cumulative
Preferred Stock; and

- purchase or otherwise acquire for consideration any shares of Series A
Participating Cumulative Preferred Stock or any stock ranking equal to it
except in accordance with a purchase offer made in writing or made public
to all holders of such shares upon such terms as our board of directors
determines are fair and equitable to the stockholders.

Any amendment adversely affecting the rights of the Series A Participating
Cumulative Preferred Stock is subject to the approval of at least 66 2/3% of
such outstanding stock, voting as a separate class.

DELAWARE BUSINESS COMBINATION STATUTE

Section 203(a) of the DGCL provides that, subject to exceptions set forth
therein, an interested stockholder of a Delaware corporation shall not engage in
any business combination, including mergers, consolidations or acquisitions of
additional shares of the corporation, with the corporation for a three-year
period following the date that such stockholder becomes an interested
stockholder unless:

- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;

- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, other than statutorily excluded shares; or

- on or subsequent to such date, the business combination is approved by
the board of directors of the corporation and authorized at an annual or
special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.

Except as otherwise set forth in Section 203(c)(5) of the DGCL, an
interested stockholder is defined to include: any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within three years
immediately prior to the date of determining whether the person is interested or
not; and the affiliates and associates of any such person.

Section 203 may make it more difficult for a person who would be an
interested stockholder to effect various business combinations with a
corporation for a three-year period. We have not elected to be exempt from the
restrictions imposed under Section 203. The provisions of Section 203 may
encourage persons

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interested in acquiring us to negotiate in advance with our board, since the
stockholder approval requirement would be avoided if a majority of the directors
then in office approves either the business combination or the transaction which
results in any such person becoming an interested stockholder. Such provisions
also may have the effect of preventing changes in our management. It is possible
that such provisions could make it more difficult to accomplish transactions
which our stockholders may otherwise deem to be in their best interests.

TRANSFER AGENT AND REGISTRAR

We have appointed Mellon Investor Services LLC as our Transfer Agent and
registrar for our common stock. The Transfer Agent's telephone number in the
United States is (800) 522-6645.

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COMPARATIVE RIGHTS OF CENTERPULSE SHAREHOLDERS
AND ZIMMER STOCKHOLDERS IN GENERAL

Holders of Centerpulse registered shares and Centerpulse ADSs will receive
shares of Zimmer common stock as part of the consideration in our offer.
Centerpulse is organized under the laws of Switzerland and Zimmer is organized
under the laws of Delaware. The following is a summary of the material
differences among (i) the current rights of Zimmer stockholders under U.S.
securities law, Delaware law, the restated certificate of incorporation of
Zimmer, the restated by-laws of Zimmer and the Zimmer rights agreement prior to
the consummation of the proposed transaction, and (ii) the rights of Centerpulse
shareholders under Swiss law and Centerpulse's articles of association.

The following summary, however, does not identify all differences that may,
under given situations, be material to holders of Centerpulse registered shares
and Centerpulse ADSs and is subject in all respects, and is qualified by
reference, to U.S. state and federal securities law, Swiss law, Delaware law,
the restated certificate of Zimmer, the restated by-laws of Zimmer, the Zimmer
rights agreement and Centerpulse's articles of association. You are urged to
read these documents carefully and in their entirety. For more information
regarding how to obtain any of these documents, see the section captioned "WHERE
YOU CAN FIND MORE INFORMATION."

AUTHORIZED CAPITAL STOCK

ZIMMER

The authorized capital stock of Zimmer is set forth in the section
captioned "DESCRIPTION OF ZIMMER CAPITAL STOCK."

CENTERPULSE

Based on publicly available information, as of April 22, 2003, 11,909,313
shares of registered shares, par value CHF 30 per share, were outstanding and as
of December 31, 2002, options to purchase 422,425 shares of registered stock
have been granted. Under Swiss law, the shareholders may, in accordance with the
articles of association, or by way of an amendment of the articles of
association, resolve or authorize the issuance of preferred shares.
Centerpulse's articles of association do not provide for preferred shares.

PREFERRED STOCK

ZIMMER

Zimmer's restated certificate authorizes the board of directors to provide
for the issuance from time to time of one or more series of preferred stock with
certain rights above those of common stock. The Zimmer board of directors has
authorized the issuance of 2,000,000 shares of Series A Participating Cumulative
Preferred Stock in connection with the rights agreement. The Series A
Participating Cumulative Preferred Stock is only issuable upon the exercise of
the rights as set forth in the rights agreement. For a further description, see
the section captioned "DESCRIPTION OF ZIMMER CAPITAL STOCK -- Preferred
Stock -- Series A Participating Cumulative Preferred Stock" and "-- Rights
Agreement."

CENTERPULSE

Centerpulse may issue preferred stock by amendment of its articles of
association as approved by resolution of its shareholders. Preferential rights
of preferred stock may extend to, in particular, cumulative or non-cumulative
dividends, liquidation proceeds and preemptive rights in the case of the
issuance of new shares.

If preemptive rights of existing shareholders with respect to the issuance
of such new classes of shares are to be waived or restricted, the respective
resolutions are subject to a qualified majority vote of two thirds of the shares
represented at the meeting. For further discussion, see the sections captioned
"-- Voting Rights; Cumulative Voting" and "-- Preemptive Rights."

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VOTING RIGHTS; CUMULATIVE VOTING

ZIMMER

Each share of Zimmer common stock is entitled to one vote per share on all
matters to be voted upon by such shares. Section 214 of the DGCL, provides that
no cumulative voting rights exist in respect of elections of directors unless
otherwise stated in the certificate of incorporation. Because Zimmer's restated
certificate does not specifically provide for cumulative voting in elections of
directors, shares of Zimmer common stock cannot be cumulatively voted.

The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at any Zimmer stockholders' meeting constitutes a
quorum, except that when specified business is to be voted on by a class or
series of stock voting as a class, the holders of a majority of the voting power
of the outstanding shares of such class or series shall constitute a quorum of
such class or series for the transaction of such business. Pursuant to Zimmer's
restated by-laws, elections of directors at all meetings of stockholders called
for such purpose will be by ballot. Except as otherwise provided in any
resolution adopted by our board with respect to any series of preferred stock,
proposals are passed upon a vote of the majority of the shares of Zimmer common
stock represented at a meeting at which a quorum is present. Pursuant to
Zimmer's restated certificate, certain corporate actions and director elections
require the affirmative vote of at least 80% of the voting power of all shares
of Zimmer entitled to vote.

CENTERPULSE

Under Swiss law, shareholders pass resolutions and elect directors upon the
vote of an absolute majority of the votes represented, unless provided otherwise
by law or the articles of association. Centerpulse's articles of association
provide that each share is entitled to one vote at a shareholders' meeting.
Centerpulse's articles of association further provide that the voting rights may
only be exercised by the holder of the shares as recorded in Centerpulse's share
register.

In addition, Centerpulse's articles of association provide that
Centerpulse's board may enter nominees into Centerpulse's share register with
voting rights for up to 3% of Centerpulse's registered issued share capital.
Nominees are persons who, in their request to be entered into Centerpulse's
share register, do not expressly declare that they have acquired and will hold
the shares for their own account. Centerpulse's board may enter a nominee
holding more than 3% of Centerpulse's registered issued share capital as a
shareholder with voting rights if such nominee disclosed to Centerpulse the
names, addresses, and beneficial holdings of persons for whose account it holds
0.5% or more of Centerpulse's registered issued share capital.

Centerpulse's articles of association provide for the possibility of a vote
on a show of hands. However, votes must be cast in written or electronic form if
demanded by (i) the chairman of the meeting or (ii) the majority of the
shareholders present at the meeting.

Under Swiss law, proxies of shareholders are entitled to attend
shareholders' meetings and exercise all rights of the represented shareholders
at such meeting.

Under Swiss law, ordinary resolutions must be approved by at least a
majority of the shares represented at a meeting.

Swiss law does not provide for cumulative voting.

STOCK CLASS RIGHTS

ZIMMER

Under the DGCL, any change to the rights of holders of Zimmer common stock
or any series of preferred stock would require an amendment to the certificate
of incorporation. The DGCL provides that the holders of shares of a class or
series shall be entitled to vote as a class upon a proposed amendment if the
amendment will:

- increase or decrease the authorized shares of the class or series;

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- increase or decrease the par value of the shares of the class or series;
or

- alter or change the powers, preferences or special rights of the shares
of the class or series so as to affect them adversely.

Zimmer's restated certificate grants the board of directors the right to
issue shares of common stock as well as shares of preferred stock. Each share of
authorized common stock shall be identical in all respects to every other share
of common stock and shall have equal rights and privileges. Holders of common
stock do not have preemptive or conversion rights or other subscription rights.
The rights, preferences and privileges of holders of common stock are subject
to, and may be adversely affected by, the rights of holders of any series of
preferred stock which may be designated by the board of directors and issued in
the future. For further discussion on the rights of Zimmer common stock, see the
section captioned "DESCRIPTION OF ZIMMER CAPITAL STOCK -- Common Stock."

Zimmer's board of directors has the authority to issue from time to time in
one or more series preferred stock, to establish the number of shares of each
series and to fix the designation, powers, privileges, preferences and rights of
the shares of each such series and the qualifications, limitations and
restrictions thereof. The number of authorized shares of preferred stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding common stock, without a vote of the holders of the preferred stock,
or of any series thereof, unless a vote of any such holders is required pursuant
to any certificate of designation. Any amendment that adversely affects the
rights of the holders of Zimmer's Series A Participating Cumulative Preferred
Stock must be approved by at least 66 2/3% of such outstanding stock, voting as
a separate class. For further discussion on the rights of Zimmer's Series A
Participating Cumulative Preferred Stock, see the section captioned "DESCRIPTION
OF ZIMMER CAPITAL STOCK -- Preferred Stock -- Series A Participating Cumulative
Preferred Stock."

CENTERPULSE

Under Swiss law, the general meeting of shareholders may, by virtue of an
amendment to the articles of association, decide on the issue of preferred
shares or to convert existing shares into preferred shares. Unless otherwise
provided for in the articles of association, a company, having issued preferred
shares, may only issue new preferred shares with preferential rights to the
disadvantage of existing shareholders with the consent of a special meeting of
the impaired preferred shareholders as well as that of a general meeting of all
shareholders. The articles of association of the company must ensure that each
voting stock class may elect at least one representative to the board of
directors.

SUPERMAJORITY VOTING

ZIMMER

Unless otherwise specified in a corporation's certificate of incorporation,
the DGCL requires a majority vote of stockholders to approve a merger, sale of
assets or similar reorganization transaction. Zimmer's restated certificate does
not specifically provide for such a supermajority vote. However, the affirmative
vote of at least 80% of the outstanding shares is necessary to alter, amend or
adopt any provision inconsistent with the certain provisions of the restated
certificate. For a further discussion, see the section captioned "DESCRIPTION OF
ZIMMER CAPITAL STOCK."

CENTERPULSE

Resolutions regarding extraordinary matters listed in the Swiss Code of
Obligations (Art. 704) and Centerpulse's articles of association require the
affirmative vote of at least two-thirds of the votes represented and the
absolute majority of the par value of the shares represented (since all
Centerpulse registered shares

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have the same par value, this means that an affirmative vote of two-thirds of
the shares represented is required). Such extraordinary matters include:

- an alteration of the purpose of the company;

- the creation of shares with increased voting powers;

- the implementation of restrictions on the transfer of registered shares
and the removal of such restrictions;

- the authorized or conditional increase of the share capital;

- the increase of the share capital out of equity, against contribution in
kind, or for the purpose of an acquisition of assets and the granting of
special benefits;

- the restriction or suspension of preemptive rights;

- the change of the registered office of the company; and

- the dissolution of the company without liquidation.

SHARES WITH PRIVILEGED VOTING RIGHTS

ZIMMER

Under the DGCL, each stockholder of a Delaware corporation is entitled to
one vote for each share of capital stock held by such stockholder unless the
certificate of incorporation provides otherwise. Zimmer's restated certificate
does not alter the voting rights of Zimmer stockholders, and allows for a
certificate of designations to provide certain rights to any class of preferred
stock. Pursuant to Zimmer's certificate of designations, each share of our
Series A Participating Cumulative Preferred Stock will have 1,000 votes, as
adjustable, with all shares of the class voting together as one class with the
common stock and any other capital stock with general voting rights. If at the
time of an annual meeting for the election of directors six quarterly dividend
payment are in default, the board of directors will be increased by two seats
which seats will be voted on by the holders of Series A Participating Cumulative
Preferred Stock voting as a single class.

CENTERPULSE

As Centerpulse's articles of association provide that each share carries
one vote, Centerpulse may, by amendment of its articles of association, issue
stock with a lesser par value, thereby creating shares with privileged voting
rights. The par value of such shares may not be less than 10% of the par value
of the common shares. If shares with privileged voting rights are to be issued
and/or preemptive rights of existing shareholders with respect to the issuance
of such shares are to be waived or restricted, the respective resolutions are
subject to a qualified majority vote of two thirds of the shares represented at
the meeting. For further discussion, see the sections captioned "-- Voting
Rights; Cumulative Voting" and "-- Preemptive Rights."

ACTION WITHOUT A MEETING

ZIMMER

Under the DGCL, unless otherwise provided in a corporation's certificate of
incorporation, any action required or permitted to be taken at a stockholders'
meeting may be taken by written consent signed by the holders of the number of
shares that would have been required to effect the action at an actual meeting
of the stockholders. Zimmer's restated certificate prohibits stockholders from
taking action by written consent.

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CENTERPULSE

Under Swiss law, resolutions by written consent are not permitted.

MEETINGS

ZIMMER

Under the restated by-laws, Zimmer will hold an annual meeting on such date
and at such place as may be fixed by our board of directors. Under Section
211(d) of the DGCL, the board of directors or those persons authorized by the
corporation's certificate of incorporation or by-laws may call a special meeting
of the corporation's stockholders. Pursuant to Zimmer's restated certificate and
restated by-laws, a special meeting of the Zimmer stockholders may be called
only by a majority of the entire board of directors or by the chairman of the
board.

CENTERPULSE

"General Meeting" means any shareholders' meeting. An annual (ordinary)
general meeting must be held within six months following the end of a financial
year for the purpose of approval of annual financial statements and the annual
report. Any general meeting which is called in addition to the annual (ordinary)
general meeting is called an "extraordinary" general meeting. The invitation to
the general meeting, together with the date and agenda and the proposals, must
be published in the Swiss Official Gazette of Commerce twenty days prior to such
general meeting.

Under Swiss law, extraordinary general meetings may be called by the board,
or, if necessary, by the statutory auditors. The board may be requested to call
an extraordinary general meeting by one or more shareholders representing
together at least 10% of the share capital or if resolved by an ordinary
shareholders' meeting. General meetings may be called upon shorter notice only
if all shareholders are represented at the relevant meeting. However, such
option has no practical relevance for listed companies such as Centerpulse.
Centerpulse's articles of association also provide that an extraordinary general
meeting shall be held in the cases provided for by law or by a resolution of the
board of directors.

DIRECTOR NOMINATIONS/SHAREHOLDER PROPOSALS

ZIMMER

The restated by-laws provide for the nomination of persons to the board of
directors and for stockholder proposals of business to be considered by
stockholders. Please see the section captioned "DESCRIPTION OF ZIMMER CAPITAL
STOCK."

CENTERPULSE

Under Swiss law, one or more shareholders representing together at least
10% of share capital may request the calling of a general meeting and items to
be included in the agenda. Shareholders representing shares with an aggregate
nominal value of at least one million Swiss francs may request that a specific
item be put on the agenda of the general shareholders' meeting. Additionally, a
resolution of the general meeting may demand that another general meeting be
held.

The articles of association of Centerpulse provide that in order for a
shareholder to call a general meeting or have items included in the agenda of a
general meeting, such shareholder must deliver a request so stating to
Centerpulse's registered office at least two months before the ordinary general
meeting to which the request relates. In general, resolutions to appoint
directors are put to shareholders on the basis of one resolution for all
nominated directors.

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DIRECTORS

ZIMMER

Zimmer's restated certificate provides that the number of directors of
Zimmer shall be determined by a resolution of the whole board of directors, but
shall not be less than three. The board currently has five directors. The
directors are divided into three classes, as nearly as equal in number as
possible, with each class serving a three year term to expire at the third
succeeding annual meeting of stockholders after their election, staggered such
that one class will expire each year. Each director holds office until his or
her successor is duly elected and qualified.

Section 141 of the DGCL provides that the stockholders of a Delaware
corporation who comply with certain procedural requirements and who have a
proper purpose have the right to: inspect the corporation's stock ledger, a list
of its stockholders and its other books and records; and make copies or extracts
of those materials during normal business hours, provided that (i) a stockholder
makes a written request under oath stating the purpose of his inspection and
(ii) the inspection is for a purpose reasonably related to a person's interest
as a stockholder.

Zimmer's restated certificate provides that directors may be removed from
office only for cause by a the affirmative vote of the holders of 80% of the
voting stock then outstanding, voting together as a single class. Zimmer's
restated certificate also provides that newly created directorships resulting
from any increase in the number of directors and any vacancy in the board of
directors resulting from death, resignation, or removal from office shall only
be filled by a majority vote of the remaining directors. A director elected in
this manner will serve for the remainder of the full term of the class of
directors in which the new directorship was created, or the vacancy occurred,
and until such director's successor shall have been duly elected and qualified.

CENTERPULSE

Centerpulse's articles of association provide that the board of directors
shall consist of at least four members who each shall be elected at an ordinary
general meeting for terms of three years. The articles of association provide
that the terms of office of newly elected members shall be fixed upon their
election, observing the rotation of renewal. The board of directors currently
consists of six directors. Under Swiss law, the shareholders of a Swiss company
may, at a general meeting, (i) appoint the members of the board of directors and
(ii) grant discharge to members of the board of directors. Centerpulse's
articles of association do not modify this legal standard. The articles of
association do not specifically address the mechanism by which vacancies are
filled.

Under Swiss law, the board may not be classified with respect to the term
of office any director may hold. However, a staggered board may be created by
electing directors for the same term of office at different points of time.

Under Swiss law, board members may be removed at any time without cause and
with immediate effect by resolution of the shareholders at an ordinary or
extraordinary general meeting of the shareholders, irrespective of any
provisions of Centerpulse's articles of association or any service contract the
director might have with Centerpulse. Compensation may be payable by Centerpulse
pursuant to any service contract.

In the event of a vacancy, the remaining directors chair the company until
the next election of board members at a general meeting. If the vacancies
endanger the ability of the board of directors to make decisions, the remaining
board members must call an extraordinary general meeting for elections.

STANDARD OF CONDUCT FOR DIRECTORS

ZIMMER

None of the DGCL, Zimmer's restated certificate or restated by-laws contain
specific provisions setting forth the standard of conduct of a director. The
scope of the fiduciary duties of directors is generally determined by the courts
of the State of Delaware. In general, directors have a duty to act in good faith

119

without self-interest, on a well-informed basis and in a manner they reasonably
believe to be in the best interest of the shareholders.

Zimmer's restated by-laws provide that the business and affairs of the
corporation shall be managed by or under the direction of the board of
directors. Additionally, the restated by-laws authorize the board of directors
or any committee of the board of directors to delegate officers of the
corporation to the extent permitted by law.

CENTERPULSE

Under Swiss law, a company's directors and senior officers are bound to
performance standards as specified in the Swiss Code of Obligations.
Specifically, members of the board must act in accordance with the duties
imposed by statutory law, in accordance with the articles of association and in
the best interest of the company. Directors and members of senior management are
generally disqualified from participating in decisions that directly affect
them. In addition, directors and senior officers must carry out their duties
with due care, safeguard the interest of the company in good faith and extend
equal treatment to all shareholders in like circumstances. The test for the duty
of care is primarily an objective one: the director or senior officer is
required to apply the care a reasonable and conscious person would apply under
the same circumstances. To some extent, particular skills and functions of the
board member or officer concerned may be taken into consideration.

To the extent that Swiss law allows the delegation of executive management,
and such delegation is actually made by virtue of written organizational
regulations, the responsibility of the board is limited to due election,
instruction and supervision of the executive management. Centerpulse's articles
of association authorize the board to delegate executive management to the
extent permitted by law and the board has enacted organizational regulations
accordingly.

LIMITATION OF DIRECTOR LIABILITY

ZIMMER

As permitted by the DGCL, Zimmer's restated certificate provides that
directors of Zimmer shall not be personally liable to Zimmer or its stockholders
for monetary damages resulting from a breach of fiduciary duty as a director
except, as required by the DGCL, for liability arising from (i) any breach of
the director's duty of loyalty to Zimmer or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) payment of a dividend or approval of a stock repurchase
in violation of Section 174 of the DGCL or (iv) any transaction from which the
director derived an improper personal benefit.

CENTERPULSE

Swiss law does not permit a company to exempt any member of its board of
directors, any person engaged in the management or liquidation of the company or
its auditors from any liability for damages suffered by the company, the
shareholders or the company's obligees which were caused by intentional or
negligent violation of that person's duties. However, the general meeting of
shareholders may pass a resolution discharging the members of the board of
directors from liability for certain actions. Such release is effective only for
facts that have been disclosed and only vis-a-vis the company and those
shareholders who have consented to the resolution or who acquired shares
subsequently with knowledge of the resolution.

DIRECTORS' CONFLICTS OF INTEREST

ZIMMER

The DGCL provides that contracts or transactions between a corporation and
one or more of its directors, or between a corporation and any other entity in
which one or more of its directors are directors or have a financial interest,
are not void or voidable solely because of such interest or because such
interested director is present at or participates in the meeting of the board
that authorizes the transaction or because his
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or her vote is counted, as long as one of the following three conditions is
satisfied: (i) the interest is disclosed and a majority of the disinterested
directors approve the transaction (this constituting not only approval, but also
a quorum); (ii) the interest is disclosed and the transaction is approved "in
good faith" by vote of the stockholders; or (iii) the transaction is fair to the
corporation as of the time it is authorized, approved or ratified by the board
of directors, a committee thereof or the stockholders.

CENTERPULSE

Swiss law does not have a general provision on conflicts of interest.
However, the Swiss Code of Obligations contains a provision which requires
directors to safeguard the interests of the company, and to adhere to a duty of
loyalty and a duty of care. Breach of this provision entails personal liability
of the directors vis-a-vis the company. In addition, Swiss law contains a
provision under which payments made to a shareholder not at arm's length must be
repaid to the company. Publicly listed companies domiciled in Switzerland have
to render a corporate governance report in which the business activities of the
members of the board of directors have to be disclosed.

INDEMNIFICATION AND INSURANCE

ZIMMER

Zimmer's restated certificate requires indemnification of its past and
present directors, officers, employees and agents to the fullest extent
permitted under the DGCL. Under the DGCL, a corporation may indemnify any
director, officer, employee or agent involved in a third party action by reason
of his agreeing to serve, serving or formerly serving as an officer, director,
employee or agent of the corporation, against all expenses, judgments, fines and
settlement amounts paid in the third party action, if the director, officer,
employee or agent acted in good faith and reasonably believed that his actions
were in, or not opposed to, the best interests of the corporation and, with
respect to any criminal proceeding, had no reasonable cause to believe that his
conduct was unlawful. In addition, a corporation may indemnify any director,
officer, employee or agent involved in a derivative action brought by or on
behalf of the corporation against expenses incurred in the derivative action, if
the director, officer, employee or agent acted in good faith and reasonably
believed that his actions were in, or not opposed to, the best interests of the
corporation. If a person has been successful in defending a third party or
derivative action, indemnification for expenses incurred is mandatory under the
DGCL.

The statutory provisions for indemnification are nonexclusive with respect
to any other rights, such as contractual rights, to which a person seeking
indemnification may be entitled. Furthermore, under the DGCL a corporation may
advance expenses incurred by officers, directors, employees and agents in
defending any action upon receipt of an undertaking by the person to repay the
amount advanced if it is ultimately determined that such person is not entitled
to indemnification.

In addition, under Zimmer's restated certificate, Zimmer may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of Zimmer or of another corporation against any liability
arising out of the person's status as a director, officer, employee or agent of
Zimmer whether or not Zimmer would have the power to indemnify such person
against such expense, liability or loss under the DGCL.

CENTERPULSE

It is admissible under Swiss law to agree in a fiduciary agreement to hold
a board member harmless for any liabilities that he is confronted with during
his term of office, save for tort, gross negligence, willful intent or
contradictory action with regard to legitimate instructions. Swiss law permits
the company or each board member or officer individually to purchase and
maintain insurance for directors, officers and auditors. The coverage of such
insurances depends on the individual insurance policy.

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SHAREHOLDER DERIVATIVE SUITS

ZIMMER

Under the DGCL, a stockholder of a Delaware corporation may initiate a
derivative action to enforce a right of the corporation if the corporation fails
to enforce that right itself. The complaint pursuant to such an action must
state that:

- the plaintiff was a stockholder in the corporation at the time of the
transaction of which the plaintiff complains; or

- the plaintiff's shares thereafter devolved on the plaintiff by operation
of law;

and either:

- allege with particularity the efforts made by the plaintiff to first
obtain the relief sought by the plaintiff from the corporations
directors; or

- state the reasons for the plaintiff's failure to obtain such relief or
make such effort.

CENTERPULSE

Under Swiss law, each shareholder is entitled to file an action for damage
caused to the company. The claim of the shareholder is for performance to the
company. If the shareholder, based upon the factual and legal situation, had
sufficient cause to file an action, the judge shall discretionally divide the
costs incurred between the plaintiff and the company to the extent the costs
should not be imposed on the defendant.

DIVIDENDS

ZIMMER

Under the DGCL, a Delaware corporation's board of directors, subject to
restrictions set forth in the corporation's certificate of incorporation, may
declare and pay dividends out of (i) the surplus of the corporation, which is
defined as net assets less statutory capital, or (ii) out of the net profits of
the current or the preceding fiscal year. If, however, the capital of the
corporation has been diminished to an amount less than the aggregate amount of
capital represented by the issued and outstanding stock of all classes having
preference upon the distribution of assets, the board may not declare and pay
dividends out of the corporation's net profits until the deficiency in the
capital has been repaired. The restated certificate does not contain any
provision restricting dividends on common stock beyond the statutory provisions.

CENTERPULSE

Under Swiss law, only the ordinary general meeting of shareholders resolves
on the distribution of dividends. Consequently, Swiss law does not provide for
the distribution of interim dividends. Dividends may only be paid out of the
audited balance sheet profit or out of reserves created for this purpose.
Payments out of the share capital are not allowed, and interest shall not be
paid on the share capital. In this respect, the share capital includes share
premiums, (i.e., the excess of the consideration for the issue of shares over
the aggregate nominal share capital, if any).

Prior to the distribution of dividends, 5% of the annual profits must be
allocated to the general reserve until the amount of general reserves has
reached 20% of the paid-in nominal share capital. The articles of association
can provide for a higher general reserve or for the creation of further reserves
setting forth their purpose and use. Centerpulse's articles of association do
not provide for such additional reserves.

The board of directors may propose that a dividend be paid out, but can not
resolve the dividend itself. Dividends require approval by the shareholders.

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APPRAISAL RIGHTS

ZIMMER

The DGCL generally provides that the stockholders of a Delaware corporation
involved in a merger or consolidation have the right to demand and receive
payment of the fair value of their stock. Appraisal rights are not available,
however, to holders of shares which are:

- listed on a national securities exchange,

- designated on a national market system security on an interdealer
quotation system operated by the National Association of Securities
Dealers, Inc., or

- held of record by more than 2,000 stockholders;

Appraisal rights are available under the DGCL if stockholders are required
to accept in the merger or consolidation anything other than a combination of:

- shares of stock or depository receipts of the surviving corporation in
the merger or consolidation, or

- shares of stock or depositary receipts of another corporation that, at
the effective date of the merger or consolidation will be:

-- listed on a national securities exchange;

-- designated on a national market system security on an interdealer
quotation system operated by the National Association of Securities
Dealers, Inc.; or

-- held of record by more than 2,000 stockholders.

CENTERPULSE

There are no appraisal rights under Swiss law. However, the Swiss Stock
Exchange Act provides that upon a public takeover offer for the shares of a
listed Swiss company, and the offeror having acquired or contracted to acquire
more than 98% of the voting rights in the company, the offeror may, within three
months of the expiration of the offer, bring a court action against the company
with a motion to cancel the outstanding shares (and other equity securities, if
any (a squeeze out)). The remaining shareholders may participate in these
proceedings. After such cancellation has been awarded, the target company
reissues the securities to the offeror against payment of the offer price or
exchange of the offered shares and passes on the price paid by the offeror or
the shares received from the offeror, as the case may be, to the holders of the
cancelled securities.

PREEMPTIVE RIGHTS

ZIMMER

Under the DGCL, a stockholder of a Delaware corporation is not entitled to
preemptive rights to subscribe for additional issuances of stock or any security
convertible into stock unless preemptive rights are specifically granted in the
certificate of incorporation or otherwise contractually granted. Zimmer's
restated certificate does not provide for any preemptive rights.

CENTERPULSE

Under Swiss law, the issuance of (i) voting or non-voting shares, or (ii)
rights to subscribe for or convert into equity securities (which may be
connected to debt instruments), against consideration, is subject to prior
approval of the shareholders' meeting. In addition, such rights must at first be
offered to the existing equity shareholders in proportion to the respective
nominal values of their holdings. The shareholders' meeting may, but only for
valid reasons and subject to a qualified majority, withdraw or restrict such
preemptive rights. Valid reasons for the withdrawal of preemptive rights are, in
particular, the takeover of an enterprise, or parts

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thereof, and the acquisition of participations, including the participations of
employees in the company. No shareholder shall be advantaged or disadvantaged by
such withdrawal without valid reason.

AMENDMENTS TO CHARTER DOCUMENTS

ZIMMER

Under the DGCL, unless the corporation's certificate of incorporation
requires a greater vote, any amendment to the certificate of incorporation
requires:

- the approval of the board of directors;

- the affirmative vote of a majority of the outstanding stock entitled to
vote on the amendment; and

- the affirmative vote of a majority of the outstanding stock of each class
entitled to vote on the amendment of a class.

Zimmer's restated certificate generally may be amended by a majority of the
outstanding shares of Zimmer common stock; provided, however, that the
affirmative vote of at least 80% of the outstanding shares is necessary to
alter, amend or adopt any provision inconsistent with certain articles. For a
further discussion see the section captioned "DESCRIPTION OF ZIMMER CAPITAL
STOCK."

CENTERPULSE

Under Swiss law, shareholders may by majority resolution and qualified
majority resolution, as the case may be, amend any provisions of the company's
articles of association, subject to mandatory statutory provisions. Under Swiss
law and under Centerpulse's articles of association, the board has power to
enact and to amend the organizational regulations of Centerpulse, which govern
the organization of the board and the executive management. Under Swiss law, the
board of directors is not authorized to change the articles of association. Some
exceptions to this principle apply in connection with the implementation of
capital increases. Amendments affecting the rights of the holders of any class
of shares may, depending on the rights attached to the class and the nature of
the amendments, also require approval by resolution of the classes affected in a
separate class meeting. For a further discussion, see the section captioned
"-- Stock Class Rights."

Under Centerpulse's articles of association, the approval of at least
two-thirds of the votes represented and of the absolute majority of the nominal
value shares represented shall be required for resolutions of the shareholders'
meeting relating to certain amendments of the articles of association.

BY-LAWS

ZIMMER

Section 109 of the DGCL provides that a corporation's by-laws may be
amended or repealed by the stockholders and, to the extent provided for in the
certificate of incorporation, the board of directors. Zimmer's restated
certificate provides that the by-laws may be altered, repealed and adopted by
(i) an affirmative vote of the majority of the stockholders entitled to vote,
voting as a single class, provided, however, that the affirmative vote of at
least 80% of the outstanding shares is necessary to alter, amend or adopt any
provision inconsistent with certain articles (see the section captioned
"DESCRIPTION OF ZIMMER CAPITAL STOCK") or (ii) an affirmative vote of the
majority of the whole board of directors.

CENTERPULSE

Pursuant to Centerpulse's internal regulations, the internal regulations or
the annexes thereto can be changed at any time by a decision of the board of
directors.

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SHARE ACQUISITION PROVISIONS

ZIMMER

Section 203 of the DGCL prohibits a Delaware corporation from engaging in
mergers, dispositions of 10% or more of its assets, issuances of stock and
business combinations with a person or group that owns 15% or more of the voting
stock of the corporation, referred to as an interested stockholder, for a period
of three years of such person becoming an interested stockholder unless (i) the
board of directors approved the business combination or the transaction that
resulted in the person or group becoming an interested stockholder, (ii) after
the completion of the transaction that resulted in the person or group becoming
an interested stockholder, the person or group acquired at least 85% of the
voting stock other than stock owned by inside directors and certain employee
stock plans, or (iii) after the person or group became an interested
stockholder, the board of directors and at least two-thirds of the voting stock
(other than stock owned by the interested stockholder) approved the business
combination. Zimmer, in its restated certificate, did not expressly elect to
"opt out" of Section 203 of the DGCL and, therefore, Zimmer is governed by the
limitations set forth in Section 203 of the DGCL.

CENTERPULSE

Under Swiss law, there is no similar prohibition of business combinations
with interested shareholders. However, in certain circumstances, shareholders
and members of the board of Swiss companies, as well as persons close to them,
must refund the company for any payments not made on an arm's length basis.

ANTI-TAKEOVER MEASURES

ZIMMER

Delaware courts will generally apply a policy of judicial deference to the
decisions of a Delaware corporation's board of directors to adopt anti-takeover
measures in the face of a potential acquisition or takeover if the directors are
able to show that (i) they had reasonable grounds for believing that the
acquisition or takeover proposal presented a threat to the corporation's policy
and effectiveness, and (ii) the board action taken was reasonable in relation to
the threat posed. For a description of Zimmer's anti-takeover provisions, see
the sections captioned "DESCRIPTION OF ZIMMER CAPITAL STOCK -- Certain Anti-
Takeover Provisions of Our Restated Certificate of Incorporation and Restated
By-laws" and "-- Rights Agreement."

CENTERPULSE

Under Swiss law, directors of a company have a duty to take only those
actions which are in the interests of the company. Generally, anti-takeover
measures are not actions which fall within this category. Anti-takeover measures
of public companies are partly regulated by the Swiss Stock Exchange Act. From
the time a takeover offer is published until the result is announced, the board
of the target company may not enter into legal transactions which would have the
effect of significantly altering the assets or liabilities of the target
company. Decisions taken at a general meeting of shareholders are not subject to
this restriction and may be implemented irrespective of whether they were
adopted before or after publication of an offer. Although this means that in
general the board of the target company may not take steps designed to make the
company less attractive to the offeror or harder for it to acquire the target,
there are certain permissible maneuvers to defeat a hostile bidder, especially
if they are put into place before an actual bid has surfaced. As opposed to
certain pre-offer techniques, which usually require a resolution of the general
meeting, most post-offer maneuvers are proscribed by the Swiss takeover rules
(Swiss Stock Exchange Act and related Ordinances).

125

STOCKHOLDER RIGHTS PLAN

ZIMMER

For a summary of Zimmer's stockholder rights plan, see the section
captioned "DESCRIPTION OF ZIMMER CAPITAL STOCK -- Rights Agreement."

CENTERPULSE

Swiss law does not allow companies to adopt shareholder rights plans.

DISCLOSURE OF INTERESTS UNDER SWISS LAW

Under the Directive on Information Relating to Corporate Governance
(Corporate Governance Directive) of the SWX Swiss Exchange, the listed companies
must disclose, inter alia, the shares held by members of the board or the
executive management and parties related to such persons, in toto. Such
disclosure must be made in an annex to the annual report.

The Swiss Stock Exchange Act and the related Ordinances require a person
who has a certain interest in equity securities of a Swiss company listed in
whole or in part on a Swiss stock exchange to notify the company and the Swiss
stock exchange where the equity securities in question are listed. The
obligation to disclose is triggered by a change from below a notifiable
percentage to, or above, such percentage, and vice versa. The notifiable
percentages are 5, 10, 20, 33 1/3, 50 or 66 2/3% of the voting rights,
irrespective of whether or not such voting rights may be exercised. Persons
acting in concert, due to shareholders' agreements or as members of a group or a
family, for example, are also subject to the disclosure obligation. Securities
dealers are obliged to disclose their holdings if they are trading shares in
their own name and for their own account. A shareholder may also passively
reach, exceed or fall below one of the above thresholds due to an increase or a
reduction of the share capital. The notification to the company and the stock
exchange must be made no later than four trading days following the day upon
which the obligation to notify arises. The company must then publish the
notified share interests within two trading days in the Swiss Commercial Gazette
and in an electronic medium publishing stock market information. There are no
provisions under Swiss law entitling the company to investigate the beneficial
ownership of its shares by serving notice on shareholders who in response to
such notice must reveal their shareholdings.

Under the terms of Centerpulse's deposit agreement, each holder of
Centerpulse ADSs must make disclosure of interests as may be required of such
holder under any laws, regulations or codes of practice applicable in
Switzerland or any other applicable jurisdiction. In addition, holders of
Centerpulse registered shares are also required to file Schedules 13D with
respect to their beneficial ownership of the underlying Centerpulse ordinary
shares if they beneficially hold more than 5% of the Centerpulse registered
shares outstanding. Moreover, a disclosure requirement exists under Swiss
company law according to which a listed company must disclose in its annual
report the identity of all of its shareholders who hold more than 5% of its
voting rights.

MANDATORY BID RULES UNDER SWISS LAW

Takeovers of public companies are regulated by the Swiss Stock Exchange
Act. The Swiss Stock Exchange Act provides that when any person acquires, even
by a series of transactions over a period of time, shares which, together with
shares held or acquired by persons acting in concert with it, exceed the
threshold of 33 1/3% or more of the voting rights of a public company, the
acquirer must make an offer for all of the equity shares of the company, whether
voting or non-voting. The offer price may not be lower than the current stock
market price and must not be below 25% of the highest price paid by the offeror
in the preceding 12 months for equity securities of the target company. The
offer price may be settled by cash payment or in exchange for equity securities.
The Swiss Stock Exchange Act allows a Swiss target company to opt out of the
mandatory offer rules by adopting an article to this effect in its articles of
association. Furthermore, target companies may raise the threshold triggering a
mandatory offer requirement in their articles of incorporation from 33 1/3% to
no more than 49% of the voting rights. Centerpulse has neither an

126

opt-out provision, nor a provision raising the threshold to trigger a mandatory
offer requirement in its articles of association.

RIGHTS OF PURCHASE AND REDEMPTION

ZIMMER

Under the DGCL, a corporation may purchase or redeem its own shares out of
surplus, provided, generally that no repurchase or redemption shall occur:

- when the capital is or would become impaired;

- at a price higher than the redemption price in the case of common stock
redeemable at the option of the corporation; or

- where, in the case of redemption, the redemption is not authorized by
other provisions of the DGCL or the certificate of incorporation.

However, at any time, a corporation may purchase or redeem any of its
shares which are entitled upon any distribution of assets to a preference over
another class of its stock if these shares will be retired upon acquisition or
redemption, thereby reducing the capital of the corporation.

The New York Stock Exchange requires that prompt publicity be given and
prompt notice be sent to the New York Stock Exchange of action which will result
in, or which looks toward, either the partial or full call for redemption of a
listed security. New York Stock Exchange rules provide that when a listed
security is fully redeemed, trading is suspended as soon as the redemption funds
become available to the holders of the security. When only a part of the listed
securities are redeemed, the amount authorized to be listed is reduced by the
amount redeemed as soon as the redemption funds become available to holders of
the redeemed securities.

Zimmer's restated certificate does not restrict the corporation's rights to
repurchase or redeem its shares.

CENTERPULSE

Under Swiss law, a stock company may not issue redeemable shares. A stock
company may purchase its own shares, provided that:

- freely disposable equity in the amount necessary for this purpose is
available; and

- the total par value of such shares held by the company does not exceed
10% of the total share capital.

Such repurchased shares do not carry any right to vote at shareholders'
meetings. Furthermore, the stock company must create a blocked reserve on its
balance sheet in the amount of the purchase price of the shares held as treasury
shares. The conditions mentioned above do not apply if a company's shareholders
resolve that such company shall buy back shares in order to cancel them so as to
reduce the share capital.

Listed companies intending to implement a share buyback program must comply
with additional requirements of the Swiss Stock Exchanges and Securities Trading
Statute and the Swiss Takeover Board. All public offers by a listed company for
its own shares are deemed to be tender offers. Selective share purchases are
only permitted under certain circumstances.

127

RIGHTS OF INSPECTION

ZIMMER

Under the DGCL, stockholders who comply with certain procedural
requirements and who have a proper purpose have the right to:

- inspect the corporation's stock ledger, a list of its stockholders and
its other books and records; and

- make copies or extracts of those materials during normal business hours,
provided that (i) the stockholder makes a written request under oath
stating the purpose of his inspection and (ii) the inspection is for a
purpose reasonably related to the person's interest as a stockholder.

CENTERPULSE

Under Swiss law, shareholders have a right to inspect the share register
only with regard to their own shareholdings and otherwise only to the extent
necessary for exercising their shareholder rights. No other person has a right
to inspect the share register. The company books and correspondence of a Swiss
company may only be inspected with the express authorization of the shareholders
meeting or by resolution of the board of directors and subject to the
safeguarding of business secrets. At the general meeting of shareholders, any
shareholder is entitled to request information from the board of directors
concerning the affairs of the company. Shareholders may also ask the auditors on
issues regarding audit examination. The board of directors and the auditors,
respectively, have to answer shareholders' questions to the extent necessary for
the exercise of shareholders' rights and subject to prevailing business secrets
or other material interests of the company.

In addition, if the shareholders' inspection and information rights prove
to be insufficient, each shareholder may propose to the shareholders' meeting
that specific facts be examined by a special commissioner in a special
inspection. If the shareholders' meeting approves the proposal, the company or
any shareholder may, within thirty days from the shareholders' meeting, ask the
courts at the company's domicile to appoint a special commissioner. If the
shareholders' meeting rejects the request, one or more shareholders representing
at least 10% of the share capital or shares in an aggregate nominal value of at
least CHF 2 million may request the judge appoint a special commissioner. The
judge will issue such order if the petitioners can prima facie show that the
board of directors, any member thereof or an officer of the company infringed
the law or the articles of association and damaged the company or the
shareholders. The costs of the investigation are generally allocated to the
company and only in exceptional cases to the petitioner(s). For information
regarding inspection of the annual business report and the auditor's report, see
the section captioned "-- Proxy Statement and Reports" below.

LIMITATIONS ON ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES
LAWS

Centerpulse is incorporated in Switzerland. Many of the directors and
officers of Centerpulse are residents of Switzerland and not residents of the
U.S. In addition, although Centerpulse has substantial assets in the United
States, a large portion of its assets are located outside the U.S. As a result,
in a lawsuit based on the civil liability provisions of the U.S. federal
securities laws, U.S. investors may find it difficult to:

- effect service within the U.S. upon Centerpulse and the directors and
officers of Centerpulse located outside the U.S.;

- enforce, in U.S. courts or outside the U.S., judgments obtained against
those persons in U.S. courts;

- enforce, in U.S. courts judgments obtained against those persons in
courts in jurisdictions outside the U.S.; and

- enforce against those persons in Switzerland, whether in original actions
or in actions for the enforcement of judgments of U.S. courts, civil
liabilities based solely upon the U.S. federal securities laws.

128

Switzerland and the United States do not have a treaty providing for
reciprocal recognition of and enforcement of judgments in civil and commercial
matters. The recognition and enforcement of a judgment of the courts of the
United States in Switzerland is governed by the principles set forth in the
Swiss Federal Act on Private International Law. This statute provides in
principle that a judgment rendered by a non-Swiss court may be enforced in
Switzerland only if:

- the foreign court had jurisdiction pursuant to the Swiss Federal Act on
Private International Law;

- the judgment of such foreign court has become final and non-appealable;

- the judgment does not contravene Swiss public policy; and

- the court procedures and the service of documents leading to the judgment
were in accordance with the due process of law.

"SHORT SWING" PROFITS

ZIMMER

Directors and officers of Zimmer are governed by rules under the Exchange
Act that may require directors and officers to forfeit to Zimmer any "short
swing" profits realized from purchases and sales, as determined under the
Exchange Act and the rules thereunder, of Zimmer equity securities over short
periods.

CENTERPULSE

Swiss law does not explicitly address "short swing" profits. However,
pursuant to the Swiss Penal Code a person who has information as an insider with
respect to a listed company is subject to a fine and/or imprisonment if such
person (i) abuses a confidential fact (usually by dealing in securities) or
makes such confidential fact known to a third party, (ii) foresees that the
dissemination of such confidential fact will have a significant effect on the
price of a listed security, or (iii) makes a profit or avoids a loss.
Furthermore, a "tippee" who learns a confidential fact from an insider commits
an offense if he as tippee abuses the information as set forth above, provided
the insider is guilty of insider dealing. Insiders can be directors, managers,
auditors, agents or any of their auxiliaries.

PROXY STATEMENTS AND REPORTS

ZIMMER

Under the Exchange Act proxy rules, Zimmer must comply with notice and
disclosure requirements relating to the solicitation of proxies for
stockholders' meetings.

CENTERPULSE

As a foreign private issuer, Centerpulse is not subject to U.S. proxy
solicitation rules. However, under Swiss law, notice of a shareholder meeting
must be accompanied by: (i) the items on the agenda; and (ii) the proposals of
the board of directors or the proposals of the shareholders who have requested
the holding of a general meeting or the inclusion of an item in the agenda. If
the company proposes to the shareholders a member of its corporate body or some
other dependent person as a proxy for a general meeting of shareholders, it
shall also designate an independent person who might be mandated as a proxy by
the shareholders. No later than 20 days prior to the ordinary general meeting of
shareholders, the annual business report and the auditor's report must be made
available for inspection at the company's domicile. Any shareholder may request
that a copy of these documents be immediately sent to it.

129

REPORTING REQUIREMENTS

ZIMMER

As a U.S. public company, Zimmer must file with the SEC, among other
reports and notices:

- an annual report on Form 10-K within 90 days (scheduled to be reduced to
60 days by December 15, 2004 under recently adopted SEC rules) after the
end of each fiscal year;

- quarterly reports on Form 10-Q within 45 days (scheduled to be reduced to
35 days by December 15, 2005 under recently adopted SEC rules) after the
end of each fiscal quarter; and

- reports on Form 8-K upon the occurrence of certain corporate events.

CENTERPULSE

As a foreign private issuer with securities listed on the New York Stock
Exchange and registered under Section 12 of the Exchange Act, Centerpulse is
required to file publicly with the SEC and the New York Stock Exchange annual
reports on Form 20-F within six months after the end of each fiscal year and to
furnish reports on Form 6-K in certain other circumstances. Under the listing
rules of the SWX Swiss Exchange, Centerpulse is in general required to inform
the market of any price-sensitive facts that have arisen in its sphere of
activity and are not public knowledge. Facts are deemed to be price sensitive if
they are likely to result in substantial price movements in the shares of the
company. Ad hoc publicity announcements must be made to the market participants
so as to ensure their equal treatment. Furthermore, the admission board of the
SWX Swiss Exchange must be notified prior to trading. Events which typically
trigger a publication duty are corporate restructurings, changes in capital,
including share repurchase offers and material changes in relation to the
earnings situation, material changes in the course of business and, if
unforeseen, changes in the board of directors, management and auditors of the
company.

The listing rules of the SWX Swiss Exchange allow postponement of the
disclosure of a price sensitive fact without the need for a specific
dispensation by the SWX Swiss Exchange on condition that (i) such facts arise in
relation to a plan or decision of the company, (ii) the dissemination of such
facts would prejudice the interests of the company and (iii) the company ensures
that such facts will continue to be treated confidentially. Furthermore, the
listing rules of the SWX Swiss Exchange require Centerpulse to publish and file
annual audited business reports and interim financial reports (audited and
non-audited). Interim reports must cover a time frame of six months or less.

This summary illustrates the material differences between the corporation
laws of Delaware and Switzerland, Centerpulse's articles of association and
Zimmer's restated certificate, restated by-laws and rights agreement. The
differences can be determined in full by reference to the Swiss Code of
Obligations, the related regulations, the DGCL, Centerpulse's articles of
association and Zimmer's restated certificate, restated by-laws and rights
agreement. The DGCL and the Swiss Code of Obligations, respectively, provide
that some of the statutory provisions as they affect various rights of holders
of shares may be modified by provisions in the certificate of incorporation and
by-laws, for Delaware corporations, or the articles of association, for Swiss
corporations.

130

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements based on current
expectations, estimates, forecasts and projections about the orthopaedics
industry, management's beliefs and assumptions made by management.
Forward-looking statements may be identified by the use of forward-looking terms
such as "may," "will," "expects," "believes," "anticipates," "plans,"
"estimates," "projects," "targets," "forecasts," and "seeks" or the negative of
such terms or other variations on such terms or comparable terminology. These
statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that could cause actual outcomes and results to
differ materially. These risks and uncertainties include, but are not limited
to, price and product competition, rapid technological development, demographic
changes, dependence on new product development, the mix of our products and
services, supply and prices of raw materials and products, customer demand for
our products and services, our ability to successfully integrate acquired
companies, control of costs and expenses, our ability to form and implement
alliances, international growth, U.S. and foreign government regulation, product
liability and intellectual property litigation losses, reimbursement levels from
third-party payors, general industry and market conditions and growth rates and
general domestic and international economic conditions including interest rate
and currency exchange rate fluctuations. In particular, forward looking
statements as to our financial and business performance following the proposed
acquisitions should be qualified by the absence of any opportunity for us to
perform comprehensive due diligence on Centerpulse or InCentive, a significant
shareholder of Centerpulse. These forward looking statements might have been
significantly different had such due diligence review been undertaken. Readers
of this prospectus are cautioned not to place undue reliance on these
forward-looking statements, since, 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
prospectus and the material accompanying this prospectus.

LEGAL MATTERS

The validity of the shares of Zimmer common stock offered hereby will be
passed upon for Zimmer Holdings, Inc. by Dewey Ballantine LLP.

EXPERTS

The financial statements of Zimmer Holdings, Inc. included in and
incorporated in this prospectus by reference to Zimmer Holdings, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2002 have been so included
and incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent public accountants, given on the authority of said firm as experts
in auditing and accounting.

131

INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
PAGE
----

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Accountants........................... F-2
Consolidated Financial Statements
Consolidated Statements of Earnings for the years ended
December 31, 2002, 2001 and 2000....................... F-3
Consolidated Balance Sheets at December 31, 2002 and
2001................................................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2002, 2001 and 2000........... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000....................... F-6
Notes to the Consolidated Financial Statements............ F-7
First Quarter Consolidated Financial Statements
Consolidated Statements of Earnings for the three months
ended March 31, 2003 and 2002.......................... F-24
Consolidated Balance Sheets at March 31, 2003 (Unaudited)
and December 31, 2002.................................. F-25
Consolidated Statements of Cash Flows for the three months
ended March 31, 2003 and 2002.......................... F-26
Notes to Interim Consolidated Financial Statements........ F-27

CENTERPULSE AG AND SUBSIDIARIES
Consolidated Financial Statements
Consolidated Income Statements for the years ended
December 31, 2002, 2001 and 2000....................... F-31
Consolidated Balance Sheets at December 31, 2001 and
2000................................................... F-32
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2002, 2001 and 2000........... F-33
Consolidated Cash Flow Statements for the years ended
December 31, 2002, 2001 and 2000....................... F-34
Notes to the Consolidated Financial Statements............ F-35
Unaudited Interim Consolidated Financial Statements
Unaudited Interim Consolidated Income Statement for the
three months ended January-March, 2003 and 2002
(Restated)............................................. F-77
Unaudited Interim Consolidated Balance Sheet at March 31,
2003 and December 31, 2002 (Restated).................. F-78
Unaudited Interim Condensed Consolidated Statements of
Shareholders' Equity for the three months ended March
31, 2003 and 2002 and the years ended December 31, 2002
and 2001............................................... F-79
Unaudited Interim Consolidated Cash Flow Statements for
the three months ended January-March 2003 and 2002
(Restated)............................................. F-80
Notes to the Unaudited Interim Consolidated Financial
Statements............................................. F-81
</Table>

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of Zimmer Holdings, Inc.:

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Zimmer
Holdings, Inc. and its subsidiaries at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Indianapolis, Indiana
January 23, 2003

F-2

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
2002 2001 2000
----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

Net Sales................................................... $1,372.4 $1,178.6 $1,040.6
Cost of products sold....................................... 344.8 321.6 290.9
-------- -------- --------
Gross Profit................................................ 1,027.6 857.0 749.7
-------- -------- --------
Research and development.................................... 80.7 71.6 52.0
Selling, general and administrative......................... 546.0 537.1 429.7
-------- -------- --------
Operating expenses.......................................... 626.7 608.7 481.7
-------- -------- --------
Operating Profit............................................ 400.9 248.3 268.0
Interest expense............................................ 12.0 7.4 --
-------- -------- --------
Earnings before income taxes................................ 388.9 240.9 268.0
Provision for income taxes.................................. 131.1 91.1 92.0
-------- -------- --------
Net Earnings................................................ $ 257.8 $ 149.8 $ 176.0
======== ======== ========
Earnings Per Common Share
Basic....................................................... $ 1.33 $ 0.77 $ 0.91
Diluted..................................................... $ 1.31 $ 0.77 $ 0.91
Weighted Average Common Shares Outstanding
Basic....................................................... 194.5 193.7 193.6
Diluted..................................................... 196.8 194.3 193.6
</Table>

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

F-3

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
DECEMBER 31,
--------------------
2002 2001
-------- --------
(IN MILLIONS, EXCEPT
SHARE AMOUNTS)

ASSETS
Current Assets:
Cash and equivalents...................................... $ 15.7 $ 18.4
Accounts receivable, less allowance for doubtful
accounts............................................... 214.8 181.7
Inventories, net.......................................... 257.6 200.0
Prepaid expenses.......................................... 71.7 59.3
Deferred income taxes..................................... 52.6 49.2
------ ------
Total Current Assets........................................ 612.4 508.6
Property, Plant and Equipment, net.......................... 157.8 148.2
Deferred Income Taxes....................................... 70.1 66.8
Other Assets................................................ 18.6 21.4
------ ------
Total Assets................................................ $858.9 $745.0
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 59.8 $ 67.4
Income taxes payable...................................... 19.5 4.3
Other current liabilities................................. 164.8 151.4
Short-term debt........................................... 156.7 150.0
------ ------
Total Current Liabilities................................... 400.8 373.1
Other Long-term Liabilities................................. 91.8 79.3
Long-term Debt.............................................. -- 213.9
------ ------
Total Liabilities........................................... 492.6 666.3
------ ------
Commitments and Contingencies (Note 17)
Stockholders' Equity:
Common stock, $0.01 par value, one billion shares
authorized, 195.2 million (193.9 million in 2001)
issued and outstanding................................. 2.0 1.9
Paid-in capital........................................... 36.9 4.4
Retained earnings......................................... 313.4 55.6
Accumulated other comprehensive income.................... 14.0 16.8
------ ------
Total Stockholders' Equity.................................. 366.3 78.7
------ ------
Total Liabilities and Stockholders' Equity.................. $858.9 $745.0
====== ======
</Table>

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

F-4

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<Table>
<Caption>
ACCUMULATED NET
COMMON SHARES OTHER INVESTMENT TOTAL
--------------- PAID-IN RETAINED COMPREHENSIVE BY FORMER STOCKHOLDERS'
NUMBER AMOUNT CAPITAL EARNINGS INCOME PARENT EQUITY
------ ------ ------- -------- ------------- ---------- -------------
(IN MILLIONS)

Balance January 1, 2000..... -- $ -- $ -- $ -- $ 7.3 $ 384.0 $ 391.3
-------
Net earnings................ -- -- -- -- -- 176.0 176.0
Foreign currency
translation............... -- -- -- -- (0.3) -- (0.3)
-------
Comprehensive income........ -- -- -- -- -- -- 175.7
-------
Net cash transferred to
former parent............. -- -- -- -- -- (306.0) (306.0)
----- ---- ----- ------ ------ ------- -------
Balance December 31, 2000... -- -- -- -- 7.0 254.0 261.0
Net earnings................ -- -- -- 69.7 -- 80.1 149.8
Foreign currency
translation............... -- -- -- -- 2.6 -- 2.6
Unrealized foreign currency
hedge gains, net of tax... -- -- -- -- 12.1 -- 12.1
Reclassification
adjustment................ -- -- -- -- (4.9) -- (4.9)
-------
Comprehensive income........ -- -- -- -- -- -- 159.6
-------
Net cash transferred to
former parent............. -- -- -- -- -- (56.3) (56.3)
Dividend to former parent... -- -- -- -- -- (290.0) (290.0)
Issuance of common stock.... 193.6 1.9 -- -- -- (1.9)
Reclassification of
remaining net investment
of former parent.......... -- -- -- (14.1) -- 14.1 --
Exercise of stock options
and issuance of restricted
stock..................... 0.3 -- 4.4 -- -- -- 4.4
----- ---- ----- ------ ------ ------- -------
Balance December 31, 2001... 193.9 1.9 4.4 55.6 16.8 -- 78.7
Net earnings................ -- -- -- 257.8 -- -- 257.8
Foreign currency
translation............... -- -- -- -- 13.5 -- 13.5
Unrealized foreign currency
hedge losses, net of
tax....................... -- -- -- -- (12.2) -- (12.2)
Reclassification
adjustment................ -- -- -- -- (3.5) -- (3.5)
Minimum pension liability,
net of tax................ -- -- -- -- (0.6) -- (0.6)
-------
Comprehensive income........ -- -- -- -- -- -- 255.0
-------
Exercise of stock options
and issuance of restricted
stock..................... 1.3 0.1 32.5 -- -- -- 32.6
----- ---- ----- ------ ------ ------- -------
Balance December 31, 2002... 195.2 $2.0 $36.9 $313.4 $ 14.0 $ -- $ 366.3
===== ==== ===== ====== ====== ======= =======
</Table>

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

F-5

ZIMMER HOLDINGS, INC. AND CONTROLLED ENTITIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
2002 2001 2000
------- ------- -------
(IN MILLIONS)

Cash flows provided by (used in) operating activities:
Net earnings.............................................. $ 257.8 $ 149.8 $ 176.0
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation........................................... 25.3 23.4 23.1
Income taxes........................................... 29.9 1.1 7.8
Receivables............................................ (25.0) 2.6 7.8
Inventories............................................ (59.7) (50.2) (2.1)
Accounts payable and accrued liabilities............... (12.2) 41.9 14.5
Other assets and liabilities........................... 4.1 3.2 5.3
------- ------- -------
Net cash provided by operating activities......... 220.2 171.8 232.4
------- ------- -------
Cash flows used in investing activities:
Additions to property, plant and equipment................ (33.7) (54.7) (29.0)
Investments in other assets............................... (2.0)
------- ------- -------
Net cash used in investing activities....................... (35.7) (54.7) (29.0)
------- ------- -------
Cash flows provided by (used in) financing activities:
Proceeds from (payments of) borrowings, net............... (212.8) 366.3 --
Dividend paid to former parent............................ -- (290.0) --
Net increase (decrease) in due to former parent........... -- (144.0) 102.6
Net transactions with former parent....................... -- (32.8) (306.0)
Proceeds from exercise of stock options................... 23.9 1.4 --
------- ------- -------
Net cash used in financing activities............. (188.9) (99.1) (203.4)
------- ------- -------
Effect of exchange rates on cash and equivalents............ 1.7 0.4 --
------- ------- -------
Increase (decrease) in cash and equivalents....... (2.7) 18.4 --
Cash and equivalents, beginning of year..................... 18.4 -- --
------- ------- -------
Cash and equivalents, end of year........................... $ 15.7 $ 18.4 $ --
======= ======= =======
</Table>

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

F-6

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

Zimmer Holdings, Inc. and its subsidiaries (individually and collectively
the "Company") design, develop, manufacture and market orthopaedic
reconstructive implants and trauma products. Orthopedic reconstructive implants
restore joint function lost due to disease or trauma in joints such as knees,
hips, shoulders and elbows, while trauma products are devices used primarily to
reattach or stabilize damaged bone and tissue to support the body's natural
healing process. The Company also manufactures and markets other products
relating to orthopaedic and general surgery. The Company has operations in 20
countries and markets its products in 70 countries. The Company operates in a
single industry but has three reportable geographic segments.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- The consolidated financial statements include the
accounts of the Company after elimination of all significant intercompany
accounts and transactions. The consolidated financial statements represent the
Company's operations as a public company commencing on August 6, 2001, combined
with the operations of Zimmer as a division of its former parent prior to
becoming a public company. For periods prior to August 6, 2001, intercompany
accounts with its former parent, other than specific outstanding obligations,
were combined with invested capital and reported in the consolidated financial
statements as net investment by former parent. Certain amounts in the 2001 and
2000 consolidated financial statements have been reclassified to conform to the
2002 presentation.

Use of Estimates -- The consolidated financial statements are prepared in
conformity with accounting principles generally accepted in the United States
and, accordingly, include amounts that are based on management's best estimates
and judgments. Actual results could differ from those estimates.

Foreign Currency Translation -- The financial statements of the Company's
foreign subsidiaries are translated into U.S. dollars using period-end exchange
rates for assets and liabilities and average exchange rates for operating
results. Unrealized translation gains and losses are included in accumulated
other comprehensive income in stockholders' equity. Foreign currency transaction
gains and losses included in net earnings are not material.

Revenue Recognition -- A significant portion of the Company's revenue is
recognized for field based product upon notification that the product has been
implanted or used. For all other transactions, the Company recognizes revenue
when title is passed to customers, generally upon shipment. Estimated returns
and allowances are recorded as a reduction of sales when the revenue is
recognized. The reserves for doubtful accounts were $7.2 million and $6.5
million as of December 31, 2002 and 2001, respectively.

Cash and Equivalents -- The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents. The
Company currently does not have any investments which would not be considered
cash equivalents. The carrying amounts reported in the balance sheet for cash
and cash equivalents are valued at cost, which approximates their fair value.

Inventories -- Inventories, net of allowances for obsolete and slow-moving
goods, are stated at the lower of cost or market, with cost determined on the
basis of average costing.

Prepaid Expenses -- Prepaid expenses include the cost of instruments in
stock for surgical procedures consigned for use in connection with implantation
of the Company's products. These costs are recognized in selling, general and
administrative expense in the year in which the instruments are placed into
service.

Property, Plant and Equipment -- Property, plant and equipment is carried
at cost less accumulated depreciation. Depreciation is computed based on the
estimated useful lives of ten to forty years for buildings and improvements and
3 to 8 years for machinery and equipment using the straight-line method.
Maintenance

F-7

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and repairs are expensed as incurred. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," the Company reviews property, plant and
equipment for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. An impairment loss
would be recognized when estimated future cash flows relating to the asset are
less than its carrying amount.

Research and Development -- The Company expenses all research and
development costs as incurred. Research and development costs include salaries,
prototypes, depreciation of equipment used in research and development,
consultant fees and amounts paid to collaborative partners.

Income Taxes -- The Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates in effect for the years in which the differences are expected
to reverse. Federal income taxes are provided on the portion of the income of
foreign subsidiaries that is expected to be remitted to the U.S.

Derivative Financial Instruments -- The Company accounts for all derivative
financial instruments in accordance with SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires that all
derivative instruments be required as assets or liabilities on the balance sheet
and measured at fair value. The Company maintains written policies and
procedures that permit, under appropriate circumstances and subject to proper
authorization, the use of derivative financial instruments solely for hedging
purposes. The use of derivative financial instruments for trading or speculative
purposes is prohibited. The Company utilizes foreign exchange forward contracts
to offset the effect of exchange rate fluctuations on anticipated foreign
currency transactions, primarily intercompany sales and purchases expected to
occur within the next twelve to twenty-four months. Derivative instruments that
qualify as cash flow hedges are designated as such from inception. Formal
documentation is maintained of the Company's objectives, the nature of the risk
being hedged, identification of the instrument, the hedged transaction, the
hedging relationship and how effectiveness of the hedging instrument will be
assessed. The Company's policy requires that critical terms of a hedging
instrument are essentially the same as a hedged forecasted transaction. On this
basis, with respect to a cash flow hedge, changes in cash flows attributable to
the hedged transaction are generally expected to be completely offset by the
cash flows attributable to hedge instruments. The Company, therefore, performs
quarterly assessments of hedge effectiveness by verifying and documenting that
critical terms of the hedge instrument and forecasted transactions have not
changed. The Company also assesses 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 earnings when the hedged item affects net earnings. The
ineffective portion of a derivative's change in fair value, if any, is reported
in net earnings.

Stock Compensation -- At December 31, 2002, the Company has three
stock-based employee compensation plans, which are described more fully in Note
10. The Company accounts for those plans under the recognition and measurement
principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations. No stock based employee compensation cost is
reflected in net income, as all options granted under those plans had exercise
prices equal to the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income and

F-8

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

earnings per share if the Company had applied the fair value recognition
provisions of SFAS No. 123, "Accounting for Stock Based Compensation," to the
above plans.

<Table>
<Caption>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
2002 2001 2000
------ ------ ------
(IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)

Net income, as reported.................................... $257.8 $149.8 $176.0
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of tax............................................... (12.7) (13.4) (7.8)
------ ------ ------
Pro forma net income....................................... $245.1 $136.4 $168.2
====== ====== ======
Earnings per share:
Basic -- as reported..................................... $ 1.33 $ 0.77 $ 0.91
Basic -- pro forma....................................... 1.26 0.70 0.87
Diluted -- as reported................................... 1.31 0.77 0.91
Diluted -- pro forma..................................... 1.25 0.70 0.87
</Table>

Comprehensive Income -- Other comprehensive income refers to revenues,
expenses, gains and losses that under generally accepted accounting principles
are included in comprehensive income but are excluded from net earnings as these
amounts are recorded directly as an adjustment to stockholders' equity. The
Company's other comprehensive income is comprised of unrealized foreign currency
hedge gains and losses, net of tax, minimum pension liability adjustments, net
of tax, and foreign currency translation adjustments.

The components of accumulated other comprehensive income at December 31,
2002 and 2001, are as follows (in millions):

<Table>
<Caption>
2002 2001
----- -----

Net unrealized foreign currency hedge gains (losses)........ $(8.5) $ 7.2
Cumulative translation adjustment........................... 23.1 9.6
Minimum pension liability................................... (0.6) --
----- -----
$14.0 $16.8
===== =====
</Table>

Accounting Pronouncements -- Effective January 1, 2002, the Company adopted
the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets," and SFAS
No. 144 without any material impact on its financial position, results of
operations or cash flows.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. This pronouncement is not expected to have a material effect on the
Company's financial position, results of operations or cash flows.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses the
financial accounting and reporting for exit and disposal activities and certain
costs associated with those activities. SFAS No. 146 requires that a liability
for a cost associated with an exit or disposal activity, other than certain
one-time termination benefits, be measured initially at its fair value and
recognized in the period in which the liability is incurred. SFAS No. 146 is
effective for exit or

F-9

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

disposal activities that are initiated after December 31, 2002. This
pronouncement is not expected to have a material effect on the Company's
financial position, results of operations or cash flows.

On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure." SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition to the fair value method of accounting for stock-based
employee compensation. SFAS No. 148 also amends the disclosure provisions of
SFAS No. 123 and APB Opinion No. 28, "Interim Financial Reporting," to require
disclosure in the summary of significant accounting policies of the effects of
an entity's accounting policy with respect to stock-based employee compensation
on reported net earnings and earnings per share in annual and interim financial
statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies
to account for employee stock options using the fair value method, the
disclosure provisions of SFAS No. 148 are applicable to all companies with
stock-based employee compensation, regardless of whether they account for that
compensation using the fair value method of SFAS No. 123 or the intrinsic value
method of APB Opinion No. 25. The Company adopted SFAS No. 148 on December 31,
2002.

3. INVENTORIES

Inventories at December 31, 2002 and 2001, consist of the following (in
millions):

<Table>
<Caption>
2002 2001
------ ------

Finished goods.............................................. $206.7 $158.4
Raw materials and work in progress.......................... 50.9 41.6
------ ------
Inventories, net............................................ $257.6 $200.0
====== ======
</Table>

Reserves for obsolete and slow-moving inventory at December 31, 2002 and
2001 were $45.5 million and $43.3 million, respectively. Provisions charged to
expense were $6.0 million, $11.9 million and $12.1 million for the years ended
December 31, 2002, 2001 and 2000, respectively. Amounts written off against the
reserve were $7.1 million, $8.5 million and $8.5 million for the years ended
December 31, 2002, 2001 and 2000, respectively.

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2002 and 2001, was as follows
(in millions):

<Table>
<Caption>
2002 2001
------- -------

Land........................................................ $ 8.2 $ 8.0
Building and equipment...................................... 354.4 320.3
Construction in progress.................................... 13.3 27.8
------- -------
375.9 356.1
Accumulated depreciation.................................... (218.1) (207.9)
------- -------
Property, plant and equipment, net.......................... $ 157.8 $ 148.2
======= =======
</Table>

F-10

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. OTHER CURRENT LIABILITIES

Other current liabilities at December 31, 2002 and 2001, consist of the
following (in millions):

<Table>
<Caption>
2002 2001
------ ------

Service arrangements........................................ $ 59.6 $ 49.5
Salaries, wages and benefits................................ 29.0 39.2
Accrued liabilities......................................... 76.2 62.7
------ ------
Total other current liabilities............................. $164.8 $151.4
====== ======
</Table>

6. OTHER LONG-TERM LIABILITIES

Included in Other Long-term Liabilities at December 31, 2002 and 2001 were
$43.5 million and $30.7 million, respectively, of accrued distributor benefits.
The Company's independent distributors accrue benefits based upon Company
financial performance.

7. DEBT

CREDIT FACILITY

The Company has a $600 million multi-currency, revolving senior unsecured
syndicated Credit Facility that matures on July 31, 2004. Borrowings under the
Credit Facility may bear interest at the appropriate LIBOR rate, depending upon
the currency denomination of the borrowing, or an alternative base rate, in each
case, an applicable margin determined by reference to the Company's senior
unsecured long-term debt rating and the amounts drawn under the Credit Facility.

As of December 31, 2002, the Company had $156.7 million in outstanding
borrowings, including $156.2 million under the Credit Facility. As of December
31, 2002, the Credit Facility borrowings were comprised of $82 million in U.S.
dollar based borrowings with a weighted average interest rate of 3.42 percent
(4.35 percent as of December 31, 2001) and the equivalent of $74.2 million in
Japanese Yen based borrowings with a weighted average interest rate of 0.93
percent (1.17 percent as of December 31, 2001). The borrowings under the Credit
Facility have been classified as short term based on the Company's expectation
it will be repaid by the end of 2003.

The Credit Facility is to be used for general corporate purposes. The
Credit Facility also allows for the issuance of letters of credit.

The Credit Facility contains customary affirmative and negative covenants
and events of default for an unsecured financing arrangement, none of which are
considered restrictive to the operation of the business. Financial covenants
include a maximum leverage ratio and a minimum interest coverage ratio. The
Company was in compliance with all covenants under the Credit Facility as of
December 31, 2002. Also, the Credit Facility restricts the payment of dividends
and the making of investments if the Company does not have an investment grade
rating, as defined. The Company's credit rating as of December 31, 2002 met such
requirement. Commitments under the Credit Facility are subject to certain fees,
including a facility and a utilization fee.

UNCOMMITTED CREDIT FACILITIES

The Company has a $26 million uncommitted unsecured revolving line of
credit. The purpose of this credit line is to support the working capital needs,
letters of credit and overdraft needs for the Company. The uncommitted credit
agreement contains customary affirmative and negative covenants and events of
default, none of which are considered restrictive to the operation of the
business. In addition, this uncommitted credit

F-11

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreement provides for unconditional and irrevocable guarantees by the Company.
In the event the Company's long-term debt ratings by both Standard and Poor's
Ratings Services and Moody's Investor's Service, Inc., fall below BB- and Ba3,
then the Company may be required to repay all outstanding and contingent
obligations. The Company's credit rating as of December 31, 2002 met such
requirement. This uncommitted credit line matures on July 31, 2003. Outstanding
borrowings under this uncommitted line of credit as of December 31, 2002 were
$0.5 million with a weighted average interest rate of 6.35%.

The Company also has a $15 million uncommitted revolving unsecured line of
credit. The purpose of this line of credit is to support short-term working
capital needs of the Company. The agreement for this uncommitted unsecured line
of credit contains customary covenants, none of which are considered restrictive
to the operation of the business. This uncommitted line matures on July 31,
2003. There were no borrowings under this uncommitted line of credit as of
December 31, 2002.

The Company has a $20 million uncommitted revolving unsecured line of
credit. The purpose of this line of credit is to support short-term working
capital needs of the Company. The pricing is based upon money market rates. The
agreement for this uncommitted unsecured line of credit contains customary
covenants, none of which are considered restrictive to the operation of the
business. This uncommitted line matures on July 31, 2003. There were no
borrowings under this uncommitted line of credit as of December 31, 2002.

The Company was in compliance with all covenants under all three of the
uncommitted credit facilities as of December 31, 2002. The Company had no
long-term debt as of December 31, 2002.

Outstanding debt as of December 31, 2002 and 2001, consist of the following
(in millions):

<Table>
<Caption>
2002 2001
------ ------

Credit Facility............................................. $156.2 $358.2
Uncommitted credit facilities............................... 0.5 5.7
------ ------
Total debt.................................................. $156.7 $363.9
====== ======
</Table>

The Company paid $13.0 million and $4.6 million in interest charges during
2002 and 2001, respectively.

FAIR VALUE

The carrying value of the Company's borrowings approximates fair value due
to their short term maturities and variable interest rates.

8. DERIVATIVE FINANCIAL INSTRUMENTS

F-12

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The notional amounts of outstanding foreign exchange forward contracts,
principally Japanese Yen and the Euro, entered into with third parties, at
December 31, 2002, was $252 million. The fair value of derivative instruments
recorded in accrued liabilities at December 31, 2002, was $13.8 million, or $8.5
million net of taxes, which is deferred in other comprehensive income and is
expected to be reclassified to earnings over the next two years, of which, $7.7
million, or $4.8 million, net of taxes, is expected to be reclassified to
earnings over the next twelve months.

9. CAPITAL STOCK AND EARNINGS PER SHARE

As discussed in Note 14, all of the shares of Company common stock were
distributed at the Distribution by the former parent to its stockholders in the
form of a dividend of one share of Company common stock, and the associated
preferred stock purchase right, for every ten shares of common stock of the
former parent. In July 2001 the board of directors of the Company adopted a
rights agreement intended to have anti-takeover effects. Under this agreement
one right attaches to each share of Company common stock. The rights will not
become exercisable until the earlier of: a) the Company learns that a person or
group acquired, or obtained the right to acquire, beneficial ownership of
securities representing more than 20 percent of the shares of Company common
stock then outstanding, or b) such date, if any, as may be designated by the
board of directors following the commencement of, or first public disclosure of
an intention to commence, a tender offer or exchange offer for shares of Company
common stock then outstanding that could result in a person or group acquiring,
or obtaining the right to acquire, beneficial ownership of securities
representing more than 20 percent of Company common stock then outstanding.

The board of directors authorized for issuance 2 million shares of a series
of preferred stock of the Company designated as Series A Participating
Cumulative Preferred Stock ("Series A Preferred Stock") in connection with the
adoption of the rights agreement. Shares of the Series A Preferred Stock are
only issuable upon the exercise of the rights. No shares of the Series A
Preferred Stock have been issued as of December 31, 2002.

The board of directors may redeem all of the rights at a redemption price
of $0.01 per right. If not previously exercised or redeemed, the rights will
expire 10 years from the date that the rights agreement commenced.

The numerator for both basic and diluted earnings per share is net earnings
available to common stockholders. The denominator for basic earnings per share
is the weighted average number of common shares outstanding during the period.
The denominator for diluted earnings per share is weighted average shares
outstanding adjusted for the effect of dilutive stock options. The following is
a reconciliation of weighted average shares for the basic and diluted share
computations (in millions):

<Table>
<Caption>
2002 2001 2000
----- ----- -----

Weighted average shares outstanding for basic net earnings
per share................................................. 194.5 193.7 193.6
Effect of dilutive stock options............................ 2.3 0.6 --
----- ----- -----
Weighted average shares outstanding for diluted net earnings
per share................................................. 196.8 194.3 193.6
===== ===== =====
</Table>

For periods prior to the Distribution, basic and diluted shares outstanding
are assumed to be equivalent to the number of shares of Company common stock
outstanding immediately following the Distribution.

10. STOCK OPTION AND COMPENSATION PLANS

As of December 31, 2002, the Company had three stock option plans in
effect, the 2001 Stock Incentive Plan, the TeamShare Stock Option Plan and the
Stock Plan for Non-Employee Directors. The Company has reserved the maximum
number of shares of common stock available for award under the terms of each of

F-13

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

these plans and has registered 34.3 million shares of common stock. Options may
be granted under these plans at a price of not less than the fair market value
of a share of common stock on the date of grant. The 2001 Stock Incentive Plan
provides for the grant of nonqualified stock options and incentive stock
options, long-term performance awards, restricted stock awards and deferred
stock units. Options granted under the 2001 Stock Incentive Plan may include
stock appreciation rights. The TeamShare Stock Option Plan provides for the
grant of non-qualified stock option and stock appreciation rights while the
Stock Plan for Non-Employee Directors provides for awards of stock options,
restricted stock and restricted stock units to non-employee directors.

Options granted under these plans generally vest over three to five years,
although in no event in less than one year, and expire ten years from the date
of grant. Certain options have price thresholds, which affect exercisability.

Under the 2001 Stock Incentive Plan, the total number of awards which may
be granted in a given year pursuant to options and other awards under the plan
may not exceed 1.9 percent of the outstanding shares of the Company's stock on
the effective date of the Plan for 2001 or January 1 of each subsequent year,
plus the number of shares from the prior year that were available for grant but
not granted, that were granted but subsequently terminated, expired, cancelled
or surrendered without being exercised or tendered in the prior year to pay for
options or satisfy tax withholding requirements. No participant may receive
options or awards which in the aggregate exceed 2 million shares of stock over
the life of the Plan.

At the Distribution, certain options to purchase Bristol-Myers Squibb stock
that were held by Company employees were converted to Company stock options
under either the 2001 Stock Incentive Plan or the TeamShare Stock Option Plan.
The options were converted at quantities and exercise prices that maintained the
intrinsic value of the option as it existed immediately prior to the
Distribution. The vesting dates and exercise periods of the options were not
affected by the conversion.

A summary of the status of all options granted to employees and
non-employee directors at December 31 and changes during the period from the
distribution date is presented below:

<Table>
<Caption>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
-------------- ----------------
(IN THOUSANDS)

Conversion of Bristol-Myers Squibb options on
Distribution.......................................... 8,700 $23.93
Options granted......................................... 2,239 28.67
Options exercised....................................... (129) 12.80
Options cancelled....................................... (83) 29.88
------ ------
Outstanding at December 31, 2001........................ 10,727 25.01
Options granted......................................... 1,833 30.34
Options exercised....................................... (1,262) 18.94
Options cancelled....................................... (263) 28.73
------ ------
Outstanding at December 31, 2002........................ 11,035 $26.51
====== ======
</Table>

F-14

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
at December 31, 2002:

<Table>
<Caption>
OUTSTANDING EXERCISABLE
---------------------------- ------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
RANGE OF EXERCISE PRICES OPTIONS LIFE PRICE OPTIONS PRICE
- ------------------------ -------------- ----------- -------- -------------- --------
(IN THOUSANDS) (IN THOUSANDS)

$ 6.25-$17.00 1,275 2.93 $10.92 1,275 $10.92
$17.01-$27.50 3,675 6.61 24.83 2,021 24.59
$27.51-$37.50 6,085 8.02 30.78 1,367 31.28
------ -----
11,035 4,663
====== =====
</Table>

Options exercisable at December 31, 2002 and 2001, were 4.7 million and 4.0
million, respectively, with average exercise prices of $22.81 and $19.15,
respectively.

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:

<Table>
<Caption>
2002 2001 2000
---- ---- ----

Dividend Yield.............................................. --% --% 1.5%
Volatility.................................................. 30.3% 41.7% 24.5%
Risk-free interest rate..................................... 4.6% 4.8% 6.3%
Assumed forfeiture rate..................................... 3.0% 3.0% 3.0%
Expected life (years)....................................... 5 7 7
</Table>

The above assumptions for 2002 and 2001 pertain to the Company, while 2000
assumptions are associated with the Company's former parent.

The weighted average fair value for options granted during 2002, 2001 and
2000 was $10.63, $14.10 and $16.34, respectively.

See Note 2 for the effect on net earnings and earnings per share if the
Company had applied the fair value recognition provisions of SFAS No. 123 to
stock based employee compensation.

RESTRICTED STOCK

At the Distribution, certain members of management had restricted stock
grants for Bristol-Myers Squibb stock which were converted into Company
restricted stock grants at quantities and prices that maintained the intrinsic
value that existed immediately prior to the Distribution. Total converted grants
represented 106,560 shares at the Distribution. Subsequent to the Distribution,
restrictions on 32,578 and 20,361 shares were eliminated in 2002 and 2001,
respectively. In addition, restricted stock grants were made for 50,200 and
33,681 shares in 2002 and 2001, respectively. The awards are being expensed over
the vesting period of five years from date of grant and the expense recorded by
the Company for all periods presented was not significant.

11. RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

The Company has defined benefit pension plans covering substantially all
U.S. and Puerto Rico employees. 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, the Company sponsors various

F-15

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

non-U.S. pension arrangements, including retirement and termination benefit
plans required by local law or coordinated with government sponsored plans.

The Company also provides comprehensive medical and group life insurance
benefits to substantially all U.S. and Puerto Rico retirees who elect to
participate in the Company's comprehensive medical and group life plans. The
medical plan is contributory, and the life insurance plan is non-contributory.
No similar plans exist for employees outside the U.S. and Puerto Rico.

In both the U.S. and jurisdictions outside of the U.S., the Company has
adopted employee benefit plans that are comparable to those of its former
parent. In general, for purposes of determining eligibility to participate,
eligibility for benefits, benefit forms and vesting under Company plans, each
active employee is credited with his or her service with the former parent to
the extent the corresponding plans of the former parent gave credit for such
service.

In connection with the Distribution, the Company and its former parent
entered into an Employee Benefits Agreement which allocated responsibilities
relating to employee compensation, benefit plans and programs and other related
matters. Under the agreement, as of a specified date, active employees of the
Company ceased to be active participants in benefit plans maintained by the
former parent and became eligible to participate in all applicable Company
plans.

The agreement provides that, as of the Distribution, the Company assumed,
retained and is liable for all wages, salaries, welfare, incentive compensation
and other employee-related obligations and liabilities for all current and
former employees of the Company, except as specifically provided otherwise. The
former parent retained certain obligations for domestic pension benefits for
services rendered through the Distribution. The former parent also retained
obligations for medical and group life insurance benefits for all domestic
retirees and those employees eligible to retire as of the Distribution.
Substantially all assets funding its pension and postretirement benefit plans
were retained by the former parent.

The components of net pension expense as of December 31 for the Company's
defined benefit retirement plans subsequent to the Distribution are as follows
(in millions):

<Table>
<Caption>
U.S. AND
PUERTO RICO NON-U.S.
------------ -------------
2002 2001 2002 2001
----- ---- ----- -----

Service cost............................................. $ 7.2 $2.3 $ 2.0 $ 1.4
Interest cost............................................ 2.0 0.7 0.7 0.5
Expected return on plan assets........................... (1.2) -- (1.0) (0.5)
Amortization of prior service cost....................... 0.1 -- -- --
Amortization of unrecognized actuarial (gain) loss....... 0.1 -- 0.2 (0.1)
----- ---- ----- -----
Net periodic benefit cost................................ $ 8.2 $3.0 $ 1.9 $ 1.3
===== ==== ===== =====
</Table>

The weighted average actuarial assumptions used in accounting for the
Company's defined benefit retirement plans were as follows:

<Table>
<Caption>
U.S. AND
PUERTO RICO NON-U.S.
----------- -----------
2002 2001 2002 2001
---- ---- ---- ----

Discount rate.............................................. 7.00% 7.25% 4.17% 3.64%
Rate of compensation increase.............................. 3.60% 3.50% 3.17% 2.92%
Expected long-term rate of return on plan assets........... 9.00% 9.00% 5.95% 5.68%
</Table>

F-16

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in benefit obligations and plan assets, for December 31, 2002 and
2001 for the Company's pension plans, were (in millions):

<Table>
<Caption>
U.S. AND
PUERTO RICO NON-U.S.
--------------- -------------
2002 2001 2002 2001
------ ------ ----- -----

Benefit obligation -- beginning of year.............. $ 25.5 $ -- $13.3 $12.6
Obligation assumed from former parent................ -- 22.6 3.9 3.3
Plan amendments...................................... (1.6) -- -- --
Service cost......................................... 7.2 2.3 2.0 1.3
Interest cost........................................ 2.0 0.7 0.7 0.5
Benefits paid........................................ (0.1) (0.1) (0.6) (2.6)
Actuarial (gain) loss................................ 9.5 -- 0.6 (0.1)
Exchange rate gain (loss)............................ -- -- 1.7 (1.7)
------ ------ ----- -----
Benefit obligation -- end of year.................... $ 42.5 $ 25.5 $21.6 $13.3
====== ====== ===== =====
Plan assets at fair market value -- beginning of
year............................................... $ 2.2 $ -- $12.5 $12.6
Assets contributed by former parent.................. -- 2.3 3.6 3.1
Actual return on plan assets......................... (1.0) -- (2.0) (0.5)
Company contributions................................ 20.7 -- 2.7 1.6
Benefits paid........................................ (0.2) (0.1) (0.6) (2.6)
Expenses............................................. (0.3) -- -- --
Exchange rate gain (loss)............................ -- -- 1.1 (1.7)
------ ------ ----- -----
Plan assets at fair market value -- end of year...... $ 21.4 $ 2.2 $17.3 $12.5
====== ====== ===== =====
Funded status........................................ $(21.1) $(23.3) $(4.3) $(0.8)
Unrecognized prior service cost...................... (1.5) 0.2 -- 0.1
Unrecognized actuarial (gain) loss................... 9.8 (2.2) 8.4 4.4
------ ------ ----- -----
Net amount recognized................................ $(12.8) $(25.3) $ 4.1 $ 3.7
====== ====== ===== =====
Amounts recognized in consolidated balance sheet:
Prepaid pension.................................... $ -- $ -- $ 5.0 $ 4.4
Accrued benefit liability.......................... (13.9) (25.3) (0.9) (0.7)
Accumulated other comprehensive income............. 1.1 -- -- --
------ ------ ----- -----
Net amount recognized.............................. $(12.8) $(25.3) $ 4.1 $ 3.7
====== ====== ===== =====
</Table>

The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the Company's U.S. and Puerto Rico pension plans with
accumulated benefit obligations in excess of plan assets were $38.9 million,
$21.5 million and $20.5 million, respectively, as of December 31, 2002 and $25.5
million, $8.8 million and $2.2 million, respectively, as of December 31, 2001.

F-17

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of net periodic expense as of December 31 for the Company's
postretirement benefit plans subsequent to the Distribution are as follows (in
millions):

<Table>
<Caption>
DECEMBER 31, 2002 2001
- ------------ ---- ----

Service cost................................................ $1.1 $0.5
Interest cost............................................... 1.2 0.5
---- ----
Net periodic benefit cost................................... $2.3 $1.0
==== ====
</Table>

The weighted average actuarial assumptions used in accounting for the
Company's postretirement benefit plans were as follows:

<Table>
<Caption>
DECEMBER 31, 2002 2001
- ------------ ----- ----

Discount rate............................................... 7.00% 7.25%
Initial health care cost trend rate......................... 10.00% 9.00%
Ultimate health care cost trend rate........................ 5.00% 5.00%
First year of ultimate trend rate........................... 2012 2008
</Table>

Changes in benefit obligations and plan assets, from the Distribution to
December 31, 2002 for the Company's postretirement benefit plans, were (in
millions):

<Table>
<Caption>
DECEMBER 31, 2002 2001
- ------------ ------ ------

Benefit obligation -- beginning of year..................... $ 18.1 $ --
Obligation assumed from former parent....................... -- 17.1
Service cost................................................ 1.1 0.5
Interest cost............................................... 1.2 0.5
Actuarial loss.............................................. 0.1 --
------ ------
Benefit obligation -- end of year........................... $ 20.5 $ 18.1
------ ------
Funded status............................................... $(20.5) $(18.1)
Unrecognized prior service cost............................. (0.1) (0.1)
Unrecognized actuarial loss................................. 2.1 2.0
------ ------
Net amount recognized....................................... $(18.5) $(16.2)
====== ======
Accrued benefit liability recognized........................ $(18.5) $(16.2)
====== ======
</Table>

As of December 31, 2002 and 2001, the Company has no assets in its
postretirement benefit plans.

A one percentage point change in the assumed health care cost trend rates
would have no significant effect on the service and interest cost components of
net postretirement benefit expense and the accumulated postretirement benefit
obligation. The effect of a change in the healthcare cost trend rate is tempered
by a cap that limits medical costs to be paid by the Company.

Included in the consolidated statement of earnings are allocations from the
Company's former parent for expenses specifically attributable to the Company's
employees' participation in its retirement and postretirement benefit plans for
periods prior to the Distribution. Amounts included were $6.0 million and $10.0
million for the years ended December 31, 2001 and 2000, respectively.

The Company also sponsors defined contribution plans for substantially all
of the U.S. and Puerto Rico employees. The principal defined contribution plan
is the Zimmer Holdings, Inc. Savings and Investment Program. The Company's
contribution under this plan is based on employee contributions and the level of

F-18

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

company match. The Company recognized $3.5 million, $3.0 million and $3.0
million of expense for the savings and investment program for the years ended
December 31, 2002, 2001 and 2000, respectively.

12. INCOME TAXES

The components of earnings before taxes consist of the following (in
millions):

<Table>
<Caption>
2002 2001 2000
------ ------ ------

United States operations................................... $292.0 $200.4 $211.0
Foreign operations......................................... 96.9 40.5 57.0
------ ------ ------
Total...................................................... $388.9 $240.9 $268.0
====== ====== ======
</Table>

The provision for income taxes consists of (in millions):

<Table>

Current:
Federal................................................... $ 79.9 $68.8 $58.2
State..................................................... 12.9 15.9 10.8
Foreign................................................... 34.4 28.6 26.0
------ ----- -----
127.2 113.3 95.0
------ ----- -----
Deferred:
Federal................................................... 3.3 (9.5) 2.7
State..................................................... (1.3) (1.6) 0.3
Foreign................................................... 1.9 (11.1) (6.0)
------ ----- -----
3.9 (22.2) (3.0)
------ ----- -----
$131.1 $91.1 $92.0
====== ===== =====
</Table>

For periods prior to the Distribution, the income tax provision was
calculated on a separate return basis while actual tax payments were made on a
combined return basis by the Company's former parent. Income taxes paid by the
Company during 2002 and 2001 (for the period after the Distribution) were $114.2
million and $43.4 million, respectively.

A reconciliation of the U.S. statutory income tax rate to the Company's
effective tax rate is as follows:

<Table>
<Caption>
2002 2001 2000
---- ---- ----

U.S. statutory income tax rate.............................. 35.0% 35.0% 35.0%
State taxes, net of federal deduction....................... 3.0 3.9 2.7
Foreign income taxes at rates different from
the U.S. statutory rate, net of foreign tax credits....... -- 0.9 (1.0)
Tax benefit relating to operations in Puerto Rico........... (2.6) (2.6) (1.2)
Earnings of Foreign Sales Corporation....................... (1.1) (1.4) (1.8)
R&D Credit.................................................. (0.6) (0.1) --
Non-deductible separation costs............................. -- 1.9 --
Other....................................................... -- 0.2 0.6
---- ---- ----
Effective income tax rate................................... 33.7% 37.8% 34.3%
==== ==== ====
</Table>

F-19

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of
deferred income taxes consisted of the following (in millions):

<Table>
<Caption>
2002 2001
------ ------

Inventory................................................... $ 40.1 $ 39.1
Depreciation................................................ 36.3 30.6
Accrued liabilities......................................... 37.4 40.1
Other....................................................... 8.9 6.2
------ ------
$122.7 $116.0
====== ======
</Table>

The Company's former parent received a ruling from the Internal Revenue
Service ("IRS"), that the Distribution would qualify as a tax-free transaction.
Such a ruling, while generally binding upon the IRS, is subject to certain
factual representations and assumptions. The Company has agreed to certain
restrictions on its future actions to provide further assurances that the
Distribution will qualify as tax-free. If the Company fails to abide by such
restrictions and, as a result, the Distribution fails to qualify as a tax-free
transaction, the Company will be obligated to indemnify its former parent for
any resulting tax liability.

Under the Tax Sharing Agreement (the "Agreement") executed in conjunction
with the Distribution, the Company's former parent retains control and
discretion with regard to any federal, foreign, combined, consolidated and
certain separate state tax filings or tax audits for periods through the
Distribution and retains all refunds for such periods. The Agreement was amended
to clarify the Company is responsible for 25 percent of tax audit assessments in
foreign jurisdictions for periods prior to the Distribution up to a cumulative
maximum of $5 million.

At December 31, 2002, the Company had an aggregate of $53.7 million of
unremitted earnings of foreign subsidiaries that have been, or are intended to
be, permanently reinvested for continued use in foreign operations. If the total
undistributed earnings of foreign subsidiaries were remitted, a significant
amount of the additional tax would be offset by the allowable foreign tax
credits.

13. SEGMENT DATA

The Company designs, develops, manufactures and markets orthopaedic
reconstructive implants, trauma products and orthopaedic surgical products which
include surgical supplies and equipment designed to aid in orthopaedic
procedures and to accommodate patient rehabilitation needs post surgery.
Operations are managed through three major geographic areas -- the Americas,
which is comprised principally of the United States and includes other North,
Central and South American markets; Asia Pacific, which is comprised primarily
of Japan and includes other Asian and Pacific markets; and Europe, which is
comprised principally of the major countries of Europe as well as the Middle
East and Africa. This structure is the basis for the Company's reportable
segment information discussed below. Segment performance is evaluated based on
sales and segment operating profit, exclusive of separation costs and operating
expenses pertaining to global operations and corporate expenses. Included in
segment operating profit is a cost of capital charge which is offset in global
operations. Global operations include U.S. based research, development
engineering, brand management, corporate legal, finance, human resource
functions, and operations and logistics.

F-20

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net sales, segment operating profit and year-end assets are as follows (in
millions):

<Table>
<Caption>
NET SALES OPERATING PROFIT YEAR-END ASSETS
------------------------------ --------------------------- ---------------
2002 2001 2000 2002 2001 2000 2002 2001
-------- -------- -------- ------- ------- ------- ------ ------

Americas............. $ 932.9 $ 790.7 $ 655.4 $ 434.1 $ 356.3 $ 313.4 $597.2 $530.7
Asia Pacific......... 269.6 255.2 264.5 117.8 104.9 100.9 158.9 141.2
Europe............... 169.9 132.7 120.7 35.7 20.7 18.5 102.8 73.1
-------- -------- -------- ------ ------
Net sales............ $1,372.4 $1,178.6 $1,040.6
======== ======== ========
Separation costs..... -- (70.0) --
Global operations and
corporate
expenses........... (186.7) (163.6) (164.8)
------- ------- -------
Operating profit..... $ 400.9 $ 248.3 $ 268.0
======= ======= =======
Total assets......... $858.9 $745.0
====== ======
</Table>

Product category:

<Table>
<Caption>
2002 2001 2000
-------- -------- --------

Reconstructive implants................................ $1,061.7 $ 886.5 $ 764.5
Trauma................................................. 133.8 128.3 123.4
Orthopaedic surgical products.......................... 176.9 163.8 152.7
-------- -------- --------
Total.................................................. $1,372.4 $1,178.6 $1,040.6
======== ======== ========
</Table>

Depreciation expenses were $25.3 million, $23.4 million and $23.1 million
and additions to fixed and other assets were $33.7 million, $54.7 million and
$29.0 million for the years ended December 31, 2002, 2001 and 2000,
respectively, and related principally to the Company's U.S. and Puerto Rico
facilities.

14. SEPARATION FROM BRISTOL-MYERS SQUIBB COMPANY

The Company was incorporated in Delaware as a wholly-owned subsidiary of
Bristol-Myers Squibb, its former parent, on January 12, 2001. On July 25, 2001,
Bristol-Myers Squibb transferred the assets and liabilities of its orthopaedic
business to the Company. On August 6, 2001, Bristol-Myers Squibb distributed all
of the shares of Company common stock to Bristol- Myers Squibb stockholders in
the form of a dividend of one share of Company common stock and the associated
preferred stock purchase right, for every 10 shares of Bristol-Myers Squibb
common stock. The Distribution qualified as a tax-free distribution made under
Section 355 and 368(a)(1)(1) of the Internal Revenue Code of 1986 as more
fully-described in Note 12. On August 6, 2001, the Company assumed all
obligations under the Credit Facility established by the Company and its former
parent with then outstanding borrowings of $290 million. With additional
borrowings under the Credit Facility, the Company repaid amounts due to its
former parent of approximately $90 million, and finally, the Company assumed an
additional $22 million of borrowings under the Credit Facility for separation
costs. The Company also recognized certain liabilities and obligations for
pension, post-retirement, long-term disability and U.S. sales agent benefits.
Recognition of these liabilities and obligations reduced the net investment in
Zimmer by its former parent.

The Company incurred $70.0 million ($49.9 million net of taxes) in costs,
fees and expenses relating to the separation from its former parent and
distribution of Company common stock to the Bristol-Myers Squibb stockholders.
These costs, fees and expenses were primarily for retention bonuses; legal
separation matters; professional expenses; and costs of producing, printing,
mailing and distributing the information statement related to the Distribution.

F-21

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. TRANSACTIONS WITH FORMER PARENT

Prior to the Distribution, the former parent of the Company provided
certain services, including administration of treasury, insurance, payroll,
employee compensation and benefits, travel and meeting services, public and
investor relations, real estate services, internal audit, corporate aviation and
related services, telecommunications, computing services, corporate income tax
and selected legal services. Management of the Company believes that the methods
used to allocate expenses to the Company for these services were reasonable,
although it cannot be assured that all the expenses that would have been
incurred had the Company been a separate, standalone entity have been reflected
in financial results prior to the Distribution. These services accounted for a
total expense of $17.2 million for the period January 1, 2001 through the
Distribution, and $29.9 million for the year ended December 31, 2000.

The Company and its former parent entered into an Interim Services
Agreement pursuant to which the former parent provided the Company, on an
interim, transitional basis, various services, including, but not limited to,
employee benefits administration and information technology services. The agreed
upon charges for such services were intended to allow the former parent to
recover fully the allocated costs of providing the services. The Interim
Services Agreement expired on December 31, 2002, except with respect to
information technology services, which will remain in effect until the Company
completes the transition to an alternative service provider, expected by mid
year 2003.

16. LEASES

Future minimum rental commitments under non-cancelable operating leases in
effect as of December 31, 2002 were $8.3 million for 2003, $7.0 million for
2004, $5.7 million for 2005, $4.4 million for 2006, $2.9 million for 2007 and
$8.6 million thereafter. Total rent expense for the years ended December 31,
2002, 2001 and 2000 aggregated $9.1 million, $5.7 million and $6.0 million,
respectively.

17. COMMITMENTS AND CONTINGENCIES

The Company is subject to product liability and other claims arising in the
ordinary course of business, for which the Company maintains insurance, subject
to self-insured retention limits. The Company establishes accruals for product
liability and other claims in conjunction with outside counsel based on current
information and historical settlement information for open claims, related fees
and for claims incurred but not reported. While it is not possible to predict
with certainty the outcome of these cases, it is the opinion of management that
these cases will not have a material adverse effect on the consolidated
financial position, results of operations or cash flows of the Company.

In addition to product liability, the Company is subject to other lawsuits
and claims arising in the ordinary course of business, none of which are
expected to have, upon ultimate resolution, a material effect on the Company's
consolidated financial position, results of operations or cash flows.

Pursuant to the Company's exclusive distribution and strategic alliance
with Implex Corporation relating to Trabecular Metal products and technology and
other products, the Company is subject to annual minimum purchase commitments.
Such commitments are in line with the Company's expectation and product
development plans with regard to the products covered under this agreement.

F-22

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<Table>
<Caption>
2001 QUARTER ENDED 2002 QUARTER ENDED
--------------------------------- ---------------------------------
MAR JUN SEP DEC MAR JUN SEP DEC
------ ------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)

Net sales................................. $286.0 $294.3 $286.7 $311.6 $319.1 $345.6 $337.5 $370.2
Gross profit.............................. 204.9 212.8 211.7 227.6 238.3 260.4 252.4 276.5
Net earnings(1)........................... 36.0 43.2 27.4 43.2 54.6 65.9 65.1 72.2
Net earnings per common share:
Basic................................... 0.19 0.22 0.14 0.22 0.28 0.34 0.33 0.37
Diluted................................. 0.19 0.22 0.14 0.22 0.28 0.34 0.33 0.37
</Table>

- ---------------

(1) 2001 net earnings include $70.0 million ($49.9 million net of tax) in costs
relating to the separation of the Company from its former parent. Net
earnings also include $7.4 million ($4.7 million net of tax) of interest
expense for the period from the Distribution to December 31, 2001.

F-23

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<Table>
<Caption>
THREE MONTHS
ENDED MARCH 31,
---------------------
2003 2002
--------- ---------
(IN MILLIONS, EXCEPT
PER SHARE AMOUNTS,
UNAUDITED)

NET SALES................................................... $390.1 $319.1
Cost of products sold....................................... 96.9 80.8
------ ------
GROSS PROFIT................................................ 293.2 238.3
------ ------
Research and development.................................... 21.4 19.1
Selling, general and administrative......................... 149.8 130.9
------ ------
Operating expenses........................................ 171.2 150.0
------ ------
OPERATING PROFIT............................................ 122.0 88.3
Interest expense............................................ 1.4 3.6
------ ------
Earnings before income taxes and cumulative effect of change
in accounting principle................................... 120.6 84.7
Provisions for income taxes................................. 40.4 30.1
------ ------
Earnings before cumulative effect of change in accounting
principle................................................. 80.2 54.6
Cumulative effect of change in accounting principle, net of
tax....................................................... 55.1 --
------ ------
NET EARNINGS................................................ $135.3 $ 54.6
====== ======
EARNINGS PER COMMON SHARE -- BASIC
Earnings before cumulative effect of change in accounting
principle.............................................. $ 0.41 $ 0.28
Cumulative effect of change in accounting principle, net
of tax................................................. 0.28 --
------ ------
Earnings Per Common Share -- Basic........................ $ 0.69 $ 0.28
====== ======
EARNINGS PER COMMON SHARE -- DILUTED
Earnings before cumulative effect of change in account
principle.............................................. $ 0.41 $ 0.28
Cumulative effect of change in accounting principle, net
of tax................................................. 0.27 --
------ ------
Earnings Per Common Share -- Diluted...................... $ 0.68 $ 0.28
====== ======
PRO FORMA AMOUNTS ASSUMING THE NEW ACCOUNTING PRINCIPLE IS
APPLIED RETROACTIVELY
Net Earnings.............................................. $ 80.2 $ 56.2
Earnings Per Common Share -- Basic........................ $ 0.41 $ 0.29
Earnings Per Common Share -- Diluted...................... $ 0.41 $ 0.29
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic..................................................... 195.7 194.0
Diluted................................................... 198.0 195.7
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.
F-24

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
MARCH 31, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARE
AMOUNTS)

ASSETS
CURRENT ASSETS:
Cash and equivalents...................................... $ 33.4 $ 15.7
Accounts receivable, less allowance for doubtful
accounts............................................... 237.4 214.8
Inventories, net.......................................... 265.9 257.6
Prepaid expenses.......................................... 17.5 71.7
Deferred income taxes..................................... 20.5 52.6
------ ------
Total Current Assets................................... 574.7 612.4
Property, Plant and Equipment, net.......................... 311.0 157.8
Deferred Income Taxes....................................... 74.6 70.1
Other Assets................................................ 18.5 18.6
------ ------
TOTAL ASSETS................................................ $978.8 $858.9
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Account payable........................................... $ 64.8 $ 59.8
Income taxes payable...................................... 42.0 19.5
Other current liabilities................................. 159.0 164.8
Short term debt........................................... 76.9 156.7
------ ------
Total Current Liabilities.............................. 342.7 400.8
Other Long-term Liabilities................................. 93.4 91.8
------ ------
TOTAL LIABILITIES........................................... 436.1 492.6
------ ------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, one billion shares
authorized, 196.4 in 2003 and 195.2 in 2002 issued and
outstanding............................................ 2.0 2.0
Paid-in capital........................................... 75.8 36.9
Retained earnings......................................... 448.7 313.4
Accumulated other comprehensive income.................... 16.2 14.0
------ ------
TOTAL STOCKHOLDERS' EQUITY.................................. 542.7 366.3
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $978.8 $858.9
====== ======
</Table>

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

F-25

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
FOR THE THREE
MONTHS ENDED
MARCH 31,
---------------
2003 2002
------ ------
(IN MILLIONS,
UNAUDITED)

CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net earnings.............................................. $135.3 $ 54.6
Depreciation.............................................. 19.6 5.5
Income taxes.............................................. 59.1 20.3
Cumulative effect of change in accounting principle....... (89.1) --
Receivables............................................... (22.2) (16.6)
Inventories............................................... (7.4) (21.9)
Accounts payable and accrued expenses..................... 2.2 (11.3)
Other assets and liabilities.............................. 7.3 1.9
------ ------
Net cash provided by operating activities.............. 104.8 32.5
------ ------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property, plant and equipment................ (33.0) (6.5)
Investments in other assets............................... -- (2.0)
------ ------
Net cash used in investing activities.................. (33.0) (8.5)
------ ------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayments of borrowings, net............................. (79.6) (19.3)
Proceeds from exercise of stock options................... 25.3 4.8
Net decrease in due to/from former parent................. -- (6.9)
------ ------
Net cash used in financing activities.................. (54.3) (21.4)
------ ------
Effect of exchange rates on cash and equivalents............ 0.2 (0.2)
------ ------
Increase in cash and equivalents.......................... 17.7 2.4
Cash and equivalents, beginning of year..................... 15.7 18.4
------ ------
Cash and equivalents, end of period......................... $ 33.4 $ 20.8
====== ======
</Table>

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

F-26

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM 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 2002 annual report on Form 10-K filed by Zimmer Holdings, Inc.
(together with all its subsidiaries, the "Company"). In the opinion of
management, the accompanying unaudited consolidated financial statements include
all adjustments necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods presented. Results
for interim periods should not be considered indicative of results for the full
year. Certain amounts in the three months ended March 31, 2002 have been
reclassified to conform to the current presentation.

2. CHANGE IN ACCOUNTING PRINCIPLE

Instruments are hand held devices used by orthopaedic surgeons during total
joint replacement and other surgical procedures. Effective January 1, 2003,
instruments are recognized as long-lived assets and are included in property,
plant and equipment. Undeployed instruments are carried at cost, net of
allowances for obsolescence. Instruments in the field are carried at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method based on average estimated useful lives of approximately five years
determined principally in reference to associated product life cycles. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," the Company
reviews instruments for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. An
impairment loss would be recognized when estimated future cash flows relating to
the asset are less than its carrying amount. Depreciation of instruments is
recognized as a selling, general and administrative expense, consistent with
classification of instrument cost in prior periods.

In prior periods, undeployed instruments were carried as a prepaid expense
at cost and recognized in selling, general and administrative expense in the
year in which the instruments were placed into service. The new method of
accounting for instruments was adopted to recognize the cost of an important
asset of the Company's business within the consolidated balance sheet and
meaningfully allocate the cost of that asset over the periods benefited, which
the Company has determined extend through a product's life cycle.

The effect of the change during the quarter ended March 31, 2003 was to
increase earnings before cumulative effect of change in accounting principle by
$2.8 million, or $0.014 per share. The cumulative effect adjustment of $55.1
million (net of income taxes of $34.0 million) to retroactively apply the new
capitalization method as if applied in years prior to 2003 is included in
earnings during the quarter ended March 31, 2003. The pro forma amounts shown on
the consolidated statement of earnings have been adjusted for the effect of the
retroactive application on depreciation and related income taxes.

3. STOCK COMPENSATION

At March 31, 2003, the Company had three stock-based compensation plans for
employees and non-employee directors, which are described more fully in the
notes to the consolidated financial statements included in the Company's 2002
annual report on Form 10-K. The Company accounts for those plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. No stock based
compensation cost is reflected in net earnings related to those plans, as all
stock options granted had exercise prices equal to the market value of the
underlying common stock on the date of grant. The following table illustrates
the effect on net earnings and earnings per

F-27

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

share if the Company had applied the fair value recognition provisions of SFAS
No. 123, "Accounting for Stock Based Compensation," to the above plans.

<Table>
<Caption>
FOR THE THREE
MONTHS ENDED
MARCH 31,
----------------
2003 2002
------- ------
(IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)

Net earnings, as reported................................... $135.3 $54.6
Deduct: Total stock-based compensation expense determined
under fair value based method for all awards, net of
tax....................................................... (3.5) (3.2)
------ -----
Pro forma net earnings...................................... $131.8 $51.4
====== =====
Earnings per share:
Basic -- as reported...................................... $ 0.69 $0.28
Basic -- pro forma........................................ 0.67 0.26
Diluted -- as reported.................................... 0.68 0.28
Diluted -- pro forma...................................... 0.67 0.26
</Table>

4. COMPREHENSIVE INCOME

The reconciliation of net earnings to comprehensive income is as follows:

<Table>
<Caption>
FOR THE THREE
MONTHS ENDED
MARCH 31,
--------------
2003 2002
------ -----
(IN MILLIONS)

Net Earnings................................................ $135.3 $54.6
Other Comprehensive Income (Loss):
Foreign currency translation.............................. 1.0 (2.2)
Unrealized foreign currency hedge gains (losses), net of
tax.................................................... 3.8 (0.1)
Reclassifications......................................... (2.6) (2.1)
------ -----
Total Other Comprehensive Income (Loss)..................... 2.2 (4.4)
------ -----
Comprehensive Income........................................ $137.5 $50.2
====== =====
</Table>

5. EARNINGS PER SHARE

The following table reconciles the diluted shares used in computing diluted
earnings per share:

<Table>
<Caption>
FOR THE THREE
MONTHS ENDED
MARCH 31,
-------------
2003 2002
----- -----
(IN MILLIONS)

Basic average common shares outstanding..................... 195.7 194.0
Effect of dilutive securities............................... 2.3 1.7
----- -----
Diluted average common shares outstanding................... 198.0 195.7
===== =====
</Table>

There were no anti-dilutive securities outstanding at March 31, 2003 or
2002.

F-28

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INVENTORIES

<Table>
<Caption>
MARCH 31, DECEMBER 31,
2003 2002
--------- ------------
(IN MILLIONS)

Finished goods........................................ $212.9 $206.7
Raw materials and work in progress.................... 53.0 50.9
------ ------
Inventories, net.................................... $265.9 $257.6
====== ======
</Table>

7. PROPERTY, PLANT AND EQUIPMENT

<Table>
<Caption>
MARCH 31, DECEMBER 31,
2003 2002
--------- ------------
(IN MILLIONS)

Land.................................................. $ 8.2 $ 8.2
Buildings and equipment............................... 359.6 354.4
Instruments........................................... 275.6 --
Construction in progress.............................. 13.3 13.3
------- -------
656.7 375.9
Accumulated depreciation.............................. (345.7) (218.1)
------- -------
Property, plant and equipment, net.................. $ 311.0 $ 157.8
======= =======
</Table>

8. FINANCIAL INSTRUMENTS

The Company is exposed to market risk due to changes in currency exchange
rates. As a result, the Company utilizes foreign exchange forward contracts to
offset the effect of exchange rate fluctuations on certain anticipated foreign
currency transactions, primarily intercompany sales and purchases expected to
occur within the next twelve to twenty-four months. The Company does not hold
financial instruments for trading or speculative purposes. 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, then recognized in
earnings when the hedged item affects earnings. The ineffective portion of a
derivative's change in fair value, if any, is reported in earnings. The net
amount recognized in earnings during the quarters ended March 31, 2003 and 2002,
due to ineffectiveness and amounts excluded from the assessment of hedge
effectiveness, was not significant. The fair value of outstanding derivative
instruments recorded on the balance sheet at March 31, 2003, together with
settled derivative instruments where the hedged item has not yet affected
earnings, was a net unrealized loss of $11.8 million, or $7.3 million net of
taxes, and is deferred in other comprehensive income and is expected to be
reclassified to earnings over the next two years; $8.8 million, or $5.4 million
net of taxes, is expected to be reclassified to earnings over the next twelve
months.

9. SEGMENT INFORMATION

The Company designs, develops, manufactures and markets orthopaedic
reconstructive implants, trauma products, and orthopaedic surgical products
which include surgical supplies and equipment designed to aid in orthopaedic
procedures and to accommodate patient rehabilitation needs post surgery.
Operations are managed through three major geographic areas -- the Americas,
which is comprised principally of the United States and includes other North,
Central and South American markets; Asia Pacific, which is comprised primarily
of Japan and includes other Asian and Pacific markets; and Europe, which is
comprised principally of Europe as well as the Middle East and Africa. This
structure is the basis for the Company's reportable segment information
discussed below. Segment performance is evaluated based on sales and segment
operating profit,

F-29

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

exclusive of operating expenses pertaining to global operations and corporate
expenses. Global operations include U.S. based research, development
engineering, brand management, corporate legal, finance, human resource
functions and operations and logistics.

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

<Table>
<Caption>
NET SALES OPERATING PROFIT
--------------- -----------------
THREE MONTHS THREE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
--------------- -----------------
2003 2002 2003 2002
------ ------ ------- -------

Americas........................................... $266.1 $224.3 $135.0 $107.2
Asia Pacific....................................... 70.0 57.8 32.8 25.8
Europe............................................. 54.0 37.0 14.2 8.7
------ ------
Total............................................ $390.1 $319.1
====== ======
Global Operations and corporate expenses........... (60.0) (53.4)
------ ------
Operating profit................................... $122.0 $ 88.3
====== ======
</Table>

Product category net sales are as follows (in millions):

<Table>
<Caption>
NET SALES
---------------
THREE MONTHS
ENDED MARCH 31
---------------
2003 2002
------ ------

Reconstructive implants..................................... $309.9 $245.1
Trauma...................................................... 35.8 32.6
Orthopaedic surgical products............................... 44.4 41.4
------ ------
Total..................................................... $390.1 $319.1
====== ======
</Table>

10. COMMITMENTS AND CONTINGENCIES

F-30

CENTERPULSE AG AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

<Table>
<Caption>
NOTES 2002 2001 2000
----- ----- ------- -----
(IN MILLIONS CHF)

NET SALES................................................... 1,470 1,418 1,347
Cost of sales............................................... (480) (540) (420)
GROSS PROFIT................................................ 990 878 927
Selling, general and administrative expense................. (631) (648) (555)
Research and development expense............................ (94) (130) (108)
Other operating income...................................... 8 2 -- 6
Goodwill amortization....................................... (50) (57) (39)
Hip and knee implant litigation............................. 9 -- (1,476) --
Exceptional operating items................................. 10 (12) (198) (1)
Gain on sale of discontinued operations..................... 11 200 -- --
OPERATING INCOME/(LOSS)..................................... 405 (1,631) 230
Financial (expense)/income.................................. 12 (28) 7 29
Other non-operating (expense)/income........................ 12 (1) (21) --
INCOME/LOSS BEFORE TAXES.................................... 376 (1,645) 259
Taxes....................................................... 13 (37) 454 (67)
NET INCOME/(NET LOSS) BEFORE MINORITY INTERESTS............. 339 (1,191) 192
Minority interests.......................................... (2) (2) (2)
NET INCOME/(LOSS)........................................... 337 (1,193) 190
PER REGISTERED SHARE/PER AMERICAN DEPOSITARY SHARE (ADS)
Basic earnings/(loss) per share............................. 14 33.10 (119.62) 19.01
Basic earnings/(loss) per ADS............................... 3.31 (11.96) 1.90
Diluted earnings/(loss) per share........................... 14 32.82 (119.62) 18.98
Diluted earnings/(loss) per ADS............................. 3.28 (11.96) 1.90
</Table>

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

F-31

CENTERPULSE AG AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
NOTES 2002 2001
----- ----- -----
(IN MILLIONS CHF)

ASSETS
NON-CURRENT ASSETS
Intangible assets........................................... 15 604 930
Property, plant and equipment............................... 16 200 236
Investments and other financial assets...................... 17 70 65
Deferred income taxes....................................... 13 541 643
TOTAL NON-CURRENT ASSETS.................................... 1,415 1,874
CURRENT ASSETS
Inventories................................................. 18 352 411
Trade accounts receivable................................... 19 290 308
Other accounts receivable and prepaid expenses.............. 82 122
Cash and cash equivalents................................... 199 156
TOTAL CURRENT ASSETS........................................ 923 997
TOTAL ASSETS................................................ 2,338 2,871

EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY........................................ 21 1,270 784
Minority interests.......................................... 8 7
NON-CURRENT LIABILITIES
Non-current borrowings...................................... 22 487 20
Deferred income taxes....................................... 19 19
Non-current provisions...................................... 23 159 1,468
Other non-current liabilities............................... 4 11
Total non-current liabilities............................... 669 1,518
CURRENT LIABILITIES
Current borrowings.......................................... 24 70 75
Current provisions.......................................... 23 92 223
Trade accounts payable...................................... 64 70
Other current and accrued liabilities....................... 25 165 194
TOTAL CURRENT LIABILITIES................................... 391 562
TOTAL LIABILITIES........................................... 1,060 2,080
TOTAL EQUITY AND LIABILITIES................................ 2,338 2,871
</Table>

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

F-32

CENTERPULSE AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<Table>
<Caption>
CUMULATIVE
SHARE ADDITIONAL RETAINED TRANSACTION TREASURY
CAPITAL PAID-IN CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------- --------------- -------- ----------- -------- ------
(IN MILLIONS CHF, EXCEPT SHARE DATA)

JANUARY 1, 2000.................... 300 766 683 95 (5) 1,839
Dividends (CHF 5 per share)........ -- -- (50) -- -- (50)
Options exercised (note 30)........ -- 3 -- -- -- 3
Increase in treasury stock......... -- -- -- -- (2) (2)
Net income......................... -- -- 190 -- -- 190
Currency translation adjustments... -- -- -- 13 -- 13
Comprehensive income(1)............ -- -- 190 13 -- 203
DECEMBER 31, 2000.................. 300 769 823 108 (7) 1,993
Adjustments for adopting IAS 39.... -- -- 12 -- -- 12
Dividends (CHF 6 per share)........ -- -- (60) -- -- (60)
Options exercised (note 30)........ -- -- -- -- -- --
Increase in treasury stock......... -- -- -- -- (9) (9)
Fair value reserve................. -- -- (9) -- -- (9)
Net income......................... -- -- (1,193) -- -- (1,193)
Currency translation adjustments... -- -- -- 50 -- 50
Comprehensive income(1)............ -- -- (1,193) 50 -- (1,143)
DECEMBER 31, 2001.................. 300 769 (427) 158 (16) 784
Capital increase(2)................ 55 201 -- -- -- 256
Cost of capital increase(2)........ -- (18) -- -- -- (18)
Options exercised (note 30)........ 1 2 -- -- -- 3
Increase in treasury stock......... -- -- -- -- (1) (1)
Fair value reserve................. -- -- -- -- -- --
Net income......................... -- -- 337 -- -- 337
Currency translation adjustments... -- -- -- (91) -- (91)
Comprehensive income(1)............ -- -- 337 (91) -- 246
DECEMBER 31, 2002.................. 356 954 (90) 67 (17) 1,270
</Table>

- ---------------

(1) Comprehensive income includes changes in equity, other than those arising
from investment by owners and distributions to owners. The comprehensive
income was CHF 246, CHF (1,143) and CHF 203 million in 2002, 2001 and 2000,
respectively.

(2) As part of the financing of the obligations under the Settlement Agreement,
the Company increased its capital by means of a tradeable preemptive rights
offering, which was completed with the delivery of new shares on October 15,
2002.

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

F-33

CENTERPULSE AG AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

<Table>
<Caption>
2002 2001 2000
------ ------ ----
(IN MILLIONS CHF)

CASH FLOW FROM OPERATING ACTIVITIES
Net income/(net loss)..................................... 337 (1,193) 190
Minority interests........................................ 2 2 2
Gain on sale of discontinued operations................... (200) -- --
Depreciation and amortization............................. 124 195 117
Change in provisions(1)................................... (1,282) 1,492 (7)
Change in net current assets & long-term receivables...... (75) (40) (10)
Exceptional write-down of goodwill........................ -- 53 --
Other non-cash items, net................................. (15) (416) 5
TOTAL CASH FLOW FROM OPERATING ACTIVITIES................... (1,109) 93 297
CASH FLOW FROM INVESTING ACTIVITIES
(Purchase)/sale of intangible assets...................... (2) (8) (6)
(Purchase)/sale of tangible assets........................ (60) (71) (49)
Acquisitions including minority investments............... (14) (413) (80)
Proceeds from divestitures................................ 400 27 4
(Purchase)/sale of long-term financial assets............. (11) (38) (22)
TOTAL CASH FLOW FROM INVESTING ACTIVITIES................... 313 (503) (153)
NET CASH FLOW BEFORE FINANCING ACTIVITIES................... (796) (410) 144
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital................... 241 -- 3
Change in treasury stock.................................. (1) (9) (2)
Increase in borrowings.................................... 1,010 7 --
Repayment of borrowings................................... (484) (26) (4)
Dividends................................................. -- (60) (50)
TOTAL CASH FLOW (-USED IN) FROM FINANCING ACTIVITIES........ 766 (88) (53)
Net effect of currency translation on cash and cash
equivalents............................................... 73 21 (4)
CHANGE IN CASH AND CASH EQUIVALENTS......................... 43 (477) 87
Cash and cash equivalents at beginning of period............ 156 633 546
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. 199 156 633
Supplemental cash flow information:
Interest receipts........................................... 4 14 39
Interest payments........................................... (12) (8) (8)
Income tax payments......................................... (44) (24) (55)
</Table>

- ---------------

(1) Included in change in provisions in 2002 is the cash outflow related to the
hip and knee implant litigation of CHF 1,242 million.

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

F-34

CENTERPULSE AG AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: GENERAL INFORMATION

On January 9, 1997, the Board of Directors of Sulzer Ltd, Winterthur,
Switzerland ("Sulzer") approved a plan to offer a minority shareholding in its
SulzerMedica Group ("Group") to the public. In order to prepare for this
offering, Sulzer transferred its ownership interest in its orthopedic,
electrophysiology and cardiovascular prostheses subsidiaries to SulzerMedica Ltd
("SulzerMedica" or the "Company"), a company previously named Sulzer Orthopedics
Ltd, incorporated in Switzerland. On July 14, 1997, SulzerMedica Ltd increased
its share capital by 2,600,000 registered shares, each with a nominal value of
CHF 30. These shares were sold to the public through an Initial Public Offering
(IPO) in July 1997, for CHF 350 per share. Upon completion of the IPO via
capital increase, Sulzer's beneficial ownership of the Company's common stock
was reduced to 74%. On February 1, 1999, Sulzer-Medica completed its sale of the
electrophysiology business.

At the Sulzer Annual General Meeting on April 19, 2001 the shareholders
approved the separation of Sulzer and SulzerMedica. The separation was completed
on July 10, 2001. At the extraordinary shareholders' meeting of SulzerMedica on
July 9, 2001 the Company took the final step to complete its independence from
parent company Sulzer. At the Annual General Meeting of SulzerMedica on May 17,
2002 the shareholders approved the change of the Group's name from SulzerMedica
to Centerpulse.

On June 12, 2002 the Group announced its plans to divest its Cardiovascular
Division, comprising the Group's entire Cardiac and Vascular Care product lines
that produce and distribute mechanical and tissue heart valves and products for
the treatment of vascular obstructions and diseases. On November 7, 2002, the
Group concluded the sale of IntraTherapeutics, Inc. to ev3 Inc., a portfolio
company run by equity firms Warburg Pincus LLC and The Vertical Group, for USD
95 million. On November 18, 2002, the Group concluded the sale of Vascutek Ltd.
to Terumo Corporation of Japan for USD 170 million. On November 27, 2002, the
Group announced that it had entered into a definitive agreement to sell its
Carbomedics Inc. and Mitroflow Corp. mechanical and tissue valve business to the
Italian medical device company Snia S.p.A. for a total consideration of USD 116
million. On January 21, 2003, the Group announced that this sale had been
concluded.

NOTE 2: BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS). The consolidated financial
statements have been prepared under the historical cost convention as modified
by the revaluation of available-for-sale investment securities.

In 2002 no new International Accounting Standards or International
Financial Reporting Standards have been introduced.

The term "in millions CHF" in these Consolidated Financial Statements
refers to millions of Swiss francs.

NOTE 3: ACCOUNTING AND CONSOLIDATION PRINCIPLES

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. The most significant estimates relate to
valuation of the depreciable lives of fixed assets and intangible assets,
allowances for doubtful accounts, inventory obsolescence, provisions, impairment
charges and deferred taxes. Actual results could differ from estimates.

F-35

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Consolidation principles. The consolidated financial statements include
all of the assets, liabilities, income and expense of companies in which
Centerpulse, directly or indirectly, holds more than 50% of the voting rights or
otherwise has the power to control the company.

Acquisitions have been accounted for using the purchase method. All
material intercompany balances and transactions are eliminated.

Investments in associated companies. Companies in which the Group holds
between 20% and 50% of the voting rights and exercises significant influence are
accounted for by using the equity method. Due to the insignificance of this
position the Group's share in the equity is presented under "Investments and
other financial assets" and not in a separate line. The Group's share of net
income is presented under "Other operating income".

Available-for-sale investments. As of January 1, 2001 minority investments
and other financial assets are initially recorded at cost and subsequently
carried at fair value. The Group has classified all these equity investments as
available-for-sale. Changes in fair value are deferred as a fair value
adjustment in equity and recycled to the income statement when the asset is
sold. Unrealized losses considered to be other than temporary are included in
the income statement. Depending on the classification of the investment as
operating or not, the impairment is recorded as other operating expenses or as
financial expense, or as exceptional operating item, respectively.

Foreign currency conversion. Items included in the financial statements of
each entity in the Group are measured using the currency that best reflects the
economic substance of the underlying events and circumstances relevant to that
entity ("the measurement currency"). The consolidated financial statements are
presented in Swiss Francs, which is the measurement currency of the parent.
Transactions in foreign currencies are translated into the measurement currency
using exchange rates prevailing at the dates of transaction. Assets and
liabilities in foreign currencies are stated at the year-end rate. The resulting
exchange differences are included in the net income.

The assets and liabilities of foreign affiliates, including acquired
goodwill, are translated using the year-end rates of exchange. Income statements
and cashflow statements are translated at average exchange rates for the year if
the effective rate does not deviate significantly from the average exchange
rate. Currency conversion differences resulting from consolidation are included
in shareholders' equity. In the event of sale or liquidation of foreign
affiliated companies, the cumulative currency conversion differences relating to
the Company that has been disposed of form part of the gain or loss on the sale
or liquidation proceeds.

Goodwill and other intangible assets. Goodwill arising from acquisitions
is capitalized in the currency of the acquired company and amortized on a
straight-line basis over its useful life, not exceeding 20 years.

Other intangible assets include licenses, patents, trademarks and similar
rights as well as existing technology acquired from third parties. These assets
are amortized over their estimated useful lives, not exceeding 10 years.

Property, plant and equipment. Property, plant and equipment are stated at
cost less accumulated depreciation. Depreciation is provided on a straight-line
basis over the estimated useful life, land is not depreciated.

F-36

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The estimated useful lives of property, plant and equipment are as follows:

<Table>

Buildings................................................... 25-40 years
Machinery................................................... 5-15 years
Equipment................................................... 5-10 years
Tools, EDP equipment and patterns........................... max. 5 years
Motor vehicles.............................................. 4 years
</Table>

Interest costs on borrowings to finance the construction of property, plant
and equipment are capitalized during the period of time that is required to
complete and prepare the property for its intended use, as part of the cost of
the asset.

Investment property. Investment property is held for long-term rental
yields and is not occupied by the Group. Such properties are carried at cost
less accumulated depreciation. The disclosed fair value is based on market
evidence and on discounted cash flow projections based on existing and potential
rent contracts.

Impairment. If circumstances affecting the recoverability of tangible and
intangible assets change, and impairment has occurred, the Company compares the
estimated discounted cash flows expected to be generated by the asset with its
carrying value. It then records and recognizes an impairment charge by means of
a special depreciation of the excess carrying value and adjusts the useful lives
of intangible assets as appropriate.

Inventories. Raw materials, supplies and consumables are stated at the
lower of cost or net realisable value. Finished products and work in progress
are stated at the lower of production cost or net realizable value. Production
costs include the cost of materials and direct and indirect manufacturing cost.
Depending on the nature and the use, inventories are valued on the basis of
weighted average prices or the FIFO method. Allowances are made for obsolete,
slow-moving and excess inventories.

Accounts receivable. Trade receivables are carried at original invoice
amount less provision made for impairment of these receivables. Such provision
for impairment of trade receivables is established if there is objective
evidence that the Group will not be able to collect all amounts due according to
the original terms of receivables. The amount of the provision is the difference
between the carrying amount and the recoverable amount, being the present value
of expected cash flows.

Cash and cash equivalents. Cash and cash equivalents comprise bills,
postal and bank accounts, together with current account and deposit balances
with maturities of under three months at acquisition.

Provisions. Provisions are recognized when the Group has a present legal
or constructive obligation as a result of past events, it is probable that an
outflow of resources will be required to settle the obligation, and a reliable
estimate of the amount can be made.

Derivative financial instruments. The Company uses derivative financial
instruments to manage the economic impact of fluctuations in foreign currency
exchange rates. Derivative financial instruments are initially recognized in the
balance sheet at cost and subsequently are remeasured at their fair value. The
method of recognizing the resulting gain or loss is dependent on the nature of
the item being hedged. The Group designates certain derivatives as either (1) a
hedge of the fair value of a recognized asset or liability (fair value hedge),
or (2) a hedge of a forecasted transaction or of a firm commitment (cash flow
hedge), or (3) a hedge of a net investment in a foreign entity on the date a
derivative contract is entered into.

Changes in the fair value of derivatives that are designated and qualify as
fair value hedges and that are highly effective, are recorded in the income
statement, along with any changes in the fair value of the hedged asset or
liability that is attributable to the hedged risk.

F-37

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in the fair value of derivatives that are designated and qualify as
cash flow hedges and that are highly effective, are recognized in equity. The
Group has classified all hedging activities as fair value hedges.

Employee benefits. The liability of defined benefit plans for retirement
benefits corresponds to the present value of benefits payable. The discount rate
used for determining the present value is based on the prevailing interest rates
applicable to long-term corporate or government bond issues with maturities
extending over the average duration of the retirement benefit entitlements. All
actuarially computed gains and losses which exceed 10% of the present value of
future benefits payable or the underlying assets of the benefit plan
("corridor"), are amortized over the average remaining active period of
employment.

Defined contribution plans are pure saving plans without any added
benefits. The contributions made are charged directly to personnel costs.

Revenue recognition. Revenue comprises the invoiced value for the sale of
goods and services net of value-added tax, rebates and discounts, and after
eliminating sales within the Group. Revenue from the sale of goods is recognized
when significant risks and rewards of ownership of the goods are transferred to
the buyer. Accruals for estimated future returns and credits are made when the
related revenue is recognized. Such amounts are estimated on the basis of
historical rates of return, customer inventory levels and other factors.

Income per share. Basic income per share is calculated by dividing net
income by the weighted average number of shares issued minus treasury stock
during the year.

Diluted net income per share is computed by dividing net income by the
weighted average number of registered shares issued, minus treasury stock,
during the year plus the incremental shares that would have been outstanding
under the management stock option plan (see "Stock-based compensation") upon the
assumed exercise of dilutive stock options.

Research and development costs. Research expenditure is recognized as an
expense as incurred. Costs incurred on development projects (relating to the
design and testing of new or improved products) are recognized as intangible
assets when it is probable that the project will be a success considering its
commercial and technological feasibility, and only if the cost can be measured
reliably.

Stock-based compensation. Under the terms of the management stock option
plans, the option exercise price is equal to the fair market value of the share
at the date of grant and, accordingly, no costs other than social security costs
are recorded in connection with the plans.

Taxes. Provision is made for all income taxes assessed on profits earned
up to the balance sheet date in the year to which they relate. Deferred taxes
are included on differences between the amounts carried for tax purposes and
those carried for corporate purposes, applying the liability method. For this
purpose, all the valuation differences recorded by affiliated companies and tax
losses they are carrying forward are taken into consideration. Deferred taxes
are calculated at the locally applicable tax rates. These tax rates are
immediately adjusted to reflect the effects of changes in the law. A potential
offset against future tax costs through losses they are carrying forward and
valuation differences is included in the balance sheet if this is expected to be
realized in the form of anticipated profits. Deferred taxes on proposed profit
distributions by subsidiaries are accrued. Where profits of subsidiaries are
retained in the business and used for local investment, they are not included in
the deferred tax calculation. Where the disposal of an investment is foreseen,
the applicable deferred taxes are included. Deferred tax assets and liabilities
are only offset by the entities subject to these taxes, to the extent that such
income taxes are payable to the same authority and such offset is permitted by
law. The movements in the deferred tax position are accounted for as a direct
charge or credit to tax expense.

F-38

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EXPLANATORY NOTES

NOTE 4: CURRENCY EXCHANGE RATES

<Table>
<Caption>
AVERAGE RATES
---------------------
CONSOLIDATED
YEAR-END RATES STATEMENTS OF INCOME
CONSOLIDATED AND CASH FLOW
BALANCE SHEETS STATEMENTS
------------------ ---------------------
CHF 2002 2001 2000 2002 2001 2000
- --- ---- ---- ---- ----- ----- -----

1 US Dollar.................................... USD 1.39 1.68 1.62 1.56 1.69 1.69
1 Pound Sterling............................... GBP 2.23 2.44 2.43 2.34 2.43 2.56
1 Euro......................................... EUR 1.45 1.48 1.52 1.47 1.51 1.56
100 Japanese Yen............................... JPY 1.17 1.28 1.42 1.24 1.39 1.57
</Table>

NOTE 5: COMPOSITION OF THE GROUP

A list of investments held directly or indirectly by Centerpulse Ltd is
provided below:

<Table>
<Caption>
COMPANY/ MANAGEMENT SHARE REGISTERED CAPITAL
- ------------------- ----- ------------------

SWITZERLAND
(4) Centerpulse Management Ltd, Zurich...................... 100 % CHF 100,000.--
Max Link
(4) Centerpulse Services Ltd, Zurich........................ 100 % CHF 100,000.--
Claudio Aquilina
(1) Centerpulse Orthopedics Ltd, Baar....................... 100 % CHF 12,000,000.--
(3) Richard Fritschi
(1) Centerpulse Orthopedics (Switzerland) Ltd, Munsingen.... 100 % CHF 100,000.--
(3) Peter Liniger
(2) Sulzer Cardiovascular Ltd, Baar......................... 100 % CHF 500,000.--
Mike Barrett
BELGIUM
(1) Centerpulse BeLux SA/NV, Brussels....................... 100 % EUR 300,000.--
(3) Jean-Pierre Willems
GERMANY
(4) Centerpulse Germany Holding GmbH, Freiburg.............. 100 % EUR 35,000,000.--
Urs Kamber
(1) Centerpulse Germany GmbH, Freiburg...................... 100 % EUR 4,500,000.--
(3) Klaus Hug/Georg Stadler
(5) Centerpulse Dental GmbH, Freiburg....................... 100 % EUR 511,292.--
Werner Grotz/Steven E. Hanson
(2) Sulzer Cardiovascular GmbH, Hamburg..................... 100 % EUR 512,000.--
Mike Barrett
FRANCE
(1) Centerpulse France SA, Etupes........................... 100 % EUR 130,000.--
(3) Maurice Meytre
(1) Centerpulse Sud-Ouest Sarl, Toulouse-Blagnac............ 100 % EUR 54,000.--
(3) Francoise Loesch
(1) Centerpulse Ouest Sarl, La Meziere...................... 100 % EUR 2,256,000.--
(3) Philippe Jaffres
(1) Centerpulse Centre Sarl, Ebreuil (Vichy)................ 100 % EUR 8,000.--
(3) Benoit Combe
</Table>

F-39

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
COMPANY/ MANAGEMENT SHARE REGISTERED CAPITAL
- ------------------- ----- ------------------

(1) Centerpulse Nord Sarl, Lille............................ 100 % EUR 8,000.--
(3) Eric Bauduin
(1) Centerpulse Industrie Sarl, Etupes...................... 100 % EUR 1,600,000.--
Maurice Meytre
(2) Sulzer Cardiovascular SA, Meudon (Paris)................ 100 % EUR 2,515,409.--
James F. A. Deegan
(5) Centerpulse Dental Sarl, Rungis (Paris)................. 100 % EUR 76,225.--
Alexander Ochsner
UNITED KINGDOM
(4) Centerpulse (UK) Holdings Ltd, Inchinnan................ 100 % GBP 16,160,000.--
Marcel Bauckhage
(4) SM RE Ltd, St. Peter Port (Guernsey).................... 100 % CHF 5,000,000.--
Guy Hendry
(1) Centerpulse (UK) Ltd, Alton............................. 100 % GBP 1,050,000.--
(3) Guido Bassing
(2) Sulzer Carbomedics UK Ltd, Crawley...................... 100 % GBP 1,000.--
James F. A. Deegan
NETHERLANDS
(1) Centerpulse Netherlands BV, Utrecht..................... 100 % EUR 25,000.--
(3) Rob Ringelberg
(2) Sulzer Cardiovascular BV, Utrecht....................... 100 % EUR 150,500.--
John Lawrence Groover
ITALY
(1) Centerpulse Italia S.p.A., Opera (Milan)................ 100 % EUR 14,025,000.--
(3) Marco Grubenmann
(1) Allo System Srl, Villorba (Treviso)..................... 51 % EUR 40,000.--
(3) Antonio De Cristofaro
(1) Migliori Srl, Viagrande (Catania)....................... 51 % EUR 434,000.--
(3) Fernando Migliori
AUSTRIA
(1) Centerpulse Austria GmbH, Modling....................... 100 % EUR 60,000.--
(3) Manfred Koppl
SPAIN
(1) Centerpulse Iberica SA, Madrid.......................... 100 % EUR 62,226.10--
(3) Marcel Kyburz
SWEDEN
(1) Centerpulse Orthopedics Sweden AB, Stockholm............ 100 % SEK 200,000.--
(3) Bengt Sedell
CZECH REPUBLIC
(1) Centerpulse CZ sro, Prague.............................. 100 % CZK 24,700,000.--
Oldrich Cech
CANADA
(2) Sulzer Medica Canada Inc., Toronto...................... 100 % CAD 3,200,000.--
Paul E. Parsons
(1) Centerpulse Orthopedics Canada Inc., Toronto............ 100 % CAD 4,000,001.--
Daniel Berdat
(2) Sulzer Carbomedics Canada Ltd, Calgary.................. 100 % CAD 100.--
Charles D. Griffin
</Table>

F-40

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
COMPANY/ MANAGEMENT SHARE REGISTERED CAPITAL
- ------------------- ----- ------------------

(2) Sulzer Mitroflow Corp., Richmond........................ 100 % CAD 12,000,000.--
Mark Seboldt
(5) Centerpulse Dental Corp., Etobicoke (Ontario)........... 100 % CAD 100.--
Steven E. Hanson
USA
(4) Centerpulse USA Holding Co., Houston, Texas............. 100 % USD 185,000,000.--
Gabor-Paul Ondo
(4) Centerpulse USA Inc., Houston, Texas.................... 100 % USD 1,000.--
Gabor-Paul Ondo
(2) Sulzer Carbomedics Inc., Austin, Texas.................. 100 % USD 117,490,215.--
Dennis C. Wallach
(1) Centerpulse Orthopedics Inc., Austin, Texas............. 100 % USD 209,349,052.--
David Floyd
(3) Centerpulse Spine-Tech Inc, Minneapolis/Minnesota....... 100 % USD 615,290,443.--
Mike McCormick
(3) Centerpulse Spine Tech Surgical Inc,
Minneapolis/Minnesota..................................... 100 % USD 13,702,429.--
Mike McCormick
(5) Centerpulse Dental Inc., Carlsbad/California............ 100 % USD 52,378,029.--
Steven E. Hanson
(6) Centerpulse Biologics Inc., Austin, Texas............... 100 % USD 1,280,394.--
Thomas Zehnder
AUSTRALIA
(1) Centerpulse Australia Pty Ltd, Chatswood................ 100 % AUD 14,450,000.--
Paul Aragones
(5) Centerpulse Dental Australia Pty Ltd, Kensington........ 100 % AUD 1.--
David Colquhoun
ISRAEL
(5) Centerpulse Dental Ltd, Ramat Gan....................... 100 % ILS 100.--
Steven E. Hanson
SOUTH AFRICA
(1) Centerpulse RSA (Proprietary) Ltd, Greenside............ 100 % ZAR 100.--
(3) Michael Nesbitt
INDIA
(1) Centerpulse India Ltd, Chennai.......................... 100 % INR 3,000,000.--
(3) K. Senthilnathan
JAPAN
(1) Centerpulse Japan KK, Tokyo............................. 100 % JPY 350,000,000.--
(3) Hans Rudolf Schuerch
KOREA
(1) Centerpulse Korea Ltd, Seoul............................ 100 % KRW 319,220,000.--
(3) Dae Sik Pyon
</Table>

- ---------------

(1) Orthopedics

(2) Cardiovascular (divested as of January 21, 2003)

(3) Spine-Tech

(4) Management

F-41

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) Dental

(6) Research & Development Biologics

Acquisitions of subsidiaries in the year 2001 are set out in the following
list which indicates the companies acquired, the country, the division and the
date of integration into the consolidation. In each case, all voting rights were
acquired. No significant acquisitions took place in 2002 and 2000.

On June 12, 2002 the Group announced its plans to divest its Cardiovascular
Division. For further information see note 11.

2001

- Paragon Implant Company Encino (USA); Dental Division; Jan. 1, 2001

- IntraTherapeutics Inc. St. Paul (USA); Cardiovascular Division; Feb. 1,
2001

- Sulzer Australia Pty Ltd Chatswood (Australia); Orthopedics and
Cardiovascular Division; July 1, 2001

The purchase price considerations of these acquisitions amount to CHF 432
million in 2001. No agreements to make contingent payments have been entered
into in connection with these acquisitions.

The 1999 agreement to purchase Mitroflow Inc. foresees a potential
adjustment of the purchase price of a maximum of USD 17 million including
interest, depending upon when Centerpulse receives approval from the US Federal
Drug Administration, FDA, for the main product, a biological valve. If FDA
approval is not obtained within a specified time frame no payment beyond the
recorded liability is required.

NOTE 6: EFFECTS OF ACQUISITIONS

The impact of significant subsidiaries acquired was as follows:

<Table>
<Caption>
2002 2001 2000
---- ---- ----
(IN MILLIONS CHF)

Net sales................................................... -- 91 --
Operating income............................................ -- (33) --
Non-current assets acquired................................. -- 89 --
Current assets acquired..................................... -- 53 --
thereof cash acquired..................................... -- 6 --
Liabilities acquired........................................ -- (47) --
</Table>

NOTE 7: SEGMENT INFORMATION

In 2002 the Group changed its reporting structure from two segments to four
segments. The information presented below has been changed from prior years to
reflect this adjustment to the primary reporting format. Since the change the
Group's business has been managed on a worldwide basis and structured into four
operating segments. The Orthopedics division develops, manufactures and
distributes hip, knee and other orthopedic implants. Spine-Tech develops and
distributes spinal implants. The Dental division develops, manufactures and
distributes dental implants. The Cardiovascular Division develops, manufactures
and distributes heart valves including repair products, vascular grafts and
stents.

As discussed in greater detail in note 11, the Group has decided to divest
its Cardiovascular Division, including the Company's entire Cardiac Care and
Vascular Care product lines. Subsequent to this divestment the Company will
comprise of the three remaining global businesses (Orthopedics, Spine-Tech and
Dental).

F-42

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Group's further operating activities consist of biologic activities and
Group management, including the costs of holding, financing and managing
Centerpulse.

The geographic segmentation reflects the main operating areas of the Group.
The Group's policy specifies that the transfer of goods and services between the
various segments be carried out at arm's length.

Between the Divisions, no material inter-segment sales have occurred.

PRIMARY REPORTING FORMAT -- SEGMENT INFORMATION BY DIVISION

PART 1

<Table>
<Caption>
2002 2001 2000
----- ------ -----
(IN MILLIONS CHF)

NET SALES
Orthopedics Division........................................ 923 855 861
Spine-Tech Division......................................... 179 175 179
Dental Division............................................. 131 120 57
Cardiovascular Division(1).................................. 237 268 250
TOTAL....................................................... 1,470 1,418 1,347
OPERATING INCOME
Orthopedics Division........................................ 168 (1,370) 187
Spine-Tech Division......................................... 7 (35) (4)
Dental Division............................................. 15 2 2
Cardiovascular Division(1).................................. 37 (88) 61
Biologics and Group Management.............................. 178 (140) (16)
TOTAL....................................................... 405 (1,631) 230
</Table>

- ---------------

(1) Incl. in 2002 and 2001 are CHF 7.8 million sales to ATS Medical, Inc.

PRIMARY REPORTING FORMAT -- SEGMENT INFORMATION BY DIVISION

PART 2

<Table>
<Caption>
2002 2001 2000
----- ----- -----
(IN MILLIONS CHF)

CAPITAL EXPENDITURE
Orthopedics Division...................................... 40 55 42
Spine-Tech Division....................................... 11 19 11
Dental Division........................................... 3 5 2
Cardiovascular Division................................... 8 9 6
Biologics and Group Management............................ 9 4 2
TOTAL....................................................... 71 92 63
</Table>

F-43

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
2002 2001 2000
----- ----- -----
(IN MILLIONS CHF)

DEPRECIATION AND AMORTIZATION
Orthopedics Division...................................... 51 57 51
Spine-Tech Division....................................... 45 48 50
Dental Division........................................... 11 12 1
Cardiovascular Division................................... 16 104 12
Biologics and Group Management............................ 1 3 2
TOTAL....................................................... 124 224 116
ASSETS
Orthopedics Division...................................... 413 488 423
Spine-Tech Division....................................... 1,014 1,185 1,098
Dental Division........................................... 75 86 31
Cardiovascular Division(2)................................ 129 342 198
Biologics and Group Management(2)......................... 707 770 775
TOTAL....................................................... 2,338 2,871 2,525
LIABILITIES
Orthopedics Division...................................... 652 1,526 131
Spine-Tech Division....................................... 149 165 150
Dental Division........................................... 13 15 6
Cardiovascular Division................................... 29 70 51
Biologics and Group Management............................ 217 304 189
TOTAL....................................................... 1,060 2,080 527
</Table>

- ---------------

(2) In 2001 CHF 42 million related to tax assets from loss carry forward of the
Cardiovascular Division are shown under Biologics and Group Management.

SECONDARY REPORTING FORMAT -- GEOGRAPHICAL SEGMENTS

PART 1

<Table>
<Caption>
2002 2001 2000
----- ----- -----
(IN MILLIONS CHF)

NET SALES BY LOCATION OF CUSTOMERS
Switzerland............................................... 69 61 59
European Union............................................ 582 560 530
Other Europe.............................................. 18 19 17
North America............................................. 639 629 602
All Other countries....................................... 162 149 139
TOTAL....................................................... 1,470 1,418 1,347
</Table>

F-44

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
2002 2001 2000
----- ----- -----
(IN MILLIONS CHF)

NET SALES BY LOCATION OF SUBSIDIARIES
Switzerland............................................... 470 472 431
European Union............................................ 586 563 537
Other Europe.............................................. 5 4 4
North America............................................. 834 849 806
All Other countries....................................... 89 70 52
TOTAL....................................................... 1,984 1,958 1,829
TRANSFERS TO OTHER GEOGRAPHIC AREAS FROM
Switzerland............................................... (378) (364) (338)
European Union............................................ (20) (17) (20)
Other Europe.............................................. -- -- --
North America............................................. (116) (159) (124)
All Other countries....................................... -- -- --
TOTAL....................................................... (514) (540) (482)
NET SALES TO THIRD PARTIES BY LOCATION OF SUBSIDIARIES
Switzerland............................................... 92 108 93
European Union............................................ 566 546 517
Other Europe.............................................. 5 4 4
North America............................................. 718 690 681
All Other countries....................................... 89 70 52
TOTAL....................................................... 1,470 1,418 1,347
</Table>

SECONDARY REPORTING FORMAT -- GEOGRAPHICAL SEGMENTS

PART 2

<Table>
<Caption>
2002 2001 2000
----- ------ -----
(IN MILLIONS CHF)

OPERATING INCOME BY LOCATION OF SUBSIDIARIES
Switzerland................................................. 87 (22) 49
European Union.............................................. 256 46 58
Other Europe................................................ -- -- --
North America............................................... 51 (1,662) 118
All Other countries......................................... 11 7 5
TOTAL....................................................... 405 (1,631) 230
ASSETS BY LOCATION OF SUBSIDIARIES
Switzerland................................................. 229 210 223
European Union.............................................. 444 452 454
Other Europe................................................ 5 4 4
North America............................................... 1,590 2,138 1,796
All Other countries......................................... 70 67 48
TOTAL....................................................... 2,338 2,871 2,525
</Table>

F-45

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
2002 2001 2000
----- ------ -----
(IN MILLIONS CHF)

CAPITAL EXPENDITURE BY LOCATION OF SUBSIDIARIES
Switzerland................................................. 6 1 3
European Union.............................................. 22 25 27
Other Europe................................................ -- -- --
North America............................................... 39 63 30
All Other countries......................................... 4 3 3
TOTAL....................................................... 71 92 63
</Table>

NOTE 8: OTHER OPERATING INCOME/EXPENSE

<Table>
<Caption>
2002 2001 2000
---- ----- -----
(IN MILLIONS CHF)

Currency exchange differences............................... 1 (3) (2)
Sundry operating income/expense............................. -- 4 8
Share of gain/loss of associate earnings.................... 1 (1) --
TOTAL OTHER OPERATING INCOME/EXPENSE........................ 2 -- 6
</Table>

Sundry operating income in 2001 and 2000 relates mainly to revenue from an
OEM-agreement entered into at the end of 1999.

NOTE 9: HIP AND KNEE IMPLANT LITIGATION AND OTHER MATERIAL LITIGATION

BACKGROUND

On December 5, 2000, Centerpulse Orthopedics Inc. ("COUS", formerly Sulzer
Orthopedics Inc.), a subsidiary of the Company located in Austin, Texas, issued
a voluntary recall of certain lots of Inter-Op(TM) acetabular shells, a
component of a hip implant manufactured and sold by COUS. The recall stemmed
from an investigation of reports of early loosening of the shell from patients'
hipbones, followed by revision surgery. The investigation identified as
potentially problematic approximately 39,000 shells manufactured between July
1997 and December 2000. On May 17, 2001, COUS sent a special alert to surgeons
who had implanted a porous-coated tibial base plate in patients, advising them
of adverse clinical outcomes reported by some surgeons.

Approximately 25,800 affected Inter-Op(TM) acetabular shells, 8,800
reprocessed Inter-Op(TM) shells and 1,600 affected tibial base plates were
implanted in patients worldwide, with approximately 32,100 devices implanted in
the United States, 1,200 in Canada and 2,900 in other countries. Accordingly,
COUS and the Company faced legal challenges worldwide to resolve cases and
claims in connection with the recall, and the special alert with the main
litigation procedures taking place in the United States and Canada.

LITIGATION IN THE UNITED STATES

Following the December 5, 2000 recall of Inter-Op(TM) shells and the May
17, 2001 special alert regarding tibial base plates, lawsuits were filed in both
state and federal courts throughout the U.S. against COUS, alleging defective
design, marketing and manufacture of its Inter-Op(TM) shell and tibial base
plate. Plaintiffs also alleged claims against COUS for breach of express and
implied warranties associated with these devices.

F-46

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In August 2001, in Nueces County, Texas COUS defended the only recall-related
lawsuit ever to go to trial in Nueces County, Texas. The jury in that lawsuit
awarded three patients and their spouses a total of approximately USD 15
million. COUS subsequently appealed the judgment and later settled the lawsuit
for a substantially reduced amount.

Also in August 2001, the Court conditionally certified a class of affected
product recipients and preliminarily approved a Class Action Settlement
Agreement (the "Settlement Agreement"), that resolved all claims related to the
affected products. This initial Settlement Agreement was modified in extensive
negotiations over the succeeding seven months culminating in a final agreement
reached through the combined efforts of attorneys for COUS and attorneys
representing patients in both federal and state courts. The Court granted
preliminary approval of the modified Settlement Agreement on March 13, 2002 and
final approval on May 8, 2002.

The Settlement Agreement established a Settlement Trust (the "Settlement
Trust") in order to pay claims in accordance with the terms of the Settlement
Agreement. The Settlement Trust was funded with approximately USD 1.1 billion,
of which Centerpulse contributed USD 725 million in cash on November 4, 2002.
Centerpulse's insurers and Sulzer AG, the Company's former parent company,
funded the balance. The Settlement Trust is divided into five separate funds:
the Medical Research and Monitoring Fund (USD 1.0 million); the Unrevised
Affected Product Recipient Fund (USD 28 million), from which class members who
have not undergone a revision surgery are entitled to receive USD 1,000; the
Affected Product Revision Surgery Fund (USD 622.5 million), from which class
members who have undergone revision surgery are entitled to receive USD 160,000
for each affected product that has been revised; the Extraordinary Injury Fund
(USD 100 million), from which a class member who has experienced any of several
specified complications related to an affected product may apply for benefits;
and the Professional Services Fund (USD 244 million), which includes two
sub-funds: the Subrogation and Uninsured Expenses Sub-Fund (USD 60 million),
from which third-party payors and uninsured patients may be reimbursed their
expenses up to USD 15,000 per affected product revision surgery; and the
Plaintiffs' Counsel Sub-Fund (USD 184 million), from which contingent-fee
attorneys representing class members are entitled to receive up to USD 46,000
per revision and from which members of the Plaintiffs' Liaison Counsel are
eligible to be compensated.

COUS has entered into separate agreements with the Centers for Medicare and
Medicaid Services (together, "Medicare") and approximately 200 private insurers
implementing a process for validating and paying claims for reimbursement of
expenses from the Subrogation and Uninsured Expenses Sub-Fund. Pursuant to these
agreements, Medicare and the private insurers receive a lump sum of no more than
USD 15,000 for each patient for whom they are the primary payor.

The Settlement Agreement specifies certain cut-off dates after which class
members who undergo a revision surgery for an affected product are no longer
eligible to receive benefits as a consequence of that revision surgery. These
dates are June 5, 2003 for class members implanted with an affected
Inter-Op(TM)shell; November 17, 2003 for class members implanted with an
affected tibial baseplate; and September 8, 2004 for class members implanted
with a reprocessed Inter-Op(TM) shell. Patients whose reprocessed Inter-Op(TM)
shell, a shell recovered in the voluntary recall and subjected to a newly
validated cleaning and sterilization process prior to implantation, is revised
prior to the cut-off date are entitled to class revision surgery benefits even
though COUS believes that the reprocessed Inter-Op(TM) shells are entirely safe
and effective.

The class plaintiffs who opted out of the Settlement Agreement may still
bring claims against the Company. In addition, pursuant to the Settlement
Agreement, the Company agreed to fund 50% of the cost of providing benefits for
each validated claim for revision surgery benefits in excess of 4,000 and 100%
of the cost of providing benefits for each validated claim for reprocessed
Inter-Op(TM) shell revision surgery benefits in excess of 64.

F-47

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition, in the event that the USD 60 million Subrogation and Uninsured
Expenses Sub-Fund is depleted, the Settlement Agreement provides that the
Settlement Trust can apply to the Company for additional funding.

LITIGATION IN CANADA

In Canada, approximately 780 patients were implanted with a recalled
Inter-Op(TM) shell. On May 7, 2002, COUS agreed to a class action settlement in
a lawsuit pending in Quebec Superior Court. The Quebec court granted final
approval of the class settlement on March 28, 2003. The settlement calls for the
Company to pay USD 1,000 to each class member who has not undergone a revision
surgery, USD 75,000 to each class member who has undergone a single revision of
an affected product, USD 100,000 to each class member who has undergone two
revisions of an affected product, and USD 150,000 to each class member who has
undergone three or more revisions of an affected product or who experienced any
of several specified complications. Following final approval of the settlement,
class members will have thirty days during which to opt out of the class if they
so choose. Prior to preliminary approval of the class settlement, COUS concluded
individual settlements with 70 patients, representing what the company believes
is the majority of Canadian patients whose recalled Inter-Op(TM) shell required
revision surgery.

STATUS OUTSIDE THE U.S. AND CANADA

Outside the United States and Canada, approximately 140 affected product
recipients in Australia, Austria, Belgium, France, Germany, Italy, Japan, Korea,
Sweden and Switzerland had to undergo revision surgery. In some instances the
patients who received affected hip or knee implants have brought claims against
Centerpulse. Several of these claims have already been settled.

RELATED MATTERS

COUS, Centerpulse and various other Centerpulse companies are defendants in
a number of lawsuits in U.S. state and federal courts brought by patients
implanted with Inter-Op(TM) hip implants and tibial base plate knee implants
that were not affected products and therefore are not covered by the Settlement
Agreement. Many of the lawsuits were filed prior to the finalization of the
Settlement Agreement, apparently under the mistaken belief that the patient was
implanted with an affected product. Following the announcement of the Settlement
Agreement, some patients discovered that their implant is not an affected
product. The Company is aware of approximately 75 such lawsuits as of the
current date, involving both patients who did and who did not undergo revision
surgery. There may be additional such lawsuits that have not as yet come to the
attention of the Company, and additional such lawsuits may be filed in the
future. The Company believes that the products at issue in these lawsuits are
not defective and intends to defend vigorously against any attempt to pursue
these claims.

OTHER LITIGATION

JOINT MEDICAL PRODUCTS CORPORATION

Joint Medical Products Corporation, a division of Johnson & Johnson, filed
a complaint on January 28, 1997, in the U.S. District Court for the District of
Connecticut against Centerpulse USA Inc. and COUS. The suit alleged infringement
of a patent owned by Joint Medical relating to an acetabular cup and polymeric
insert used in hip prostheses and sought treble damages, attorneys' fees and
injunctive relief. In December 1997 (and as later amended in December 1999), the
parties stipulated and the court ordered that the case be dismissed without
prejudice and that the parties' April 1995 agreement tolling the statute of
limitations remain in effect pending the conclusion of a reissue proceeding in
the US Patent and Trademark Office, the USPTO, involving the Joint Medical
patent. A "reissue" proceeding is an administrative proceeding in which a patent
owner surrenders his patent to the USPTO, alleging that a mistake was made
during the original

F-48

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

examination of the underlying patent application in the USPTO, and requests that
the USPTO reissue a corrected patent. The USPTO then initiates a new examination
proceeding in light of the information received from the patent owner and
others. At this time, the Company does not know whether or when the USPTO will
reissue the Joint Medical patent or, since the patent claims may change during
the reissue proceeding, what defenses may be available to the Company if the
USPTO does reissue the Joint Medical patent. In the event that the USPTO
reissues the Joint Medical Products patent, the Company intends to defend itself
vigorously against any allegations of infringement.

GARY MICHELSON

Dr. Gary Michelson initiated an arbitration proceeding against Spine-Tech
in 2001 alleging breaches of a 1999 settlement agreement between the parties
(the "1999 Agreement"), including Spine-Tech's alleged failure to pay royalties
due on sales of fusion cages to Smith & Nephew prior to the Company's
acquisition of Spine-Tech in 1998 and Spine-Tech's alleged omission of an
attribution notice from certain publications as required by the terms of the
1999 Agreement. The 1999 Agreement provides for a USD 50,000 penalty payable by
Spine-Tech for each incident of omission, and Dr. Michelson has alleged
approximately 2,000 such incidents. The arbitration hearing is currently set for
April 2003, and Spine-Tech intends to defend itself vigorously against Dr.
Michelson's allegations.

GUIDANT CORPORATION

By letter dated March 21, 2001, Guidant Corporation ("Guidant") made a
demand for indemnification against Centerpulse USA Holding Co. ("Holding Co.")
under the terms of the 1998 Stock and Asset Purchase Agreement (the "Guidant
Agreement") by which Holding Co. sold its electrophysiology business to Guidant.
In the demand, Guidant asserted that it issued a physician advisory with respect
to three models of Micron defibrillators (approximately 2,000 devices)
manufactured by Sulzer Intermedics Inc. ("Intermedics") and that, as a result
thereof, the defibrillators are being replaced sooner than otherwise
anticipated. Guidant made a demand against Holding Co. for the damages or losses
allegedly suffered by Guidant or Intermedics. By letter dated March 13, 2002,
Guidant asserted that the projected amount of its claim would be approximately
USD $3.7 million, and made demand for payment of USD $2.1 million allegedly
incurred as of that date. Holding Co. has responded by denying Guidant's request
for indemnification and by requesting additional information from Guidant with
respect thereto. The Company is aware of one lawsuit brought by a Micron
recipient, Gerald Lavey, alleging that he suffered and continues to suffer
damages and harm for which he seeks USD $1.5 million from Guidant and
Intermedics. Guidant and Intermedics, in turn, have made demand against Holding
Co. for indemnification under the Guidant Agreement for Lavey's claim, and
Holding Co. has denied that it is liable to indemnify Guidant and Intermedics.
The Company intends to defend itself vigorously in these matters.

IMPLANT INNOVATIONS, INC.

In March 2003, Implant Innovations, Inc. (3i), a subsidiary of Biomet,
Inc., served a complaint filed in the U.S. District Court for the Southern
District of Florida against Centerpulse Dental Inc., a subsidiary of the
Company. The suit alleges that various products of Centerpulse Dental, including
its Integral(TM), Omniloc(R), Spline(R), Taper-Lock(TM), SpectraCone(TM),
AdVent(TM), Screw-Vent(R), and SwissPlus(TM) impression copings, healing
abutments having matching emergence profiles, bone profiling tools, and abutment
installation tools, infringe six of 3i's patents and seeks treble damages,
attorney fees, and injunctive relief. The Company intends to defend itself
vigorously against 3i's allegations of infringement.

F-49

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10: EXCEPTIONAL OPERATING ITEMS

<Table>
<Caption>
2002 2001 2000
---- ----- ----
(IN MILLIONS CHF)

Litigation settlement income................................ -- 48 --
Impairment of intangibles................................... -- (91) --
Equity Investments (reversal/impairment).................... 28 (50) --
Restructuring and other exceptional legal expenses.......... (40) (105) (1)
TOTAL EXCEPTIONAL OPERATING ITEMS........................... (12) (198) (1)
</Table>

Exceptional operating items in 2002 included restructuring costs in
connection with the move of the Baar operation to Winterthur, production
capacity adjustments in Carbomedics and the formation of the shared service
center in North America, costs for the name change, as well as exceptional legal
expenses of CHF 39 million.

A CHF 16 million charge booked in 2001 in connection with a Canadian Court
ruling to purchase the remaining stake in Orthosoft Inc. was reversed after a
final ruling on December 4, 2002 in favor of Centerpulse. CHF 12 million of an
impairment charge booked in 2001 in relation to the investment in Orquest was
reversed. The forthcoming take over of Orquest by DePuy AcroMed resulted in the
estimate that a substantial part of the impairment is no longer justified.

In 2001, the Company received approximately USD 28 million in connection
with the settlement of a pending litigation by Centerpulse Spine-Tech Inc. Soon
after the integration but especially towards year-end 2001, the stent market did
not develop in line with high sales expectations. Despite restructuring measures
initiated in the fourth quarter at Sulzer IntraTherapeutics Inc., the impairment
test performed as of year-end showed an impairment on goodwill of USD 31 million
and on existing technology of USD 11 million. The value in use (based on the
income approach utilizing the discounted cash flow method) was determined using
a weighted discount rate of 10.3%.

As a result of the deterioration of the cage sales and also in connection
with the introduction of a competitor's product in December 2001, the impairment
test at Centerpulse Spine-Tech's Inc. existing technology disclosed a loss of
USD 8 million. The value in use was determined using a discount rate of 15%. In
relation to the Orthosoft Inc. engagement, a minority holding, total charges of
CHF 5 million were recorded. The high expectations regarding the product
development were not realistic and a Canadian court order to purchase the
remaining stake resulted in an additional charge of CHF 16 million. For an
additional payment commitment of CHF 8 million in 2002 a provision was booked.

The investment in Orquest Inc. and license, cross-license, research and
distribution agreement was determined to be impaired as of year end 2001 as a
result of further delays in the common research and development programs. In
addition, since further benefits are unlikely to be realized, the write down
related to this exposure resulted in an exceptional operating item of USD 20
million.

Centerpulse Orthopedics Inc. cooperated in 1999 with @Outcome in order to
offer orthopedic clinics and surgical group practices a secure internet access
for the communication with patients, thus simplifying patient management. The
market acceptance of the product but also the financial outlook resulted in a
complete write down of the exposure totaling USD 8 million in 2001.

In addition, as a result of the change in management during 2001, various
restructuring measures were initiated in order to improve operational
efficiency. This resulted in exceptional operating items of CHF 33 million in
various other US businesses and the Group office in the US. Restructuring costs
of CHF 20 million for Centerpulse Biologics Inc are included in this position.

F-50

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11: DISCONTINUING OPERATIONS

On June 12, 2002 the Group announced its plans to divest of the
Cardiovascular Division, comprising the Group's entire cardiac care and vascular
care product lines which produce and distribute mechanical and tissue heart
valves and products for the treatment of vascular obstructions and diseases. The
company will focus on its core businesses: hip and knee implants (Orthopedics
Division), spine implants and instrumentation (Spine-Tech Division), dental
implants (Dental Division) and research and development, to capitalize on the
Group's redefined core markets.

On November 7, 2002, the Group announced the closing of the sale of
IntraTherapeutics, Inc. to ev3 Inc., a portfolio company of private equity firms
Warburg Pincus LLC and The Vertical Group for USD 95 million. On November 18,
2002, the Group announced the closing of the sale of Vascutek Ltd. to Terumo
Corporation of Japan for USD 170 million. On November 27, 2002, the Group
announced that it had entered into a definitive agreement to sell its
Carbomedics Inc. and Mitroflow Corp. mechanical and tissue valve business to
Italian medical device company Snia S.p.A. for total consideration of USD 116
million. On January 21, 2003, the group announced the closing of the sale.

The gain on the sale of the business unit Vascular Care, consisting of
Centerpulse's grafts and stents business amounted to CHF 200 million.

In accordance with IAS 35 the Cardiovascular Division divestment qualifies
as a discontinued operation. This division represented 19% of Centerpulse's
consolidated revenues in 2001 with operations primarily in the European Union
and North America.

The impact of the divested business on the consolidated financial
statements was as follows:

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Net sales................................................... 72 --
Operating income............................................ 15 --
Taxes....................................................... (8) --
Total assets................................................ 155 --
thereof cash.............................................. - --
TOTAL LIABILITIES........................................... 47 --
</Table>

The following shows the impact of the discontinuing operations as of and
for each of the years ended December 31, 2002, 2001 and 2000.

CONSOLIDATED INCOME STATEMENTS

<Table>
<Caption>
2002 2002 2002
----------- ------------- -----------
CENTERPULSE DISCONTINUING CENTERPULSE
HISTORICAL OPERATIONS ADJUSTED
----------- ------------- -----------
(IN MILLIONS CHF)

NET SALES......................................... 1,470 229 1,241
Cost of sales..................................... (480) (78) (402)
GROSS PROFIT...................................... 990 151 839
Selling, general and administrative expense....... (631) (92) (539)
Research & development expense.................... (94) (21) (73)
Other operating income............................ 2 1 1
Goodwill amortization............................. (50) (7) (43)
</Table>

F-51

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
2002 2002 2002
----------- ------------- -----------
CENTERPULSE DISCONTINUING CENTERPULSE
HISTORICAL OPERATIONS ADJUSTED
----------- ------------- -----------
(IN MILLIONS CHF)

Exceptional operating items....................... (12) (3) (9)
Gain on sale of discontinued operations........... 200 200 --
OPERATING INCOME.................................. 405 229 176
Financial (expense)/income........................ (28) (4) (24)
Other non-operating (expense)/income.............. (1) -- (1)
INCOME BEFORE TAXES............................... 376 225 151
Taxes............................................. (37) (10) (27)
NET INCOME BEFORE MINORITY INTERESTS.............. 339 215 124
Minority interests................................ (2) -- (2)
NET INCOME........................................ 337 215 122
Cash flow from operating activities............... (1,109) 35 (1,144)
Cash flow from investing activities............... 313 (6) 319
Cash flow from ( -- used in) financing
activities...................................... 766 (23) 789
Adjustment to investing activities(1)............. -- -- (23)
Adjustment to financing activities(1)............. -- 23 --
Consolidated cash flow from operating
activities...................................... (1,109) 35 (1,144)
Consolidated net cash flow from investing
activities...................................... 313 (6) 319
Consolidated net cash flow from financing
activities...................................... 766 -- 766
EARNINGS PER REGISTERED SHARE/PER AMERICAN
DEPOSITORY SHARE(ADS)
Basic earnings/(loss) per share................... 33.10 21.12 11.98
Basic earnings/(loss) per ADS..................... 3.31 2.11 1.20
Diluted earnings/(loss) per share................. 32.82 20.85 11.84
Diluted earnings/(loss) per ADS................... 3.28 2.09 1.18
</Table>

- ---------------

(1) The adjustments represent the net investing activities from intercompany
activities. Consolidated cash flows and consolidated net cash flows present
Centerpulse and the Cardiovascular Division as if the intercompany
transactions had not occurred.

F-52

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
2002 2002 2002
----------- ------------- -----------
CENTERPULSE DISCONTINUING CENTERPULSE
HISTORICAL OPERATIONS ADJUSTED
----------- ------------- -----------
(IN MILLIONS CHF)

ASSETS
NON-CURRENT ASSETS
Intangible assets....................................... 604 27 577
Property, plant and equipment........................... 200 17 183
Investments and other financial assets.................. 70 -- 70
Deferred tax assets..................................... 541 12 529
TOTAL NON-CURRENT ASSETS............................. 1,415 56 1,359
CURRENT ASSETS
Inventories............................................. 352 35 317
Trade accounts receivables.............................. 290 24 266
Other accounts receivables and prepaid expenses......... 82 9 73
Cash and cash equivalents............................... 199 5 194
TOTAL CURRENT ASSETS................................. 923 73 850
TOTAL ASSETS.................................... 2,338 129 2,209

EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY...................................... 1,270 100 1,170
Minority interests...................................... 8 -- 8
NON-CURRENT LIABILITIES
Non-current borrowings.................................. 487 10 477
Deferred income taxes................................... 19 -- 19
Non-current provisions.................................. 159 -- 159
Other non-current liabilities........................... 4 2 2
TOTAL NON-CURRENT LIABILITIES........................ 669 12 657
CURRENT LIABILITIES
Current borrowings...................................... 70 -- 70
Current provisions...................................... 92 3 89
Trade accounts payable.................................. 64 5 59
Other current and accrued liabilities................... 165 9 156
TOTAL CURRENT LIABILITIES............................ 391 17 374
TOTAL LIABILITIES.................................... 1,060 29 1,031
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY........ 2,338 129 2,209
</Table>

F-53

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATED INCOME STATEMENTS

<Table>
<Caption>
2001 2001 2001
----------- ------------- -----------
CENTERPULSE DISCONTINUING CENTERPULSE
HISTORICAL OPERATIONS ADJUSTED
----------- ------------- -----------
(IN MILLIONS CHF)

NET SALES................................................. 1,418 260 1,158
Cost of sales............................................. (540) (109) (431)
GROSS PROFIT.............................................. 878 151 727
Selling, general and administrative expense............... (648) (120) (528)
Research & development expense............................ (130) (40) (90)
Other operating income/(expense).......................... -- 2 (2)
Goodwill amortization..................................... (57) (11) (46)
Exceptional operating items............................... (198) (78) (120)
Hip and knee implant litigation........................... (1,476) -- (1,476)
OPERATING INCOME.......................................... (1,631) (96) (1,535)
Financial income/(expense)................................ 7 (4) 11
Other non-operating expense............................... (21) -- (21)
INCOME BEFORE TAXES....................................... (1,645) (100) (1,545)
Taxes..................................................... 454 17 437
NET INCOME BEFORE MINORITY INTERESTS...................... (1,191) (83) (1,108)
Minority interests........................................ (2) -- (2)
NET INCOME................................................ (1,193) (83) (1,110)
Cash flow from operating activities....................... 93 13 80
Cash flow from investing activities....................... (503) (10) (493)
Cash flow from (-- used in) financing activities.......... (88) (10) (78)
Adjustment to investing activities(1)..................... -- -- --
Adjustment to financing activities(1)..................... -- -- --
Consolidated cash flow from operating activities.......... 93 13 80
Consolidated net cash flow from investing activities...... (503) (10) (493)
Consolidated net cash flow from financing activities...... (88) (10) (78)
EARNINGS PER REGISTERED SHARE/PER AMERICAN
DEPOSITORY SHARE (ADS)
Basic earnings/(loss) per share........................... (119.62) (8.32) (111.30)
Basic earnings/(loss) per ADS............................. (11.96) (0.83) (11.13)
Diluted earnings/(loss) per share......................... (119.62) (8.32) (111.30)
Diluted earnings/(loss) per ADS........................... (11.96) (0.83) (11.13)
</Table>

- ---------------

F-54

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
2001 2001 2001
----------- ------------- -----------
CENTERPULSE DISCONTINUING CENTERPULSE
HISTORICAL OPERATIONS ADJUSTED
----------- ------------- -----------
(IN MILLIONS CHF)

ASSETS
NON-CURRENT ASSETS
Intangible assets......................................... 930 186 744
Property, plant and equipment............................. 236 34 202
Investments and other financial assets.................... 65 -- 65
Deferred income taxes..................................... 643 49 594
TOTAL NON-CURRENT ASSETS.................................. 1,874 269 1,605
CURRENT ASSETS
Inventories............................................... 411 51 360
Trade accounts receivables................................ 308 40 268
Other accounts receivables and prepaid expenses........... 122 3 119
Cash and cash equivalents................................. 156 21 135
TOTAL CURRENT ASSETS...................................... 997 115 882
TOTAL ASSETS.............................................. 2,871 384 2,487
EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY...................................... 784 314 470
Minority interests........................................ 7 -- 7
NON-CURRENT LIABILITIES
Non-current borrowings.................................... 20 10 10
Deferred income taxes..................................... 19 -- 19
Non-current provisions.................................... 1,468 6 1,462
Other non-current liabilities............................. 11 5 6
TOTAL NON-CURRENT LIABILITIES............................. 1,518 21 1,497
CURRENT LIABILITIES
Current borrowings........................................ 75 -- 75
Current provisions........................................ 223 6 217
Trade accounts payable.................................... 70 7 63
Other current and accrued liabilities..................... 194 36 158
TOTAL CURRENT LIABILITIES................................. 562 49 513
TOTAL LIABILITIES......................................... 2,080 70 2,010
TOTAL EQUITY AND LIABILITIES.............................. 2,871 384 2,487
</Table>

F-55

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATED INCOME STATEMENTS

<Table>
<Caption>
2000 2000 2000
----------- ------------- -----------
CENTERPULSE DISCONTINUING CENTERPULSE
HISTORICAL OPERATIONS ADJUSTED
----------- ------------- -----------
(IN MILLIONS CHF)

NET SALES................................................. 1,347 250 1,097
Cost of sales............................................. (420) (74) (346)
GROSS PROFIT.............................................. 927 176 751
Selling, general and administrative expense............... (555) (80) (475)
Research & development expense............................ (108) (27) (81)
Other operating income.................................... 6 -- 6
Goodwill amortization..................................... (39) (2) (37)
Exceptional operating items............................... (1) -- (1)
OPERATING INCOME.......................................... 230 67 163
Financial income/(expense)................................ 29 (3) 32
Other non-operating income/(expense)...................... -- -- --
INCOME BEFORE TAXES....................................... 259 64 195
Taxes..................................................... (67) (21) (46)
NET INCOME BEFORE MINORITY INTERESTS...................... 192 43 149
Minority interests........................................ (2) -- (2)
NET INCOME................................................ 190 43 147
Cash flow from operating activities....................... 297 72 222
Cash flow from investing activities....................... (153) 266 (462)
Cash flow from (-used in) financing activities............ (53) (335) 325
Adjustment to investing activities (1).................... -- -- 43
Adjustment to financing activities (1).................... -- (43) --
Consolidated cash flow from operating activities.......... 297 72 225
Consolidated net cash flow from investing activities...... (153) 266 (419)
Consolidated net cash flow from financing activities...... (53) (378) 325
EARNINGS PER REGISTERED SHARE/PER AMERICAN DEPOSITORY
SHARE (ADS)
Basic earnings/(loss) per share........................... 19.01 4.30 14.71
Basic earnings/(loss) per ADS............................. 1.90 0.43 1.47
Diluted earnings/(loss) per share......................... 18.98 4.30 14.68
Diluted earnings/(loss) per ADS........................... 1.90 0.43 1.47
</Table>

- ---------------

On June 3, 1998, the Group announced its intention to exit the
electrophysiology business. The subsidiaries comprising this segment were sold
on February 1, 1999, for USD 802 million (including cash on hand of CHF 19
million). The book profit of CHF 579 million realized from this transaction is
provisional since negotiations with the buyer about the final sales price are
not yet complete.

F-56

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

This transaction resulted in a tax credit of CHF 6 million. No adjustments
were necessary in 2002, 2001 and 2000.

NOTE 12: FINANCIAL INCOME/EXPENSE -- OTHER NON-OPERATING INCOME/EXPENSE

<Table>
<Caption>
2002 2001 2000
---- ---- ----
(IN MILLIONS CHF)

Gain on sale of investments................................. 1 26 4
Interest income............................................. 5 11 38
Interest expense............................................ (13) (8) (8)
Other financial expense..................................... (21) (22) (5)
TOTAL FINANCIAL (EXPENSE)/INCOME............................ (28) 7 29
</Table>

Other financial expenses in 2002 include CHF 14 million expenses for the
arrangement of the USD 635 million debt facility in the context of the hip and
knee implant litigation.

In 2001 and 2000 the gain on sale of investments is a result of a partial
sale of the Company's investment in Thoratec Laboratories Corp. In 2001 the
market value of the stake in Japan Lifeline Co. Ltd, declined significantly and
the related charge of USD 5 million is included in other financial expense. In
connection with the impairment test on ReGen Biologics Inc, an additional loan
allowance of USD 7 million was recorded as other financial expense.

In 2001 the other non-operating expenses of CHF 21 million resulted from
the spin-off of Sulzer and from the defense cost for the unsuccessful hostile
take over attempt.

NOTE 13: TAXES

<Table>
<Caption>
2002 2001 2000
---- ---- ----
(IN MILLIONS CHF)

Current income taxes
Switzerland................................................. 16 12 18
European Union.............................................. 16 10 14
Other Europe................................................ -- -- --
North America............................................... 12 (4) 11
All Other Countries......................................... 5 7 11
TOTAL CURRENT INCOME TAXES.................................. 49 25 54
Deferred income taxes
Switzerland................................................. 2 (7) (2)
European Union.............................................. 5 5 (1)
Other Europe................................................ 1 -- --
North America............................................... (23) (481) 13
All Other Countries......................................... (1) 2 (2)
TOTAL DEFERRED INCOME TAXES................................. (16) (481) 8
TOTAL INCOME TAXES.......................................... 33 (456) 62
Other taxes................................................. 4 2 5
TOTAL TAXES................................................. 37 (454) 67
</Table>

F-57

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Current income taxes, comprising taxes paid or due on the underlying income
of individual subsidiaries, are calculated according to the law applicable in
the individual countries. Other taxes include taxes not directly related to
income.

INCOME BEFORE TAXES

<Table>
<Caption>
2002 2001 2000
---- ------ ----
(IN MILLIONS CHF)

Switzerland................................................. 468 (84) 105
European Union.............................................. 281 34 40
Other Europe................................................ 1 1 1
North America............................................... (213) (1,652) 48
All Other Countries......................................... (161) 56 65
TOTAL INCOME BEFORE TAXES................................... 376 (1,645) 259
</Table>

Using the maximum tax rate for Zurich, Switzerland, of 24.4% the tax charge
on 2002 consolidated income before taxes of CHF 376 million amounts to CHF 92
million. The following table serves to indicate the reasons why in 2002, 2001
and 2000 the charge was below the reference amount.

<Table>
<Caption>
2002 2001 2000
----- -------- -----
(IN MILLIONS CHF)

Income/(loss) before taxes.................................. 375.5 (1,644.8) 258.5
Maximum tax rate (Zurich, Switzerland) (1).................. 24.4% 25.1% 25.2%
Income tax expense at maximum tax rate...................... 91.6 (412.8) 65.1
Taxes at other rates........................................ (35.7) (31.4) (10.6)
Effect of (losses)/credits and loss carry-forwards.......... (0.8) (84.8) (1.9)
Non-temporary differences................................... 16.0 19.2 13.4
Impact of the exceptional write-down of goodwill............ -- 13.3 --
Impact of divestiture....................................... (48.8) -- --
Impact of hip and knee implant litigation................... (4.1) (35.4) --
Changes in tax rate and tax laws............................ (4.1) (3.5) (1.5)
Change in valuation allowance............................... 18.0 84.2 0.1
Other....................................................... 0.7 (4.6) (3.1)
TAX EXPENSE (CURRENT AND DEFERRED).......................... 32.8 (455.8) 61.5
</Table>

- ---------------

(1) The maximum tax rate for 2002 is based on the new domicile of the Company.
In prior years the domicile was Winterthur, Switzerland.

The tax effect on non-temporary differences is mainly due to the annual
amortization of goodwill that is not deductible for tax purposes.

F-58

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, deferred taxes consisted of the following:

<Table>
<Caption>
2002 2001 2000
-------------------- -------------------- --------------------
ASSETS LIABILITIES ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ ----------- ------ -----------
(IN MILLIONS CHF)

Intangible and financial
assets......................... 23 (12) 10 (14) 14 (28)
Tangible fixed assets............ 2 (5) 3 (5) 1 (9)
Loss carry-forwards.............. 550 -- 245 -- 154 --
Inventories...................... 23 (8) 33 (9) 16 (8)
Other assets..................... 13 (3) 26 (5) 19 (3)
Eliminations of unrealized
gains.......................... 40 -- 46 -- 40 --
Non-current provisions........... 11 -- 411 -- 27 (2)
Current provisions............... 123 (2) 113 (2) 48 (2)
Other current liabilities........ 23 (1) 35 -- 9 --
TOTAL POTENTIAL TAX EFFECT....... 808 (31) 922 (35) 328 (52)
Valuation allowance.............. (255) -- (263) -- (154) --
DEFERRED TAXES................... 553 (31) 659 (35) 174 (52)
Set off of assets and
liabilities.................... (12) 12 (16) 16 (32) 32
DEFERRED TAXES, NET.............. 541 (19) 643 (19) 142 (20)
</Table>

The net of tax assets and liabilities amounts to CHF 522 million in 2002
and CHF 624 million in 2001. The change of CHF 102 million resulted from a
deferred tax income of CHF 16 million and a foreign currency translation effect
of CHF 118 million.

The deferred taxes on eliminations of unrealized gains above primarily
relate to unrealized gains from a Swiss company belonging to the Orthopedics
Division.

There was no unrecognized deferred tax liability relating to undistributed
earnings of subsidiaries at December 31, 2002, 2001 and 2000.

The Company has loss carry-forwards available of CHF 3,948 million as of
December 31, 2002. Of this amount, CHF 1,582 million will expire between 2003
and 2009 with the remaining amount of CHF 2,366 million still available for use
post-2009. The tax effect of these loss carry-forwards, at their respective
jurisdictional statutory rate, is CHF 550 million, which when netted with the
associated valuation allowance of CHF 237 million, results in an anticipated tax
benefit of CHF 313 million.

<Table>
<Caption>
TAX EFFECTS OF
LOSS CARRY- LOSS CARRY- VALUATION ANTICIPATED
AT DECEMBER 31, 2002 FORWARDS FORWARDS ALLOWANCE TAX BENEFIT EXPIRES
- -------------------- -------------- -------------- --------- ----------- -------------
(IN MILLIONS CHF)

Switzerland............ 1,217 73 73 -- 2006-09
United
States -- Federal.... 1,122 306 -- 306 2022
United
States -- Capital
loss................. 350 123 118 5 2004-22
United
States -- State...... 1,139 22 22 -- 2003-22
Germany................ 119 26 24 2 After 2009
Other countries........ 1 -- -- 2003-after 09
TOTAL.................. 3,948 550 237 313
</Table>

F-59

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14: EARNINGS PER SHARE

<Table>
<Caption>
2002 2001 2000
------ ------- ------

NET INCOME/(LOSS) IN MILL. CHF............................. 337 (1,193) 190
Weighted average number of shares outstanding (in
thousands)............................................... 10,180 9,973 9,996
BASIC INCOME/(LOSS) PER SHARE IN CHF....................... 33.10 (119.62) 19.01
NET INCOME/(LOSS) IN MILL. CHF............................. 337 (1,193) 190
Weighted average number of shares adjusted for dilutive
share options (in thousands)............................. 10,268 9,973 10,012
DILUTED INCOME/(LOSS) PER SHARE IN CHF..................... 32.82 (119.62) 18.98
</Table>

The share options outstanding are in connection with the Management Stock
Option Plan. Diluted income per share is affected by share options outstanding
when the average share price of the year is above the strike prices of the
outstanding options.

NOTE 15: INTANGIBLE ASSETS

<Table>
<Caption>
2002 2001
------------------------- -------------------------
GOODWILL OTHER TOTAL GOODWILL OTHER TOTAL
-------- ----- ------ --------- ----- -----
(IN MILLIONS CHF)

COST
Balance at January 1....................... 2,162 212 2,374 1,795 148 1,943
Changes in composition of Group............ -- (38) (38) -- 53 53
Additions.................................. 1 3 4 339 8 347
Disposals.................................. (241) (2) (243) -- -- --
Currency conversion adjustment............. (193) (30) (223) 28 3 31
Balance at December 31....................... 1,729 145 1,874 2,162 212 2,374
ACCUMULATED AMORTIZATION
Balance at January 1....................... 1,326 118 1,444 1,204 50 1,254
Changes in composition of Group............ -- (34) (34) -- -- --
Amortization............................... 50 13 63 111 68 179
Disposals.................................. (111) (1) (112) -- -- --
Currency conversion adjustment............. (75) (16) (91) 11 -- 11
Balance at December 31....................... 1,190 80 1,270 1,326 118 1,444
Net book value at January 1.................. 836 94 930 591 98 689
NET BOOK VALUE AT DECEMBER 31................ 539 65 604 836 94 930
</Table>

The 2002 figure includes the regular amortization of goodwill. No
exceptional impairment charges were recognized. Disposals relate to the
divestiture of the vascular care business as described in note 11.

The annual amortization of goodwill in 2001 includes the exceptional
write-down of CHF 52 million on Sulzer IntraTherapeutics Inc. goodwill, as
described in note 10. The total amount of impairment of goodwill in 2002, 2001
and 2000 is CHF 52 million. In the amortization of other intangible assets, the
existing technology impairment charges are included.

As of December 31, 2002 no development costs were capitalized as the
expenses did not fulfill the capitalization criteria.

F-60

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16: TANGIBLE ASSETS

<Table>
<Caption>
LAND AND MACHINERY OTHER 2002 2001
BUILDINGS AND EQUIPMENT FIXED ASSETS TOTAL TOTAL
--------- ------------- ------------ ----- -----
(IN MILLIONS CHF)

COST
Balance at January 1................ 114 164 348 626 562
Changes in composition of Group..... (8) (13) (3) (24) 27
Additions........................... 13 11 44 68 81
Disposals........................... (1) (10) (30) (41) (48)
Currency conversion adjustment...... (11) (15) (32) (58) 4
Balance at December 31................ 107 137 327 571 626
ACCUMULATED AMORTIZATION
Balance at January 1................ 38 120 232 390 339
Changes in composition of Group..... (2) (7) (2) (11) 15
Depreciation........................ 5 12 44 61 69
Disposals........................... -- (11) (22) (33) (36)
Currency conversion adjustment...... (3) (12) (21) (36) 3
Balance at December 31................ 38 102 231 371 390
Net book value at January 1........... 76 44 116 236 223
NET BOOK VALUE AT DECEMBER 31......... 69 35 96 200 236
Fire insurance value at December 31... 107 128 357 592 771
</Table>

Other fixed assets mainly consist of surgical instruments.

No property within Centerpulse is stated as an investment property, as
defined in IAS 40.

In 2002, 2001 and 2000 all interest costs were expensed as occurred, since
they did not fulfill the criteria for capitalization.

Details of leased assets included in tangible fixed assets are as follows:

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS CHF)

Cost capitalized............................................ 1 1
Net book value.............................................. -- --
Related lease liability..................................... 3 3
</Table>

F-61

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17: INVESTMENTS AND OTHER FINANCIAL ASSETS

<Table>
<Caption>
INVESTMENTS AVAILABLE-FOR OTHER
IN SALE FINANCIAL 2002 2001
ASSOCIATES INVESTMENTS ASSETS TOTAL TOTAL
----------- ------------- --------- ----- -----
(IN MILLIONS CHF)

Balance at January 1................... 7 11 47 65 104
Adoption of IAS 39..................... -- -- -- -- 15
Additions.............................. -- -- 15 15 43
Disposals.............................. -- (7) (5) (12) (35)
Fair value adjustments................. 1 13 -- 14 (66)
Currency conversion adjustment......... (2) (2) (8) (12) 4
Balance at December 31................. 6 15 49 70 65
NET BOOK VALUE
Balance at January 1................... 7 11 47 65 104
BALANCE AT DECEMBER 31................. 6 15 49 70 65
</Table>

Investments in non-consolidated companies as of December 31, 2002 include
ReGen Biologics Inc, Redwood City (USA), Tutogen Medical Inc, Clifton (USA),
@Outcome Inc, Austin (USA), Orquest Inc, Mountain View (USA), Orthosoft Inc,
Outremont (Canada), Leading KK, Tokyo (Japan), and publicly traded securities of
Thoratec Inc, Berkley (USA) and Japan Lifeline Co. Ltd, Tokyo (Japan), held as
non-current assets.

The estimate of fair value as of December 31, 2002 resulted in a partial
reversal of the impairment charge in the investment of Orquest Inc., amounting
to CHF 13 million.

Revaluation of fair value in 2001 consists of write-offs for the
investments in Orquest Inc, ReGen, @Outcome, Japan Lifeline and Orthosoft Inc.

NOTE 18: INVENTORIES

<Table>
<Caption>
2002 2001
-------------------------- --------------------------
GROSS NET GROSS NET
VALUE ALLOWANCES TOTAL VALUE ALLOWANCES TOTAL
----- ---------- ----- ----- ---------- -----
(IN MILLIONS CHF)

Raw materials, supplies and
consumables........................ 45 -- 45 63 (7) 56
Work in progress..................... 29 (2) 27 44 (2) 42
Finished products and trade
merchandise........................ 371 (91) 280 447 (134) 313
TOTAL INVENTORIES.................... 445 (93) 352 554 (143) 411
</Table>

Obsolescence reserve decreased by CHF 10 million in 2002, and increased in
2001 and 2000 by CHF 75 and 35 million respectively. Write-offs of scrapped
inventory against the allowance for obsolescence were CHF 18, 3 and 4 million in
2002, 2001, and 2000 respectively. The changes in inventory allowance due to
acquisitions and disposals amount to CHF -10, 1 and 0 million in 2002, 2001 and
2000 respectively. The currency conversion adjustment effect on the inventory
allowance was CHF -12, 0 and -2 million in 2002, 2001 and 2000 respectively.
Costs of materials included in cost of sales were CHF 246, 254 and 243 million
in 2002, 2001 and 2000 respectively.

F-62

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 19: TRADE ACCOUNTS RECEIVABLES

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Gross trade accounts receivable............................. 312 332
Allowance for doubtful accounts............................. (22) (24)
TRADE ACCOUNTS RECEIVABLE................................... 290 308
</Table>

Bad debt expenses were CHF 1, 7 and 2 million at December 31, 2002, 2001
and 2000 respectively. Bad debt write-offs against the allowance were CHF 0, 1
and 1 million in 2002, 2001 and 2000 respectively.

NOTE 20: PLEDGED ASSETS

In 2002 in connection with the Senior Credit Facility Agreement described
in note 28, to finance the hip and knee implant litigation as described in note
9, assets of the Company and its material subsidiaries have been pledged to the
Security Agent. The total amount of pledged assets of Centerpulse Group is CHF
2.2 billion.

NOTE 21: SHAREHOLDERS' EQUITY

Outstanding shares with a nominal amount of CHF 30 each as of December 31,
2002 and 2001, amount to 11,791,790 and 9,933,556, respectively. The number of
registered shares was increased by 1,822,408 shares in October 2002 through a
capital increase via a tradable pre-emptive rights offering.

The conditional share capital with a value of CHF 5,752,890 as of December
31, 2001 (original nominal value was CHF 6 million) was increased in 2002 by CHF
4.5 million to CHF 10,252,890. The conditional share capital was reduced due to
shares and ADS options exercised between 1998 and 2002 to CHF 9,188,040. See
also note 30.

Amounts planned for dividend distribution by the Company's subsidiaries at
December 31, 2002, 2001 and 2000 were approximately CHF 241 million, CHF 53
million and CHF 86 million, respectively.

As discussed in note 9 and 28 the Company has made a number of customary
representations and warranties under the senior credit facility agreement.

Hereunder, the Company is not allowed to make any dividend payments as long
as any amount is outstanding under the senior credit facility. Therefore, the
Board of Directors proposes no dividend distribution.

NOTE 22: NON-CURRENT BORROWINGS

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Loans from third parties.................................... 486 13
Mortgage loans.............................................. 6 6
Leasing commitments......................................... 1 2
TOTAL BORROWINGS............................................ 493 21
Current portion............................................. (6) (1)
TOTAL NON-CURRENT BORROWINGS................................ 487 20
</Table>

The increase in loans from third parties relates to the Senior Credit
Facility Agreement as described in note 28.

F-63

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Non-current borrowings will mature as follows:

<Table>
<Caption>
THIRD-PARTY
LOANS MORTGAGE OTHER TOTAL
----------- --------- ------ -----
(IN MILLIONS CHF)

2004 -- 2007...................................... 472 -- -- 472
2008 and thereafter............................... 9 6 -- 15
TOTAL NON-CURRENT BORROWINGS...................... 481 6 -- 487
</Table>

NOTE 23: PROVISIONS

<Table>
<Caption>
PERSONNEL WARRANTIES,
RELATED LITIGATION PROVISION OTHER 2002 2001
PROVISIONS RISKS FOR TAXES PROVISIONS TOTAL TOTAL
---------- ----------- --------- ---------- ------ -----
(IN MILLIONS CHF)

Balance at January 1................ 4 1,474 109 104 1,691 198
Changes in composition of Group..... -- -- -- (5) (5) 3
Increase............................ 5 42 -- 17 64 1,637
Unused amounts reversed............. -- (1) -- (6) (7) --
Utilization......................... (1) (1,333) (11) (22) (1,367) (141)
Currency conversion adjustment...... -- (110) -- (15) (125) (6)
BALANCE AT DECEMBER 31.............. 8 72 98 73 251 1,691
Current portion..................... 2 46 31 13 92 223
Non-current portion................. 6 26 67 60 159 1,468
BALANCE AT DECEMBER 31.............. 8 72 98 73 251 1,691
</Table>

Personnel provisions are accrued to cover expenses arising primarily from
grants, rewards for years of service, termination and pension benefits.

The decrease in provisions for litigation risks in 2002 is related to the
hip and knee implant litigation. The CHF 1,391 million (USD 828 million)
provision recognized in 2001 related to the hip and knee implant litigation was
reduced to CHF 43 million (USD 31 million) at December 31, 2002. USD 725 million
were utilized with the payment of the obligation to the settlement trust. USD 72
million were utilized for other expenses in the context of the hip and knee
implant litigation.

"Other provisions" mainly relate to accrued deductible arising from
insurance policies, and are also a result of the divestiture of various
businesses in 1999 and 2002, in situations where the Company is involved in the
procedure, as provided for in the contract, to determine the final selling
price. Management believes that the recorded provisions are adequate.

NOTE 24: CURRENT BORROWINGS

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Borrowings from third parties............................... 64 75
Reclassification of non-current borrowings.................. 6 --
TOTAL CURRENT BORROWINGS.................................... 70 75
</Table>

F-64

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 25: OTHER CURRENT AND ACCRUED LIABILITIES

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Notes payable............................................... 1 1
Social security contributions............................... 4 3
Assessed taxes payable...................................... 14 5
Commissions payable......................................... 13 14
Other liabilities........................................... 50 53
Vacation and overtime claims................................ 13 15
Salaries, wages and bonuses................................. 30 34
Corporate identity.......................................... 3 15
Fair Value of derivative financial instruments.............. 1 2
Other accruals.............................................. 36 52
Total other current liabilities and accruals................ 165 194
</Table>

NOTE 26: COMMITMENTS AND CONTINGENCIES

The contractual commitments for future investments in property, plant, and
equipment at December 31, 2002, 2001, and 2000 (for which funding will be needed
in future years), were CHF 0, CHF 6 and CHF 3 million respectively.

The future minimum rental commitments for operating leases at December 31
are:

<Table>
<Caption>
2002 2001
------------------------- -------------------------
BUILDINGS OTHER TOTAL BUILDINGS OTHER TOTAL
--------- ----- ----- --------- ----- -----
(IN MILLIONS CHF)

Maturity: < 1 year..................... 4 3 7 5 2 7
Maturity: 1-5 years.................... 5 4 9 11 5 16
Maturity: > 5 years.................... -- 2 2 -- 2 2
Total rental commitments............... 9 9 18 16 9 25
</Table>

Employees of the Company are required to respect local laws and regulatory
guidelines in the course of their business activities. In the normal course of
business, certain subsidiaries are involved in administrative and civil
proceedings that could give rise to claims not covered, or only partly covered,
by insurance. The effects of such proceedings on future earnings cannot be
foreseen.

The Company, Centerpulse USA Holding Co., and certain other material
subsidiaries of the Company have guaranteed the full payment of amounts owing
under the Senior Credit Facility, and have also guaranteed the performance of
all other obligations thereunder, subject in all cases to certain limitations
(including legal limitations under applicable law). Security has been given by
the Borrower, the Company, Centerpulse USA Holding Co. and certain subsidiaries
over certain of each company's tangible and intangible assets on a consolidated
basis in the amount of CHF 2.2 billion.

The Company is party to certain other legal actions arising in the ordinary
course of its business. Provisions have been recorded for such litigation risks
based on a best estimate. Because the judicial process for such cases is
complex, management cannot estimate the amount of any additional losses which
might be incurred in excess of the amounts provided, especially the legal cases
related to the recalled Inter-Op hip shells and withdrawn tibial base plates.

F-65

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In the opinion of management, the ultimate outcome of these situations will
not have a material impact on the consolidated financial position and results of
operations.

NOTE 27: RETIREMENT BENEFIT PLANS AND EMPLOYEE COSTS

DEFINED CONTRIBUTION PLAN

The Company has defined contribution plans which cover substantially all of
its US employees and employees in other countries. The benefits of these plans
relate to local customs and practices in the countries concerned. Company
contributions to such plans for the years ended December 31, 2002, 2001 and 2000
were CHF 9 million, CHF 10 million, CHF 8 million respectively.

DEFINED BENEFIT PLANS

Defined benefit plans covering employees of Centerpulse are in place in
Switzerland, France and the United Kingdom up to the time of the disposal of
Vascutek on November 14. Those in Switzerland and the United Kingdom cover
employees of the Company in addition to employees of Sulzer. The assets and
liabilities of these plans that relate to Company personnel have been determined
based on actuarial valuations. The most recent actuarial valuations were
performed on December 31, 2002.

PERSONNEL COSTS FOR DEFINED BENEFIT PLANS

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Current service costs of retirement benefit plans........... (13) (10)
Interest costs.............................................. (6) (5)
Expected return on plan assets.............................. 7 7
Employees contributions..................................... 5 4
Change in portion of over funding not capitalized........... -- (2)
Personnel costs for defined benefit plans................... (7) (6)
</Table>

The actual return on assets was a loss of CHF 9 million in 2002 and a loss
of CHF 7 million in 2001.

FUNDED STATUS

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Present value of funded obligations......................... (132) (134)
Fair value of plan assets(1)................................ 122 148
Over/(under)funding......................................... (10) 14
Actuarial gains (-) and losses.............................. 10 10
Portion of overfunding not capitalized(2)................... -- (24)
Overfunding reflected in the balance sheet.................. -- --
Long-term provision portion................................. -- --
Asset portion............................................... -- --
</Table>

- ---------------

(1) The joint plan assets as of December 31, 2002, and 2001, include the amount
of CHF 0 million and 17 million shares of Centerpulse Ltd which is about 0%
and 0.4% of the total plan assets.

F-66

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2) Legal requirements, particularly those of Switzerland, restrict the
utilization of over funded contributions in legally separated benefit plans.
Only amounts that will potentially reduce future pension costs are
capitalized in the consolidated balance sheets.

The actuarial weighted average assumptions used were as follows:

<Table>
<Caption>
2002 2001
---- ----

Discount rate............................................... 4.3% 4.5%
Long-term return on assets.................................. 4.6% 5.1%
Salary increases............................................ 2.3% 2.8%
Pension benefit increases................................... 1.3% 1.3%
Employee turnover........................................... 5.6% 5.3%
NUMBER OF EMPLOYEES COVERED BY DEFINED BENEFIT PLANS AS OF
DECEMBER 31............................................... 770 769
</Table>

<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS
CHF)

Employee costs
Salaries and wages.......................................... 360 346
Fringe benefits............................................. 69 72
TOTAL PERSONNEL EXPENSES.................................... 429 418
</Table>

NOTE 28: FINANCIAL INSTRUMENTS

The balance sheet values of cash, cash equivalents and current accounts
receivable and payable approximate their market values. In the case of the items
below, the carrying value in the balance sheet and their market values at the
closing date were as follows:

<Table>
<Caption>
2002 2001
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------ --------- -----
(IN MILLIONS CHF)

Available-for-sale investments and other financial
assets............................................. 64 64 58 58
Non-current borrowings............................... (493) (493) (21) (21)
</Table>

With the adoption of IAS 39 as per January 1, 2001, the carrying value
corresponds to the fair value excluding borrowings which continue to be at
amortized costs.

The fair value of investments in non-consolidated companies and other
financial assets is based on quoted market prices for those of similar
investments. For investments and other financial assets, which have no quoted
market prices, a reasonable estimate of fair value was made using available
market information and appropriate valuation techniques. The fair value of
non-current borrowings is based on the current rates offered to the Company for
debt of similar maturities. The estimates presented above on long-term financial
instruments are not necessarily indicative of the amounts that would be realized
in a current market exchange.

<Table>
<Caption>
2002 2001
--------------------------- ---------------------------
NOTIONAL CARRYING FAIR NOTIONAL CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
-------- -------- ----- -------- -------- -----
(IN MILLIONS CHF)

Foreign currency instruments
Forward exchange contracts (profit)........ 86 2 2 39 1 1
Forward exchange contracts (-loss)......... 68 (1) (1) 209 (2) (2)
</Table>

F-67

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

All hedges are classified as fair value hedges.

The Group's sales are denominated in a variety of different currencies. The
currency structure of costs deviates to some extent from the currency structure
of sales. In order to manage the exposure to the risk of foreign exchange
movements, the Group makes use of financial instruments such as forward
contracts and options. These instruments are entered into with major financial
institutions and typically expire within one year.

The notional value indicates the volume of the open derivative positions at
the balance sheet date. The determination of the fair value of open transactions
is based, where possible, on quoted prices, or alternatively on other recognized
valuation methods.

Changes in fair values resulting from currency hedging of existing assets
and liabilities are recognized in financial income. These gains and losses
generally correspond to changes in the hedged balance sheet items.

CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to significant
concentrations of credit risk, consist principally of cash investments, foreign
currency exchange contracts, and trade accounts receivable. The Company
maintains cash and cash equivalents, investments and certain other financial
instruments with various major financial institutions. The Company performs
periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any institution.
Financial transactions are spread over a number of financial institutions each
of which has a high credit rating.

The overall credit risk relating to derivatives at December 31, 2002 and
2001, amounted to CHF 2.1 and CHF 0.6 million, respectively. The credit risk
measures the maximum exposure which would arise if the counter parties failed to
meet their obligations. The outstanding financial market transactions have all
been arranged with top-rated financial institutions, and there is no
unreasonable concentration of risks.

Concentration of credit risks with respect to trade accounts receivable is
limited due to the large number of customers and their dispersion across many
geographic areas. However, a significant proportion of trade accounts receivable
is with national health care systems in several countries. Although the Company
does not currently foresee a credit risk associated with these receivables,
repayment is dependent upon the financial stability of those countries' national
economies.

SUMMARY OF SENIOR CREDIT FACILITY AGREEMENT

Centerpulse Ltd and Centerpulse Orthopedics Inc. have secured loans under a
senior credit facility from a syndicate of lenders arranged by UBS Warburg Ltd,
in an amount, initially, of USD 635 million, which has since been paid down to
USD 331 million as per December 31, 2002. The senior credit facility agreement
was executed on October 29, 2002. The entire drawings under the senior credit
facility (less transaction costs) were applied in payment of the cash portion
and cash in lieu of the convertible callable component of the Settlement
Agreement on November 4, 2002.

The senior credit facility consisted of two debt tranches: Tranche A of USD
250 million (thereof 63.5% repayable in Euros) and tranche B of USD 385 million
(thereof 28.3% repayable in Euros). Tranche A has already been fully repaid. The
tranche B loan is repayable on November 4, 2007, with nominal interim
amortization payments equal to 0.25% of the initial tranche B loan due every
3-months.

The applicable interest rate for the remaining loan is Libor plus 3.50% per
annum.

A commitment fee of 0.75% per annum was paid on the funding date in respect
of the period from the commitment letter to the funding date.

F-68

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

This fee and all other loan related costs are recognized as financial
expense over the period of repayment and at the equal ratio of repayments,
respectively.

The Group has guaranteed the full payment of amounts owing under the senior
credit facility, and has also guaranteed the performance of all other
obligations thereunder, subject in all cases to certain limitations (including
legal limitations under applicable law). Security has been given over certain
tangible and intangible assets of the Group.

The security interests granted by the Group to the United States Department
of Justice under the Medicare Settlement against the Group are subordinated to
the security interests of the senior banks under the senior credit facility,
under an intercreditor agreement with the senior banks.

All loans under the senior credit facility require prepayments under
certain conditions (with certain exceptions), including (i) in full upon demand
following a change of control (defined as a person or group acquiring more than
35% of the voting share capital), (ii) upon the receipt of proceeds of asset
disposals (subject to certain reinvestment rights), (iii) from 50% of excess
cash flow (payable at delivery of audited accounts for each financial year),
(iv) from the net proceeds of insurance claims (subject to the ability to repair
or replace the damaged assets) and (v) from 50% of the proceeds of any equity or
equity-linked issuances after the funding date.

Centerpulse may voluntarily prepay all or a portion of the senior credit
facility at anytime subject to notice and minimum amounts.

The Group has made a number of customary representations and warranties for
a credit arrangement of that type. The senior credit facility is also subject to
customary affirmative and negative covenants and restrictions. The financial
covenants include ratios involving EBITDA, net cash flow, financial
indebtedness, interest expense and mandatory repayments, all as defined by the
Senior Credit Facility Agreement. Further, the documentation contains the usual
events of default.

NOTE 29: TRANSACTIONS WITH RELATED PARTIES

At the Annual General Meeting of Sulzer on April 19, 2001 the Shareholders
approved the proposed separation of Sulzer and SulzerMedica into two fully
independent quoted companies. The separation was effected on July 10, 2001.
Transactions after the spin-off between the Company and Sulzer and its
subsidiaries are summarized below.

On October 30, 2002 the Company and Sulzer entered into an Amendment to the
Umbrella Agreement dated July 4, 1997, under which it was decided that the
Company pays an account settlement to Sulzer for the usage right for the
trademark, corporate name and/or trade name of Sulzer in the amount of CHF
1,772,000. No additional royalties will have to be paid by Centerpulse and its
affiliates after October 30, 2002.

Certain research and development activities were performed centrally by
Sulzer Markets and Technology Ltd., a subsidiary of Sulzer. Under various cost
sharing agreements the cost of such activities was charged to the companies,
which benefit directly therefrom. Direct research and development services
charged to the Company are separately disclosed in the table at the end of note
29. Exploratory research and development charges allocated to the Company are
disclosed under selling, general and administrative expense in the table at the
end of note 29.

The Company has agreed to indemnify certain suppliers for liability claims,
which may be made against them in connection with the incorporation of their
products into Centerpulse products.

The Company has insurance coverage for product liability under an umbrella
insurance policy for all its subsidiaries.

F-69

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

All transactions have been consistent with arm's length principles
according to the Umbrella Agreement entered into by the Company with Sulzer
during 1997.

Based on the Separation Agreement of July 6, 2001 the Shareholders approved
the proposed new name "Centerpulse" at the Annual Shareholder' Meeting on May
17, 2002. The renaming process is already finalized for the Holding Centerpulse
AG and most of its subsidiaries.

In 2002, the total remuneration for the Board of Directors approximated CHF
1.7 million (in 2001: CHF 1.3 million). Board members receive a substantial
portion of their fees in the form of shares or stock options.

Transactions between the Company and Sulzer and its subsidiaries amounted
to:

<Table>
<Caption>
2002 2001(1) 2000
---- ------- ----
(IN MILLIONS CHF)

TOTAL SALES OF CENTERPULSE PRODUCTS......................... -- 9 19
Rent and maintenance of buildings........................... -- (2) (5)
Selling, general and administrative expense................. -- (2) (4)
Research and development expense............................ -- (2) (3)
TOTAL COSTS................................................. -- (6) (12)
TOTAL INTEREST INCOME....................................... -- 2 3
</Table>

- ---------------

(1) Until July 10, 2001, Centerpulse was part of the Sulzer Group

Balances with Sulzer and its subsidiaries amounted to:

<Table>
<Caption>
2002 2001(1) 2000
---- ------- ----
(IN MILLIONS CHF)

Assets
Current accounts receivable................................. -- -- 5
Cash and cash equivalents................................... -- -- 98
TOTAL ASSETS................................................ -- -- 103
Liabilities
Current borrowings.......................................... -- -- 3
Current accounts payable.................................... -- -- 4
TOTAL LIABILITIES........................................... -- -- 7
</Table>

- ---------------

(1) Until July 10, 2001, Centerpulse was part of the Sulzer Group

NOTE 30: MANAGEMENT STOCK OPTION PLAN

Movements in the number of shares and ADS options outstanding are as
follows:

<Table>
<Caption>
2002 2001 2000
OPTIONS OPTIONS OPTIONS
------- ------- -------

At the beginning of the year............................ 344,463 177,472 126,458
Granted................................................. 215,900 233,943 74,048
Exercised............................................... (35,495) (199) (7,674)
Cancelled or expired.................................... (102,443) (66,753) (15,360)
AT THE END OF THE YEAR.................................. 422,425 344,463 177,472
</Table>

F-70

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Share options outstanding at the end of the year have the following terms:

<Table>
<Caption>
WEIGHTED AVERAGE REMAINING WEIGHTED AVERAGE EXERCISE 2002 2001 2000
GRANT YEAR CONTRACTUAL LIFE IN YEARS PRICE PER SHARE/ADS OPTIONS OPTIONS OPTIONS
- ---------- -------------------------- ------------------------- ------- ------- -------

1997(1).............. -- -- -- 17,440 22,958
1998................. 0.3 CHF 365/USD 24.28 16,640 24,293 31,819
1999................. 1.3 CHF 286/USD 19.36 30,419 43,710 54,703
2000................. 2.3 CHF 358/USD 21.99 38,783 54,119 67,992
2001................. 8.5 CHF 180/USD 12.00 139,045 204,901 --
2002................. 9.3 CHF 145/USD 8.38 197,538 -- --
TOTAL................ CHF 181/USD 13.19 422,425 344,463 177,472
</Table>

- ---------------

(1) expired in July 2002

INCENTIVE PLANS AND STOCK OWNER PLANS

Since the initial public offering of its Shares in 1997, the Company has
had stock option plans in place for the members of its Board of Directors, the
Executive Committee and certain key employees of Centerpulse, including its
senior management.

The 1997 SulzerMedica Management Stock Option Plan (the "1997 Stock Option
Plan") provided for the grant of options for Shares or ADSs (one option covering
one Share or 10 ADSs) with an exercise price set at the time of the grant and
equivalent to the average trading price of the Shares or ADSs during the ten
trading days prior to the date of grant. The last options under the 1997 Stock
Option Plan were granted in April 2000. The options expire five years after the
date of grant. No option may be exercised during the first year after it was
granted. Thereafter, options may be exercised each year in respect of a maximum
of 25% of the Shares or ADSs.

In November 2000, the Company approved the SulzerMedica 2001 Stock Option
Plan (the "2001 Stock Option Plan"), which became effective January 1, 2001. A
maximum of 125,000 Shares (or 1,250,000 ADSs) are available under the 2001 Stock
Option Plan. The Management Development & Compensation Committee of the Board of
Directors determines the exercise price and the vesting conditions at the time
of grant. The options expire ten years after the date of grant.

In July 2001, the Company approved the Sulzer Medica 2001 Long-Term Stock
Option Plan (the "Long-Term Plan"), which became effective August 1, 2001. A
maximum of 250,000 shares (or 2,500,000 ADSs) are available under the Long-Term
Plan. As with the 2001 Stock Option Plan, the exercise price and the vesting
conditions are determined by the Management Development & Compensation Committee
of the Board of Directors at the time of grant. The options expire 10.5 years
after the date of grant.

Under the stock option plans, options were and generally are granted once
annually, in April, but may also be granted to new employees during the year.
Options under the plans are sourced from conditional share capital pursuant to
Article 3a of the Company's Articles of Incorporation or from secondary Shares.

Options under these plans are sourced from up to 350,000 shares (or
3,500,000 ADSs) of authorized, but un-issued registered shares of Centerpulse
AG.

Based on the capital increase of Centerpulse Ltd in October 2002 a proposal
to adjust the price of the stock contained in the Management Stock Option Plan
(MSOP) has been approved by the Management Development & Compensation Committee
of the Board of Directors in December 2002. The strike price reduction was in
the range of 3% to 10%. The different percentage adjustment of the strike prices
was linked to the different parameters of the individual plans.

F-71

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 31: DIFFERENCES BETWEEN IFRS AND US GAAP

The Group's consolidated financial statements are prepared in accordance
with International Financial Reporting Standards (IFRS), which differ, in
certain material respects from accounting principles generally accepted in the
United States of America (U.S. GAAP).

Reconciliation of IFRS and U.S. GAAP net income:

<Table>
<Caption>
2002 2001 2000
---- ------ ----
(IN MILLIONS CHF)

NET INCOME/(NET LOSS) UNDER IFRS............................ 337 (1,193) 190
Impact of in-process research and development cost on
goodwill(1)............................................... 10 11 11
Impact of impairment charge on intangibles(2)............... (3) 17 (13)
Impact of goodwill amortization(3).......................... 50 -- --
Impairment reversal(4)...................................... (13) -- --
Recognized loss on sale of discontinued operations(5)....... (42) -- --
Employee benefits(6)........................................ (24) 3 1
Option re-pricing(7)........................................ (17) -- --
Deferred tax effect on U.S. GAAP adjustments................ 5 -- --
NET INCOME/(NET LOSS) UNDER U.S. GAAP....................... 303 (1,162) 189
thereof net income/(net loss) from continuing operations.... 124 (1,104) 146
thereof net income/(net loss) from discontinuing
operations................................................ 179 (58) 43
</Table>

- ---------------

(1) IMPACT OF IN-PROCESS RESEARCH AND DEVELOPMENT COST ON GOODWILL
In accordance with IAS 22, the amount of "in-process research and
development" included in the purchase price of acquisitions is considered a
form of goodwill which the Company amortizes over a twenty-year period. U.S.
GAAP requires the entire "in-process research and development" amount to be
expensed in the year of acquisition. This difference reverses over the
twenty-year period in which goodwill is amortized under IFRS. In 2002, CHF
10 million of this difference was reversed (2001: CHF 11 million).

(2) IMPACT OF IMPAIRMENT CHARGE ON INTANGIBLES
U.S. Statement of Financial Accounting Standards No. 121 (FAS 121)
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of" provides that an impairment is evaluated based on
expectations of undiscounted cash flows. This test according to U.S. GAAP
determined that in 2001 and 1999 no impairment had occurred and no
impairment charges were recognized. This difference reverses over the
remaining period in which these definite-lived intangible assets are
amortized under IFRS.

(3) IMPACT OF GOODWILL AMORTIZATION
As of January 1, 2002, the Group adopted Statement of Financial Accounting
Standards No. 142 (SFAS 142), "Goodwill and other Intangible Assets". SFAS
142 requires that all goodwill and other intangible assets existing on
implementation on January 1, 2002 be tested for impairment on an annual
basis. From January 1, 2002 goodwill and intangible assets deemed to have an
indefinite useful life are no longer amortized on a regular basis. For the
purpose of the reconciliation to U.S. GAAP, goodwill was generally amortized
through the income statement over an estimated useful life of 20 years up to
December 31, 2001. Therefore, there was no amortization charge in 2002 under
U.S. GAAP. The corresponding reversal of the regular goodwill amortization
under IFRS resulted in an additional income in the U.S. GAAP reconciliation
of CHF 50 million for 2002.

F-72

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) IMPAIRMENT REVERSAL
Statement of Financial Accounting Standards No. 115 (FAS 115) "Accounting
for Certain Investments in Debt and Equity Securities", does not allow the
reversal of an impairment loss for subsequent increases in the fair value of
a financial asset.

Under IAS 39 the impairment on a previously impaired financial asset is
reversed in the net profit or loss of the period upon subsequent recovery in
fair value of the asset.

(5) RECOGNIZED LOSS ON SALE OF DISCONTINUED OPERATIONS
Due to difference between IFRS and U.S. GAAP in the treatment of impairment
charges and goodwill amortization described under (b) and (c) of the
reconciliation of shareholders' equity the gain on sale of disposals, as
disclosed in note 11, is reduced by CHF 42 million.

(6) EMPLOYEE BENEFITS
U.S. Statement of Financial Accounting Standards No. 87 (FAS 87) "Employer's
Accounting for pensions" does not provide for an impairment test for the
overfunding of pension plans. The change of the amount of the overfunding is
shown in the income statement.

(7) OPTION RE-PRICING
If the exercise price of a fixed stock option award is subsequently reduced,
Financial Accounting Standards Board Interpretation No. 44 "Accounting for
Certain Transactions involving Stock Compensation and interpretation of APB
Opinion No. 25", requires that the option award be accounted for as variable
from the date of the modification to the date the award is exercised, is
forfeited or expires unexercised. As discussed in the reconciliation of net
income, the company records compensation expense or recovery for modified
options calculated as (the amount of) the change in the intrinsic value of
the options from the time of the modification to the date the modified
option is exercised, forfeited or expires.

The principal differences between IFRS and U.S. GAAP are presented on pages
F-115 -- F-117 with explanations of certain adjustments that affect consolidated
shareholders' equity as of December 31, 2002 and 2001.

RECONCILIATION OF SHAREHOLDERS' EQUITY

<Table>
<Caption>
2002 2001
----- ----
(IN MILLIONS
CHF)

SHAREHOLDERS' EQUITY UNDER IFRS............................. 1,270 784
Impact of in-process research and development cost on
goodwill(a)............................................... (138) (177)
Exceptional write-down on intangibles(b).................... 175 241
Impact of goodwill amortization(c).......................... 50 --
Impairment reversal(d)...................................... (13) --
Employee benefits(e)........................................ -- 24
Option re-pricing(f)........................................ (17) --
Deferred taxes(g)........................................... 5 --
SHAREHOLDERS' EQUITY UNDER U.S. GAAP........................ 1,332 872
</Table>

- ---------------

(a) IN-PROCESS RESEARCH & DEVELOPMENT
As discussed in the reconciliation of net income, the amount: "in-process
research and development" is expensed in the year of acquisition. This
difference reverses over the period in which goodwill is amortized under
IFRS.

(b) INTANGIBLES
As discussed in the reconciliation of net income, the impairment charge to
goodwill and existing technology was not recognized under FAS 121.

F-73

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
ORTHOPEDICS SPINE-TECH DENTAL CARDIOVASCULAR
DIVISION DIVISION DIVISION DIVISION TOTAL
----------- ---------- -------- -------------- -----
(IN MILLIONS CHF)

JANUARY 1, 2002.................. 44 714 120 188 1,066
Additions........................ -- -- -- -- --
Impairment losses................ -- -- -- -- --
Goodwill written off related to
disposals...................... -- -- -- (165) (165)
Translation effects.............. -- (120) (20) (3) (143)
DECEMBER 31, 2002................ 44 594 100 20 758
</Table>

- ---------------

(c) GOODWILL
U.S. Statement of Financial Accounting Standards No. 142 (FAS 142)
"Goodwill and other Intangible Assets" does not require goodwill to be
amortized after January 1, 2002. Under IFRS the Group continues to amortize
goodwill.

The changes in the carrying amount of goodwill for the year ended December
31, 2002 are as follows:

Reported net income was CHF 303; (1,162) and 189 million in 2002, 2001 and
2000 respectively. Adding back the goodwill amortization of CHF 0, 59 and
41 million in 2002, 2001 and 2000 respectively, results in Pro forma net
income of CHF 303, (1,103) and 230 million, respectively.

The Group estimates that the aggregate amortization expense for intangibles
subject to amortization for each of the five succeeding financial years
will not materially differ from the current aggregate amortization expense.

(d) IMPAIRMENT REVERSAL
At the end of 2001 the investment in Orquest was impaired and USD 11
million written off.

Evidence of a take-over of Orquest by DePuy AcroMed resulted in the
estimate that a substantial part of the impairment is no longer justified.
CHF 13 million was reversed in line with IAS 39. U.S. GAAP does not allow
the reversal of an impairment of a financial asset.

(e) EMPLOYEE BENEFITS
IAS 19 (revised 1998) "Employee benefits", effective as of January 1, 1999,
limits the benefit amount of plan assets to be recognized to the realizable
economic future benefit.

U.S. GAAP Financial Accounting Standard No. 87 (FAS 87), "Employers'
Accounting for pensions," does not provide for an impairment test for the
over funding of pension plans, as such the amount of the over-funding is
recognized as an asset.

(f) OPTION RE-PRICING
As discussed in the reconciliation of net income, the company records
compensation expense or recovery for modified options calculated as (the
amount of) the change in the intrinsic value of the options from the time
of the modification to the date the modified option is exercised, forfeited
or expires.

(g) DEFERRED TAXES
In the consolidated financial statements, deferred tax assets and
liabilities are classified as long-term and have been presented as such in
the assets and liabilities sections of the balance sheet. This presentation
is in accordance with IAS 12, "Income taxes." U.S. GAAP Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income
Taxes," provides that deferred taxes must be separated into a current and a
non-current amount based on the classification of the related asset or
liability.

F-74

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The presentation of deferred tax assets and liabilities in accordance with
FAS 109 at December 31 would be as follows:

<Table>
<Caption>
2002 2001
--------------------------------------------- ---------------------------------------------
NON- NON- NON- NON-
CURRENT CURRENT CURRENT CURRENT CURRENT CURRENT CURRENT CURRENT
ASSETS ASSETS LIABILITIES LIABILITIES ASSETS ASSETS LIABILITIES LIABILITIES
------- ------- ----------- ----------- ------- ------- ----------- -----------
(IN MILLIONS CHF)

Deferred taxes....... 216 592 14 17 243 679 15 20
Valuation allowance.. (68) (187) -- -- (69) (194) -- --
TOTAL DEFERRED
TAXES.............. 148 405 14 17 174 485 15 20
</Table>

This difference relating to deferred taxes does not result in a reconciling
adjustment to shareholders' equity as of December 31, 2002 and 2001 between
IAS and U.S. GAAP.

(h) OPERATING INCOME BEFORE GOODWILL AMORTIZATION AND EXCEPTIONAL ITEMS
Disclosure of operating income before exceptional items and goodwill
amortization is not permitted under U.S. GAAP. The exceptional items,
goodwill amortization and non-operating expenses would be included in the
determination of operating income under U.S. GAAP.

(i) OPERATING INCOME
Operating income under IFRS also consists of the income from discontinuing
operations. Under U.S. GAAP, this income from the grafts and stents
businesses in 2002 would not be included in the operating income. It would
be shown below the operating income as income from discontinuing
operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has recently issued several new
accounting standards, including SFAS No. 145 "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections",
SFAS 146 "Accounting for Costs Associated with Exit or Disposal Activities",
which will be effective for periods beginning on or after January 1, 2003. The
Group is currently determining the effect, if any, these new standards cause
divergences from its Consolidated Financial Statements.

FASB interpretation No. 45 "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others", was issued in November 2002. This Interpretation provides further
guidance for the disclosure and accounting for guarantees. The disclosure
provisions have been adopted for the year ended December 31, 2002. In accordance
with the Interpretation, all guarantees entered into after December 31, 2002 are
required to be recognized as a liability at fair value. This new Interpretation
is not expected to have a material impact on the Group's consolidated financial
statements.

FASB interpretation No. 46 "Consolidation of Variable Interest Entities".
This new Interpretation is not expected to have a material impact on the Group's
consolidated financial statements.

The Group adopted SFAS No. 141 for all business combinations after June 30,
2001. This standard requires that all business combinations be accounted for
using the purchase method, and it further clarifies the criteria for recognition
of intangible assets separately from goodwill. Since June 30, 2001, there have
been no material business combinations.

Effective January 1, 2002 the Group adopted SFAS No. 144 "Accounting for
the Impairment or Disposal of Long Lived Assets". This standard supersedes and
amends existing accounting literature related to the impairment and disposal of
long-lived assets.

F-75

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 32: SUBSEQUENT EVENTS

On January 21, 2003 the Group announced the closing of the sale of its
Corbomedics Inc. and Mitroflow Inc. mechanical and tissue heart valve business
to Italian device company Snia s.p.A for total consideration of USD 116 million.
The purchase price consists of cash consideration of USD 80 million, and a
subordinated note with a principal amount of USD 36 million. The sale of
Carbomedics and Mitroflow is the third and final step in Centerpulse's plan to
divest its cardiovascular interests.

In January 2003 the group announced that Mr. G.-P. Ondo, Head of Group Risk
Management and Member of the Executive Board, has left the company to pursue
other interests.

NOTE 33: SUBSEQUENT EVENTS (UNAUDITED)

As noted and further discussed in Note 9, the Company stated that, as of
April 11, 2003, the Claims Administrator for the Trust had received 4,362 claim
forms in relation to hip implants and tibial base plates and 150 claim forms for
reprocessed hip implants. The Claims Administrator has determined that for these
classes of claims, 3,795 and 119 respectively are likely to be valid. It is not
known at present how many more claims will be made or whether the remaining and
future claims are valid and hence how many will qualify for settlement. Claims
processing will continue throughout 2003, 2004 and 2005.

Those class plaintiffs who opted out of the Settlement Agreement may still
bring claims against the Company. As of April 11, 2003, of the original 136
persons opted out of the Settlement Agreement, at present 36 patients implanted
with an affected product remain unresolved, of which one is known to have
undergone revision surgery, and thus represent the highest claimant compensation
category under the Settlement Agreement, 37 have not undergone revision surgery;
and the status of four is unknown.

On March 20, 2003, the Boards of Directors of Smith & Nephew plc ("Smith &
Nephew") and Centerpulse announced that they have agreed to a business
combination transaction between the two companies (the "Transaction").

The Transaction is proposed to be effected by Smith & Nephew Group plc (a
new holding company of Smith & Nephew to be formed for the purposes of the
Transaction) ("Smith & Nephew Group Holding") making tender offers for each of
Centerpulse and InCentive Capital AG, a shareholder of the Company that holds,
or has the right to hold, approximately 19% of the issued shares of Centerpulse.

Pursuant to the Transaction, it is contemplated that Smith & Nephew
shareholders will exchange their Smith & Nephew shares for shares in Smith &
Nephew Group Holding, on a one-for-one basis, by means of a court-approved
reorganization.

It is further contemplated in the Transaction that Smith & Nephew Group
Holding will offer 25.15 new Smith & Nephew Group Holding shares and CHF 73.42
in respect of each Centerpulse share so that Centerpulse and InCentive
shareholders will collectively own 24% of the combined group. Centerpulse and
InCentive shareholders (the latter in respect of InCentive's holding in
Centerpulse) would also be offered a Collective Mix and Match Facility whereby
they may elect to receive more or less cash to the extent that other Centerpulse
or InCentive shareholders have elected to receive more or fewer new Smith &
Nephew Group Holding shares.

The Centerpulse tender offer has been unanimously recommended by the
Centerpulse Board of Directors.

The Centerpulse tender offer is conditional on, among other things,
approval of Smith & Nephew's shareholders, regulatory clearances, court approval
of the Smith & Nephew holding company reorganization and the effectiveness of
the reorganization.

The Transaction is expected to be completed at the end of July 2003.

F-76

CENTERPULSE AG AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED INCOME STATEMENT

<Table>
<Caption>
THREE MONTHS
JANUARY -- MARCH
-------------------
2002
NOTES 2003 RESTATED(1)
----- ----- -----------
(IN MILLIONS CHF,
EXCEPT SHARE/ ADS
DATA)

NET SALES................................................... 2 318 321
Cost of Sales............................................... (104) (103)
GROSS PROFIT................................................ 214 218
Selling, general and administrative expense................. (131) (133)
Research and development expense............................ (19) (19)
Other operating income/expense.............................. 1 0
Goodwill amortization....................................... (10) (11)
Exceptional operating items................................. 0 0
Operating income from discontinued operations............... 3 0 4
Gain on sale of discontinued operations..................... 5 18 0
OPERATING INCOME............................................ 2 73 59
Financial income/expense.................................... (9) (1)
Other non-operating income/expense.......................... (5) 0
INCOME BEFORE TAXES......................................... 59 58
Taxes....................................................... (14) (14)
INCOME BEFORE MINORITY INTERESTS............................ 45 44
Minority interests.......................................... (1) 0
NET INCOME.................................................. 44 44
Basic earnings per share.................................... 3.72 4.42
Basic earnings per ADS...................................... 0.37 0.44
Diluted earnings per share.................................. 3.71 4.41
Diluted earnings per ADS.................................... 0.37 0.44
Number of shares outstanding ('000s)........................ 11825 9945
</Table>

- ---------------

(1) Restated to segregate operating income and expenses of the discontinued
operations from continuing operations.

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

F-77

CENTERPULSE AG AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED BALANCE SHEET

<Table>
<Caption>
DECEMBER 31
MARCH 31 2002
NOTES 2003 RESTATED(1)
----- -------- -----------
(IN MILLIONS CHF)

ASSETS
Intangible assets........................................... 562 577
Property, plant and equipment............................... 184 183
Investments and other financial assets...................... 59 70
Deferred income taxes....................................... 537 529
Non-current assets of discontinued operations............... 3 0 56
TOTAL NON-CURRENT ASSETS.................................... 1342 1415
Inventories................................................. 306 317
Trade accounts receivables.................................. 306 266
Other accounts receivable and prepaid expenses.............. 113 73
Cash and cash equivalents................................... 153 194
Current assets of discontinued operations................... 3 0 73
TOTAL CURRENT ASSETS........................................ 878 923
TOTAL ASSETS................................................ 2220 2338
Equity and liabilities
SHAREHOLDERS' EQUITY........................................ 1314 1270
MINORITY INTERESTS.......................................... 9 8

LIABILITIES
Non-current borrowings...................................... 7 353 477
Deferred income taxes....................................... 18 19
Non-current provisions...................................... 159 159
Other non-current liabilities............................... 1 2
Non-current liabilities of discontinued operations.......... 3 0 12
TOTAL NON-CURRENT LIABILITIES............................... 531 669
Current borrowings.......................................... 72 70
Current provisions.......................................... 6 82 89
Trade accounts payable...................................... 52 59
Other current and accrued liabilities....................... 160 156
Current liabilities of discontinued operations.............. 3 0 17
TOTAL CURRENT LIABILITIES................................... 366 391
TOTAL LIABILITIES........................................... 897 1060
TOTAL EQUITY AND LIABILITIES................................ 2220 2338
</Table>

- ---------------

(1) Restated to segregate assets and liabilities of the discontinued operations
from continuing operations.

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

F-78

CENTERPULSE AG AND SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY

<Table>
<Caption>
ADDITIONAL CUMULATIVE
SHARE PAID-IN RETAINED TRANSLATION TREASURY
CAPITAL CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------- ---------- -------- ----------- -------- -----
(IN MILLIONS CHF)

DECEMBER 31, 2001...................... 300 769 (427) 158 (16) 784
Increase in treasury stock............. 0 0 0 0 0 0
Options exercised...................... 0 0 0 0 0 0
Net income............................. 0 0 44 0 0 44
Currency translation adjustments....... 0 0 0 (1) 0 (1)
Comprehensive income(1)................ 0 0 44 (1) 0 43
MARCH 31, 2002......................... 300 769 (383) 157 (16) 827
DECEMBER 31, 2002...................... 356 954 (90) 67 (17) 1270
Increase in treasury stock............. 0 0 0 0 1 1
Options exercised...................... 1 3 0 0 0 4
Net income............................. 0 0 44 0 0 44
Currency translation adjustments....... 0 0 0 (5) 0 (5)
Comprehensive income(1)................ 0 0 44 (5) 0 39
MARCH 31, 2003......................... 357 957 (46) 62 (16) 1314
</Table>

- ---------------

(1) Comprehensive income includes changes in equity, other than those arising
from investment by owners, distributions to owners.

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

F-79

CENTERPULSE AG AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED CASH FLOW STATEMENTS

<Table>
<Caption>
THREE MONTHS
JANUARY-MARCH
------------------
2002
2003 RESTATED(1)
---- -----------
(IN MILLIONS CHF)

Net income.................................................. 45 43
Minority interests.......................................... 1 0
Gain on sale of discontinued operations..................... (18) 0
Depreciation and amortization............................... 24 28
Change in provisions........................................ (5) (38)
Change in net current assets and long-term receivables...... (52) (31)
Other non-cash items, net................................... (2) (2)
Operating cash flow from discontinued operations............ 5 (2)
CASH FLOW FROM OPERATING ACTIVITIES......................... (2) (2)
Purchase/sale of intangible assets.......................... 0 (2)
Purchase/sale of tangible assets............................ (12) (20)
Acquisitions including minority investments................. (1) (16)
Proceeds from divestitures.................................. 93 0
Purchase/sale of long-term financial assets................. 1 3
Cash flow from investing activities from discontinued
operations................................................ (1) 1
CASH FLOW FROM INVESTING ACTIVITIES......................... 80 (34)
Proceeds from issuance of share capital..................... 4 0
Change in treasury stock.................................... 1 0
Change in borrowings........................................ (120) 4
Dividends................................................... 0 0
Cash flow from financing activities from discontinued
operations................................................ 0 0
CASH FLOW FROM FINANCING ACTIVITIES......................... (115) 4
Net effect of currency translation on cash and cash
equivalents............................................... (9) 0
CHANGE IN CASH AND CASH EQUIVALENTS......................... (46) (32)
Cash and cash equivalents at end of prior period............ 199 156
Cash and cash equivalents at end of period.................. 153 124
</Table>

- ---------------

The discontinued operations paid out CHF 85 million dividends to the group in
2003 and CHF 7 million in 2002.

(1) Restated to segregate cash flow from operations, investing and financing
activities of the discontinued operations from continuing operations.

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

F-80

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

These consolidated financial statements are prepared in accordance with IAS
34 "Interim Financial Reporting." The accounting policies used in the
preparation of the consolidated financial statements are consistent with those
used in the annual financial statements for the year ended December 31, 2002.

The business of Centerpulse faces a moderate level of seasonality. Due to
the holiday season in Europe during the third quarter, the period July to
September is typically the weakest within the year.

Income tax expense is recognized based on the best estimate of the weighted
average annual income tax rate expected for the full financial year.

The consolidated financial statements should be read in conjunction with
Centerpulse's 2002 annual consolidated financial statements.

2. SEGMENT INFORMATION

In 2002 the Group changed its reporting structure from two segments to four
segments. Since the change the Group's business has been managed on a worldwide
basis and structured into four operating segments. The Orthopedics Division
develops, manufactures and distributes hip, knee and other orthopedic implants.
The Spine-Tech Division develops and distributes spinal implants. The Dental
Division develops, manufactures and distributes dental implants.

Discontinued operations consist of the Cardiovascular Division, which
develops, manufactures and distributes heart valves including repair products,
vascular grafts and stents. The sale of the Cardiovascular Division has been
completed on January 21, 2003.

Subsequent to this divestment the company comprises of the three remaining
global businesses (Orthopedics, Spine-Tech and Dental).

The Group's further operating activities consist of biologic activities and
Group management, including the costs of holding, financing and managing
Centerpulse.

SEGMENT INFORMATION

<Table>
<Caption>
BIOLOGICS
ORTHOPEDICS SPINE-TECH DENTAL AND GROUP DISCONTINUED
DIVISION DIVISION DIVISION MGT. OPERATIONS TOTAL
----------- ---------- -------- --------- ------------ -----
(UNAUDITED; IN MILLIONS CHF)

THREE MONTHS ENDED MARCH 31, 2002
Sales............................ 242 48 31 0 -- 321
Operating income/loss............ 61 1 2 (9) 4 59
Depreciation and amortization.... 13 12 3 0 5 33

THREE MONTHS ENDED MARCH 31, 2003
Sales............................ 247 41 30 0 -- 318
Operating income/loss............ 65 (3) 2 (8) 17 73
Depreciation and amortization.... 11 10 3 0 1 25
</Table>

- ---------------

Sales of discontinued operations was CHF 7 million in 2003 and CHF 65 million in
2002.

3. DISCONTINUED OPERATIONS

On June 12, 2002 the Group announced its plans to divest of the
Cardiovascular Division and to focus on its core businesses orthopedics, spine
and dental. On November 7, 2002, the Group announced the closing

F-81

CENTERPULSE AG AND SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

of the sale of IntraTherapeutics, Inc. to ev3 Inc., a portfolio company of
private equity firms Warburg Pincus LLC and The Vertical Group. On November 18,
2002, the Group announced the closing of the sale of Vascutek Ltd. to Terumo
Corporation of Japan. On January 21, 2003, the Group announced the closing of
the sale of Carbomedics, Inc. and Mitroflow Corp. to Italian medical device
company Snia S.p.A. With the sale of Carbomedics and Mitroflow the divestiture
of the Cardiovascular Division was completed.

The impact of the business divested in January 2003 on the consolidated
financial statements was as follows: Sales CHF 7 million, Operating income CHF 0
million, Taxes CHF 1 million, Assets CHF 92 million, thereof Cash 1 million,
Liabilities CHF 26 million.

4. ACQUISITIONS

In January 2003 the Dental Division has set up a new direct sales operation
in Spain. The two former distributors for Dental in Spain, Guidance Dental S.L.
and Miladental S.A., have been merged into the new company Center-pulse Dental
Iberica S.L. For this purpose the Group acquired Guidance Dental for a purchase
price consideration of EUR 1.4 million and integrated Miladental into the new
company.

Total assets acquired amounted to EUR 0.8 million, thereof cash EUR 0.04
million, and total liabilities amounted to EUR 0.7 million.

The effect on sales from the acquisition is not material.

No acquisitions took place in the 1st quarter 2002.

5. GAIN ON SALE OF DISCONTINUED OPERATIONS

The pre-tax gain on the sale of the Cardiac Care business in January 2003
amounts to CHF 18 million. The USD 36 million subordinated loan which was part
of the purchase price remains in the balance sheet in "Other accounts receivable
and prepaid expenses."

6. PROVISIONS

No major change in provisions were booked in the 1st quarter 2003 with the
exception of CHF 18 million provisions used in the context of the US implant
litigation as well as CHF 5 million additional provisions for cost to come for
legal and financial consulting services related to the planned merger of Smith &
Nephew and Centerpulse.

7. SENIOR CREDIT FACILITY/NON-CURRENT BORROWINGS

The Senior Credit Facility of USD 331 million as per December 31, 2002 has
since been paid down to USD 250 million as per March 31, 2003. The installments
were primarily funded by the cash proceeds from the disposal of Carbomedics and
Mitroflow in January 2003. Non-current borrowings have been reduced accordingly
in the 1st quarter of 2003 to CHF 353 million from 477 million at the end of
2002.

8. SUBSEQUENT EVENTS

On March 20, 2003 the Boards of Smith & Nephew and Centerpulse announced
their intention to combine both organizations to a leading global orthopedics
company. The public tender offer for all outstanding shares of Centerpulse was
published on April 25, 2003. The offer period lasts until June 24, 2003. The
settlement of the transaction is expected for July 25.

F-82

SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE

OFFICERS OF ZIMMER HOLDINGS, INC.

The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of Zimmer
and certain other information are set forth below. The principal business
address of Zimmer and, unless otherwise indicated, the business address of each
person identified below is 345 East Main Street, Warsaw, Indiana 46580. Its
telephone number is (574) 267-6131. Where no date is shown, the individual has
occupied the position indicated for the past five years. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Zimmer. Unless otherwise noted, all directors and executive
officers listed below are United States citizens.

1. DIRECTORS (INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)

<Table>
<Caption>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; FIVE YEAR EMPLOYMENT
NAME AGE HISTORY
- ---- --- -----------------------------------------------------------------

J. Raymond Elliott........................ 53 Mr. Elliott was appointed Chairman on August 6, 2001 and
President, Chief Executive Officer and Director of Zimmer since
March 20, 2001. Mr. Elliott was appointed President of Zimmer,
Inc., the Company's predecessor, in November 1997. Mr. Elliott
has approximately 30 years of experience in orthopaedics, medical
devices and consumer products. Prior to joining Zimmer, Inc., he
served as President and Chief Executive Officer of Cybex, Inc., a
publicly traded medical rehabilitation and cardiovascular
products company, from September 1995 to June 1997. Mr. Elliott
has served as a director on more than 15 business-related boards
in the U.S., Canada, Japan and Europe and has served on three
occasions as Chairman. He is currently a director of the State of
Indiana Workplace Development Board and a trustee of the
Orthopaedic Research and Education Foundation. He is a member of
the board of directors and chair of the orthopaedic sector of the
Advanced Medical Technology Association.
Augustus A. White, III, M.D., Ph.D. ...... 66 Dr. White has been a Director since 2001. He is also a Professor
of Orthopaedic Surgery at the Harvard Medical School and the
Harvard-MIT Division of Health Sciences and Technology; and
Orthopaedic Surgeon-in-Chief, Emeritus, at the Beth Israel
Deaconess Medical Center in Boston. He previously served as the
Chief of Spine Surgery at Beth Israel and is Director of the
Daniel E. Hogan Spine Fellowship Program. Dr. White is a director
of Orthologic Corp. Board Committees: Audit Committee,
Compensation and Management Development Committee and Science and
Technology Committee (Chair).
</Table>

SI-1

<Table>
<Caption>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; FIVE YEAR EMPLOYMENT
NAME AGE HISTORY
- ---- --- -----------------------------------------------------------------

Larry C. Glasscock........................ 54 Mr. Glasscock has been a Director since 2001. He is also
President and Chief Executive Officer of Anthem Insurance
Companies, Inc.; the Blue Cross and Blue Shield licensee for
Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Maine,
Colorado, Nevada and Virginia, since October 1999; and President
and Chief Executive Officer of Anthem, Inc., the publicly held
parent of Anthem Insurance, since July 2001. Mr. Glasscock joined
Anthem Insurance in April 1998 as Senior Executive Vice President
and Chief Operating Officer. He was named President and Chief
Operating Officer in April 1999. Prior to joining Anthem
Insurance, Mr. Glasscock served as Chief Operating Officer of
CareFirst, Inc. from January through April 1998 and he served as
President and Chief Executive Officer of Group Hospitalization &
Medical Services, Inc., which did business as Blue Cross and Blue
Shield of the National Capital Area, from September 1993 to
January 1998. Mr. Glasscock is a director of Anthem, Inc. Board
Committees: Audit Committee (Chair) and Compensation and
Management Development Committee.
John L. McGoldrick........................ 62 Mr. McGoldrick has been a Director since 2001. He has also been
Executive Vice President and General Counsel of Bristol-Myers
Squibb Company since January 2000; Senior Vice President, General
Counsel and President, Medical Devices Group from December 1998
to January 2000 and Senior Vice President and General Counsel
from 1995 to December 1998. Mr. McGoldrick served as Senior
director of the Board of the New Jersey Transit Corporation and
member of the board of the Advanced Medical Technology
Association, the medical device industry's trade association from
1998 to 2002. He has served on several governmental reform
commissions in New Jersey. He is an invited participant of The
Aspen Institute on the World Economy and the World Economic Forum
Davos. Before joining Bristol-Myers Squibb, Mr. McGoldrick was a
senior partner and executive committee member of the law firm of
McCarter & English. Board Committees: Compensation and Management
Development Committee (Chair).
Regina E. Herzlinger, D.B.A. ............. 59 Dr. Herzlinger has been a Director since 2001. She is also The
Nancy R. McPherson Professor of Business Administration Chair at
the Harvard Business School. Dr. Herzlinger is a director of C.R.
Bard, Inc. and Noven Pharmaceuticals, Inc. Board Committees:
Audit Committee, Compensation and Management Development
Committee and Governance Committee (Chair).
</Table>

SI-2

2. EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

<Table>
<Caption>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; FIVE YEAR EMPLOYMENT
NAME AGE HISTORY
- ---- --- -----------------------------------------------------------------

Sheryl L. Conley.......................... 42 Ms. Conley was named President, Zimmer Reconstructive in
September 2002. From May 2000 to September 2002, she served as
Vice President, Global Brand Management and Commercialization,
where she was responsible for the our worldwide branding,
marketing and new product development efforts. Ms. Conley was
General Manager, Zimmer Canada, from 1998 to 2000. In 1994, she
was selected to lead the initial product development and brand
marketing effort for the VerSys Hip System. Ms. Conley joined
Zimmer, Inc. in 1983 and has held management positions in
marketing, operations and clinical research.
James T. Crines........................... 43 Mr. Crines joined Zimmer, Inc. in 1997 as Director of Finance. On
July 1, 2001, he was appointed Vice President, Controller after
serving as Vice President, Finance and Information Technology
since September 2000. Mr. Crines served Zimmer, Inc. as Director
of Finance and Logistics, Japan from May 1999 until September
2000. Mr. Crines served as Associate Director, Accounting at
Zimmer's former parent from September 1995 until he joined
Zimmer, Inc.
David C. Dvorak........................... 39 Mr. Dvorak was appointed Senior Vice President, Corporate Affairs
and General Counsel effective December 6, 2001. He also serves as
Corporate Secretary, effective February 1, 2003. Prior to his
appointment, Mr. Dvorak served as Senior Vice President, General
Counsel and Corporate Secretary and was a member of the Executive
Committee of STERIS Corporation, an Ohio-based leader in medical
sterilization and infection control products.
John S. Krelle............................ 51 Mr. Krelle joined Zimmer, Inc. in 1987. He was named President,
Zimmer Spine/Trauma in September 2002. From June 2000 to
September 2002, he served as President, Asia Pacific based in
Tokyo, Japan. Prior to that time, he was Vice President and
General Manager for Canada, Latin America and Asia Pacific. Mr.
Krelle has over 20 years of experience in the orthopaedics and
medical products industry; his previous responsibilities with
Zimmer, Inc. include Vice President, Patient Care Global
Marketing and Development and Vice President, Global Knee
Marketing.
Sam R. Leno............................... 57 Mr. Leno was appointed Senior Vice President and Chief Financial
Officer of Zimmer effective July 16, 2001. Prior to his
appointment, Mr. Leno served as Senior Vice President and Chief
Financial Officer of Arrow Electronics, Inc., a global
distributor of electronic components, a position he held from
March 1999 until he joined us. From July 1995 until February
1999, Mr. Leno served as Executive Vice President and Chief
Financial Officer of Corporate Express, Inc., a global supplier
of office products and services.
</Table>

SI-3

<Table>
<Caption>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; FIVE YEAR EMPLOYMENT
NAME AGE HISTORY
- ---- --- -----------------------------------------------------------------

Bruno A. Melzi............................ 55 Mr. Melzi joined Zimmer, Inc. in 1990 as Managing Director,
Italy. In March 2000, Mr. Melzi was promoted from Vice President
and Managing Director of Italy, Germany and Switzerland, a
position he held since October of 1997, to his current position
of President, Europe/MEA.
Stephen H. L. Ooi......................... 49 Mr. Ooi is President, Zimmer Asia-Pacific, a position he has held
since September 2002. Mr. Ooi joined Zimmer in 1986. In 1987, he
was named General Manager, Asia, and in 1990 was promoted to Vice
President, Asia.
Bruce E. Peterson......................... 54 Mr. Peterson was appointed President, Americas of Zimmer, Inc.
effective July 1, 2001. He joined Zimmer, Inc. in 1995 as Senior
Vice President, U.S. Sales and Marketing and was given additional
responsibility for Canada and Latin America in May 2000.
</Table>

SI-4

The Swiss Offer Manager for our offer is:

CREDIT SUISSE FIRST BOSTON

<Table>

By Mail: Facsimile Transmission: By Hand/Overnight:
(for Eligible Institutions
Department FBSC Only) Department FBSC
P.O. Box 900 +41 1 333 35 93 Uetlibergstrasse 231
CH-8070 Zurich CH-8045 Zurich
Switzerland Switzerland
</Table>

The U.S. Exchange Agent for our offer is:

MELLON INVESTOR SERVICES LLC

<Table>

By Mail: Facsimile Transmission: By Overnight:
(for Eligible Institutions Only)
Mellon Investor Services LLC Mellon Investor Services LLC
Reorganization Department (201) 296-4293 Reorganization Department
P.O. Box 3301 Confirm Facsimile 85 Challenger Road
South Hackensack, New Jersey 07606 by Telephone: Mail Stop -- Reorg.
Ridgefield Park, New Jersey 07660
(201) 296-4860
(For Confirmation Only)
By Hand:
Mellon Investor Services LLC
Reorganization Department
120 Broadway, 13th Floor
New York, New York 10271
</Table>

Questions or requests for assistance or additional copies of our
prospectus, the Form of Declaration of Acceptance and Assignment, the ADS Letter
of Transmittal and the ADS Notice of Guaranteed Delivery may be directed to the
information agent or the dealer manager at their respective addresses and
telephone numbers set forth below. A holder of Centerpulse registered shares or
Centerpulse ADSs also may contact his or her broker, dealer, commercial bank,
trust company or other nominee for assistance concerning our offer.
The Information Agent for our offer is:

[INNISFREE M&A INCORPORATED LOGO]
501 Madison Avenue, 20th Floor
New York, New York 10022
For holders of Centerpulse registered shares or Centerpulse ADSs
located in the United States:
Banks and brokers call collect: (212) 750-5833
All others call toll-free in the United States: (877) 750-5836
The Dealer Manager for our offer is:
CREDIT SUISSE FIRST BOSTON LLC
Eleven Madison Avenue
New York, New York 10010-3629
Call toll free (in the U.S.): (800) 881-8320

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the DGCL, Article X of Zimmer's restated certificate of
incorporation and indemnification agreements entered into by Zimmer with its
directors provide for the exculpation of directors and the indemnification of
officers, directors, employees and agents under certain circumstances.

Section 145 of the DGCL provides that a corporation may indemnify directors
and officers as well as other employees and individuals against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation -- a "derivative action"), if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceedings, had no reasonable cause to believe their conduct was unlawful.

A similar standard is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise.

Set forth below is Article X of Zimmer's restated certificate of
incorporation pertaining to: the exculpation of directors; the indemnification
of officers, directors, employees and agents; and insurance.

SECTION 10.01. Limited Liability of Directors. A director shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except, if required by the DGCL, as
amended from time to time, for liability (a) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL, or (d) for any transaction
from which the director derived an improper personal benefit. Neither the
amendment nor repeal of this Section 10.01 shall eliminate or reduce the effect
of this Section 10.01 in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Section 10.01 would accrue or arise,
prior to such amendment or repeal.

SECTION 10.02.

(a) Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was a
director or officer of the corporation or, while a director or officer of the
corporation, is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
amounts paid or to be paid in settlement, and excise taxes or penalties arising
under the Employee Retirement Income Security Act of 1974, as in effect from
time to time) reasonably incurred or suffered by such person in connection
therewith if such person acted in good faith and in a manner such person
reasonably believed to be in compliance with the standard of conduct set forth
in Section 145 (or any successor provision) of the DGCL and such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of such person's heirs, executors and
administrators; provided, however, that, except
II-1

as provided in paragraph (b) hereof, the corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the board of directors. The corporation shall pay the expenses
incurred in defending any such proceeding in advance of its final disposition
with any advance payments to be paid by the corporation within 20 calendar days
after the receipt by the corporation of a statement or statements from the
claimant requesting such advance or advances from time to time; provided,
however, that, if and to the extent the DGCL requires, the payment of such
expenses incurred by a director or officer in such person's capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section 10.02 or otherwise.
The corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification, and rights to have the corporation
pay the expenses incurred in defending any proceeding in advance of its final
disposition, to any employee or agent of the corporation to the fullest extent
of the provisions of this article with respect to the indemnification and
advancement of expenses of directors and officers of the corporation.

(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section 10.02 is not paid in full by the corporation within 30 calendar
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standard of
conduct which makes it permissible under the DGCL for the corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the corporation. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct set forth in the
DGCL, nor an actual determination by the corporation (including its board of
directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 10.02 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the restated certificate of incorporation, by-law, agreement, vote
of stockholders or disinterested directors or otherwise. No repeal or
modification of this article shall in any way diminish or adversely affect the
rights of any director, officer, employee or agent of the corporation hereunder
in respect of any occurrence or matter arising prior to any such repeal or
modification.

(d) Insurance. The corporation may maintain insurance, at its expense, to
protect itself and any person who is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any such expense, liability or
loss, whether or not the corporation would have the power to indemnify such
person against such expense, liability or loss under the DGCL.

In addition, Zimmer has also purchased liability insurance policies
covering certain directors and officers of Zimmer.

II-2

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

2 Contribution and Distribution Agreement between
Bristol-Myers Squibb Company and Zimmer Holdings, Inc.,
dated as of August 6, 2001 (incorporated herein by reference
to Exhibit 10.1 to Current Report on Form 8-K/A dated
December 7, 2001)
3.1 Restated Certificate of Incorporation of Zimmer Holdings,
Inc. (incorporated herein by reference to Exhibit 3.1 to
Current Report on Form 8-K dated November 13, 2001)
3.2 Certificate of Designations of Series A Participating
Cumulative Preferred Stock of Zimmer Holdings, Inc., dated
as of August 6, 2001 (incorporated herein by reference to
Exhibit 3.2 to Current Report on Form 8-K dated November 13,
2001)
3.3 Restated By-laws of Zimmer Holdings, Inc. (incorporated
herein by reference to Exhibit 3.3 to Current Report on Form
8-K dated November 13, 2001)
4.1 Specimen Common Stock certificate (incorporated herein by
reference to Exhibit 4.1 to Amendment No. 3 to Registration
Statement on Form 10, dated July 6, 2001)
4.2 Rights Agreement between Zimmer Holdings, Inc. and Mellon
Investor Services LLC, as Rights Agent, dated as of August
6, 2001 (incorporated herein by reference to Exhibit 4.1 to
Current Report on Form 8-K dated November 13, 2001)
4.3 Specimen Right Certificate (incorporated herein by reference
to Exhibit B to the Rights Agreement filed as Exhibit 4.2
hereto)
4.4 Amendment No. 1 dated June 15, 2002 to the Rights Agreement
dated July 30, 2001 between Zimmer Holdings, Inc. and Mellon
Investor Services, LLC (incorporated by reference to Exhibit
4.1 to Current Report on Form 8-K dated June 17, 2002)
5 Form of opinion of Dewey Ballantine LLP
8.1 Form of opinion of Dewey Ballantine LLP (re: U.S. tax
matters)
8.2 Form of opinion of Pestalozzi Lachenal & Patry (re: Swiss
tax matters)
8.3 Form of opinion of Bird & Bird (re: U.K. tax matters)
10.1 Employee Benefits Agreement between Bristol-Myers Squibb
Company and Zimmer Holdings, Inc., dated as of August 6,
2001 (incorporated herein by reference to Exhibit 10.3 to
Current Report on Form 8-K dated November 13, 2001)
10.2 Interim Services Agreement between Bristol-Myers Squibb
Company and Zimmer Holdings, Inc., dated as of August 6,
2001 (incorporated herein by reference to Exhibit 10.2 to
Current Report on Form 8-K dated November 13, 2001)
10.3 Zimmer Holdings, Inc. 2001 Stock Incentive Plan, effective
August 6, 2001 (incorporated herein by reference to Exhibit
10.3 to Current Report on Form 8-K dated August 6, 2001)
10.4 Tax Sharing Agreement between Bristol-Myers Squibb Company
and Zimmer Holdings, Inc., dated as of August 6, 2001
(incorporated herein by reference to Exhibit 10.4 to Current
Report on Form 8-K dated November 13, 2001)
10.5 Zimmer Holdings, Inc. Executive Performance Incentive Plan,
effective August 6, 2001 (incorporated herein by reference
to Exhibit 10.5 to Current Report on Form 8-K dated August
6, 2001)
10.6 Zimmer Holdings, Inc. Stock Plan for Non-Employee Directors,
effective August 6, 2001 (incorporated by reference to
Exhibit 10.6 to Current Report on Form 8-K dated August 6,
2001)
10.7 Zimmer Holdings, Inc. Deferred Compensation Plan for
Non-Employee Directors, effective August 6, 2001
(incorporated herein by reference to Exhibit 10.7 to Current
Report on Form 8-K dated August 6, 2001)
10.8 Zimmer Holdings, Inc. Long-Term Disability Income Plan for
Highly Compensated Employees (incorporated herein by
reference to Exhibit 10.15 to Current Report on Form 8-K
dated November 13, 2001)
10.9 Compensation Agreement of J. Raymond Elliott (incorporated
herein by reference to Exhibit 10.10 to Current Report on
Form 8-K dated November 13, 2001)
10.10 Compensation Agreement of Bruce E. Peterson (incorporated
herein by reference to Exhibit 10.12 to Current Report on
Form 8-K dated November 13, 2001)
</Table>

II-3

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.11 Compensation Agreement of Bruno A. Melzi (incorporated
herein by reference to Exhibit 10.21 to Annual Report on
Form 10-K filed March 13, 2002)
10.12 Compensation Agreement of John S. Loveman-Krelle
(incorporated herein by reference to Exhibit 10.14 to
Current Report on Form 8-K dated November 13, 2001)
10.13 Change in Control Severance Agreement with J. Raymond
Elliott (incorporated herein by reference to Exhibit 10.2 to
Quarterly Report on Form 10-Q filed May 8, 2002)
10.14 Change in Control Severance Agreement with Sam R. Leno,
Bruno A. Melzi, John S. Loveman-Krelle, Bruce E. Peterson
and David C. Dvorak (incorporated herein by reference to
Exhibit 10.3 to Quarterly Report on Form 10-Q filed May 8,
2002)
10.15 Change in Control Severance Agreement with James T. Crines
(incorporated herein by reference to Exhibit 10.4 to
Quarterly Report on Form 10-Q filed May 8, 2002)
10.16 Change in Control Severance Agreement with Sheryl L. Conley
(incorporated herein by reference to Exhibit 10.20 on Annual
Report on 10-K filed March 12, 2003)
10.17 Change in Control Severance Agreement with Stephen H. L. Ooi
(incorporated herein by reference to Exhibit 10.21 on Annual
Report on 10-K filed March 12, 2003)
10.18 Amendment No. 2 to Letter Agreement dated July 17, 2002
between Zimmer, Inc. and Bank of America, N.A. dated
February 5, 2002 (incorporated herein by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q filed May 8,
2002)
10.19 First Amendment dated July 15, 2002 to the Uncommitted
Credit Agreement dated October 29, 2001 between Zimmer, Inc.
and Sumitomo Mitsui Banking Corporation (incorporated herein
by reference to Exhibit 10.1 to Quarterly Report on Form
10-Q filed November 12, 2002)
10.20 Three Year Competitive Advance and Revolving Credit Facility
among Zimmer Holdings, Inc., Zimmer, Inc., Zimmer K.K.,
Zimmer LTD. and the lenders named therein, dated as of July
31, 2001 (incorporated herein by reference to Exhibit 10.1
to Current Report on Form 8-K dated August 6, 2001)
10.21 First Amendment to Three Year Competitive Advance and
Revolving Credit Facility among Zimmer Holdings, Inc.,
Zimmer, Inc., Zimmer K.K., Zimmer LTD. and the lenders named
therein, dated as of December 10, 2001 (incorporated herein
by reference to Exhibit 10.26 to Annual Report on Form 10-K
dated March 13, 2002)
10.22 $26,000,000 Uncommitted Standard Instrument Line of Credit
between Zimmer, Inc. and subsidiaries and Bank of America,
N.A. and its affiliates and subsidiaries dated July 17, 2001
(incorporated herein by reference to Exhibit 10.23 to Annual
Report on Form 10-K filed March 13, 2002)
10.23 Amendment No. 1 to Letter Agreement dated July 17, 2001
between Zimmer, Inc. and Bank of America, N.A. dated July
26, 2001 (incorporated herein by reference to Exhibit 10.24
to Annual Report on Form 10-K filed March 13, 2002)
10.24 Guarantee Assumption Agreement, dated as of June 24, 2002,
made by each of the signatories thereto in favor of the
lenders named in the Three Year Competitive Advance and
Revolving Credit Facility Agreement dated as of July 31,
2001 (incorporated herein by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q filed August 9, 2002)
10.25 Uncommitted Credit Agreement between Zimmer, Inc. and
Sumitomo Mitsui Banking Corporation dated October 29, 2001
(incorporated herein by reference to Exhibit 10.25 to Annual
Report on Form 10-18 filed March 13, 2002)
10.26 US$20,000,000 Uncommitted Line of Credit between Zimmer
Holdings, Inc. and Fleet National Bank dated October 16,
2002 (incorporated herein by reference to Exhibit 10.2 to
Quarterly Report on Form 10-Q filed November 12, 2002)
10.27 $1,350,000,000 Revolving Credit and Term Loan Agreement
among Zimmer Holdings, Inc., Zimmer, Inc., Zimmer K. K.,
Zimmer Ltd., the borrowing subsidiaries and the lenders
named therein, dated as of June 12, 2003
10.28 $400,000,000 364-Day Credit Agreement among Zimmer Holdings,
Inc., the borrowing subsidiaries and the lenders named
therein, dated as of June 12, 2003
23.1 Consent of PricewaterhouseCoopers LLP concerning financial
statements of Zimmer Holdings, Inc.
23.2 Consent of independent public accountants concerning
financial statements of Centerpulse AG**
</Table>

II-4

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

23.3 Form of consent of Dewey Ballantine LLP (included in the
Opinion of Dewey Ballantine LLP in Exhibit 5)
23.4 Form of consent of Dewey Ballantine LLP (included in the
Opinion of Dewey Ballantine LLP in Exhibit 8.1)
23.5 Form of consent of Pestalozzi Lachenal & Patry (included in
the Opinion of Pestalozzi Lachenal & Patry in Exhibit 8.2)
23.6 Form of consent of Bird & Bird (included in the Opinion of
Bird & Bird in Exhibit 8.3)
24.1 Powers of Attorney*
99.1 Draft of ADS Letter of Transmittal
99.2 Draft of Declaration of Acceptance and Assignment***
99.3 Draft of ADS Notice of Guaranteed Delivery
99.4 Draft of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.5 Draft of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees
99.6 Draft of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
99.7 Swiss Pre-Announcement, dated May 20, 2003, of Zimmer
Holdings, Inc. with respect to its offer for Centerpulse
registered shares (including shares represented by
Centerpulse ADSs) (incorporated herein by reference to
Zimmer Holdings, Inc.'s Rule 425 filing on May 20, 2003)
99.8 Press Release of Zimmer Holdings, Inc., dated May 20, 2003
(incorporated herein by reference to Zimmer Holdings, Inc.'s
Rule 425 filing on dated May 20, 2003)
99.9 Draft of Swiss offer prospectus***
</Table>

- ---------------

* Filed with initial registration statement on May 27, 2003.

** Omitted pursuant to Securities Act Rule 437 application.

*** to be filed by amendment.

ITEM 22. UNDERTAKINGS.

a. The undersigned registrant hereby undertakes:

1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

i. To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;

ii. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act,
if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and

iii. To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities

II-5

offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;

3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

b. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

c. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

d. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

e. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Warsaw,
state of Indiana, on June 13, 2003.

ZIMMER HOLDINGS, INC.

By: /s/ J. RAYMOND ELLIOTT
--------------------------------------
J. Raymond Elliott
Chairman of the Board,
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----

/s/ J. RAYMOND ELLIOTT Chairman of the Board, President, June 13, 2003
- ------------------------------------------ Chief Executive Officer and Director
J. Raymond Elliott (Principal Executive Officer)

* Senior Vice President and Chief Financial June 13, 2003
- ------------------------------------------ Officer (Principal Financial Officer)
Sam R. Leno

* Vice President, Controller June 13, 2003
- ------------------------------------------ (Principal Accounting Officer)
James T. Crines

* Director June 13, 2003
- ------------------------------------------
Larry C. Glasscock

* Director June 13, 2003
- ------------------------------------------
Regina E. Herzlinger

* Director June 13, 2003
- ------------------------------------------
John L. McGoldrick

* Director June 13, 2003
- ------------------------------------------
Augustus A. White III

*By: /s/ J. RAYMOND ELLIOTT
-------------------------------------
J. Raymond Elliott
Attorney-in-fact for each of the persons
indicated
</Table>

II-7

EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

- ---------------

* Filed with initial registration statement on May 27, 2003.

** Omitted pursuant to Securities Act Rule 437 application.

*** to be filed by amendment.