Exhibit 10.6
ZIMMER HOLDINGS, INC.
STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose.
The purpose of the Zimmer Holdings, Inc. Stock Plan for Non-Employee
Directors (the "Plan") is to secure for Zimmer Holdings, Inc. (the "Company")
and its stockholders the benefits of the incentive inherent in increased Common
Stock ownership by the members of the Board of Directors of the Company (the
"Board") who are Eligible Directors as defined in the Plan.
2. Administration.
The Plan shall be administered by the Board. The Board shall have all the
powers vested in it by the terms of the Plan, such powers to include authority
(within the limitations described herein) to prescribe the form of the agreement
embodying awards of stock options ("Options"), restricted stock ("Restricted
Stock") and restricted stock units ("Restricted Stock Units") made under the
Plan (Options, Restricted Stock and Restricted Stock Units, in the aggregate, to
be "Awards"). The Board shall, subject to the provisions of the Plan, grant
Awards under the Plan and shall have the power to construe the Plan, to
determine all questions arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
decision of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. No member of the Board shall be liable for
anything done or omitted to be done by such member or by any other member of the
Board in connection with the Plan, except for such member's own willful
misconduct or as expressly provided by statute.
3. Amount of Stock.
The stock which may be issued and sold under the Plan will be the common
stock (par value $.01 per share) of the Company ("Common Stock"), of a total
number not exceeding 2,000,000 shares, subject to adjustment as provided in
Section 7 below. The stock to be issued may be either authorized and unissued
shares or issued shares acquired by the Company or its subsidiaries. In the
event that Awards granted under the Plan terminate or expire (without being
exercised, in the case of Options) or are cancelled, forfeited, exchanged or
surrendered, new Awards may be granted covering the shares not issued under such
lapsed Awards. No more than 25% of the Awards will be in the form of Restricted
Stock or Restricted Stock Units.
4. Eligible Directors.
The members of the Board who are eligible to participate in the Plan
("Eligible Directors") are persons who serve as directors of the Company on or
after the effective date of the Plan and:
(a) who are not current or former employees of the Company and
(b) who are not and, in the past, have not been eligible to receive
options on Company stock by participation as an employee in another plan
sponsored by the Company or under a contractual arrangement with the Company.
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5. Terms and Conditions of Options.
Each Option granted under the Plan shall be evidenced by an agreement in
such form as the Board shall prescribe from time to time in accordance with the
Plan and shall comply with the following terms and conditions:
(a) The Option exercise price shall be the fair market value of the Common
Stock shares subject to such Option on the date the Option is granted, which
shall be the average of the high and the low sales prices of a Common Stock
share on the date of grant as reported on the New York Stock Exchange Composite
Transactions Tape or, if the New York Stock Exchange is closed on that date, on
the last preceding date on which the New York Stock Exchange was open for
trading.
(b) Each year, as of the date of the annual meeting of the stockholders of
the Company ("Annual Meeting"), and at such other dates as the Board deems
appropriate, the Board may award Options to purchase shares of Common Stock to
Eligible Directors who have been elected or reelected or who are continuing as
members of the Board.
(c) For any calendar year, a participant may elect to convert all or any
portion of the basic fee payable for services on the Board, except those amounts
which are subject to the Mandatory Deferral (as defined in the Zimmer Holdings,
Inc. Deferred Compensation Plan for Non-Employee Directors (the "Deferral
Plan")), into Options to purchase shares of the Company's Common Stock
("Deferral Options"). The Deferral Options will be granted as of the date of the
next Annual Meeting following the election to convert, or at such other time as
the Board may determine. The Deferral Options will be issued at a conversion
ratio equal to an option to purchase three shares of Common Stock for each Share
Unit the participant would be entitled to receive if the participant chose to
defer all or any portion of the basic fee payable into Share Units under the
Deferral Plan. The Deferral Options will have an exercise price equal to the
market value of a share of the Company's Common Stock on the date of grant. The
Deferral Options will become fully exercisable on December 31st of the year in
which the Deferral Options are granted if the participant continues as an
Eligible Director of the Company, or at such earlier time as provided under this
Plan. A participant's election to convert all or any portion of the basic fee
payable into Deferral Options shall be made in accordance with the provisions of
the Deferral Plan.
(d) Each Eligible Director who is appointed to the Board before the
effective date of the spin-off of the Company from Bristol-Myers Squibb Company
(the "Distribution Date") shall receive, during the 90-day period commencing on
the Distribution Date, Options to purchase a total of 50,000 shares. Each
Eligible Director who is appointed to the Board on or after the Distribution
Date and before the Company's first Annual Meeting shall receive, during the
90-day period commencing on the director's date of appointment, Options to
purchase a total of 50,000 shares. These Options shall be granted by the Board
during the applicable 90-day period in three installments of 16,667 shares,
16,667 shares and 16,666 shares. These Options will be collectively referred to
herein as "Founder's Options". Except as specifically provided herein, Founder's
Options will be subject to the same terms and conditions as all other Options.
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(e) No Option granted under the Plan shall be transferable by the optionee
other than by will or by the laws of descent and distribution, and such Option
shall be exercisable, during the optionee's lifetime, only by the optionee.
Notwithstanding the foregoing, the Board may set forth in a Stock Option
Agreement, at the time of grant or thereafter, that the Options may be
transferred to members of the optionee's immediate family, to trusts solely for
the benefit of such immediate family members and to partnerships in which such
family members and/or trusts are the only partners. For this purpose, immediate
family means the optionee's spouse, parents, children, stepchildren,
grandchildren and legal dependants. Any transfer of Options made under this
provision will not be effective until notice of such transfer is delivered to
the Company.
(f) No Option or any part of an Option shall be exercisable:
(i) after the expiration of ten years from the date the Option was
granted,
(ii) unless written notice of the exercise is delivered to the
Company specifying the number of shares to be purchased and payment in full is
made for the shares of Common Stock being acquired thereunder at the time of
exercise, such payment shall be made in such form or manner that the Board at
its discretion may from time to time designate and that may include, without
limitation, payment:
(A) in United States dollars by certified check, or bank
draft, or
(B) by tendering to the Company Common Stock shares owned by
person exercising the Option and having a fair market
value equal to the cash exercise price applicable to
such Option, such fair market value to be the average of
the high and low sales prices of a Common Stock share on
the date of exercise as reported on the New York Stock
Exchange Composite Transactions Tape or, if the New York
Stock Exchange is closed on that date, on the last
preceding date on which the New York Stock Exchange was
open for trading (shares of Common Stock used to
exercise an option shall have been held by the optionee
for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to
the option) or
(C) by a combination of United States dollars and Common
Stock shares as aforesaid, and
(iii) unless the person exercising the Option has been, at all times
during the period beginning with the date of grant of the Option and ending on
the date of such exercise, an Eligible Director of the Company, except that:
(A) if such a person shall cease to be such an Eligible
Director for reasons other than retirement or death,
while holding an Option that has not expired and has not
been fully exercised, such person, at any time within
one year after the date he ceases to be such an Eligible
Director (but in no event after the Option has expired
under the provisions of Section 5(f)(i) above), may
exercise the
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Option with respect to any Common Stock shares as to
which such person has not exercised the Option on the
date the person ceased to be such an Eligible Director
only to the extent that the Option is exercisable at the
time of termination.
(B) if such person shall cease to be such an Eligible
Director by reason of retirement or death while holding
an Option that has not expired and has not been fully
exercised, such person, or in the case of death, the
executors, administrators or distributees, as the case
may be, may at any time following the date of retirement
or death (but in no event after the expiration of the
Option period set forth in Section 5(f)(i) above),
exercise the Option with respect to any shares of Common
Stock as to which such person has not exercised the
Option on the date the person ceased to be such an
Eligible Director, notwithstanding the provisions of
Sections 5(c) and 5(g),
(C) if any person who has ceased to be such an Eligible
Director for reasons other than death, shall die holding
an Option that has not been fully exercised, such
person's executors, administrators, heirs or
distributees, as the case may be, may, at any time
within the greater of (1) one year after the date of
death or (2) the remainder for the period in which such
person could have exercised the Option had the person
not died (but in no event under either (1) or (2) after
the Option has expired under the provisions of Section
5(f)(i) above), exercise the Option with respect to any
shares as to which the decedent could have exercised the
Option at the time of death.
In the event any Option is exercised by the executors, administrators, legatees
or distributees of the estate of a deceased optionee, the Company shall be under
no obligation to issue stock thereunder unless and until the Company is
satisfied that the person or persons exercising the Option are the duly
appointed legal representatives of the deceased optionee's estate or the proper
legatees or distributees thereof.
(g) Except with respect to Founder's Options and Deferral Options,
one-quarter (25%) of the total number of shares of Common Stock covered by the
Option shall become exercisable on the first anniversary date of the grant of
the Option; thereafter an additional one-quarter (25%) of the shares shall
become exercisable annually on each subsequent anniversary date of the grant of
the Option until the Option is fully exercisable. With respect to Founder's
Options, the total number of shares of Common Stock covered by the Founder's
Option shall become fully exercisable on the third anniversary date of the date
of grant of the first installment of the optionee's Founder's Options.
(h) Notwithstanding anything to the contrary herein, if an Option has been
transferred in accordance with Section 5(e), the Option shall be exercisable
solely by the transferee. The Option shall remain subject to the provisions of
the Plan, including that it will be exercisable
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only to the extent that the optionee or optionee's estate would have been
entitled to exercise it if the optionee had not transferred the Option. In the
event of the death of the transferee prior to the expiration of the right to
exercise the Option, the Option shall be exercisable by the executors,
administrators, legatees and distributees of the transferee's estate, as the
case may be for a period of one year following the date of the transferee's
death but in no event shall the Option be exercisable after the expiration of
the Option period set forth in the Stock Option Agreement. The Option shall be
subject to such other rules as the Board shall determine.
6. Terms and Conditions of Restricted Stock and Restricted Stock Units.
Restricted Stock Awards under the Plan shall consist of grants of shares
of Common Stock of the Company. The conditional grant of a Restricted Stock Unit
to a participant will entitle the participant to receive a specified number of
shares of Common Stock, if the objectives specified in the Award, if any, are
achieved and the other terms and conditions thereof are satisfied. Each Award
will be subject to the following terms and conditions:
(a) The Board shall (i) select the members to whom Restricted Stock and
Restricted Stock Unit Awards may from time to time be granted, (ii) determine
the number of shares to be covered by each Award granted, (iii) determine the
terms and conditions (not inconsistent with the Plan) of any Award granted
hereunder, and (iv) prescribe the form of the agreement, legend or other
instrument necessary or advisable in the administration of Awards under the
Plan.
(b) Any Restricted Stock and Restricted Stock Unit Award granted under the
Plan shall be evidenced by an agreement executed by the Company and the
recipient, in such form as the Board shall approve and with such terms and
conditions as the Board shall prescribe.
(c) The shares of Restricted Stock awarded pursuant to the Plan shall be
subject to the following restrictions and conditions:
(i) During the restriction period, the participant will not be
permitted to sell, transfer, pledge or assign Restricted Stock awarded under
this Plan.
(ii) Except as the Board may otherwise determine, a participant
holding Restricted Stock shall have all of the rights of a stockholder of the
Company, including the right to vote the shares and receive dividends and other
distributions, provided that distributions in the form of stock shall be subject
to the same restrictions as the underlying Restricted Stock.
7. Adjustment in the Event of Change in Stock.
In the event of changes in the outstanding Common Stock by reason of stock
dividends, recapitalizations, mergers, consolidations, stock splits,
combinations or exchanges of shares and the like, the aggregate number and class
of shares available under the Plan, the number, class and the price of shares
subject to outstanding Options and Awards of Restricted Stock and Restricted
Stock Units shall be appropriately adjusted by the Board, whose determination
shall be conclusive.
8. Miscellaneous Provisions.
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(a) Except as expressly provided for in the Plan, no Eligible Director or
other person shall have any claim or right to be granted an Award under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Eligible Director any right to be retained in the service of the
Company.
(b) Except as provided for under Section 5(e), a participant's rights and
interest under the Plan may not be assigned or transferred in whole or in part
either directly or by operation of law or otherwise (except in the event of a
participant's death, by will or the laws of descent and distribution),
including, but not by way of limitations, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner, and no such right or
interest of any participant in the Plan shall be subject to any obligation or
liability of such participant.
(c) No Common Stock shares shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in compliance with
applicable federal, state and other securities laws and regulations.
(d) It shall be a condition to the obligation of the Company to issue
Common Stock shares upon exercise of an Option or with respect to any other
Award, that the participant (or any beneficiary or person entitled to receive
the benefit of an Award) pay to the Company, upon its demand, such amount as may
be requested by the Company for the purpose of satisfying any liability to
withhold federal, state, local or foreign income or other taxes. If the amount
requested is not paid, the Company may refuse to issue Common Stock shares.
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares in connection with an Award under the
Plan and issuance of shares in connection with Awards shall be subordinate to
the claims of the Company's general creditors.
(g) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through such person shall be
conclusively deemed to have indicated his acceptance and ratification of, and
consent to, any action taken under the Plan by the Company or the Board.
9. Change in Control.
In the event an Eligible Director's membership on the Board terminates
pursuant to a qualifying termination (as defined below) during the three (3)
year period following a change in control of the Company (as defined below) and
prior to the exercise of Options granted under this Plan, all outstanding
Options shall immediately become fully vested and exercisable notwithstanding
any provisions of the Plan or of the applicable Option agreement to the
contrary. In addition, in the event of a change in control of the Company, the
Board may (i) determine that outstanding Options shall be assumed by, or
replaced with comparable options by, the surviving corporation (or a parent or
subsidiary of the surviving corporation) and that outstanding awards shall be
converted to similar awards of the surviving corporation (or a parent or
subsidiary of the surviving corporation), or (ii) take such other actions with
respect to outstanding options and awards as the Board deems appropriate.
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The following definitions shall apply for purposes of the Plan:
(a) For the purpose of this Plan, a change in control shall be deemed to
have occurred on the earlier of the following dates:
(1) The date any person, as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934 ("Person"), shall have become the direct or indirect
beneficial owner of twenty percent (20%) or more of the then outstanding
common shares of the Company;
(2) The date the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation other than (i) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent at
least 75% of the combined voting power of the voting securities of the
Company or the surviving entity outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected to implement
a recapitalization of the Company in which no Person acquires more than
50% of the combined voting power of the Company's then outstanding
securities;
(3) The date the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets;
(4) The date there shall have been a change in a majority of the Board of
Directors of the Company within a two (2) year period beginning after the
effective date of the Plan, unless the nomination for election by the
Company's shareholders of each new director was approved by the vote of
two-thirds of the directors then still in office who were in office at the
beginning of the two (2) year period.
(b) For purposes of this Plan provision, a qualifying termination shall be
deemed to have occurred if the Eligible Director ceases to be a member of the
Board for any reason other than death, disability, voluntary resignation,
willful misconduct or activity deemed detrimental to the interests of the
Company.
10. Amendment or Discontinuance.
The Plan may be amended at any time and from time to time by the Board as
the Board shall deem advisable, including, but not limited to amendments
necessary to qualify for any exemption or to comply with applicable law or
regulations; provided, however, that except as provided in Section 7 above, the
Board may not, without further approval by the stockholders of the Company,
increase the maximum number of shares of Common Stock as to which Awards may be
granted under the Plan, reduce the minimum Option exercise price described in
Section 5(a) above, extend the period during which Awards may be granted or
exercised under the Plan or change the class of persons eligible to receive
Awards under the Plan. No amendment of the Plan shall materially and adversely
affect any right of any participant with respect to any Award theretofore
granted without such participant's written consent.
11. Termination.
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This Plan shall terminate upon the earlier of the following dates or
events to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan;
or
(b) ten years from the effective date of the Plan as provided in
Section 12 below.
12. Effective Date of Plan.
The Plan shall become effective as of August 6, 2001 or such later date as
the Board may determine, provided that Bristol-Myers Squibb Company in its
capacity as the Company's sole stockholder shall have adopted the Plan.
13. Governing Law.
The validity, construction, interpretation and effect of the Plan and
agreements issued under the Plan shall be governed and construed by and
determined in accordance with the laws of the State of Indiana, without giving
effect to the conflict of laws provisions thereof.
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