Exhibit 10.16
February 21, 2001
Xxxxx Xxxxx
C/X Xxxxxx, Inc.
Italy
PERSONAL AND CONFIDENTIAL
Dear Bruno:
Last year you and Xxxxxxx-Xxxxx Squibb Company ("Xxxxxxx-Xxxxx Squibb")
executed a letter agreement dated November 3, 2000 (the "2000 Agreement"), and a
letter amendment dated December 14, 2000 (the "2000 Amendment") that described
the bonus payments and other incentives that you would receive in the event that
Xxxxxx, Inc. ("Zimmer") was sold to a third-party entity on or before September
30, 2001. It now appears possible that Xxxxxxx-Xxxxx Squibb may divest its
interest in Zimmer through a "spin-off" transaction involving the distribution
of Zimmer stock to Xxxxxxx-Xxxxx Squibb shareholders (the "Spin-Off"). The
Spin-Off may be preceded by a public offering of Zimmer shares (the "IPO").
During the divestiture process, we believe that operating the Zimmer business as
usual is in the best interests of Xxxxxxx-Xxxxx Squibb, Zimmer and its
employees. To provide assurance to you and to help ensure that the Zimmer
business is managed and operated efficiently and effectively both before and
after the divestiture, Xxxxxxx-Xxxxx Squibb and Zimmer wish to offer you the
incentives described in this letter. If these incentives are satisfactory and
you wish to participate, please sign and return this letter in the manner
described on the last page of this letter.
The terms and conditions of this letter agreement will apply in the event
of an IPO or Spin-Off of Zimmer that occurs on or before September 30, 2001 and,
with respect to payments and benefits contingent upon a Spin-Off, the
consummation of the Spin-Off on or before March 31, 2002. In the event of a
disposition of Zimmer which is not an IPO or Spin-Off occurring on or before
September 30, 2001 and, with respect to payments and benefits contingent upon a
Spin-Off, if the Spin-Off is not completed on or before March 31, 2002, the
terms and conditions of this letter agreement will terminate and will not apply.
Please note that if Zimmer is sold to a third party entity on or before
September 30, 2001, you will receive the bonus payments and other incentives
subject to the conditions described in the 2000 Agreement and the 2000
Amendment.
As a member of the Zimmer management team, you are expected to carry out
the duties and responsibilities of your job during the coming months. In
addition, your assistance will be necessary to complete the divestiture process.
For your extra efforts and cooperation in helping Xxxxxxx-Xxxxx Squibb and
Zimmer during this period, you will be provided with the following incentives,
subject to all of the terms and conditions of this letter agreement:
1. SPECIAL STOCK OPTION AWARD. Effective on the date of the Spin-Off or, if it
occurs first, the IPO (the "Effective Date"), you will receive an option to
purchase shares of Zimmer stock with an economic value at the time of grant of
$175,000 using a generally accepted valuation methodology. This option will be
issued under a new option and equity compensation plan (the "Zimmer Stock
Incentive Plan") that will be adopted by Xxxxxx'x Board of Directors. Your
option will vest in equal installments over a period of four years provided that
you remain employed with Zimmer during that time, or as provided otherwise under
the Zimmer Stock Incentive Plan. The exercise price will equal the fair market
value of Zimmer stock at the time the option is granted.
2. SPECIAL RESTRICTED STOCK AWARD. As of the Effective Date, you will receive a
grant of Zimmer restricted stock with a value (determined as if no restrictions
applied) of $60,000. The restricted stock will vest in three equal installments
on the third, fourth and fifth anniversaries of the grant of the award provided
that you remain employed with Zimmer during that time. Any dividends that are
payable on Zimmer stock
Xxxxx Xxxxx
February 21, 2001
Page 2
will be paid to you on this restricted stock on a current basis. This restricted
stock will also be issued under the Zimmer Stock Incentive Plan.
3. CONVERSION OF OUTSTANDING STOCK OPTIONS. Any Xxxxxxx-Xxxxx Squibb stock
options granted to you prior to the Effective Date (including, but not limited
to, the options awarded to you on January 3, 2000 pursuant to a 50% reduction in
target cash bonus under the Xxxxxxx-Xxxxx Squibb Company Performance Incentive
Plan ("PIP")) that are outstanding on the date of the Spin-Off, will be
converted into new Zimmer stock options. The number of shares and the exercise
price of your new Zimmer options will be determined by the Xxxxxxx-Xxxxx Squibb
Board of Directors based upon a conversion ratio that will be used for all
Zimmer employees and that preserves any gains earned through the date of
conversion. Your new Zimmer options will be vested in the same proportion that
your Xxxxxxx-Xxxxx Squibb options were vested and the nonvested portion of your
new Zimmer options will vest from the original grant date of your Xxxxxxx-Xxxxx
Squibb options according to the vesting schedule in such Xxxxxxx-Xxxxx Squibb
options. Certain of your Xxxxxxx-Xxxxx Squibb options were subject to a price
appreciation threshold of 30% for a period of eight years following grant. Your
new Zimmer options will also be subject to a 30% price appreciation threshold
that will be based upon the adjusted exercise price of your Zimmer options and
future share price appreciation of Zimmer shares subject to the requirement that
the price appreciation threshold be met for 15 consecutive trading days. Any
Xxxxxxx-Xxxxx Squibb stock options granted to you after the date of this letter
agreement that are converted into new Zimmer stock options will reflect any
applicable conditions to exercisability such as vesting requirements or price
appreciation thresholds.
4. 2001 PERFORMANCE INCENTIVE PLAN and PIP DEFERRAL PROGRAM. Your 2001 payment
under the PIP will be calculated in accordance with the following terms and
conditions: (i) your full target bonus will be in effect in 2001; (ii) your
payment will be based upon actual results versus targeted performance criteria
through the Effective Date, subject to the established PIP payout schedule;
(iii) if the Effective Date is on or before June 30, 2001, a six-month bonus
payment will be made; (iv) if the Effective Date occurs after June 30, 2001, you
will accrue additional months of bonus credit beyond six months subject to any
applicable conditions of the PIP; and (v) your 2001 PIP payment will be made on
December 15, 2001 and February 15, 2002 consistent with the current plan
provisions, provided that you remain employed with Zimmer through the
aforementioned payment dates. Regarding your participation in the PIP Referral
Program, you will receive distributions from your PIP deferral account
consistent with the terms of your distribution election as soon as practicable
after the Effective Date.
5. SPECIAL SEVERANCE UPON TERMINATION OF EMPLOYMENT. In the event that you are
terminated without cause on the Effective Date or within twelve months following
the consummation of the Spin-Off, you will be eligible to receive termination
payments. Based on our common understanding of the current regulations of the
Italian dirigenti of trade companies (CCNL dirigenti commercio), in no case will
any termination payment be less than 12 months of base salary. (This 12 months
of base salary is inclusive of any notice periods/payments that may apply.
Twelve months base salary means your monthly base salary, not including the
value of benefits, car, or any other allowances, multiplied by twelve). Should
the current regulation, applicable to dirigenti of trade companies, be modified,
as to reduce your termination payment, we will ensure that in no case will the
payment be less than 12 months salary, inclusive of notice/payments which may
apply.
6. CONDITIONS OF THIS LETTER AGREEMENT. The incentive payments and benefits
described in this letter agreement are contingent upon: (a) the Effective Date
occurring on or before September 30, 2001 and, with respect to payments and
benefits contingent upon a Spin-Off, the consummation of the Spin-Off on or
before March 31, 2002; (b) your continuous employment with Zimmer through and
including the date of the relevant award, and your cessation of employment
within the Xxxxxxx-Xxxxx Squibb controlled group (as defined under section
1563(a) of the Internal Revenue Code) as a result of
Xxxxx Xxxxx
February 21, 2001
Page 3
the Spin-Off; (c) your execution on the date of the consummation of the
Spin-Off, and the effectiveness, of a general release in favor of Xxxxxxx-Xxxxx
Squibb, its affiliates, and others related to such entities (including but not
limited to their directors, officers, employees) and a limited release of
Zimmer, its affiliates, and others related to such entities (including but not
limited to their directors, officers, employees) with respect to Xxxxxx'x
obligations in connection with the Spin-Off, in form and substance satisfactory
to Xxxxxxx-Xxxxx Squibb and Zimmer, (d) your honoring the need for strict
confidentiality regarding the IPO and the Spin-Off and the terms of this letter
agreement, neither of which should be discussed with anyone (other than your
personal financial or legal advisors) without the express and specific
permission of Xxxxxx X. Xxxxxxxx, Senior Vice President, Corporate Development,
it being acknowledged that matters relating to the IPO and the Spin-Off (except
the terms of this letter agreement) may be discussed only with employees of
Xxxxxxx-Xxxxx Squibb and its affiliates and their legal and financial advisors
who are participating in the IPO and the Spin-Off process and no others (and
then only with those individuals on a "need to know" basis); (e) your providing
full support and cooperation in the best interests of Xxxxxxx-Xxxxx Squibb and
Zimmer up to and including the date of the Spin-Off; and (f) following the
Spin-Off, your taking no action, excluding normal competitive activity not
contrary to law and not inconsistent with your other contractual obligations to
Xxxxxxx-Xxxxx Squibb, Zimmer or their affiliates, but including any actions
prohibited by this letter agreement, which would be considered contrary to the
best interests of Xxxxxxx-Xxxxx Squibb, Zimmer or their affiliates.
7. NON-COMPETE AND NON-SOLICITATION. As a condition to your receipt of any
payments or benefits under this letter agreement, you agree that, for a period
commencing on the date of your execution of this letter agreement and ending on
the date which is one year after the consummation of the Spin-Off you will not,
directly or indirectly, (i) own, manage, control or participate in the
ownership, management or control of, be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or otherwise
with, any other corporation, partnership, proprietorship, firm, association, or
other business entity, or otherwise engage in any business, which is engaged in
any manner in, or otherwise competes with, the business of Zimmer or any of its
affiliates in the United States of America or any of the countries in which
Zimmer or any of its affiliates is doing business, (ii) solicit on behalf of any
other corporation, partnership, proprietorship, firm, association, or other
business entity, any person or business that is a customer or supplier of Zimmer
or any of its affiliates, or (iii) solicit for employment, hire, employ, or
retain in any capacity (including but not limited to as an employee, director,
independent contractor, consultant or otherwise), other than for employment
within Zimmer or its affiliates in conjunction with the IPO and Spin-Off or
within Xxxxxxx-Xxxxx Squibb or its affiliates, any person who is employed or
otherwise engaged on a full or part-time basis by Xxxxxxx-Xxxxx Squibb or its
affiliates (including but not limited to Zimmer). You understand and agree that
a breach by you of this paragraph would be a material breach of your obligations
under this letter agreement, and that, if any amounts have been provided to you
under the terms of this letter agreement prior to any such breach, in addition
to any other remedy that may be available to Xxxxxxx-Xxxxx Squibb in law or at
equity, upon demand, you will promptly return all such amounts to Xxxxxxx-Xxxxx
Squibb or Zimmer as appropriate.
8. NOT AN EMPLOYMENT AGREEMENT. The terms of this letter agreement neither bind
you to continued employment with Xxxxxxx-Xxxxx Squibb, Zimmer, their affiliates
or any successor thereto, nor confer any rights upon you with respect to the
continuation of employment by Xxxxxxx-Xxxxx Squibb, Zimmer, their affiliates or
any successor thereto.
9. WITHHOLDING. With the exception of your PIP payments, which will be paid to
you through normal payroll processing for PIP, with appropriate withholding of
relevant taxes, if applicable, the tax liabilities that may arise from other
payments will be your sole responsibility.
Xxxxx Xxxxx
February 21, 2001
Page 4
10. EXCLUSIVE RETENTION AND SEVERANCE BENEFIT. In the event that any or all
other employees of Zimmer receive or are offered either a retention or similar
bonus payable upon or in connection with the IPO or the Spin-Off (a "Retention
Bonus"), or an enhanced severance benefit payable upon or in connection with the
IPO or the Spin-Off, you understand and agree that you will not be eligible to
receive such Retention Bonus or enhanced severance benefit, except as explicitly
set forth in this letter agreement.
11. RETURN OF COMPANY PROPERTY AND USE OF COMPANY PERQUISITES. In the event of
your separation from Xxxxxxx-Xxxxx Squibb, Zimmer or their affiliates (whether
prior to or in connection with the IPO or Spin-Off), you agree to return all
property belonging to Xxxxxxx-Xxxxx Squibb, Zimmer or their affiliates
(including but not limited to any company laptop or computers, and other
equipment, documents and property belonging to Xxxxxxx-Xxxxx Squibb, Zimmer or
their affiliates) upon such separation (in accordance with the normal practice
relating thereto); provided, however, at Xxxxxx'x discretion, you may continue
to retain use of your employer-provided automobile.
12. GOVERNING LAW; JURISDICTION. This letter agreement will be governed by and
construed under the laws of the State of New York, without regard to its
principles of conflict of laws. You and Xxxxxxx-Xxxxx Squibb agree to submit to
the jurisdiction of the courts of the state of New York in the event of any
dispute regarding this letter agreement.
Please acknowledge your understanding of and agreement to the provisions of this
letter agreement by signing and returning a copy of this letter to me by March
9, 2001.
Very truly yours,
/s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
Senior Vice President
Corporate Development
Xxxxxxx-Xxxxx Squibb Company
Xxxxx Xxxxx
Xxxxxx, Inc.
AGREED TO AND ACCEPTED:
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DATE:
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For specific acceptance of Paragraph #7 (Non-Compete and Non-Solicitation)
AGREED TO AND ACCEPTED:
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DATE:
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