ZIMMER HOLDINGS, INC.

345 East Main Street

Warsaw, Indiana 46580

March 22, 2006

Dear Fellow Stockholder:

     You are cordially invited to attend the Annual Meeting of Stockholders of Zimmer Holdings, Inc. at The St. Regis Hotel, New York, Two East 55th Street, at Fifth Avenue, New York, New York on Monday, May 1, 2006, at 9:00 a.m.

     This booklet includes a notice of meeting and proxy statement. The proxy statement describes the business to be transacted at the meeting and provides other information about the company that you should know when you vote your shares.

     The principal items of business of the meeting will be the election of two directors, approval of the Zimmer Holdings, Inc. 2006 Stock Incentive Plan, ratification of the selection of the company’s independent registered public accounting firm for 2006 and consideration of a stockholder proposal. We will also review the status of the company’s business.

     It is important that your shares be represented whether or not you attend the meeting. Registered stockholders can vote their shares via the Internet or by using a toll-free telephone number. Instructions for using these convenient services appear on the proxy card. You can also vote your shares by marking your votes on the proxy card, signing and dating it and mailing it promptly using the envelope provided.

     We have provided space on the proxy card for comments. We urge you to use it to let us know your feelings about the company or to bring a particular matter to our attention. If you hold your shares through an intermediary, please feel free to write directly to us.

Zimmer Holdings, Inc.

345 East Main Street

Warsaw, Indiana 46580

NOTICE OF ANNUAL MEETING

OF STOCKHOLDERS

     Notice is hereby given that the Annual Meeting of Stockholders of Zimmer Holdings, Inc. will be held at The St. Regis Hotel, New York, Two East 55th Street, at Fifth Avenue, New York, New York on Monday, May 1, 2006, at 9:00 a.m. for the following purposes as set forth in the accompanying proxy statement:

     Holders of record of the company’s common stock at the close of business on March 8, 2006, will be entitled to vote at the meeting.

Dated: March 22, 2006

YOUR VOTE IS IMPORTANT

REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT.

IF YOU DO NOT ATTEND THE ANNUAL MEETING TO VOTE IN PERSON, YOUR VOTE WILL NOT BE COUNTED UNLESS A PROXY REPRESENTING YOUR SHARES IS PRESENTED AT THE MEETING.

TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING, PLEASE VOTE IN ONE OF THESE WAYS:

OR

OR

IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE BY BALLOT.

ZIMMER HOLDINGS, INC.

PROXY STATEMENT

ANNUAL MEETING AND PROXY SOLICITATION INFORMATION

     This proxy statement is furnished in connection with the solicitation of proxies by Zimmer Holdings, Inc. on behalf of the Board of Directors for use at the Annual Meeting of Stockholders on May 1, 2006.

     This proxy statement is being sent to all stockholders of record as of the close of business on March 8, 2006 for delivery beginning March 22, 2006. Although the proxy statement is being mailed together with the 2005 Annual Report, the 2005 Annual Report does not form any part of the material for the solicitation of proxies.

Stockholders Entitled to Vote

     Holders of record of the company’s $0.01 par value common stock at the close of business on March 8, 2006 will be entitled to vote at the meeting. Each share is entitled to one vote on each matter properly brought before the meeting. Proxies are solicited to give all stockholders who are entitled to vote on the matters that come before the meeting the opportunity to do so whether or not they attend the meeting in person.

Proxies and Voting

     If you are a registered stockholder, you can simplify your voting and save the company expense by voting via the Internet or calling the toll-free number listed on the proxy card. Internet and telephone voting information is provided on the proxy card. A control number, located on the lower right of the proxy card, is designated to verify a stockholder’s identity and allow the stockholder to vote the shares and confirm that the voting instructions have been recorded properly. If you vote via the Internet or by telephone, please do not return a signed proxy card.

     If you choose to vote by mail, mark your proxy card enclosed with the proxy statement, date and sign it, and mail it in the postage-paid envelope. The shares represented will be voted according to your directions. You can specify how you want your shares voted on each proposal by marking the appropriate boxes on the proxy card. Please review the voting instructions on the proxy card and read the entire text of the proposals and the positions of the Board of Directors in the proxy statement prior to marking your vote. If your proxy card is signed and returned without specifying a vote or an abstention on any proposal, it will be voted according to the recommendation of the Board of Directors on that proposal. That recommendation is shown for each proposal on the proxy card.

     If you are a beneficial stockholder, you must provide instructions on voting to your nominee holder.

     For the reasons set forth in more detail later in the proxy statement, the Board of Directors recommends a vote “FOR” the election of the two nominees as directors, “FOR” approval of the Zimmer Holdings, Inc. 2006 Stock Incentive Plan, “FOR” ratification of the selection of the company’s independent registered public accounting firm for 2006 and “AGAINST” the stockholder proposal.

     The Board of Directors knows of no other matters that may be brought before the meeting. However, if any other matters are properly presented for action, it is the intention of the named proxies to vote on them according to their best judgment.

     A plurality of the votes cast at the meeting is required to elect directors. The affirmative vote of a majority of the shares of stock present in person or by proxy and entitled to vote on the matter is required for approval of all other proposals.

     In accordance with the laws of the State of Delaware and the company’s Restated Certificate of Incorporation and Restated By-Laws, as amended, (1) for the election of directors, which requires a plurality of the votes cast, only proxies and ballots indicating votes “FOR” or “WITHHELD” are counted to determine the total number of votes cast; broker non-votes are not counted, and (2) for the adoption of all other proposals, which are decided by a majority of the shares of stock of the company

present in person or by proxy and entitled to vote, only proxies and ballots indicating votes “FOR,” “AGAINST” or “ABSTAIN” on the proposals or providing the designated proxies with the right to vote in their judgment and discretion on the proposals are counted to determine the number of shares present and entitled to vote; broker non-votes are not counted. In addition, under New York Stock Exchange rules, the number of votes cast on the proposal to approve the 2006 Stock Incentive Plan must represent more than 50% of all the shares entitled to vote on the proposal. The proposal to adopt the 2006 Stock Incentive Plan is a “non-discretionary” item for purposes of determining whether a broker has authority to vote a beneficial stockholder’s shares without his or her instructions. Therefore, if you are a beneficial stockholder and you do not provide your broker with voting instructions with respect to that proposal, your shares will not be voted on the proposal.

     If you are a registered stockholder and wish to give your proxy to someone other than the individuals named on the proxy card, you may do so by crossing out the names appearing on the proxy card and inserting the name of another person. The signed card must be presented at the meeting by the person you have designated on the proxy card. You may revoke your proxy at any time before it is voted at the meeting by taking one of the following three actions: (1) by giving timely written notice of the revocation to the Secretary of the company; (2) by executing and delivering a proxy with a later date; or (3) by voting in person at the meeting.

     If you are a beneficial holder and wish to vote in person at the meeting, you must obtain from the record holder a proxy issued in your name.

     If you participate in the Zimmer Holdings, Inc. Employee Stock Purchase Plan, the Zimmer Holdings, Inc. Savings and Investment Program or the Zimmer Puerto Rico Savings and Investment Program, your plan trustee will vote the company shares credited to your plan account in accordance with your voting instructions. The trustee votes the shares on your behalf because you are the beneficial owner, not the record owner, of the shares credited to your account. The trustee will vote the plan shares for which it does not receive voting instructions in the same proportion as the shares for which it received voting instructions.

     Tabulation of proxies and the votes cast at the meeting will be conducted by an independent agent and certified to by independent inspectors of election.

Costs of Proxy Solicitation and Questions

     Employees of the company may solicit proxies on behalf of the Board of Directors through the mail, in person, and by telecommunications. The cost thereof will be borne by the company. In addition, management has retained The Altman Group, Inc. to assist in soliciting proxies for a fee of $5,000, plus out-of-pocket expenses. The company will, upon request, reimburse brokerage firms and others for their reasonable expenses incurred for forwarding solicitation material to beneficial owners of stock. Questions concerning proxy voting or process should be directed to The Altman Group, Inc. via telephone at (800) 761-6578 (this call is toll-free in the United States).

List of Stockholders

     In accordance with Delaware law, a list of stockholders entitled to vote at the meeting will be available at the meeting and for ten days prior to the meeting, between the hours of 8:00 a.m. and 5:00 p.m., at the company’s offices at 345 East Main Street, Warsaw, Indiana by contacting the Secretary of the company.

VOTING SECURITIES

     At the close of business on March 8, 2006, there were 248,067,247 shares of $0.01 par value common stock outstanding and entitled to vote.

PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information concerning each person (including any group) known to the company to beneficially own more than five percent (5%) of company common stock as of March 8, 2006. Unless otherwise noted, shares are owned directly or indirectly with sole voting and investment power.

SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS

     The following table sets forth, as of January 3, 2006, beneficial ownership of shares of company common stock by each current director, each of the executives named in the Summary Compensation Table and all current directors and executive officers as a group. Unless otherwise noted, such shares are owned directly or indirectly with sole voting and dispositive power.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the company’s directors, executive officers and the beneficial holders of more than 10% of the company’s common stock are required to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based on its records and other information, the company believes that during 2005 all applicable Section 16(a) filing requirements were met.

BOARD OF DIRECTORS

     The business of the company is managed under the direction of the Board of Directors. It has responsibility for establishing broad corporate policies and for the overall performance of the company. The Board meets on a regularly scheduled basis during the year to review significant developments affecting the company and to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings. Members of senior management regularly attend Board meetings to report on and discuss their areas of responsibility. Directors are also expected to attend the annual meeting of stockholders. All of the directors attended the 2005 annual meeting. In 2005, the Board of Directors held seven meetings and committees of the Board held a total of 32 meetings. Overall attendance at such meetings was 99%. Each director attended more than 75% of the total meetings of the Board of Directors and each of the committees on which he served during 2005.

Corporate Governance

     The company is committed to maintaining the highest standards of business conduct and corporate governance, which it believes are essential to running its business efficiently, serving stockholders well and maintaining the company’s integrity in the marketplace. The company has adopted a Code of Business Conduct that applies to all directors, officers and employees and a Code of Ethics for Chief Executive Officer and Senior Financial Officers. The Board of Directors has adopted Corporate Governance Guidelines, which, in conjunction with the Restated Certificate of Incorporation, Restated Bylaws, as amended, Board committee charters and key Board policies, form the framework for governance of the company. The current version of the Code of Business Conduct, the Code of Ethics for Chief Executive Officer and Senior Financial Officers, the Board’s Corporate Governance Guidelines and the charters for the four standing committees of the Board, as well as the Board’s policies on auditor ratification and stockholder rights plans, are available in the Investor Relations/ Corporate Governance section of the company’s website, www.zimmer.com, and will be provided in print without charge upon written request to the Secretary of the company at the address shown on the cover page of this proxy statement. The Board regularly reviews corporate governance developments and modifies its Corporate Governance Guidelines, committee charters and key practices as warranted. Any modifications are reflected on the company’s website. The company will also either disclose on Form 8-K or post on its website any substantive amendment to, or waiver from, the Code of Ethics for Chief Executive Officer and Senior Financial Officers or a provision of the Code of Business Conduct that applies to any director or executive officer of the company.

Director Independence

     As permitted by the rules of the New York Stock Exchange, the Board has adopted categorical standards to assist it in making determinations of director independence. These standards incorporate, and are consistent with, the definition of “independent” contained in the New York Stock Exchange listing rules. These standards are set forth in Appendix A to this proxy statement and are also included in the Board’s Corporate Governance Guidelines, which are available on the company’s website as described above. The Board has determined that each of the non-employee directors of the company, Stuart M. Essig, Larry C. Glasscock, John L. McGoldrick and Augustus A. White, III, M.D., Ph.D., meets these standards and is independent.

Committees of the Board

     The company’s Restated By-Laws, as amended, specifically provide that the Board may delegate responsibility to committees. During 2005, the Board had four standing committees: an Audit Committee, a Compensation and Management Development Committee, a Corporate Governance Committee and a Science and Technology Committee. The membership of the Audit Committee, the Compensation and Management Development Committee and the Corporate Governance Committee is composed entirely of independent directors. In addition, the members of the Audit Committee meet the heightened standards of independence for audit committee members required by Securities and Exchange Commission rules and New York Stock Exchange listing standards. The membership of the Science and Technology Committee is composed of one independent director and one employee representative, and the committee works together with an Advisory Board of Science and Technology.

     The table below shows the current membership of each Board committee and the number of meetings held during 2005.

Audit Committee. The principal functions of the Audit Committee include:

     The Board of Directors has determined that both Larry C. Glasscock and Stuart M. Essig qualify as “audit committee financial experts” as defined by rules of the Securities and Exchange Commission. For a description of the relevant experience of Mr. Glasscock and Mr. Essig, see pages 10 and 9, respectively. During 2005, the Board updated the written charter of the Audit Committee. A copy of the current charter is attached as Appendix B to this proxy statement.

     The report of the Audit Committee appears on pages 6 – 7.

Compensation and Management Development Committee. The duties of the Compensation and Management Development Committee include:

     The report of the Compensation and Management Development Committee appears on pages 11 – 15.

Corporate Governance Committee. The duties of the Corporate Governance Committee include:

     The Corporate Governance Committee will consider director nominees recommended by stockholders. A stockholder who wishes to recommend a director candidate for consideration by the Corporate Governance Committee should send such recommendation to the Secretary of the company at the address shown on the cover page of this proxy statement, who will then forward it to the committee. Any such recommendation should include a description of the candidate’s qualifications for board service, the candidate’s written consent to be considered for nomination and to serve if nominated and elected, and

addresses and telephone numbers for contacting the stockholder and the candidate for more information. A stockholder who wishes to nominate an individual as a director candidate at the annual meeting of stockholders, rather than recommend the individual to the Corporate Governance Committee as a nominee, must comply with the advance notice requirements set forth in the company’s Restated By-Laws, as amended (see “2007 Proxy Proposals” for more information on these procedures).

     In considering candidates for the Board, the Corporate Governance Committee considers the entirety of each candidate’s credentials and does not have any specific minimum qualifications that must be met by a committee-recommended nominee. The committee is guided by the following basic selection criteria for all nominees: independence; highest character and integrity; experience and understanding of strategy and policy-setting; reputation for working constructively with others; and sufficient time to devote to Board matters. The committee also gives consideration to diversity, age, international background and experience and specialized expertise in the context of the needs of the Board as a whole. During the past year, the company paid a fee to a third-party search firm to assist the committee in identifying and evaluating potential director candidates.

Science and Technology Committee. The duties of the Science and Technology Committee include:

Executive Sessions of and Communication with Non-Management Directors

     Non-management directors meet in executive sessions without management present upon the adjournment of every regularly scheduled meeting of the Board and at other times they determine. The director who presides at these meetings rotates session-by-session among the non-management directors in alphabetical order of their last names.

     In order that interested parties may be able to make their concerns known to the non-management directors, the Board has adopted a method for communicating directly with the non-management directors. The Board has designated Stuart M. Essig to receive such communications on behalf of the non-management directors. Interested parties may contact Mr. Essig via e-mail at sessig@integra-ls.com.

Stockholder Communication with the Board

     The Board has implemented a process whereby stockholders of the company may send communications to the Board’s attention. Any stockholder desiring to communicate with the Board, or one or more specified members thereof, should communicate in a writing addressed to Zimmer Holdings, Inc., Board of Directors, c/o Secretary, at the address shown on the cover page of this proxy statement. The Secretary of the company has been instructed by the Board to promptly forward all such communications to the specified addressees thereof.

Audit Committee Report

     The Audit Committee is responsible for monitoring the integrity of the company’s financial statements, the qualifications, performance and independence of the company’s independent registered public accounting firm, the performance of the company’s internal audit function and the company’s compliance with legal and regulatory requirements. The committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm.

     Management is responsible for the financial reporting process, including the system of internal control, for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States and for management’s report on internal control over financial reporting. The company’s independent registered public accounting firm is responsible for auditing the consolidated financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States as well as rendering an opinion on management’s report on internal control over financial reporting. The committee’s responsibility is to oversee and review the financial reporting process and to review and discuss management’s report on internal control over financial reporting. Committee members are not, however, professionally engaged in the practice of accounting or auditing and do not provide any expert or other special assurance as to such financial statements concerning compliance with laws, regulations or accounting principles generally accepted in the United States or as to the independence of the independent registered public accounting firm. The committee

relies, without independent verification, on the information provided to it and on the representations made by management and the independent registered public accounting firm.

     The committee held 13 meetings during 2005. The meetings were designed, among other things, to facilitate and encourage communication among the committee, management, the internal auditor and the company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, or PwC.

     The committee discussed with the internal auditor and PwC the overall scope and plans for their respective audits. The committee met with the internal auditor and PwC, with and without management present, to discuss the results of their examinations and their evaluations of the company’s internal control over financial reporting. The committee reviewed and discussed the company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including consideration of the Public Company Accounting Oversight Board’s (PCAOB) Auditing Standard No. 2, An Audit of Internal Control over Financial Reporting Performed in Conjunction With an Audit of Financial Statements.

     The committee discussed with management the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the company’s risk assessment and risk management policies.

     Management has represented to the committee that the company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the committee has reviewed and discussed the consolidated financial statements with management and PwC. The committee reviewed and discussed with management, the internal auditor and PwC management’s report on internal control over financial reporting and PwC’s report thereon. The committee also discussed with management and the internal auditor the process used to support certifications by the company’s Chief Executive Officer and Chief Financial Officer that are required by the Securities and Exchange Commission and the Sarbanes-Oxley Act of 2002 to accompany the company’s periodic filings with the Securities and Exchange Commission and the processes used to support management’s report on internal control over financial reporting.

     The committee also discussed with PwC all matters required to be discussed by that firm’s professional standards, including, among other things, matters related to the conduct of the audit of the company’s consolidated financial statements and the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees).

     PwC provided to the committee the written disclosures and the letter required by Independence Standards Board Standard No. 1, as amended (Independence Discussions with Audit Committees), and represented that PwC is independent from the company. The committee also discussed with PwC its independence from the company. When considering PwC’s independence, the committee considered if services PwC provided to the company beyond those rendered in connection with its audit and related reviews of the company’s consolidated financial statements and attestation on management’s report on internal control over financial reporting, were compatible with maintaining its independence. The committee concluded that the provision of such services by PwC has not jeopardized PwC’s independence.

     Based on the reviews and discussions described above, and subject to the limitations on the committee’s role and responsibilities referred to above and in the charter of the Audit Committee, the committee recommended to the Board of Directors, and the Board approved, that the company’s audited consolidated financial statements for the year ended December 31, 2005 be included in the company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

     The committee has also confirmed there have been no new circumstances or developments since their respective appointments to the Audit Committee that would impair any member’s ability to act independently.

Compensation of Non-Employee Directors

     The Board of Directors believes that providing competitive compensation is necessary to attract and retain qualified non-employee directors. The key components of director compensation include an annual retainer, committee chair annual retainers, meeting fees and equity-based awards. It is the Board’s practice to provide a mix of cash and equity-based compensation to more closely align the interests of directors with the company’s stockholders.

     Retainers and Meeting Fees. During 2005, each non-employee director received an annual retainer of $50,000 (subject to mandatory deferral requirements as described below) and an additional fee of $1,500 for attending each Board meeting and each Board committee meeting not held on the same day as a Board meeting. An additional annual fee of $5,000 was paid to each Board committee chair. At the end of each calendar quarter, non-employee directors are paid one-fourth of their annual retainers and committee chair annual fees and fees for attending Board and committee meetings held during the quarter.

     Equity-Based Compensation and Mandatory Deferrals. During 2005, each non-employee director received 500 deferred share units, or DSUs, as of the date of the annual meeting of stockholders with an initial value based on the price of the company’s common stock on that date. The company requires that these annual DSU awards be credited to a deferred compensation account under the provisions of the Restated Zimmer Holdings, Inc. Deferred Compensation Plan for Non-Employee Directors, also referred to as the Deferred Compensation Plan. DSUs represent an unfunded, unsecured right to receive shares of the company’s common stock (or the equivalent value in cash), and the value of DSUs varies directly with the price of the company’s common stock. The company also requires that 50% of a director’s annual retainer be deferred and credited to his or her deferred compensation account in the form of DSUs with an initial value equal to the amount of fees deferred until the director holds a total of at least 5,000 DSUs. Non-employee directors may elect to defer receipt of compensation in excess of their mandatory deferral and annual DSU award. Elective deferrals are also credited to the director’s deferred compensation account in the form of DSUs with an initial value equal to the amount of fees deferred. All DSUs are immediately vested. Annual DSU awards and mandatory deferral DSUs will be paid in shares of the company’s common stock, and elective deferral DSUs will be paid in cash, in both cases following termination of the non-employee director’s service on the Board. Non-employee directors may elect to convert all or a portion of their annual retainer not subject to mandatory deferral into stock options using a ratio of an option to purchase three shares of common stock for each DSU the director would have received if he or she had elected to defer such compensation. These stock options become fully exercisable on the last day of the calendar year in which the options are granted if the director continues as a non-employee director of the company throughout that year.

     The Zimmer Holdings, Inc. Stock Plan for Non-Employee Directors provides that non-employee directors may receive stock options, restricted stock and restricted stock units. No director received an award under this plan during 2005, except two directors who elected to convert to stock options the portion of their annual retainers not subject to mandatory deferral as described above.

     Insurance, Expense Reimbursement and Director Education. The company provides non-employee directors with travel accident insurance and reimburses reasonable expenses incurred for transportation, meals and lodging when on company business. The company also reimburses non-employee directors for reasonable out-of-pocket expenses, including tuition costs, incurred in attending director education programs approved by the company. During 2005, Stuart M. Essig attended a director education program sponsored by the National Association of Corporate Directors, or NACD (Rules of the Road — What the Board Expects from the CFO). In addition, Larry C. Glasscock attended a director education program presented to directors of WellPoint, Inc. by the NACD.

     The following table sets forth the value of the retainer and other fees earned by the non-employee directors during 2005. Each non-employee director has deferred a portion of these amounts (ranging from the mandatory deferral of the annual DSU award and one-half of the annual retainer to deferral of 100% of all compensation).

Changes to Director Compensation

     During 2005, the Corporate Governance Committee retained an independent compensation consultant to conduct a competitive assessment of the company’s non-employee director compensation program and to suggest recommendations for strengthening the program going forward. This assessment included a review of recently published general industry surveys on board of director compensation as well as an analysis of the director compensation practices of a group of 14 comparable publicly-traded peer companies, including total retainer and meeting fees, long-term equity compensation and total direct compensation. The 14 companies comprising the peer group were the same companies approved by the Compensation and Management Development Committee for benchmarking executive compensation, as described in the Compensation and Management Development Committee Report that begins on page 11.

     As a result of its review, the Corporate Governance Committee recommended to the Board, and the Board approved, the following changes to the compensation of the company’s non-employee directors, effective as of the 2006 annual meeting of stockholders on May 1:

     The Board believes that these changes will place the compensation of the company’s non-employee directors at approximately the median of the comparable publicly-traded peer group mentioned above. In addition, as a result of these changes, approximately 80% of the initial value of the base compensation paid to a non-employee director (not including Committee chair annual retainers) will be equity-based compensation, the receipt of which is subject to mandatory deferral until the director completes his or her service on the Board. Once a director satisfies the minimum 5,000 DSU ownership requirement described above under “Equity-Based Compensation and Mandatory Deferrals”, the percentage of the initial value of his or her base compensation that is subject to mandatory deferral will decrease to approximately 60%. The Board believes that the mandatory deferral of equity-based compensation serves to increase share ownership levels of non-employee directors and aligns directors’ interests more closely with those of stockholders.

Directors and Nominees

     The Board of Directors is divided into three classes whose terms expire at successive annual meetings. Two directors will be elected at the meeting to serve a term expiring in 2009. The nominees for director named below are currently directors of the company. The Board appointed Mr. Essig director in 2005 upon the recommendation of the Corporate Governance Committee. A third-party search firm recommended Mr. Essig to the committee as a potential director candidate. Dr. White has been a director since 2001 and was last elected by stockholders in 2003. After the election of two directors at the meeting, the company will have five directors, including the three directors whose present terms extend beyond the meeting, and there will be one vacancy on the Board of Directors. The Board intends to fill the vacancy in due course following the selection of a suitable candidate, in accordance with the company’s Restated Certificate of Incorporation. Listed first below are the nominees for election, followed by the directors whose terms expire in 2007 and 2008, with information including their principal occupations and other business affiliations, the year each was first elected as a director, the Board committee memberships of each and each director’s age.

Nominees for Director: 2006 – 2009 Term

EXECUTIVE COMPENSATION

Compensation and Management Development Committee Report

Introduction

     The Compensation and Management Development Committee (the Committee) of the Board of Directors is responsible for ensuring that the company’s executive compensation plans, policies and programs are competitive and reflect the long-term interests of stockholders. The Committee determines and approves the Chief Executive Officer’s compensation and makes recommendations to the Board of Directors with respect to non-CEO executive officer compensation, including annual base salary, annual and long-term incentive opportunities and equity-based compensation. The Committee authorizes all awards under the company’s equity-based compensation plans and approves and authorizes the company to enter into any compensation-related agreements with executive officers of the company as, when and if appropriate. All members of the Committee are considered independent under New York Stock Exchange listing rules and the categorical standards for director independence adopted by the Board of Directors. The Committee operates under a written charter adopted by the Board of Directors which can be accessed in the Investor Relations/ Corporate Governance section of the company’s website, www.zimmer.com.

Compensation Philosophy

     The company’s compensation program for executive officers is designed and administered to attract, retain and motivate highly qualified executives, and to align their interests with the long-term interests of the company’s stockholders, by providing appropriate, competitive compensation and financial rewards. The ultimate goal of the company’s executive compensation program is to increase stockholder value by providing the executives with appropriate incentives to achieve the company’s business objectives, particularly in light of the highly competitive business environment and industry in which the company operates. The Committee believes that it can best accomplish this goal by structuring an executive compensation program that rewards executives for superior performance, as measured by financial and non-financial factors, including major compensation components that are linked directly to increases in recognized measures of stockholder value. The company also encourages executives to act as equity owners through the stock ownership guidelines discussed later in this report.

Compensation Components

     Executive officer compensation, like compensation for other company employees generally, consists of annual base salary, cash incentive compensation, equity-based incentive compensation, health, welfare and retirement benefits and a limited number of perquisites.

     The company uses a compensation consultant to develop and assess its compensation programs. In 2004 and 2005, the Committee directly engaged a second compensation consultant to provide broad advice across a range of compensation issues and to assist the Committee in determining appropriate compensation arrangements for executive officers, particularly long-term incentive compensation. This consultant reports directly to the Committee. The Committee also compares the company’s pay structure and its business, financial and stock price performance to a group of 14 industry-relevant peer companies. The Committee periodically evaluates the composition of the peer group to ensure it remains relevant. Ten of the 14 peer companies are included in the S&P 500 Health Care Equipment Index, as is the company. The performance of the company’s stock is compared to the performance of the index in the graph on page 23.

     Base Salaries. The base salaries of executive officers are set at levels intended to be competitive with companies within the medical device and biotech industries and with other competitors for talent generally. The Committee reviews base salaries of the Chief Executive Officer and the non-CEO executive officers annually and makes adjustments or recommendations, in light of past individual performance as measured by both qualitative and quantitative factors and the potential for making significant contributions in the future, to ensure that salary levels remain appropriate and competitive. The Committee generally treats individual factors as more significant than overall company performance in a particular year in determining base salary levels and any increase in base salary levels.

     Cash Incentive Compensation. The Committee believes that cash incentive compensation should be linked directly to achievement of specified financial and non-financial objectives by the company. Accordingly, the Committee treats company performance as more significant than individual performance in determining cash incentive compensation payouts.

     Under the company’s Executive Performance Incentive Plan, each executive officer is eligible for an annual cash incentive award in an amount up to a target percentage of the executive officer’s base salary. The Executive Performance Incentive Plan, approved by stockholders in 2003, provides incentives for management to enhance stockholder value by meeting current year performance targets. The annual cash incentive award payments are based upon the company’s achievement of those targets. Payment levels generally range from 0% if the company fails to achieve at least 85% of target to 200% if the company achieves 120% of target. In no event may the incentive payments exceed 200% of the target amounts. For 2005, the performance objectives include components based upon earnings per share (representing 50% of each executive officer’s potential award), revenue (representing 25% of each executive officer’s potential award) and cash flow (representing 25% of each executive officer’s potential award).

     Each executive officer is also eligible for a cash incentive award under the company’s three-year Supplemental Performance Incentive Plan, or the Supplemental Plan. The Supplemental Plan, recommended by the Committee and adopted by the Board of Directors in 2004, promotes company and stockholder interests by providing incentives to employees who have responsibilities relating directly to the integration of Centerpulse AG into the company to successfully accomplish that integration and achieve specified, measurable expense savings and efficiencies, or “synergies”. The Centerpulse integration plan sets forth targets for the dollar value of total synergies to be achieved by the end of each of 2004, 2005 and 2006. The annual cash incentive award payments under the Supplemental Plan are based upon the company’s achievement of those targets. Payment levels range from 0% if the company fails to achieve 100% of target to 100% if the company achieves 150% of target.

     Equity-Based Incentive Compensation. The Committee believes that equity-based incentives are an important element of long-term compensation. The value of these incentives to the executive is dependent on increases in value of the company’s stock, providing incentives for increasing stockholder value. Under the 2001 Stock Incentive Plan, or the 2001 Plan, the Committee may grant stock options, restricted stock, performance shares and other forms of equity-based compensation to executive officers and other key employees. The Committee determines the form of and amount of shares underlying awards in part based on broad guidelines that are intended to be competitive within the medical device and biotech industries and with other competitors for talent generally. Within those broad guidelines, the Committee treats individual factors, including past performance and potential for making significant contributions in the future, as more significant than overall company performance in a particular year in determining the form of and amount of shares underlying an individual award.

     During each of 2004 and 2005, the Committee’s compensation consultant assisted the Committee in evaluating executive compensation with a focus on providing long-term incentives. At the conclusion of the 2004 evaluation, the Committee decided to incorporate performance-based conditions into stock option awards under the 2001 Plan. In January 2005, the Committee granted stock options to executive officers in large part consistent with the guidelines used for the 2004 grant. However, one-half of the stock options only become exercisable to the extent that the company exceeds specified performance targets for earnings per share, revenue and free cash flow for 2005. If the performance targets are achieved, the performance-conditioned stock options then vest ratably over a four-year period as long as the executive remains employed by the company.

     At the conclusion of the 2005 evaluation by the Committee’s compensation consultant, the Committee decided to grant long-term performance awards in the form of performance shares to executive officers and other upper-level management employees under the 2001 Plan in combination with a reduced number of nonqualified stock options. Performance shares provide the executives an opportunity to earn a number of shares of the company’s common stock to the extent that the company’s actual performance over a three-year performance period meets or exceeds the performance goal specified in the award and the other terms and conditions of the award are met. The annual grant of stock options to executive officers in January 2006 was approximately 75% of the levels of the 2005 grant. These stock options vest ratably over a four-year period. In addition, individual awards of performance shares were made. Earned performance shares are subject to cliff vesting at the end of the three-year performance period. The Committee set a performance goal with respect to the performance shares of a specified target for the compound annual growth rate, or CAGR, of the company’s earnings per share, or EPS, over the three-year performance period beginning January 1, 2006 and ending December 31, 2008. The number of shares of the company’s common stock that may be earned with respect to the performance share awards will be determined at the end of the three-year performance period after the Committee determines whether and the extent to which the performance goal has been satisfied. The percentage of shares earned will range from 0% of an executive’s award if the actual CAGR of EPS is less than 85% of target, to 33.3% of an executive’s award if the actual CAGR of EPS is at least 100% of target, to 100% of an executive’s award if the actual CAGR of EPS is at least 120% of target. The executives have no voting or dividend rights with respect to the performance shares until the shares are earned. An executive who terminates employment prior to the end of the three-year performance period for reasons other than death, disability or retirement will forfeit all of his or her performance shares, unless determined otherwise by the Committee in its sole discretion. An executive’s performance shares may be earned prior to the end of the performance period if the company experiences a change in control, but payment of such earned performance shares would be subject to mandatory deferral until the earlier of the end of the three-year performance period or the executive’s termination of employment (other than termination by the company for “cause” or by the executive without “good reason”).

     Perquisites. The company provides executive officers with a limited range of perquisites or other benefits not generally available to other employees. Certain executives (primarily those living overseas) are provided with company cars. The company maintains two club memberships in the United States for business use by sales and management personnel and pays the cost of a small number of club memberships internationally. Non-business use of company aircraft is very limited and infrequent. The Committee reviews Mr. Elliott’s non-business use of company aircraft on an annual basis and Mr. Elliott is taxed on the imputed income attributable to all such use. The company does not provide any additional income to Mr. Elliott to pay the taxes on the imputed income.

     Executives who relocate may take advantage of benefits provided under the company’s relocation assistance program, including, for example, reimbursement of temporary housing and moving expenses, but such benefits are not exclusive to executives; the company’s relocation assistance program is generally available to all management-level employees.

     As explained below, during 2005, the Committee undertook a review of the company’s perquisites. Based on that review, the Committee believes the nature and costs to the company of perquisites currently provided to the executive officers are reasonable.

     Retirement and Deferred Compensation Plans. Executives may participate in the company’s 401(k) savings plan and the benefits equalization plan that supplements the savings plan. These plans are discussed in more detail on page 16. Executives hired before September 2, 2002 also participate in the company’s defined benefit pension plan and the benefits equalization plan that supplements the pension plan. These plans are discussed in more detail beginning on page 19. An executive may also elect to defer receipt of a portion of his or her annual bonus payable under the Executive Performance Incentive Plan. The deferral provisions of the Executive Performance Incentive Plan are discussed on page 16.

CEO Compensation

     As required under its charter, the Committee reviews and approves corporate goals and objectives relevant to Mr. Elliott’s compensation as Chief Executive Officer and evaluates his performance in light of those goals and objectives on an annual basis.

     Mr. Elliott’s compensation is determined in accordance with the principles summarized above. A significant portion of Mr. Elliott’s total compensation is at-risk based on the company’s performance. His total compensation in 2005 reflects the Committee’s assessment of the company’s continuing strong performance during the year as well as the company’s superior results over the past four years since its birth as an independent public company.

     Mr. Elliott’s base salary was increased by 3.6% to $725,000 effective January 1, 2005 and was increased by 3.4% to $750,000 effective January 1, 2006. These annual increases are consistent with the range of annual salary increases of 3% to 4% applicable to company employees generally. Mr. Elliott’s incentive opportunities under the Executive Performance Incentive Plan and the Supplemental Plan for 2005 were based on the company’s achievement of specified goals for the performance criteria described above. Mr. Elliott’s target bonus under the Executive Performance Incentive Plan was equal to 100% of his base salary. Because actual results for 2005 exceeded targeted objectives, Mr. Elliott received a bonus equal to $944,675 under

the Executive Performance Incentive Plan. In addition, because the company exceeded the targeted objectives for 2005 under the Supplemental Plan, Mr. Elliott received a supplemental bonus equal to $241,346 under that plan.

     In January 2005, the Committee granted Mr. Elliott 140,000 stock options and a maximum of 140,000 performance-conditioned stock options as part of his annual compensation program. The total number of stock options granted in 2005 was the same as the number granted in 2004. Based on the company’s 2005 performance, 94,080 of the performance-conditioned stock options vested as to performance and now vest 25% per year subject to maintenance of employment. In January 2006, the Committee granted Mr. Elliott 210,000 stock options and a three-year grant of 210,000 performance shares. As described above, the performance shares entitle Mr. Elliott to earn up to a maximum of 210,000 shares of the company’s common stock if the actual compound annual growth rate of the company’s earnings per share for the three-year performance period equals or exceeds 120% of the target set by the Committee. The Committee believes that these equity-based awards recognize the ongoing strong performance of the company and provide better alignment with stockholders’ interests.

     The following tally sheet sets forth the estimated total value of Mr. Elliott’s compensation package in 2005, as well as the estimated values of his supplemental retirement and post-retirement benefits at age 60 and the company’s estimated severance payment obligations under alternative contingent scenarios.

2005 CEO TALLY SHEET

     The Committee reviewed the total compensation paid and other benefits made available to Mr. Elliott for 2005 and found these amounts to be reasonable.

Executive Stock Ownership Guidelines and Other Committee Actions

     The Board of Directors has established stock ownership guidelines for executive officers of the company in order to align their interests more closely with those of stockholders. The Committee oversees compliance by executive officers with these guidelines. The guidelines require (a) the Chief Executive Officer to own shares with a value equal to at least five times his base salary; (b) designated other senior executive officers, including each of the current non-CEO executive officers named in the Summary Compensation Table of this proxy statement, to own shares with a value equal to at least three times the senior executive officer’s base salary; and (c) other executive officers to own shares with a value equal to at least the executive officer’s base salary. All shares owned by an executive count toward these guidelines, including shares owned directly and indirectly, shares held in the company’s 401(k) plan, shares held in the company’s Employee Stock Purchase Plan, as amended, restricted shares and performance shares (at the target award level) payable in company stock. In addition, one-half of the gain on vested stock options is counted toward these guidelines. All executive officers are either in compliance with the guidelines or are pursuing plans that will enable them to achieve compliance within the time frame prescribed in the guidelines.

     During 2005, the Committee took several steps to improve its understanding of the company’s executive compensation program and to satisfy itself that the level of compensation of the company’s executive officers is appropriate. These steps included reviewing (a) the company’s practices on perquisites; (b) the anticipated payments to the executive officers that would be required in the event of a change in control of the company and termination of the executives’ employment under the Change in Control Severance Agreements described elsewhere in this proxy statement; and (c) the key features of the company’s two supplemental executive retirement plans, the benefits equalization plan that supplements the company’s defined benefit pension plan, and the benefits equalization plan that supplements the company’s 401(k) savings plan.

     The Committee believes that the company’s compensation program, with its emphasis on compensation that is at-risk based on the company’s performance and the value of the company’s equity, focuses the efforts of executives and employees on the attainment of a sustained high rate of company growth and profitability for the benefit of the company’s stockholders.

Policy Regarding Deductibility of Compensation

     Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid to each of the executive officers listed in the Summary Compensation Table in this proxy statement to $1,000,000 per year, but contains an exception for certain performance-based compensation. The Committee’s policy is to take into account Section 162(m) in establishing compensation for the company’s senior executives. However, the deductibility of some types of compensation payments can depend upon the timing of an executive’s vesting or exercise of previously granted rights. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the Committee’s control also can affect deductibility of compensation. For these and other reasons, the Committee has determined that it will not necessarily seek to limit executive compensation to that sum which is deductible under Section 162(m) of the Code.

     The Executive Performance Incentive Plan and the 2001 Stock Incentive Plan contain performance-based conditions and have previously been approved by stockholders to ensure deductibility of payments under those plans under Section 162(m). The company is seeking stockholder approval of a new 2006 Stock Incentive Plan at the annual meeting. The Committee will continue to monitor developments and assess alternatives for preserving the deductibility of compensation payments and benefits to the extent reasonably practicable, consistent with its compensation policies and as determined to be in the best interests of the company and its stockholders.

Executive Officer Compensation Tables and Notes

     The following tables set forth information regarding compensation paid to the company’s Chief Executive Officer and each of the company’s four other most highly compensated executive officers (based on salary and bonus earned during 2005) who were serving as executive officers as of December 31, 2005. The tables also provide compensation information with respect to one former executive officer who would have been among the four most highly compensated executive officers during 2005 but who was no longer serving as an executive officer as of December 31, 2005.

SUMMARY COMPENSATION TABLE

OPTION/SAR GRANTS IN LAST FISCAL YEAR

AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR

AND FISCAL YEAR-END OPTION/SAR VALUES⁽¹⁾

Pension Benefits

     Messrs. Elliott, Leno and Dvorak and Ms. Conley are participants in the Zimmer Holdings, Inc. Retirement Income Plan, a non-contributory, defined benefit pension plan. The company has also adopted a non-contributory, defined benefit supplemental pension plan. The retirement income plan and supplemental pension plan provide all participants with credit for their service years, if any, with the company’s former parent. Benefits payable under the company’s plans will be offset by the value of benefits payable to participants under the former parent’s plans. Because they are employed in the company’s international operations, Mr. Melzi and Mr. Fritschi participate in the non-U.S. pension plans described below.

     U.S. Pension Benefits. The following is a summary of the terms of the retirement income plan and the supplemental pension plan as those plans apply to Messrs. Elliott, Leno and Dvorak and Ms. Conley.

     Participants are given full credit under the retirement income plan for service and compensation accrued under the former parent’s plan. Under the retirement income plan, pension benefits are determined by final average annual compensation, where annual compensation is the sum of a participant’s annualized base salary as of the last day of the year and any bonus payments received in such year. The amounts shown in the columns labeled “Salary” and “Bonus” in the Summary Compensation Table for a given year reflect the dollar value of base salary and bonus earned during such year. The normal retirement benefit will equal 2% of final average pay times years of service (up to a maximum of 40 years) minus 1/70th of estimated primary Social Security benefit at age 65 times years of service (up to a maximum of 40 years). Normal retirement age is 65. Participants will also be able to retire beginning at age 55, if they have at least 10 years of service, and begin to receive benefits at that time. The early retirement benefit will be calculated in the same manner as the normal retirement benefit, except that the accrued benefits will be reduced based on the participant’s age at the time of retirement. A participant with ten years of service will be able to receive 100 percent of the benefit at retirement between ages 60 and 65. Benefits payable under the retirement income plan will be offset by the value of benefits payable to the recipient under the former parent’s plan.

     U.S. laws place limitations on compensation amounts that may be included under the retirement income plan. Pension amounts based on the retirement income plan formula which exceed the applicable limitations will be paid under the Benefit Equalization Plan of the Zimmer Holdings, Inc. Retirement Income Plan. In addition, under the benefit equalization plan, participants will receive recognition for years of service in excess of 40, if any, and annual compensation for a given year will include any bonus amounts earned (rather than paid) for such year. The purpose of this benefit equalization plan is to provide benefits for certain employees participating in the retirement income plan whose funded benefits under that plan are or will be limited by application of the Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code of 1986, as amended (the Code). The benefit equalization plan is intended to be an “excess benefit plan,” as that term is defined under ERISA with respect to those participants whose benefits under the retirement income plan have been limited by Section 415 of the Code, and a “top hat” plan meeting the requirements of the appropriate sections of ERISA with respect to

those participants whose benefits under the retirement income plan have been limited by Section 401(a)(17) of the Code. As with the retirement income plan, benefits payable under the benefit equalization plan will be offset by the value of benefits payable to the recipient under the former parent’s plan.

     The following table sets forth the aggregate annual benefit payable under the retirement income plan and the benefit equalization plan upon retirement at normal retirement age for each level of remuneration specified at the listed years of service.

PENSION PLAN TABLE

     Benefit amounts shown are straight-life annuities before the deduction for Social Security benefits. As of December 31, 2005, the following executive officers named in the Summary Compensation Table had the indicated years of credited service for pension plan purposes: Mr. Elliott – 14.00 years; Mr. Leno – 5.00 years; Mr. Dvorak – 4.135 years; and Ms. Conley – 23.00 years.

     The company has granted Mr. Elliott additional age and service credit for purposes of calculating his pension benefits from the company and determining his eligibility for retiree health and life insurance benefits. For purposes of determining the extent of any early retirement pension subsidies, Mr. Elliott will be deemed to have attained age 55 as of August 6, 2001, the date of the separation from the former parent, and he will be entitled to those subsidies upon the commencement of his company pension benefits at or after his actual attainment of age 55. Also, for purposes of calculating the amount of his pension benefits and determining his eligibility for retiree health and life insurance benefits, Mr. Elliott will be deemed to have accumulated 10 years of service and 10 years of credited service with the company as of August 6, 2001. These additional pension benefits will be paid from the company’s general assets pursuant to the company’s supplemental pension plan or a similar unfunded, nonqualified pension benefit arrangement, and will be offset by the supplemental pension benefits paid to Mr. Elliott by the former parent. The additional pension benefits from the company will be paid at the same time and in the same form as the other supplemental benefits payable to Mr. Elliott under the company’s supplemental pension plan.

     Non-U.S. Pension Plans. The company maintains a number of pension plans (schemes) for its employees whose principal place of employment is outside the United States. These pension plans are governed, and in some instances mandated, by the laws of the applicable jurisdictions and vary significantly from plan to plan.

     As a resident of Italy, Mr. Melzi’s pension benefits will be provided under three plans regulated by Italian law and/or the Italian National Labour Collective Agreement. The National Pension Scheme is a plan regulated by the National Pension Authority under which eligible employees and their employers must pay a certain percentage of the employee’s salary each month to the National Pension Authority. This plan is comparable to Social Security in the United States except that it is a defined contribution plan, whereas Social Security is a defined benefit plan. Under the National Labour Collective Agreement, individuals graded as “Dirigenti” are also provided pension benefits under the Dirigenti Pension Scheme. In accordance with the Dirigenti Pension Scheme, the company annually pays a percentage of Mr. Melzi’s salary to a private fund, which is paid out to Mr. Melzi at retirement. This plan is a defined contribution plan. In addition to the two defined contribution pension plans, the Trattatamento Fine Rapporto (“TFR”) is a fund to which a certain percentage of an employee’s annual salary must be paid. The TFR is a cash balance defined benefit plan. The TFR is reserved until the employee’s labour contract is terminated for any reason, including retirement, at which point the employer must pay the employee the amount in the TFR. The TFR to which Mr. Melzi is currently entitled, converted to U.S. dollars at current exchange rates, is approximately $448,801.

     Pension benefits will be provided to Mr. Fritschi under the terms and conditions of two schemes, “Sulzer Vorsorgeeinrichtung (SVE)” and “Johann Jakob Sulzer Stiftung (JJS),” which schemes apply to certain executives. The SVE is a defined contribution plan under which eligible employees and their employers contribute a certain percentage of their annual earnings up to an earnings amount. The JJS is a defined contribution plan under which eligible employees and their employers contribute a certain percentage of their annual earnings in excess of an earnings amount.

Retention Agreement

     Pursuant to a retention agreement entered into with Mr. Elliott in February 2001, Mr. Elliott was awarded 17,544 phantom deferred share units. At the time of Mr. Elliott’s retirement or termination of employment, his units will be distributed to him in the form of a lump sum cash payment equal to the number of units awarded multiplied by the fair market value of company

common stock at the time of his retirement or termination, plus the sum of any dividends credited on shares of company common stock from the date of the award to his retirement or termination date.

Change in Control Arrangements

     The company has entered into change in control agreements with thirteen executives, including each of the executive officers named in the Summary Compensation Table. The agreements are intended to provide for continuity of management in the event of a change in control of the company. The agreements with the executives named in the Summary Compensation Table have an initial term that ended December 31, 2003 (in the case of Messrs. Elliott, Leno, Melzi and Dvorak) or December 31, 2004 (in the case of Ms. Conley and Mr. Fritschi) and provide for automatic extensions, beginning on January 1, 2004 or January 1, 2005, as applicable, in one-year increments, unless either the company or the executive gives prior notice of termination or a change in control shall have occurred prior to January 1 of such year. If a change in control occurs during the term of the agreement, the agreement shall continue in effect for a period of not less than 36 (in the case of Mr. Elliott) or 24 (in the case of the other executives) months beyond the month in which such change in control occurred.

     The agreements provide that the executives could be entitled to certain severance benefits following a change in control of the company and termination of employment. Under each agreement, a change in control would include any of the following events: (1) a “person,” as defined in the Securities Exchange Act of 1934, as amended, acquires 20% or more of the combined voting power of the company’s then outstanding securities; (2) a majority of the company’s directors are replaced during a two-year period; or (3) the stockholders approve a merger or consolidation of the company (unless the stockholders of the company own 75% of the surviving entity) or approve a plan of complete liquidation of the company.

     If, following a change in control, the executive is terminated by the company for any reason other than for cause (as defined in the agreement), or death, or by the executive for good reason (as defined in the agreement), the covered executive would be entitled to a lump sum severance payment equal to three (in the case of Mr. Elliott), two (in the case of Messrs. Leno, Melzi, Dvorak and Fritschi, Ms. Conley and two other executive officers, the “tier 2 executives”) or one (in the case of five other executives, the “tier 3 executives”) times the sum of the executive’s base salary and target bonus under the company’s Executive Performance Incentive Plan. In addition, the executive would receive a payout of any unpaid incentive compensation which has been allocated or awarded to the executive for the completed calendar year preceding the date of termination and a pro rata portion to the date of termination of the aggregate value of all contingent incentive compensation awards to the executive for the current calendar year.

     Further, all outstanding stock options granted to the executive would become immediately vested and exercisable and all restrictions on restricted stock awards would lapse, unless otherwise provided for under a written stock award agreement. The executive would receive a cash amount equal to the unvested portion, if any, of the company’s matching contributions (and attributable earnings) credited to the executive under the Savings and Investment Program. The executive would receive a cash amount or the additional benefit to which the executive would have been entitled had he or she been fully vested and credited with three (Mr. Elliott), two (the tier 2 executives) or one (the tier 3 executives) additional years of service and age for the purpose of calculating his or her tax-qualified and nonqualified pension benefits. For a three (Mr. Elliott), two (the tier 2 executives) or one (the tier 3 executives)-year period after the date of termination, the executive would receive life and health insurance benefits and perquisites substantially similar to those that the executive is receiving immediately prior to the notice of termination. Thereafter, in the case of Mr. Elliott, the executive will be eligible to participate in the company’s retiree medical and dental plans.

     In the event that any payments made to Mr. Elliott or a tier 2 executive in connection with a change in control and termination of employment would be subject to excise tax as excess parachute payments under the Code, the company will “gross up” the executive’s compensation to fully offset such excise taxes provided the payments exceed 110% of the maximum total payment which could be made without triggering the excise taxes. If the aggregate parachute payments exceed such maximum amount but do not exceed 110% of such maximum amount, then the parachute payments would be automatically reduced so that no portion of the parachute payments is subject to excise tax and no gross-up payment would be made.

     To receive the severance benefits provided under the agreements, an executive must sign a general release of claims.

Non-Compete Arrangements

     The company has entered into Non-Disclosure, Non-Competition and Non-Solicitation Employment Agreements with each of the current executive officers named in the Summary Compensation Table.

     Agreements with U.S.-Based Executives. The agreements with U.S.-based executives provide that the executive is restricted from competing with the company for a period of eighteen months following termination of employment within a specified territory, which generally includes every country in which the company has significant operations. To the extent an executive is unable to obtain employment consistent with his or her training and education solely because of the provisions of this agreement, the executive will be eligible to receive, subject to the terms of the agreement: (1) payments equal to the

executive’s monthly base pay at the time of his or her termination for each month of such unemployment through the end of the non-competition period; or (2) to the extent the executive is able to obtain employment, but solely because of the agreement, the monthly base pay for the replacement employment is less than the executive’s monthly base pay at the time of his or her termination, payments equal to the difference in monthly base pay for each such month through the end of the non-competition period.

     Agreement with Mr. Melzi. The agreement with Mr. Melzi provides that he is restricted from competing with the company in Italy, France, Switzerland and Germany for a period of eighteen months following termination of employment. In exchange for Mr. Melzi’s undertakings in the agreement, as is common under Italian law, he will be eligible to receive, subject to the terms of the agreement, a gross amount equal to sixty percent (60%) of his fixed base compensation during the 365 days preceding the effective date of his termination. This amount will be payable in three equal installments over the non-competition period.

Employment and Non-Compete Agreements with Mr. Fritschi

     Mr. Fritschi is party to an employment agreement with a Swiss subsidiary of the company. The terms of the agreement provide that it runs for an indefinite period of time and that Mr. Fritschi’s employment may be terminated upon six months notice by either party, although no notice is required if the company terminates his employment for “cause.” The agreement calls for an annual base salary payable in Swiss Francs which at current exchange rates is approximately $355,000 per year and a target bonus equal to 50% of his annual base salary. The agreement also provides that Mr. Fritschi is eligible to receive awards under the company’s management stock incentive plan and is covered by two pension plans. The company has provided Mr. Fritschi with the required six month notice that his employment will terminate on June 30, 2006. During this six-month termination period, Mr. Fritschi will continue to receive his base salary, bonuses earned with respect to 2005 performance, and pro-rata 2006 bonus at target and he will be entitled to all contractual pension, insurance and benefits contributions.

     Mr. Fritschi is also bound by the terms of a confidentiality, non-competition and non-solicitation agreement similar to those described above. For Mr. Fritschi, the non-competition period is twelve months and he is restricted from competing with the company in a specified territory which includes Switzerland, the continental United States, Canada, Mexico, Japan, the European Union and other countries in which the company is doing business at the time his employment is terminated. To the extent Mr. Fritschi is unable to obtain employment consistent with his training and education solely because of the provisions of this agreement, he will be eligible to receive, following the expiration of any severance benefits to which he is otherwise eligible to receive and subject to the terms of the agreement: (1) payments equal to his monthly base pay at the time of his termination plus bonus paid at target for each month of such unemployment through the end of the non-competition period; or (2) to the extent he is able to obtain employment, but solely because of the agreement, the monthly base pay including the pro rata bonus payment for the replacement employment is less than his monthly base pay including the pro rata bonus payment at the time of his termination, payments equal to the difference for each such month through the end of the non-competition period. The agreement also provides that Mr. Fritschi will be entitled to receive all contractual pension, insurance and benefits contributions until the earlier of the expiration of the non-competition period or such time as he is able to obtain employment.

Performance Graph

     The following graph compares the performance of company common stock for the periods indicated with the performance of the S&P 500 Stock Index and the S&P 500 Health Care Equipment Index.

Comparison of Cumulative Total Return

     Assumes $100 was invested on August 7, 2001 (the first date company common stock was traded on the New York Stock Exchange) in company common stock and each index. Values are as of December 31 assuming dividends are reinvested. No cash dividends have been declared or paid on company common stock. Returns over the indicated period should not be considered indicative of future returns.

Compensation Committee Interlocks and Insider Participation

     No member of the Compensation and Management Development Committee during 2005 was an officer, employee or former officer of the company or had any relationship requiring disclosure herein pursuant to Securities and Exchange Commission regulations. No executive officer of the company served as a member of a compensation committee or a director of another entity under circumstances requiring disclosure under Securities and Exchange Commission regulations.

Equity Compensation Plan Information

     The following table gives information about company common stock that may be issued upon the exercise of options, warrants and rights under all of the company’s existing equity compensation plans as of December 31, 2005, including the 2001 Stock Incentive Plan, as amended, the TeamShare Stock Option Plan, as amended, the Stock Plan for Non-Employee Directors, as amended, the Restated Deferred Compensation Plan for Non-Employee Directors, the Employee Stock Purchase Plan, as amended, and the Independent Sales Representatives Deferred Annual Final Compensation and Equity Incentive Plan.

     The Independent Sales Representatives Deferred Annual Final Compensation and Equity Incentive Plan is an unfunded, deferred compensation plan for the company’s independent distributors. Participants may allocate their account balances in 10% increments among stock option units, deferred stock units and a non-interest bearing deferred compensation account. A participant’s stock option units will be converted into deferred stock units upon the earlier of (1) the ten-year anniversary of the date of grant of the applicable stock option unit, or (2) the date of the termination of the participant’s distributor agreement. Deferred stock units will be converted into shares of common stock on a one-to-one basis upon distribution from the plan. Participants may elect to receive distributions of their interest in the plan in annual installments over a period of three to ten years. The maximum number of shares that may be issued over the life of the plan is 750,000.

Proposal 1. Election of Directors

     Two directors are to be elected at the meeting for a three-year term ending at the 2009 annual meeting. Stuart M. Essig and Augustus A. White, III, M.D., Ph.D., who are presently directors of the company, have been nominated by the Board of Directors for election at this annual meeting. The accompanying proxy will be voted for the Board of Directors’ nominees, except where authority to so vote is withheld. Should one or both nominees be unable to serve, the proxy will be voted for such person(s) as shall be designated by the Board of Directors.

     THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE NOMINEES FOR DIRECTOR.

Proposal 2. Approval of the Zimmer Holdings, Inc. 2006 Stock Incentive Plan

     On February 17, 2006, the Board of Directors adopted, subject to stockholder approval, the Zimmer Holdings, Inc. 2006 Stock Incentive Plan, or the 2006 Plan. The Board of Directors has directed that the proposal to approve the 2006 Plan be submitted to the company’s stockholders for their approval at the meeting. Stockholder approval is also being sought to comply with New York Stock Exchange corporate governance listing standards and so that compensation attributable to awards under the 2006 Plan may be deductible for tax purposes as performance-based compensation under Section 162(m) of the Code. (See the discussion of Section 162(m) under “U.S. Federal Income Tax Consequences” below.)

     The 2006 Plan will replace the Zimmer Holdings, Inc. 2001 Stock Incentive Plan, as amended, or the 2001 Plan, which by its terms will expire on August 5, 2006. The 2001 Plan was approved by stockholders at the 2003 annual meeting. Similar to the 2001 Plan, the 2006 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares to officers and key employees of the company. In large part, the 2006 Plan continues the provisions and practices of the 2001 Plan. As of December 31, 2005 the 2001 Plan had 11,150,943 shares of common stock remaining available for issuance. If the 2006 Plan is approved by stockholders at the meeting, no further grants will be made under the 2001 Plan.

     The 2001 Plan was adopted, and the 2006 Plan is being proposed, to support the achievement of the company’s business objectives by providing incentives that link the interests of key employees to the interests of stockholder through equity-based awards. These awards are important components of the company’s management compensation program, which is designed to attract, retain and motivate top quality management employees to accomplish the business objectives of the company. The Board of Directors believes that it is in the company’s best interests to continue to use equity-based awards as an integral part of its management compensation program. The number of persons who will be eligible to participate in the 2006 Plan is approximately 930.

     The material terms of the 2006 Plan are summarized below. This summary is not intended to be a complete description of the 2006 Plan and is qualified in its entirety by reference to the full text, a copy of which is included in this proxy statement as Appendix C.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE ZIMMER HOLDINGS, INC. 2006 STOCK INCENTIVE PLAN.

Summary of the 2006 Plan

Purpose

     The purpose of the 2006 Plan is to secure for the company and its stockholders the benefits of the incentive inherent in common stock ownership by officers and key employees who will be largely responsible for the company’s future growth and

continued financial success. The plan provides long-term incentives in addition to current compensation to certain officers and key employees of the company and its subsidiaries who contribute significantly to the long-term performance and growth of the company.

Administration

     The 2006 Plan is administered by the Board of Directors through the Compensation and Management Development Committee, or the Committee, which is composed entirely of non-employee directors who are intended to meet the criteria of “outside director” under Section 162(m) of the Code and “non-employee director” under Section 16 of the Securities Exchange Act of 1934, as amended. The Committee selects the officers and key employees who receive options or awards, the form of those awards, the number of shares or dollar targets of the options or awards and all terms and conditions of the options or awards. The Committee also certifies the level of attainment of performance targets.

Eligibility; Forms of Awards

     Options and awards may be granted only to present or future officers and key employees of the company, including its subsidiaries and affiliates. The Committee may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares.

Maximum Stock Award Levels

     The maximum number of shares available for awards under the 2006 Plan is 10,000,000. Of these total available shares, no more than 1,000,00 shares may be issued pursuant to restricted stock, restricted stock unit, performance unit or performance share awards, and no more than 1,000,000 shares may be issued pursuant to incentive stock option awards. No individual participant may be granted awards in any single calendar year during the term of the 2006 Plan in respect of more than 500,000 shares of common stock. For purposes of the foregoing limitation, the number of shares in awards that are made with respect to a period longer than one calendar year shall be considered to have been made on a pro rata basis in the calendar years during such period.

Qualifying Performance Criteria

     Awards of performance shares and performance units will be, and any other type of award (except incentive stock options) in the discretion of the Committee may be, contingent upon achievement of qualifying performance criteria. The Committee will determine the specific targets for the selected qualifying performance criteria. For awards that are intended to qualify for exemption from the limitation on deductibility imposed by Section 162(m) of the Code, the targets will be established within the required time period. Following the applicable performance period, the Committee will determine the extent to which the criteria have been achieved and the corresponding level to which vesting requirements have been satisfied and will certify these determinations in writing.

     The qualifying performance criteria will be based on one or more of the following measures: net sales; revenue; gross profit; operating profit; net earnings; earnings per share; profit margin (gross, operating or net); cash flow, net cash flow or free cash flow; acquisition integration synergies; acquisition integration milestone achievements; stock price performance; total stockholder return; expense reduction; debt or net debt reduction; or financial return ratios. The foregoing measures may be based on the company as a whole or on a business unit, affiliate or subsidiary, either individually, alternatively or in any combination, as determined by the Committee.

Stock Options and Stock Appreciation Rights

     Stock options awarded may be either incentive stock options or nonqualified stock options. Options will expire no later than 10 years after the date of grant and may not be exercised prior to one year following the date of grant unless otherwise determined by the Committee. The exercise price of stock options may not be less than the fair market value of common stock on the date of grant. The Committee may establish other vesting or performance requirements which must be met prior to the exercise of the stock options. Stock options may be granted in tandem with stock appreciation rights.

Restricted Stock and Restricted Stock Unit Awards

     The Committee may also grant shares of restricted stock or restricted stock units that are subject to the continued employment of the participant and may also be subject to performance criteria at the discretion of the Committee. Generally, if the participant’s employment terminates prior to the completion of the specified employment or the attainment of the specified performance goals, the awards will lapse. The Committee may provide for a pro-rated attainment of time-based restrictions.

Generally, an award will not vest during a period less than one year following the date of the award unless the Committee determines otherwise. During the restriction period, unless the Committee determines otherwise, a participant who holds restricted stock will be entitled to vote the shares and to receive cash dividends, if any are declared. A participant who holds restricted stock units will have none of the rights of a stockholder until the restriction period has ended and shares of common stock have been issued.

Long-Term Performance Awards

     The Committee may grant performance units or performance shares. Performance units entitle the participant to receive a specified dollar value, variable under conditions specified in the award, if the performance objectives specified in the award are achieved and the other terms and conditions thereof are satisfied. Performance shares entitle the participant to receive a specified number of shares of common stock, or the equivalent cash value, if the objectives specified in the award are achieved and other terms are satisfied.

Adjustments

     The number, class and price of stock options and other awards are subject to appropriate adjustment in the event of certain changes in company common stock, including stock dividends, stock splits, recapitalizations, reorganizations, corporate separation or division, mergers, consolidations, split-ups, combinations or exchanges of shares and similar transactions.

Change in Control

     Unless the Committee otherwise expressly provides in the agreement relating to an award, in the event a participant’s employment with the company terminates pursuant to a qualifying termination (as defined in the 2006 Plan) during the three year period following a change in control of the company (as defined in the 2006 Plan): (1) all of the participant’s outstanding options will become immediately fully vested and exercisable and (2) the restriction period applicable to all outstanding awards of restricted stock and restricted stock units will immediately expire and all restrictions imposed under such awards will immediately lapse.

     If the company undergoes a change in control during the award period applicable to an award of performance shares or performance units, unless the Committee otherwise expressly provides in the agreement relating to an award, the number of shares or units deemed earned shall be the greater of (1) the target number of shares or units specified in the participant’s award agreement or (2) the number of shares or units that would have been earned by applying the qualifying performance criteria specified in the award agreement to the company’s actual performance from the beginning of the applicable award period to the date of the change in control.

     In addition, in the event of a change in control of the company, the Committee may (1) determine that outstanding options will be assumed by, or replaced with comparable options by, the surviving corporation and that outstanding awards will be converted to similar awards of the surviving corporation, or (2) take such other actions with respect to outstanding options and awards as the Committee deems appropriate.

Amendment of the Plan

     The Board of Directors may amend or suspend the 2006 Plan at any time and from time to time; provided, however, that the Board of Directors shall submit for stockholder approval any amendment (other than an amendment pursuant to the adjustment provisions described above) required to be submitted for stockholder approval by law, regulation or applicable stock exchange requirements or that otherwise would: (1) increase the maximum stock award levels described above; (2) reduce the price at which stock options may be granted to below fair market value on the date of grant; (3) reduce the option price of outstanding stock options; (4) extend the term of the 2006 Plan; or (5) change the class of persons eligible to be participants.

Employees Based Outside the U.S.

     The 2006 Plan provides that the Committee may modify the terms and conditions of awards granted to employees who are employed outside the United States in order to comply with provisions of laws in other countries in which the company operates or has employees.

U.S. Federal Income Tax Consequences

     The United States federal income tax consequences arising with respect to awards granted under the 2006 Plan will depend on the type of the award. The following provides only a general description of the application of federal income tax laws to certain awards under the 2006 Plan. This discussion is intended for the information of stockholders considering how to vote at

the meeting and not as tax guidance to participants in the 2006 Plan, as the consequences may vary with the types of awards made, the identity of the participants, and the method of payment or settlement. The summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local, or foreign tax laws.

     From the participants’ standpoint, as a general rule, ordinary income will be recognized at the time of payment of cash or delivery of actual shares of common stock (for example, upon exercise of nonqualified stock options). Future appreciation on shares of common stock held beyond the ordinary income recognition event will be taxable at capital gains rates when the shares of common stock are sold. The company, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the participant, and the company will not be entitled to any tax deduction in respect of capital gain income recognized by the participant.

     Exceptions to these general rules may arise under the following circumstances: (1) if shares of common stock, when delivered, are subject to a substantial risk of forfeiture by reason of failure to satisfy any employment-, service-, or performance-related condition, ordinary income taxation and the company’s tax deduction will be delayed until the risk of forfeiture lapses (unless the recipient makes a special election to ignore the risk of forfeiture); (2) if an employee is granted an option that qualifies as an “incentive stock option,” no ordinary income will be recognized, and the company will not be entitled to any tax deduction, if shares of common stock acquired upon exercise of such option are held more than the longer of one year from the date of exercise and two years from the date of grant; (3) the company will not be entitled to a tax deduction for compensation attributable to awards granted to its chief executive officer or any of its four other most highly compensated officers, if and to the extent such compensation does not qualify as “performance-based compensation” under Section 162(m) of the Code, and such compensation, along with any other non-performance-based compensation paid in the same calendar year, exceeds $1 million; and (4) an award may be taxable to the participant at 20 percentage points above ordinary income tax rates at the time it becomes vested, plus interest, even if that is prior to the delivery of the cash or common stock in settlement of the award, if the award constitutes “deferred compensation” under Section 409A of the Code, and the requirements of Section 409A of the Code are not satisfied.

     Section 162(m) of the Code generally disallows a publicly held corporation’s tax deduction for compensation paid to its chief executive officer or any of its four other most highly compensated officers in excess of $1,000,000 in any year. Compensation that qualifies as performance-based compensation is excluded from the $1,000,000 deductibility cap and therefore remains fully deductible by the corporation that pays it. The company intends that options and stock appreciation rights granted at the fair market value of the common stock on the date of grant will qualify as performance-based compensation. Performance shares, performance units, restricted stock and restricted stock units granted under the 2006 Plan will only qualify as performance-based compensation when the Committee conditions such grants on the achievement of specific performance goals in accordance with the requirements of Section 162(m) of the Code.

     The 2006 Plan provides that the company has the right to require the recipient of any award under the 2006 Plan to pay to the company an amount necessary for the company to satisfy its obligation to pay the minimum required federal, state, or local income tax, Federal Insurance Contribution Act tax, social insurance tax or other required withholding amount applicable to the participant with respect to such award. The company may, to the extent permitted by law, withhold from other amounts payable to such individual an amount necessary to satisfy these obligations. Unless the Committee determines otherwise, a participant may satisfy the company’s withholding obligation by having shares retained or by delivering shares held for more than six months.

Future Plan Awards

     If the 2006 Plan is approved by stockholders, the grant of awards under the plan will be entirely within the discretion of the Committee. It is currently not possible for the company to determine the benefits or amounts that will be awarded in the future under the plan. As outlined above, the proposed 2006 Plan is in large part a continuation of the 2001 Plan. If the 2006 Plan had been in place during 2005, the Committee does not believe that the decisions made in 2005 would have been different. See “Plan Benefits” below for a description of awards made under the 2001 Plan during 2005.

     The closing price of company common stock on March 8, 2006 was $68.27 per share.

PLAN BENEFITS

     The following table sets forth the awards received by or allocated to the persons listed under the 2001 Plan for 2005.

Proposal 3. Ratification of Selection of Independent Registered Public Accounting Firm

     The Audit Committee has selected PricewaterhouseCoopers LLP, or PwC, as the company’s independent registered public accounting firm for 2006. PwC has served as the company’s independent registered public accounting firm since 2001. The company expects that representatives of PwC will be present at the meeting and will be available to respond to appropriate questions. They will also have an opportunity to make a statement if they desire to do so.

     In response to a stockholder proposal presented at the 2004 annual meeting that was approved by a majority of stockholders, the Board of Directors has resolved to submit the selection of the company’s independent registered public accounting firm to stockholders for ratification. If a majority of stockholders voting on the matter do not ratify the selection, the Audit Committee will reconsider its choice taking into consideration the views of the stockholders and may, but will not be required to, appoint a different independent registered public accounting firm.

     The following table sets forth the aggregate fees billed by PwC for audit, audit-related, tax and all other services for 2005 and 2004.

Pre-Approval Policies and Procedures

     The Audit Committee pre-approves all audit and permissible non-audit services to be provided to the company by its independent registered public accounting firm prior to commencement of services. Mr. Glasscock, Audit Committee Chairman, has the delegated authority to pre-approve such services up to a specified aggregate fee amount. These pre-approval decisions are presented to the full Audit Committee at its next scheduled meeting.

     THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”

RATIFICATION OF THE SELECTION OF PWC AS THE COMPANY’S INDEPENDENT AUDITOR FOR 2006.

Proposal 4. Stockholder Proposal to Elect Each Director Annually

     Mr. John Chevedden, as legal proxy for Victor Rossi, who holds 400 shares of common stock, has informed the company that he intends to submit the following proposal at this year’s meeting:

RESOLVED: Shareholders request that our Directors take the necessary steps, in the most expeditious manner possible, to adopt annual election of each director. This includes complete transition from the current staggered system to 100% annual election of each director in one election cycle if practicable. Also to transition solely through direct action of our board if practicable.

Victor Rossi, P. O. Box 249, Boonville, California 95415 submitted this proposal.

     66% Yes-Vote

Thirty-three (33) shareholder proposals on this topic won an impressive 66% average yes-vote in 2005 through late September. The Council of Institutional Investors www.cii.org, whose members have $3 trillion invested, recommends adoption of this proposal topic.

     Progress Begins with One Step

It is important to take one step forward in our corporate governance and adopt the above RESOLVED statement since our 2005 governance standards were not impeccable. For instance in 2005 it was reported (and certain concerns are noted):

The less-than-best practices above reinforce the reason to take one step forward now and adopt annual election of each director.

Our board previously took a step forward in terminating the poison pill after we voted 77% in favor on a 2004 shareholder proposal.

     Best for the Investor

Arthur Levitt, Chairman of the Securities and Exchange Commission, 1993-2001 said:

In my view it’s best for the investor if the entire board is elected once a year. Without annual election of each director shareholders have far less control over who represents them.

     “Take on the Street” by Arthur Levitt

Elect Each Director Annually

Yes on 4

Statement in Opposition

The Board of Directors unanimously recommends a vote “AGAINST” adoption of this stockholder proposal for the following reasons:

     The Board of Directors evaluates the company’s issues of corporate governance regularly, including the value of maintaining a classified Board structure. After careful consideration, the Board has determined that it is in the best interests of the company and its stockholders to maintain the current classified Board structure and recommends a vote against this stockholder proposal.

     Since the company was spun off from Bristol-Myers Squibb Company in 2001, the Board has been divided into three classes of directors serving staggered three-year terms, with each class being as nearly as possible equal to one-third of the total directors. The Board believes that the staggered election of directors helps assure continuity and stability of the company’s complex business strategies and policies and ensures that a majority of directors will always have prior experience as directors with extensive knowledge of the company. The Board believes that directors with greater experience and understanding of the company constitute a valued resource and are more capable of making fundamental decisions about the company and guiding its management in making such decisions. Staggered elections function to prevent sudden change in the composition of the entire Board in any single year. Electing directors to three-year, rather than one-year terms, strengthens the independence of non-management directors by providing them with longer terms of office within which to focus on and further the strategic long-term goals of the company.

     The Board in its present form is accountable to stockholders and committed to sound corporate governance practices. Four of the company’s five directors are independent and all directors owe fiduciary duties to the company and its stockholders regardless of the length of the term for which they are elected. In addition, the Board has implemented measures to further foster accountability, including the adoption of Corporate Governance Guidelines (that focus on the independence and quality of members of the Board and its effective functioning) and regular annual self-evaluations of the Board and its committees. The Board has considered the stockholder proposal, but believes that directors elected to a classified Board are no less accountable to stockholders than they would be if all directors were elected annually, in that stockholders have an opportunity each year to express their approval, or disapproval, of the performance of the Board as each class of directors stands for re-election. Further, a majority of the Board can be replaced over the course of two annual meetings, which would occur within the span of approximately one year.

     In the event of an unsolicited proposal to acquire or restructure the company, the classified Board structure would not prevent a change of control, but would allow the company time and leverage to evaluate the adequacy and fairness of any takeover proposal, consider alternative proposals and to ultimately negotiate with the sponsor to assure stockholder value is maximized.

     Approval of this stockholder proposal would not automatically result in the annual election of directors. To do so would require further action to amend the company’s Restated Certificate of Incorporation which provides for a classified Board. To amend the relevant provisions of the Restated Certificate of Incorporation, both the Board and stockholders holding at least 80% of the outstanding voting stock of the company would have to approve such amendments. While the Board would consider the merits of such amendments, it would do so consistent with its fiduciary duty to act in a manner it believes to be in the best interest of the company and its stockholders.

     The Board believes that several statements in the proposal may give stockholders the erroneous impression that the company is significantly behind other companies in matters of corporate governance:

     The Board is genuinely interested in maintaining good corporate governance. It encourages stockholders to review the entire TCL report at the website noted above and draw their own conclusions.

     In closing, this is the first time the company has received a stockholder proposal to move to annual elections of directors. The Board, with the assistance of outside legal counsel, carefully considered this proposal and the arguments both in favor of and in opposition to classified boards of directors. Following extensive review and deliberation, the Board concluded that the company’s classified Board structure continues to promote the best interests of the company’s stockholders.

     THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “AGAINST” THE ADOPTION OF THIS STOCKHOLDER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.

2007 PROXY PROPOSALS

     To be considered for inclusion in next year’s proxy statement, the company must receive stockholder proposals relating to the 2007 annual meeting of stockholders at its principal executive offices, 345 East Main Street, Warsaw, Indiana 46580, attention: Secretary, no later than November 22, 2006.

     Under the company’s Restated By-Laws, as amended, no business may be brought before an annual meeting except as set forth in the notice of the meeting or as otherwise brought before the meeting by or at the direction of the Chairman of the Board or by a stockholder entitled to vote who has delivered notice to the company containing certain information set forth in the Restated By-Laws, as amended, not later than the 90th day nor earlier than the 120th day prior to the first anniversary of the preceding year’s annual meeting. For the company’s meeting in 2007, the company must receive this notice no later than January 31, 2007 and no earlier than January 1, 2007. However, in the event that the 2007 annual meeting is called for a date that is more than 30 days before or more than 60 days after May 1, 2007, notice must be delivered no earlier than the 120th day prior to the 2007 annual meeting and not later than the later of the 90th day prior to the 2007 annual meeting or the 10th day following the day public announcement of the date of the meeting is first made. These notice requirements are deemed satisfied by a stockholder who has complied with SEC Rule 14a-8 and whose proposal is included in the company’s proxy statement. A copy of the by-law provisions discussed above may be obtained by writing the company at its principal executive offices, 345 East Main Street, Warsaw, Indiana 46580, attention: Secretary.

INCORPORATION BY REFERENCE

     The sections of this proxy statement entitled “Audit Committee Report,” “Compensation and Management Development Committee Report” and “Performance Graph” do not constitute soliciting material and should not be deemed filed or incorporated by reference into any other company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the company specifically incorporates them by reference therein.

Appendix A

ZIMMER HOLDINGS, INC.

CATEGORICAL STANDARDS OF DIRECTOR INDEPENDENCE

     As permitted by the rules of the New York Stock Exchange, the Board has adopted categorical standards to assist it in making determinations of independence. These standards incorporate, and are consistent with, the definition of “independent” contained in the New York Stock Exchange listing rules. Any determination of independence for a director who does not meet these standards will be specifically explained in the Company’s proxy statement. The standards are as follows:

Appendix B

CHARTER OF THE AUDIT COMMITTEE

OF THE BOARD OF DIRECTORS OF

ZIMMER HOLDINGS, INC.

Purpose

     The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Zimmer Holdings, Inc. (the “Company”) is appointed by the Board to assist the Board in fulfilling its responsibility to oversee (1) the integrity of the Company’s financial statements, (2) the independent auditor’s qualifications and independence, (3) the performance of the Company’s internal audit function and independent auditors, and (4) the Company’s compliance with legal and regulatory requirements.

     The Committee is also responsible for producing the annual report required by the rules of the Securities and Exchange Commission (the “SEC”) to be included in the Company’s proxy statement.

Committee Membership

     The Committee shall consist of at least three directors. The members of the Committee shall meet the independence and experience requirements of the New York Stock Exchange and Rule 10A-3(b)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). At least one member of the Committee shall be an “audit committee financial expert” as defined by the SEC. Committee members shall not simultaneously serve on the audit committees of more than two other public companies.

     The members and the Chair of the Committee shall be appointed by the Board on the recommendation of the Corporate Governance Committee. Committee members may be replaced by the Board. The determination of a director’s qualification to serve on the Committee shall be made by the Board in keeping with the applicable requirements and definitions of the New York Stock Exchange, the Exchange Act and the SEC. The Committee may form and delegate authority to subcommittees of one or more members when appropriate, provided the subcommittees are composed entirely of independent directors.

Committee Authority and Responsibilities

     The Committee’s job is one of oversight, recognizing that the Company’s management is responsible for preparing the Company’s financial statements and for developing and maintaining systems of internal accounting and financial controls and that independent auditors are responsible for their audit of the financial statements and obtaining the necessary understanding of the internal controls to conduct the audit, along with reporting identified areas of improvement in internal controls identified during the course of the audit. The Committee also recognizes that the financial management and the internal and independent auditors have more knowledge and information about the Company than do Committee members. Consequently, in carrying out its oversight responsibilities, the Committee is not providing any expert or special assurance as to the Company’s financial statements or internal controls or any professional certification as to the independent auditor’s work.

     In discharging its oversight role, the Committee shall have full access to all books, records, facilities and personnel of the Company. The Committee shall also have authority to obtain advice and assistance from external legal, accounting or other advisors, without consulting or obtaining the approval of the full Board or any officer of the Company in advance. The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report or performing other audit, review or attest services and to any advisors employed by the Committee.

     The following functions shall be the common recurring activities of the Committee in carrying out its oversight responsibilities:

Oversight of the Company’s Relationship with the Independent Auditor

Financial Statement and Disclosure Matters

Oversight of the Company’s Internal Audit Function

Other Responsibilities

Last Reviewed and Revised on December 9, 2005

Appendix C

ZIMMER HOLDINGS, INC.

2006 STOCK INCENTIVE PLAN

     1. Purpose: The purpose of the 2006 Stock Incentive Plan is to secure for the Company and its stockholders the benefits of the incentive inherent in common stock ownership by the officers and key employees of the Company who will be largely responsible for the Company’s future growth and continued financial success and by providing long-term incentives in addition to current compensation to certain key executives of the Company who contribute significantly to the long-term performance and growth of the Company. It is intended that the former purpose will be effected through the granting of various forms of equity-based awards and that the latter purpose will be effected through the granting of such equity-based awards which are subject to performance-based conditions.

     2. Definitions: For purposes of this Plan:

     3. Amount of Stock:

     4. Administration: The Plan shall be administered under the supervision of the Board of Directors of the Issuer, which may exercise its powers, to the extent herein provided, through the agency of its Compensation and Management Development Committee (the “Committee”), which shall be appointed by the Board of Directors of the Issuer.

     5. Eligibility: Awards may be granted only to present or future officers and key employees of the Company, including Subsidiaries and Affiliates which become such after the effective date of the Plan. Any officer or key employee of the Company shall be eligible to receive one or more Awards under the Plan. Any director who is not an officer or employee of the Company shall be ineligible to receive an Award under the Plan. The adoption of this Plan shall not be deemed to give any officer or employee any right to an Award, except to the extent and upon such terms and conditions as may be determined by the Committee.

     6. Qualifying Performance Criteria: Awards under Section 8 of this Plan shall be, and any other type of Award (other than incentive stock options) in the discretion of the Committee may be, contingent upon achievement of Qualifying Performance Criteria.

     7. Stock Options: Stock options under the Plan shall consist of incentive stock options under Section 422 of the Code or nonqualified stock options (options not intended to qualify as incentive stock options), as the Committee shall determine. In addition, the Committee may grant stock appreciation rights in conjunction with an option, as set forth in Section 7(b)(12), or may grant an option in conjunction with an award of performance units or performance shares, as set forth in Section 7(b)(11) (an “Associated Option”).

     Each option shall be subject to the following terms and conditions: