Exhibit 10.2
ZIMMER HOLDINGS, INC. SAVINGS AND INVESTMENT PROGRAM
EFFECTIVE August 6, 2001
TABLE OF CONTENTS
1. DEFINITIONS ............................................................
2. ELIGIBILITY AND PARTICIPATION ..........................................
3. BASIC AND SUPPLEMENTARY CONTRIBUTIONS ..................................
4. CHANGE IN CONTRIBUTIONS ................................................
5. EMPLOYING COMPANY CONTRIBUTIONS ........................................
6. LIMITATIONS ON CONTRIBUTIONS ...........................................
7. ROLLOVER CONTRIBUTIONS .................................................
8. INVESTMENT CHOICES OF PARTICIPANT ......................................
9. MAINTENANCE AND VALUATION OF PARTICIPANTS' ACCOUNTS ....................
10. VESTING ................................................................
11. METHOD OF PAYMENT UPON DISTRIBUTION OR WITHDRAWAL ......................
12. WITHDRAWALS AND LOANS FROM ACCOUNT .....................................
13. DISTRIBUTION UPON TERMINATION OF EMPLOYMENT ............................
14. TRANSFER OF A PARTICIPANT ..............................................
15. SUSPENSION OF CONTRIBUTIONS ............................................
16. EFFECT OF SUSPENSION OF CONTRIBUTIONS ..................................
17. LEAVE OF ABSENCE, LAYOFF, ABSENCE ON DISABILITY AND REEMPLOYMENT .......
18. DESIGNATION OF BENEFICIARIES IN THE EVENT OF DEATH .....................
19. TRUSTEE OF THE PLAN ....................................................
20. ADMINISTRATION OF THE PLAN .............................................
21. TOP HEAVY PROVISIONS ...................................................
22. AMENDMENT AND MODIFICATION OF THE PLAN .................................
23. SUSPENSION, TERMINATION, MERGER OR CONSOLIDATION OF PLAN ...............
24. GENERAL PROVISIONS .....................................................
i
ZIMMER HOLDINGS, INC.
SAVINGS AND INVESTMENT PROGRAM
PURPOSE
The purpose of this Zimmer Holdings, Inc. Savings and Investment Program
(the "Plan") is to provide a convenient way for the employees of Zimmer
Holdings, Inc. ("Zimmer") and certain of its subsidiaries to save on a regular
and long-term basis and to encourage such employees to make contributions and
continue careers with Zimmer.
INTRODUCTION
This Plan was adopted by Zimmer in conjunction with the spin-off of Zimmer
Holdings, Inc. ("Zimmer") from the Bristol-Myers Squibb Company (the
"Bristol-Myers Squibb Company"). In connection with the spin-off of Zimmer, the
accounts of active Zimmer employees under the Bristol-Myers Squibb Company
Savings and Investment Program (the "Bristol-Myers Squibb Plan") were
transferred from the Bristol-Myers Squibb Plan to this Plan.
1
ARTICLE 1
DEFINITIONS
For the purposes of the Plan the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
Section 1.01 "Administrative Agent" shall mean the third party
administrator appointed by the Committee which has the responsibility to
receive, cumulate and communicate to the Trustee investment and distribution
instructions (including requests for loans for a period of not more than 60
months from the Plan, but excluding loans from the Plan in excess of 60 months,
financial emergency and hardship withdrawals) received from Participants. With
respect to any such responsibilities which are responsibilities of the Committee
as the "administrator" or "named fiduciary" of the Plan under ERISA, the
Administrative Agent shall be a delegate of the Committee in accordance with
Section 20.06. With respect to any responsibilities assumed by the Trustee
pursuant to the Trust Agreement referred to in Article 19, the Administrative
Agent shall be an agent of the Trustee.
Section 1.02 "Administrative Error" shall mean an error in operating the
Plan determined by the Committee to require correction by permitting additional
contributions by the Employee and/or an Employing Company, distributing
contributions made to the Plan due to factual error, correcting distributions
made in error or otherwise conforming the operations of the Plan to the terms of
the Plan.
Section 1.03 "Affiliate" shall mean any corporation, trade or business if
it and Zimmer are members of a controlled group of corporations, or are under
common control, or are members of an affiliated service group, within the
meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the Code, respectively;
provided, however, that for purposes of Section 6.02, the definitions prescribed
by Sections 414(b) and 414(c) of the Code shall be modified as provided by
Section 415(h) of the Code by substituting "more than 50%" common control for
"at least 80%" common control.
Section 1.04 "After-Tax Contribution" shall mean a contribution to the
Plan pursuant to the election described in Section 2.01 by the Employee, which
election authorizes the Employee's Employing Company to deduct the amount of
such contribution from the portion of the Employee's Annual Benefit Salary or
Wages otherwise payable currently for each payroll period without reducing the
amount includible in his gross income for federal income tax purposes.
Section 1.05 "Annual Benefit Salary or Wages" shall mean a Participant's
regular salary or wages prior to any authorized Pre-Tax Contributions pursuant
to Section 2.01 of the Plan or any authorized salary reduction amount pursuant
to a plan established under Section 125 of the Code, including total commissions
paid with respect to the preceding calendar year on the basis of sales, and
incentive payments paid with respect to the preceding calendar year to
production workers at Zimmer; but excluding any compensation for overtime,
special remuneration or bonuses, as determined by the Employing Company from its
payroll records. Notwithstanding the foregoing, for sales personnel of Zimmer
who are paid on a strict
2
commission basis, 85% of their commissions paid with respect to the preceding
calendar year on the basis of sales shall be considered as Annual Benefit Salary
or Wages. The amount of a Participant's Annual Benefit Salary or Wages taken
into account under the Plan shall not exceed $150,000, as adjusted by the
Commissioner of the Internal Revenue Service for increases in the cost of living
in accordance with Section 401(a)(17)(B) of the Code. If a Participant is a
United States citizen employed by a foreign subsidiary corporation of an
Employing Company and is deemed to be an Employee of such Employing Company, his
Annual Benefit Salary or Wages from such foreign subsidiary to be taken into
account, if determined in a currency other than United States dollars, shall,
for the purposes of the Plan, be considered as having been converted to United
States dollars at such rate of exchange as shall be determined by Zimmer from
time to time.
Section 1.06 "Basic Contribution" shall mean Pre-Tax Contributions,
After-Tax Contributions, or a combination thereof, which are so designated by
the Employee pursuant to Article 3.
Section 1.07 "Beneficiary" shall mean the beneficiary designated by the
Participant to receive all or part of the amount in the account balance of a
Participant, Inactive Participant or Former Participant upon such person's death
in accordance with Article 18.
Section 1.08 "Board of Directors" shall mean the Board of Directors of
Zimmer, or the Executive Committee of such Board of Directors, as they may be
constituted from time to time.
Section 1.09 "Bristol-Myers Squibb" shall mean the Bristol-Myers Squibb
Company, a Delaware Corporation.
Section 1.10 "Bristol-Myers Squibb Plan" shall mean the Bristol-Myers
Squibb Company Savings and Investment Program.
Section 1.11 "Bristol-Myers Squibb Stock" shall mean the shares of common
stock of Bristol-Myers Squibb.
Section 1.12 "Bristol-Myers Squibb Stock Fund" shall mean the Investment
Fund invested primarily in shares of Bristol-Myers Squibb Stock.
Section 1.13 "Business Day" shall mean any day on which the New York Stock
Exchange is open for business.
Section 1.14 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Section 1.15 "Committee" shall mean the committee referred to in Article
20.
Section 1.16 "Effective Date" shall mean August 6, 2001.
Section 1.17 "Employee" shall mean (i) a person who on the Effective Date
was both a common law employee of an Employing Company and a participant in the
Bristol-Myers Squibb Plan and, (ii) with respect to a person or who becomes a
common law employee of an Employing
3
Company after the Effective Date, a person who is employed by an Employing
Company on the date which is six months after the date on which such person
completed one Hour of Service and whose employment is for not less than 1,000
Hours of Service during any twelve consecutive month period; provided, however,
Employee shall not include any common law employee of an Employing Company
covered by a collective bargaining agreement which does not provide for
participation under the Plan, any person designated by an Employing Company as a
leased employee of an Employing Company, or any person who performs services for
an Employing Company and whom the Employing Company treats for federal tax
purposes as an independent contractor. The foregoing notwithstanding, if any
person is subsequently determined to be an Employee by the Internal Revenue
Service or any other federal, state or local governmental agency or competent
court of authority, such person will deemed to be an Employee commencing on the
date that this determination is finally adjudicated or otherwise accepted by the
Employing Company; provided, however, that such person must meet the other
requirements of this paragraph and that such person shall not, under any
circumstances, be deemed to be an Employee for the period of time during which
such Employing Company treated the person as an independent contractor for
federal tax purposes regardless of whether the determination of the status of
the person as an Employee has retroactive effect. In addition, any person who
performs services for the Employing Company, regardless of whether such person
is a common law employee or an independent contractor of an Employing Company,
shall not be an Employee for any period of time during which such person has
agreed in writing that such person will not participate in the Plan or generally
the Employing Company's employee benefit plans.
Employee shall also mean a citizen or resident of the United States who is
a full-time employee of a foreign affiliate (as defined in Section 3121(l)(6) of
the Code) of an Employing Company (which foreign affiliate is not itself an
Employing Company) to which an agreement entered into between such Employing
Company and the Internal Revenue Service under Section 3121(l) of the Code
applies and a full-time employees of a domestic subsidiary (as defined in
Section 407(a) of the Code) of an Employing Company (which domestic subsidiary
is not itself an Employing Company); provided, however, in either case that (i)
such United States citizen or resident is employed by an Employing Company
participating in the Plan or by the foreign affiliate or domestic subsidiary, as
determined by the Employing Company, on the date which is six months after the
date on which such person first completed one Hour of Service for an Employing
Company or a foreign affiliate or domestic subsidiary thereof; (ii) a funded
deferred compensation plan is not provided with respect to the remuneration paid
to such employee by an Employing Company or such foreign affiliate or domestic
subsidiary; and (iii) such employee receives compensation from such foreign
affiliate or domestic subsidiary other than a pension, retirement allowance,
retainer or fee under contract. The foregoing notwithstanding, the term Employee
does not include any employee (i) who is a resident of and performs services in
Puerto Rico and who is in a class of employees eligible to participate in the
Zimmer Puerto Rico, Inc. Savings and Investment Program; or (ii) who is a
non-resident alien of the United States, and who receives no earned income
within the meaning of Section 911(d)(2) of the Code, or any similar provision of
the Code as the same may be amended, and the regulations thereunder, from an
Employing Company which constitutes income from sources within the United States
within the meaning of Section 861(a)(3) of the Code as amended (or any similar
provision of the Code as the same may be amended) and the regulations
thereunder.
4
Section 1.18 "Employing Company" shall mean Zimmer and any Affiliate which
the Board of Directors or the Committee may from time to time determine to bring
under the Plan which shall adopt the Plan and any successor of any of them.
Section 1.19 "Employing Company Contributions" shall mean contributions
made by the Employee's Employing Company pursuant to Article 5 hereof with
respect to such Employee's Basic Contributions.
Section 1.20 "Enrollment Date" shall mean any Business Day on which an
Employee elects to enroll in the Plan.
Section 1.21 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
Section 1.22 "Former Participant" means an individual who is no longer
employed by an Employing Company or any of its Affiliates but for whom an
account balance is maintained in the Trust.
Section 1.23 "Highly Compensated Employee" has the meaning defined in
Section 414(q) of the Code.
Section 1.24 "Hour of Service" means, with respect to a person who is a
common law employee of Zimmer or an Affiliate, each hour for which:
(a) he is paid, or entitled to payment, for the performance of duties for
an Employing Company as determined by the Employing Company;
(b) back pay, irrespective of mitigation of damages, is either awarded or
agreed to by an Employing Company;
(c) he is paid, or entitled to payment, by an Employing Company on account
of a period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty, military duty or
leave of absence;
(d) a court order, agreement with the Department of Labor or other federal
or local government agency or department, or similar agreement requires that
service be awarded;
(e) he is absent without pay during a leave of absence, period of layoff
not to exceed six months or disability leave as provided in Article 17; and
(f) he is paid, or entitled to payment, for the performance of duties
prior to the effective Date for an employer participating in the Bristol-Myers
Squibb Plan.
For purposes of paragraph (a), Hours of Service shall be credited for the
period during which the duties are performed and for purposes of paragraph (b),
Hours of Service shall be credited for the period to which the award or
agreement pertains. For the purposes of paragraphs (c) and (d), Hours of Service
shall be credited for the period during which the absence occurs
5
(but not to exceed six months for layoff) and during such a period of absence,
shall be credited as though the period of absence were a period of active
employment with an Employing Company. The same Hours of Service shall not be
credited under more than one of paragraphs (a), (b), (c), (d), (e) or (f). It
shall be assumed that each Employee as to whom Employing Company records do not
and are not required by law to reflect hours worked for any relevant period,
worked 45 hours for each week for which he or she would be required to be
credited with at least one Hour of Service under Department of Labor Regulations
2530.200b-2.
Section 1.25 "Inactive Participant" shall mean an individual who remains
employed by an Employing Company or an Affiliate whose Pre-Tax Contributions and
After-Tax Contributions to the Plan have been suspended for any of the reasons
provided in the Plan.
Section 1.26 "Investment Fund" shall mean an investment option established
in accordance with Article 8, including (but not limited to) the Zimmer Stock
Fund and the Bristol-Myers Squibb Stock Fund, portfolios managed by the Trustee,
the Committee (or its delegate) or an Investment Manager and investments in any
mutual fund which is registered under the Investment Company Act of 1940 and any
commingled trust fund (including any group trust meeting the requirements of
Revenue Ruling 81-100) established for the investment of funds of profit sharing
and pension plans which trust is exempt from tax under Section 501(a) of the
Code, by reason of qualifying under Section 401(a) of the Code (as such Sections
may be renumbered, amended or re-enacted).
Section 1.27 "Investment Manager" has the meaning given such term under
Section 3(38) of ERISA.
Section 1.28 "One Year Break in Service" means a consecutive twelve month
period used to determine an Employee's Years of Service during which period that
Employee has not completed more than 500 Hours of Service. Solely for
determining whether an Employee has a One Year Break in Service, an Employee who
is absent from work by reason of pregnancy, birth of a child of the Employee,
placement of a child with an Employee because of the adoption of such child, or
for purposes of caring for a child of the Employee for a period beginning with
the birth or placement of the child shall be credited with the number of Hours
of Service the Employee would have normally been credited with during the period
of absence from service; provided, however, the total Hours of Service credited
shall not exceed 501 hours and shall be credited (i) only to the Plan Year in
which the absence from service begins if the Employee would have a One Year
Break in Service in that Plan Year, or (ii) if the Employee would not have a One
Year Break in Service in the Plan Year in which the absence from service begins,
in the immediately following Plan Year. The Plan shall not credit Hours of
Service as provided above unless the Employee furnishes to the Committee such
timely information as the Plan may reasonably require to establish that the
absence from work is for the reasons described above and the number of days of
absence for such purpose.
Section 1.29 "Participant" shall mean an Employee who has elected to
participate in the Plan as provided in Article 2 and whose participation in the
Plan at the time of reference has not been suspended or terminated as provided
in the Plan. If a Participant becomes represented by a collective bargaining
agent after he has elected to participate in the Plan, such Participant's right
to continue to participate shall be determined in accordance with the terms of
the contract
6
between the collective bargaining agent and the Employing Company. If the
contract provides that the Participant shall no longer continue to participate
and does not provide for a transfer of the participant's account balance to
another plan pursuant to Section 14.04, the Participant shall be deemed to have
elected to suspend Pre-Tax Contributions and After-Tax Contributions and the
Participant shall become an Inactive Participant.
Section 1.30 "Participant Loan Fund" shall mean an account invested in
debt obligations evidencing loans to the Participant pursuant to Section 12.06.
Section 1.31 "Plan" shall mean the Zimmer Savings and Investment Program
as described herein.
Section 1.32 "Plan Year" shall mean a calendar year or, in the case of the
first plan year, the period commencing on the Effective Date and ending on
December 31, 2001.
Section 1.33 "Pre-Tax Contribution" shall mean a contribution to the Plan
pursuant to the election described in Section 2.01 by the Employee, which
election authorizes the Employee's Employing Company to reduce, by the amount of
the contribution, (i) the portion of his Annual Benefit Salary or Wages payable
currently for each payroll period and (ii) the amount includible in his gross
income for federal income tax purposes
Section 1.34 "Qualified Nonelective Contribution" shall mean a
contribution made on behalf of an Employee by the Employee's Employing Company
pursuant to Section 5.04 of the Plan, which is neither an Employing Company
Contribution nor a Pre-Tax Contribution or After-Tax Contribution, which and
that is 100% vested at all times and which may not be distributed from the Plan,
on account of hardship or otherwise, prior to the termination of employment or
death of the Employee, the Employee's attainment of age 59 1/2 or becoming
disabled and entitled to receive disability payments under a disability pay plan
maintained by the Employing Company, the termination of the Plan without
establishment of a successor plan, or the sale of the Employing Company or of
substantially all the assets of a division of the Employing Company or of the
Employing Company which employs the Employee, as required under Section
401(m)(4) of the Code and regulations issued thereunder.
Section 1.35 "Rollover Contribution" shall have the meaning given such
term in Section 7.01.
Section 1.36 "Supplementary Contribution" shall mean Pre-Tax
Contributions, After-Tax Contributions, or a combination thereof, which are so
designated by the Employee pursuant to Article 3.
Section 1.37 "Telephonic Notification" shall mean any communication
acceptable to the Administrative Agent, including communication via telephone,
telegraph, satellite, internet web site or other wireless communication.
Section 1.38 "Trustee" shall mean the trustee(s) under the Trust
Agreement(s) referred to in Article 19.
7
Section 1.39 "Valuation Date" shall mean any date specified by the
Committee or, if the Committee does not so specify, shall mean:
(a) with respect to valuation of Investment Funds, as of the close of each
Business Day;
(b) with respect to any inter-Investment Fund transfer pursuant to
Sections 8.03, as of the close of the first Business Day coincident with or
immediately following the date the Participant requests such transfer;
(c) with respect to withdrawals in the case of Financial Hardship pursuant
to Section 12.02 and withdrawals due to financial emergency pursuant to Section
12.04, as of the close of the first Business Day following the date upon which
such withdrawal is approved;
(d) with respect to all other distributions and withdrawals, as of the
close of the first Business Day coincident with or next following the date the
Participant, Inactive Participant, Former Participant or Beneficiary (as
applicable) requests such distribution or withdrawal, provided, however, that
the Valuation Date with respect to any payments which qualify as eligible
rollover distributions pursuant to Section 13.08 shall be delayed by such
waiting period as may apply by law or regulation to such distributions.
The foregoing notwithstanding, (i) if upon any otherwise applicable
Valuation Date trading in Zimmer Stock or Bristol-Myers Squibb Stock is
suspended by the Securities and Exchange Commission or halted pursuant to the
rules of the New York Stock Exchange and does not resume prior to the close of
that day, then, with respect to any valuation of the Zimmer Stock Fund or the
Bristol-Myers Squibb Stock Fund, inter-Investment Fund transfer, distribution or
withdrawal for which a determination of the net asset value of units in the
Zimmer Stock Fund or the Bristol-Myers Squibb Stock Fund and the closing price
per share of Zimmer Stock or Bristol-Myers Squibb Stock is required, the
Valuation Date shall be delayed to the close of the next business day on which
trading in of Zimmer Stock or Bristol-Myers Squibb Stock resumes; provided,
however, that where the suspension or halt in trading occurs on the last
Valuation Date of any month or continues through the close of business on that
day, then the Valuation Date shall not be delayed and the Administrative Agent
shall determine the net asset value of units in the Zimmer Stock Fund or the
Bristol-Myers Squibb Stock Fund and a deemed closing price per share of Zimmer
Stock or Bristol-Myers Squibb Stock as of that date in accordance with a uniform
valuation procedure established by the Committee which shall be applied in a
uniform and non-discriminatory manner to all persons similarly situated, or (ii)
if there is insufficient liquidity in the Zimmer Stock Fund or the Bristol-Myers
Squibb Stock Fund to allow for same day withdrawals or transfers to other
investment funds, the Trustee will suspend transactions requiring the sale of
Zimmer Stock Fund or Bristol-Myers Squibb Stock Fund units until sufficient fund
liquidity is restored and the Valuation Date with respect to such suspended
transactions shall be delayed to the close of the business day on which the sale
of Zimmer Stock Fund or Bristol-Myers Stock Fund units occurs.
Section 1.40 "Year of Service" means with respect to an Employee, each
calendar year during which an Employee has completed at least 1,000 Hours of
Service. To the extent an Employee has less than 1,000 hours in the first and
last calendar year of employment, such hours
8
shall be aggregated and if the total equals or exceeds 1,000 hours, then the
Participant shall be credited with an additional year of service. If the
Employee has incurred a One Year Break in Service by reason of termination of
service and is reemployed by an Employing Company, in respect of the period
subsequent to his reemployment, the calendar year which includes his date of
reemployment and each succeeding calendar year, providing he has completed at
least 1,000 Hours of Service during each such calendar year. If the Employee has
not incurred a One Year Break in Service by reason of termination of service and
is reemployed by an Employing Company, he shall continue to be credited with
Years of Service as provided above. An Employee shall not be credited with Years
of Service in respect of any period prior to the date on which the Plan (or any
predecessor plan as defined by regulations of the Secretary of the Treasury or
his delegate) became effective with respect to the Employee's Employing Company.
Years of Service shall include any period of service that was recognized for
purposes of determining Years of Service under the Bristol-Myers Squibb Plan as
of the Effective Date.
Section 1.41 "Zimmer" shall mean Zimmer Holdings, Inc., a Delaware
Corporation.
Section 1.42 "Zimmer Stock" shall mean the shares of common stock of
Zimmer which are registered for the purpose of the Plan from time to time with
the Securities and Exchange Commission.
Section 1.43 "Zimmer Stock Fund" shall mean the Investment Fund invested
primarily in shares of Zimmer Stock.
Masculine pronouns include the feminine as well as the masculine gender.
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
Section 2.01 Participation. Any Employee may elect to participate in the
Plan, beginning on an Enrollment Date, if on such date the Employee authorizes
Pre-Tax Contributions, After-Tax Contributions, or both, from the Employee's
Annual Benefit Salary or Wages in accordance with Section 3.01 and directs the
investment of such Pre-Tax Contributions or After-Tax Contributions in
accordance with Article 8. For any payroll period, the Pre-Tax Contributions and
After-Tax Contributions elected by a Participant cannot, in the aggregate exceed
sixteen percent (16%) of the portion of the Participant's Annual Benefit Salary
or Wages otherwise payable for such payroll period; provided, however, that in
order to correct an Administrative Error the total Pre-Tax Contributions and
After-Tax Contributions elected by the Participant can, in the aggregate, exceed
sixteen percent (16%) of the portion of the Participant's Annual Benefit Salary
or Wages otherwise payable for such payroll period, but only to the extent
necessary to correct such Administrative Error. Such authorization and direction
shall be by Telephonic Notification to the Administrative Agent.
Section 2.02 Service with an Affiliate. Any common law employee of an
Affiliate which is not an Employing Company or of a division or branch of an
Employing Company or who is included in an employee classification which is not
participating in the Plan, who
9
becomes an Employee may elect to participate in the Plan as provided in this
Article 2, and for purposes of Article 10, such Employee's service with any
Affiliate which is not an Employing Company, or with a division or branch of an
Employing Company which is not participating in the Plan or in a classification
of Employees ineligible to participate in the Plan, shall be taken into account
in the same manner and to the same extent as if such service had been employment
as an Employee with an Employing Company.
ARTICLE 3
BASIC AND SUPPLEMENTARY CONTRIBUTIONS
Section 3.01 Contribution Amount. Subject to Article 6 hereof, an Employee
may authorize a Basic Contribution from his Annual Benefit Salary or Wages of
from 2% to 6% (in whole percentages) of his Annual Benefit Salary or Wages, and
a Supplementary Contribution from his Annual Benefit Salary or Wages of from 1%
to 10% (in whole percentages) of his Annual Benefit Salary or Wages; provided,
however, that the Employee may not authorize a Supplementary Contribution for
any payroll period unless he has authorized a Basic Contribution equal to 6% of
his Annual Benefit Salary or Wages for such payroll period. Notwithstanding the
foregoing, to the extent necessary to correct an Administrative Error, a
Participant may authorize a Basic Contribution from his Annual Benefit Salary or
Wages in excess of 6% (in whole percentages) of his Annual Benefit Salary or
Wages and a Supplementary Contribution from his Annual Benefit Salary or Wages
in excess of 10% (in whole percentages) of his Annual Benefit Salary or Wages.
Any authorization of a Basic Contribution or Supplementary Contribution in order
to correct an Administrative Error shall be made in accordance with principles
and procedures established by the Committee which are applicable to all persons
similarly situated, setting forth the timing and manner of such authorization;
provided, however, that the Committee may determine the period during which such
additional Basic or Supplementary Contributions may be made. An Employee may
authorize Basic or Supplementary Contributions in the form of Pre-Tax
Contributions, After-Tax Contributions, or a combination thereof. Basic or
Supplementary Contributions authorized by a Participant in order to effect a
correction of an Administrative Error shall be accounted for separately in the
Plan Year in which made. If the percentage of a Participant's Annual Benefit
Salary or Wages contributed on his behalf to the Plan as Pre-Tax Contributions
for any payroll period is 6% or greater, then the Participant's After-Tax
Contribution, if any, for that payroll period shall be deemed a Supplementary
Contribution, unless such Pre-Tax Contributions for any payroll period equal or
exceed 6% solely due to a correction of an Administrative Error. If the
percentage of a Participant's Annual Benefit Salary or Wages contributed on his
behalf to the Plan as a Pre-Tax Contribution is less than 6% for any payroll
period, then such Pre-Tax Contribution shall be a Basic Contribution and the
Employee's After-Tax Contribution, if any, for that payroll period shall be a
Basic Contribution to the extent it does not exceed the difference between (i)
6% of the Employee's Annual Benefit Salary or Wages for such payroll period and
(ii) the Employee's Pre-Tax Contribution for such payroll period; any remaining
After-Tax Contribution shall be a Supplementary Contribution; provided, however,
that the Committee may determine that different percentage allocations between
Basic and Supplementary Contributions are required in order to correct an
Administrative Error to the extent a Participant elects under this Section 3.01
10
to make, or under Section 4.01 to reduce, his Pre-Tax Contribution and/or
After-Tax Contributions below 6% of his Annual Benefit Salary or Wages, then
such Contribution shall be deemed to be made first to correct any Administrative
Error. Pre-Tax Contributions and After-Tax Contributions will begin with the
first payroll period commencing after the Enrollment Date on which the Employee
begins participation in the Plan.
Section 3.02 Payroll Period Basis. Pre-Tax Contributions and After-Tax
Contributions shall be computed on a payroll period basis. Pre-Tax Contributions
and After-Tax Contributions during each payroll period shall be remitted to the
Trustee as soon as practicable after the end of such payroll period.
Section 3.03 Contributions from Salary and Wages. Except for a Rollover
Contribution pursuant to Article 7, a Participant shall be entitled to
contribute to the Plan only through Pre-Tax Contributions and After-Tax
Contributions from his Annual Benefit Salary or Wages. No deduction shall be
made until the Employee has authorized the Administrative Agent by Telephonic
Notification to deduct from his Annual Benefit Salary or Wages the amount of the
Pre-Tax Contribution or After-Tax Contribution to the Plan, specifying the exact
percentage.
Section 3.04 Elections Under the Bristol-Myers Squibb Plan. All elections
made by Participants that are in force under the Bristol Myers Squibb Plan as of
the Effective Date, shall be recognized and enforced under this Plan until
changed by the Participant in accordance with the provisions of this Plan
including, but not limited to, contribution elections under Section 3.01,
investment elections under 8.02 and beneficiary designations under Section
18.01. Any election by a Participant under the Bristol-Myers Squibb Plan to
invest Pre-Tax Contributions, After-Tax Contributions or Rollover Contributions
in any investment fund offered under the Bristol-Myers Squibb Plan that is not
an Investment Fund under this Plan, shall be invested in the Investment Fund
selected by the Committee.
ARTICLE 4
CHANGE IN CONTRIBUTIONS
Section 4.01 Contribution Change Notification. A Participant may change,
effective as of the first day of the next payroll period (or as soon thereafter
as administratively feasible), the percentage of his Annual Benefit Salary or
Wages that he has authorized as his Pre-Tax Contributions or After-Tax
Contributions to another permissible percentage by giving Telephonic
Notification to the Administrative Agent. Notwithstanding anything above to the
contrary, if the Participant's Pre-Tax Contributions must be reduced in order to
meet the nondiscrimination requirements of Section 401(k) of the Code, then to
the extent the Participant authorizes, the Participant may change the percentage
of his Annual Benefit Salary or Wages authorized as his After-Tax Contributions
to include such former Pre-Tax Contributions by giving Telephonic Notification
to the Administrative Agent.
Section 4.02 Effectiveness of Change. In the event of a change in the
Annual Benefit Salary or Wages of a Participant, the percentage of his Pre-Tax
Contributions and After-Tax
11
Contributions, if any, currently in effect shall be applied as soon as
practicable with respect to such changed Annual Benefit Salary or Wages, without
action by the Participant.
Section 4.03 Suspension of Contributions. In the event that, pursuant to a
Participant's satisfaction of the conditions set forth in Section 12.02 of the
Plan, the Committee approves a withdrawal of Pre-Tax Contributions from the Plan
due to Financial Hardship, his Pre-Tax Contributions and After-Tax Contributions
under the Plan may be suspended for the twelve-month period commencing on the
date of the Financial Hardship withdrawal under the Plan in accordance with
Article 12.
ARTICLE 5
EMPLOYING COMPANY CONTRIBUTIONS
Section 5.01 Matching Contributions. Subject to the provisions of Article
6 hereof, each Employing Company shall contribute, on behalf of each of the
Participants in its employ, an Employing Company Contribution equal to 75% of
the first 6% of the Participant's (whether consisting of Pre-Tax Contributions,
After-Tax Contributions, or a combination thereof) paid into the Plan for each
payroll period. Any amount applied as a credit in reduction of an Employing
Company Contribution for any payroll period in accordance with Section 13.05
shall be considered as a part of the Employing Company Contribution for such
payroll period. Any Employing Company Contribution made with respect to any
portion of a Participant's Basic Contribution that is attributable to the
correction of an Administrative Error shall be calculated separately.
Section 5.02 Remittance of Employing Company Contributions. Employing
Company Contributions made pursuant to Section 5.01 with respect to each
Participant's periodic Basic Contributions shall be remitted to the Trustee as
soon as practicable after the end of each payroll period.
Section 5.03 Supplementary Contributions Not Matched. Employing Company
Contributions will not be made with respect to Supplementary Contributions.
Section 5.04 Qualified Nonelective Contributions. Qualified Nonelective
Contributions may be made by an Employing Company on behalf of Employees who are
not Highly Compensated Employees, in order to satisfy the Actual Deferral
Percentage tests under Section 401(k)(3) of the Code and the Actual Contribution
Percentage test under Section 401(m)(2) of the Code, pursuant to regulations
under the Code. Where made to satisfy each such tests, Qualified Nonelective
Contributions shall be allocated among those Employees eligible to participate
in the Plan who are not Highly Compensated Employees, beginning with the
Employee who has the lowest amount of compensation within the meaning of Section
414(s) of the Code for the Plan Year to which the contributions relate and
allocating to his account whatever amount is required to satisfy the test,
limited to the maximum permitted under Section 415 of the Code, and if further
allocations are required, repeating the same procedure with respect to each
Employee having the next lowest amount of compensation (as defined under Section
414(s) of the Code) for the year, until the Employer shall determine that the
test has been
12
satisfied. An Employing Company shall maintain records sufficient to demonstrate
satisfaction of each such test and the amount of Qualified Nonelective
Contributions used in each such test. Qualified Nonelective Contributions may
also be made, where appropriate, to correct an Administrative Error. Qualified
Nonelective Contributions shall be allocated as of a date within, and made
before the last day of the twelve-month period immediately following, the Plan
Year to which the contributions relate.
ARTICLE 6
LIMITATIONS ON CONTRIBUTIONS
Section 6.01 Contributions Subject to Limitations. Any provision of
Article 3 or Article 5 to the contrary notwithstanding, the Pre-Tax
Contributions, After-Tax Contributions and Employing Company Contributions made
on behalf of a Participant under this Plan for any Plan Year shall be subject to
the limitations of this Article 6.
Section 6.02 Limitation on Annual Additions. (a) Anything to the contrary
notwithstanding, the Plan shall be administered in a manner which will result in
its complying with the provisions of Section 415 of the Code. In the case of a
Participant who is permanently and totally disabled (as defined in Section
21(e)(3) of the Code) and is eligible to receive disability payments under a
disability pay plan maintained by his Employing Company, the term "Participant's
compensation" shall mean the compensation the Participant would have received
for the year if the Participant was paid at the rate of compensation paid
immediately before becoming permanently and totally disabled.
(b) (i) In addition to other limitations set forth in the Plan and
notwithstanding any other provisions of the Plan, the annual additions (within
the meaning of Section 415(c)(2) of the Code) under the Plan (and all other
defined contribution plans required to be aggregated with this Plan under the
provisions of Section 415 of the Code), shall not increase to an amount in
excess of the amount permitted under Section 415 of the Code at any time. For
purposes of this paragraph and for determining compliance with Section 415 of
the Code, compensation shall mean compensation as defined in Section 415(c)(3)
of the Code and the regulations thereunder.
(ii) In the case where (A) this Plan and another defined
contribution plan of the Employer cover the same Participant and (B) reductions
in either the amount of annual additions under this Plan or the amount of annual
additions or annual benefit under such other plan with respect to the
Participant (or both) are necessary in order to comply with Code Section 415, a
reduction in the annual benefit or annual additions under such other plan or
plans to the Participant shall be made to the extent necessary to comply with
Code Section 415 prior to any reduction in the annual additions under this Plan
with respect to the Participant.
(iii) A Limitation Year, for purposes of applying this Section 6.02
means the twelve (12) month period commencing January 1 and ending December 31.
13
(iv) Notwithstanding anything to the contrary in this Section 6.02,
the special transitional relief afforded by Section 235 of the Tax Equity and
Fiscal Responsibility Act of 1982, as amended, is specifically incorporated
herein.
(c) To comply with the limitations on annual additions of this Section
6.02, annual additions shall be reduced or eliminated in accordance with the
order set forth below and any Pre-Tax Contributions or After-Tax Contributions
of a Participant which are in excess of those permitted by the limitations shall
be returned to him, unless he has elected to have any such Pre-Tax Contributions
credited to the Participant's book account under the Benefit Equalization Plan
of Zimmer Holdings, Inc. and its Subsidiary or Affiliated Corporations
Participating in the Zimmer Holdings, Inc. Savings And Investment Program, and
any contributions of any Employing Company based upon any such excess Pre-Tax
Contributions shall be applied in reduction of the Employing Company's
obligation to contribute to the Plan on behalf of other Participants:
(i) Pre-Tax Contributions in excess of 6% of the Participant's
Annual Benefit Salary or Wages;
(ii) Remaining Pre-Tax Contributions;
(iii) Employing Company Contributions;
(iv) After-Tax Contributions which are deemed to be Supplementary
Contributions;
(v) After-Tax Contributions which are deemed to be Basic
Contributions; and
(vi) Qualified Nonelective Contributions.
Section 6.03 Limitation on Pre-Tax Contributions, After-Tax Contributions
and Employing Company Contributions. The Pre-Tax Contributions, After-Tax
Contributions, and Employing Company Contributions made on behalf of any
Participant for any Plan Year, when expressed as a percentage of such
Participant's compensation within the meaning of Section 414(s) of the Code for
such Plan Year, shall not exceed the Actual Deferral Percentage permitted by
Section 401(k)(3) of the Code or the Actual Contribution Percentage permitted by
Section 401(m)(2) of the Code for such Plan Year. In determining whether any
such Contributions exceed the Actual Deferral Percentage permitted by Section
401(k)(3) of the Code or the Actual Contribution Percentage permitted by Section
401(m)(2) of the Code, Zimmer shall use the current year testing method. In
order to comply with the requirements of Sections 401(k)(3) and 401(m)(2) of the
Code, the Committee may, in its sole discretion, take either or both of the
following actions: (i) reduce all or any portion of the current and future
contributions to be made by or on behalf of any Participant or group of
Participants for any Plan Year in the manner set forth in subsection (a) hereof;
or (ii) reduce all or any portion of the contributions previously made by or on
behalf of any Participant or group of Participants for a Plan Year in the manner
set forth in subsection (b) hereof.
(a) If the Committee shall determine that the contributions on behalf of
any Participant or group of Participants might result in discrimination in
contributions in favor of
14
Employees who are Highly Compensated Employees or might cause the Plan to
violate the requirements of Sections 401(k) or 401(m) of the Code, the Committee
shall, regardless of elections filed under Section 3.01 hereof, have the right
to cause such adjustments to be made in current or future Pre-Tax Contributions
or After-Tax Contributions and Employing Company Contributions on behalf of such
Participant or Participants as will, in the Committee's opinion, avoid such
discrimination and satisfy the requirements of Sections 401(k) and/or 401(m) of
the Code, including without limitation the right to reduce or suspend the amount
of future Pre-Tax Contribution or After-Tax Contributions or Employing Company
Contributions previously authorized by, or made on behalf of, a Participant or
Participants. To the extent it is deemed necessary to limit Pre-Tax
Contributions or After-Tax Contributions or Employing Company Contributions of
Participants in order to meet the nondiscrimination requirements of Sections
401(k) or 401(m) of the Code, (i) the Pre-Tax Contributions, After-Tax
Contributions and Employing Company Contributions of each Participant who is not
a Highly Compensated Employee and of each Participant who is a Highly
Compensated Employee whose Actual Deferral Percentage (as defined in Section
401(k)(3) of the Code) or Contribution Percentage (as defined in Section
401(m)(3) of the Code) is not expected to exceed the permitted Actual Deferral
Percentage or Contribution Percentage under Sections 401(k) or 401(m) of the
Code, as the case may be, shall be honored in accordance with each such
Participant's authorization and (ii) the Pre-Tax Contributions, After-Tax
Contributions and a proportionally corresponding amount of Employing Company
Contributions, if necessary, of each Participant who is a Highly Compensated
Employee whose Actual Deferral Percentage or Contribution Percentage is expected
to exceed the permitted Actual Deferral Percentage or Contribution Percentage
for such group under Sections 401(k) or 401(m) of the Code, shall be subject to
adjustment which shall be accomplished by reducing by one percent the Pre-Tax
Contributions and/or After-Tax Contributions which constitute Supplementary
Contributions of those Participants whose Contribution Percentage for the Plan
Year is expected to be the greatest, then, to the extent deemed necessary, by
reducing by one percent the Pre-Tax Contributions and/or After-Tax Contributions
of such Participants which constitute Basic Contributions of such Participants
and the Employing Company Contributions made with respect to Basic Contributions
of such Participants (whether such Basic Contributions are made in the form of
Pre-Tax Contributions or After-Tax Contributions); in the event further
reduction is deemed necessary, those Participants whose Actual Deferral
Percentage or Contribution Percentage is expected to be the greatest after
taking the prior reduction into account will have their Pre-Tax Contributions
and/or After-Tax Contributions which constitute Supplementary Contributions or
Basic Contributions and, if deemed necessary, their Employing Company
Contributions reduced in the same manner; such process will be repeated until
the Committee shall determine that the maximum permitted Actual Deferral
Percentage or Contribution Percentage for the group of Highly Compensated
Employees will not be exceeded. The decision of the Committee in this regard
shall be final and shall not be subject to question by the Trustee,
Administrative Agent or by any Participant or group of Participants.
(b) In the event that the Plan does not comply with the nondiscrimination
requirements of Sections 401(k) or 401(m) after the reduction (if any) described
in subsection (a) (and after any Qualified Nonelective Contributions have been
considered) for any Plan Year, the Committee shall determine (i) the sum total
of the contributions made by or on behalf of all of the Participants which would
be considered Excess Contributions (within the meaning of Section 401(k)(8)(B)
of the Code) and (ii) the sum total of the contributions made by or on behalf of
all
15
of the Participants which would be considered Excess Aggregate Contributions
(within the meaning of Section 401(m)(6)(B) of the Code) and shall take the
following corrective steps to eliminate each sum total:
(A) with respect to the sum determined in (i), the Pre-Tax Contributions
made by the Participant who has the highest dollar amount of such
contributions for the Plan Year and is a Highly Compensated Employee
shall be reduced by the amount required to cause his Pre-Tax
Contributions to equal those made by the Highly Compensated Employee
having the next highest dollar amount of Pre-Tax Contributions, and
the part of the first Participant's Pre-Tax Contributions equal to
the amount of the dollar reduction (and any income allocable to that
part) shall be distributed to him by no later than the close of the
immediately following Plan Year, or if his Employing Company so
elects within two and one-half (2 1/2) months after the close of the
Plan Year to which the recharacterization relates, shall be treated
as distributed to and recontributed by him to the Plan provided that
in such case the Employing Company shall provide timely notice of
such treatment to the Participant and the Internal Revenue Service;
and
(B) with respect to the sum determined in (ii), the After-Tax
Contributions and Employing Company Contributions made by or on
behalf of the Participant who has the highest dollar amount of such
contributions for the Plan Year and is a Highly Compensated Employee
shall be reduced by the amount required to cause such contributions
to equal those made by the Highly Compensated Employee having the
next highest dollar amount of such contributions, and the part of
the first Participant's After-Tax Contributions and Employing
Company Contributions equal to the amount of the dollar reduction
(and any income allocable to that part) shall be distributed to him
and to the extent forfeitable shall be forfeited by no later than
the close of the immediately following Plan Year; and
(C) if further reductions are required to eliminate such sums after the
reductions described above, the same procedure shall be repeated
with respect to each next succeeding level of Highly Compensated
Employees having the now highest dollar amount of contributions
until the Committee shall determine that the maximum permitted
Actual Deferral Percentage or Contribution Percentage for the group
of Highly Compensated Employees will not be exceeded; provided that
if at any step a lesser reduction would equal the total sum still to
be eliminated, then only the lesser reduction amount shall be
distributed, recharacterized or forfeited.
Section 6.04 Dollar Limitation on Pre-Tax Contributions. (a) The amount of
Pre-Tax Contributions for a Participant for his taxable year shall be limited to
the maximum amount permitted to be deferred for that year under Section
402(g)(1) and (5) of the Code (the "maximum deferral amount"). Any Pre-Tax
Contributions which would be considered to be excess deferrals (within the
meaning of Section 402(g)(2) of the Code, but excluding amounts described in
Section 1105(c) of the Tax Reform Act of 1986) shall be distributed to the
Participant in accordance with the rules of subsection (b) hereof.
16
(b) To the extent the Participant has made Pre-Tax Contributions to the
Plan in excess of the amount set forth in subsection (a) (an "Excess Deferral"),
such Excess Deferrals shall be distributed to him no later than the 15th day of
April following the end of the taxable year during which such Pre-Tax
Contributions are made. If, for a taxable year, a Participant makes Pre-Tax
Contributions to this Plan and to any other plan or arrangement, he may allocate
the amount of any Excess Deferrals for such taxable year among such plans. No
later than the first day of March following the close of the taxable year during
which the Excess Deferrals are made, the Participant shall notify the Committee
in writing of the amount of the Excess Deferrals allocated to this Plan. Such
Excess Deferrals shall then be distributed (including income thereon) to the
Participant no later than the following April 15th and shall not be deemed to be
annual additions for the limitation year in which made.
ARTICLE 7
ROLLOVER CONTRIBUTIONS
Section 7.01 Eligibility. An Employee (whether or not otherwise a
Participant) may make a "Rollover Contribution" to the Plan at any time
consisting of either an "Eligible Rollover Distribution" or an "Individual
Retirement Account Rollover Contribution."
Section 7.02 Investment and Distribution of Rollover Contributions. Any
Rollover Contribution shall be held in a separate account, shall be invested in
accordance with the direction of the Participant pursuant to Article 8, shall be
distributed in the same manner and at the same time as described in Articles 11
and 13 with respect to a distribution to such Employee of benefits under the
Plan, and shall be subject to the provisions of Article 22, to the extent
applicable.
Section 7.03 "Eligible Rollover Distribution" means a distribution to an
Employee from a profit-sharing, pension or stock bonus plan meeting the
requirements of Section 401(a) of the Code, paid to an Employee which
constitutes an "eligible rollover distribution" within the meaning of Section
402(c)(4) of the Code, provided that (i) such distribution is directly
transferred to the Plan in the manner provided under Section 401(a)(31) of the
Code or (ii) where the Employee receives such a distribution, such distribution
(or the cash proceeds of the sale of other property received in such
distribution) is transferred to the trust under this Plan on or before the 60th
day after the day on which the Employee received the property distributed. The
maximum amount which may be transferred shall not exceed the portion of such
distribution which would be includible in his gross income in the absence of
such rollover. The amount so transferred must consist of cash distributed from
such other plan or any portion of the cash proceeds from the sale of distributed
property other than cash, to the extent permitted by Section 402(c)(6) of the
Code.
Section 7.04 "Individual Retirement Account Rollover Contribution" means
the entire amount received by an Employee from an individual retirement account
representing the entire amount in the account if no part of the amount in the
account is attributable to any source other than a rollover contribution from
(i) an employee's trust described in Section 401(a) of the Code,
17
which is exempt from tax under Section 501(a) of the Code, or (ii) a qualified
annuity plan meeting the requirements of Section 403(a) and, in the case of an
individual retirement account, any earnings on such sums. An Individual
Retirement Account Rollover Contribution will be accepted only if the entire
qualifying amount was received by the Employee in cash and only such cash amount
is included in the Individual Retirement Account Rollover Contribution.
ARTICLE 8
INVESTMENT CHOICES OF PARTICIPANT
Section 8.01 Establishment of Investment Funds. The Committee shall
establish the Zimmer Stock Fund and such other Investment Funds as it shall
determine to be necessary or appropriate for the purpose of providing
Participants with options for the investment of their Plan accounts and may,
from time to time, (i) establish additional Investment Funds, (ii) liquidate (or
provide that no new investments be made in) or change the permissible
investments of existing Investment Funds, or (iii) open an Investment Fund which
had previously been closed to new investments by Participants pursuant to
Section 8.01(ii) above. There shall also be established a Participant Loan Fund
from which all loan proceeds shall be disbursed and to which the outstanding
balance of, and accrued interest on, any outstanding loan shall be credited.
Section 8.02 Investment Elections. Subject to the provisions of Section
8.09, each Participant shall make separate investment elections with respect to
(i) Pre-Tax Contributions, (ii) After-Tax Contributions, and (iii) Rollover
Contributions. Such Participant shall direct, at the time the Participant elects
to participate in the Plan, that the Pre-Tax Contributions, After-Tax
Contributions and Rollover Contributions made on his behalf to the Plan be
invested, in 1% increments, in any one or a combination of the Investment Funds.
Investment elections given by a Participant shall continue in effect until
changed by the Participant. A Participant may change investment elections as to
future Pre-Tax Contributions, After-Tax Contributions, and Rollover
Contributions as of the first day of the next payroll period (or as soon
thereafter as administratively feasible) by giving Telephonic Notification to
the Administrative Agent.
Section 8.03 Election to Transfer Amounts Between Investment Funds. As of
any Valuation Date, and subject to the provisions of Section 8.04 and 8.09, a
Participant may direct that the amount in such Participant's account invested in
any Investment Fund be liquidated in 1% increments and the proceeds invested in
one or more of the Investment Funds in the manner the Participant shall
designate. The provisions of this Section 8.03 shall also apply to a
Participant, Former Participant, Inactive Participant or Beneficiary, whose
account shall not have been distributed as provided in Section 13.02 or 13.03(a)
and, with respect to the undistributed portion of his account, to a Former
Participant or Beneficiary who has elected distribution of his account in
installments as provided in Section 13.01(b) or Section 13.02. Any direction
under this Section 8.03 shall be given by Telephonic Notification to the
Administrative Agent.
Section 8.04 Employing Company Contributions and the Zimmer Stock Fund.
Employing Company Contributions to the Plan made on behalf of a Participant on
or after the Effective Date shall be invested in the Zimmer Stock Fund. The
following amounts that are
18
invested in the Zimmer Stock Fund may not be liquidated and invested in other
Investment Funds as provided in Section 8.03: (i) Employing Company
Contributions made on or after the Effective Date, (ii) dividends and other
distributions received by the Trustee that are attributable to Employing Company
Contributions made on or after January 1, 1991 under the Bristol-Myers Squibb
Plan, and (iii) any dividends and other distributions received by the Trustee
that are attributable to the amounts described in (i) or (ii). The foregoing
notwithstanding, effective as of the date that a Participant attains age 55,
such Participant may make a separate investment election with respect to future
Employing Company Contributions in accordance with Section 8.02, and may elect
to liquidate and invest any portion or all of such Participant's account
invested in the Zimmer Stock Fund in accordance with Section 8.03.
Section 8.05 Dividend Reinvestment. Dividends and other distributions
received by the Trustee with respect to Zimmer Stock held in the Zimmer Stock
Fund shall be invested in the Zimmer Stock Fund. Except as provided in Section
8.09, dividends, interest and other distributions received by the Trustee with
respect to any other Investment Fund shall be invested in the same Investment
Fund in which the investment yielding such dividend, interest or other
distribution is held.
Section 8.06 Investment of Qualified Nonelective Contributions. A
Qualified Nonelective Contribution made on behalf of a Participant to correct an
Administrative Error shall be invested in such Investment Fund determined by the
Committee, until the Participant directs otherwise. A Qualified Nonelective
Contribution made to satisfy the requirements of Sections 401(k)(3) and
401(m)(2) of the Code shall be invested in accordance with the Participant's
current separate investment election applicable to Pre-Tax Contributions. The
portion of a Qualified Nonelective Contribution designated as an Employing
Company Contribution shall be invested as provided in Section 8.04.
Section 8.07 Investment of Recovered Claims. In the event that the Plan
receives a recovery from a claim filed by the Trustee for the benefit of the
Plan and/or certain Participants and beneficiaries, the Committee shall, in its
discretion, determine the accounts and the Investment Funds to be credited. To
the extent possible, the Committee shall credit the accounts of Participants and
beneficiaries on whose behalf the claim was made, but, if such Participants and
beneficiaries cannot be clearly identified or it is administratively unfeasible
to so determine them, the Committee may, in its sole discretion, determine to
benefit a class of Participants and beneficiaries which it deems represents such
participants and beneficiaries. Where the recovery is related to an Investment
Fund, the Committee may determine that such recovery shall be deposited in such
Investment Fund (or the Investment Fund that most closely resembles such
Investment Fund) for the benefit of the Participants and beneficiaries currently
investing in such Investment Fund.
Section 8.08 Investment of Accounts From Merged Plans. Except as provided
in this Article 8, any funds transferred by a Participant to the Plan pursuant
to Section 23.03 shall initially be invested, in 1% increments, in such
Investment Fund or Funds as the Participant shall direct or, in the absence of
such direction, in such Investment Fund determined by the Committee.
19
Section 8.09 Bristol-Myers Squibb Stock Fund. The Committee shall
establish the Bristol-Myers Squibb Stock Fund for the purpose of holding
Bristol-Myers Squibb Stock that is transferred to the Plan from the
Bristol-Myers Squibb Plan. Participants may not direct that Pre-Tax
Contributions, After-Tax Contributions, Rollover Contributions or any other
contribution be invested in the Bristol-Myers Squibb Stock Fund. Participants
may not elect that any amount liquidated in accordance with Section 8.03 be
invested in the Bristol-Myers Squibb Stock Fund. Dividends and other
distributions received by the Trustee with respect to Bristol-Myers Squibb Stock
held in the Bristol-Myers Squibb Stock Fund shall be invested in the Zimmer
Stock Fund.
Section 8.10 Initial Freeze. During the period beginning on the Effective
Date and ending on or about August 13, 2001 (or as soon as practicable
thereafter), no distributions pursuant to Article 13, no loans or withdrawals
pursuant to Article 12 and no inter-Investment Fund transfers pursuant to this
Article 8 shall be processed. The existing account balances of active Zimmer
Employees which were invested in the Bristol-Myers Squibb Plan on the Effective
Date shall be automatically transferred to the corresponding Investment Fund and
the Participant Loan Fund under this Plan as determined by the Committee.
ARTICLE 9
MAINTENANCE AND VALUATION OF PARTICIPANTS' ACCOUNTS
Section 9.01 Maintenance of Separate Accounts. The Committee shall
establish for each Participant separate accounts which shall reflect separately
(i) Pre-Tax Contributions, (ii) After-Tax Contributions (Post-1986), (iii)
After-Tax Contributions (Pre-1987), (iv) Rollover Contributions, (v) Employing
Company Contributions, and (vi) Qualified Nonelective Contributions, and the
investment return on each of the foregoing, and shall reflect any transfers to
or transfers, withdrawals or distributions from such accounts.
Section 9.02 Valuation of Mutual Fund Investment Funds. The value of each
Participant's account in an Investment Fund which consists solely of a single
mutual fund registered under the Investment Company Act of 1940 shall be
accounted for in shares of such mutual fund. Contributions and inter-Investment
Fund transfers shall be converted into shares based on the fair market value of
a share of each such Investment Fund on the Valuation Date applicable, and the
number of shares in the affected Investment Funds shall be adjusted accordingly.
The value of a Participant's account under the Plan invested in such Investment
Funds shall be determined by multiplying the number of shares in each such
Investment Fund held on his behalf by the fair market value of a share as of the
relevant Valuation Date.
ARTICLE 10
VESTING
Section 10.01 Pre-Tax Contributions, After-Tax Contributions, Qualified
Nonelective Contributions and Rollover Contributions Fully Vested. Amounts
attributable to Pre-Tax
20
Contributions or After-Tax Contributions from a Participant's Annual Benefit
Salary or Wages, Qualified Nonelective Contributions, Rollover Contributions
made by a Participant pursuant to Article 7 shall be fully vested in him at all
times.
Section 10.02 Vesting of Employing Company Contributions. Except as
provided in Sections 10.03 or 10.04, the amount attributable to Employing
Company Contributions credited to a Participant's account which is vested shall
be a percentage of the total amount attributable to Employing Company
Contributions credited to his account, determined on the basis of his Years of
Service, according to the schedule below:
Years of Service Completed Vested Percentage
Less than 1 -0-
1 20%
2 40%
3 60%
4 80%
5 100%
Section 10.03 Employing Company Contributions Fully Vested on Effective
Date. The above notwithstanding, as of the Effective Date, all amounts
transferred from the Bristol-Myers Squibb Plan to this Plan shall be 100%
vested.
Section 10.04 Full Vesting Upon Retirement or Death. The above
notwithstanding, a Participant shall be 100% vested in amounts attributable to
Employing Company Contributions as provided in Article 13, but in no event later
than upon his attaining age 65 while an Employee.
Section 10.05 Full Vesting Upon Disability. In the case of a Participant
or Inactive Participant who becomes eligible for benefits under a long-term
disability pay plan maintained by his Employing Company, amounts attributable to
Employing Company Contributions shall be 100% vested.
ARTICLE 11
METHOD OF PAYMENT UPON DISTRIBUTION OR WITHDRAWAL
Section 11.01 Method of Payment. Except as provided in Section 11.02, a
distribution or withdrawal from a Participant's account shall be paid in the
following manner:
(a) With respect to amounts invested in the Zimmer Stock Fund or the
Bristol-Myers Squibb Stock Fund, payment shall be made in cash; except that a
Participant may elect, upon termination of employment or retirement or in a
withdrawal described in Article 12 hereof, to receive Zimmer Stock or
Bristol-Myers Squibb Stock in lieu of cash in an amount equal to the
21
portion of his account balance which is invested in the Zimmer Stock Fund or
Bristol-Myers Squibb Stock Fund respectively. If a Participant elects a
distribution or withdrawal of Zimmer Stock or Bristol-Myers Squibb Stock, in the
case of any fractional share, payment shall be in cash on the basis of the
closing price per share of Zimmer Stock or Bristol-Myers Squibb Stock on the New
York Stock Exchange on the Valuation Date as of which distribution or withdrawal
is to be made. For the purposes of distribution and withdrawal, there shall be
deemed to be in a Participant's account on the Valuation Date as of which
distribution or withdrawal is to be made a number of shares of Zimmer Stock or
Bristol-Myers Squibb Stock determined by dividing the total value of the amount
invested in Zimmer Stock or Bristol-Myers Squibb Stock in such Participant's
account on such Valuation Date by the closing price per share of Zimmer Stock or
Bristol-Myers Squibb Stock on the New York Stock Exchange on such Valuation
Date.
(b) With respect to amounts invested in the Participant Loan Fund, such
amounts shall be reduced by the amount of the loan then outstanding and with
respect to any remaining amount, payment shall be in cash.
(c) With respect to amounts invested in Investment Funds other than the
Zimmer Stock Fund, the Bristol-Myers Squibb Stock Fund or the Participant Loan
Fund, payment shall be in cash.
Section 11.02 Annuity Form of Payment. Notwithstanding Section 11.01, with
respect to a Participant (including for purposes of this Section 11.02 an
Inactive Participant or a Former Participant) who was hired before October 1,
1994 and who has prior to the time of distribution of his account, pursuant to
Section 13.01, 13.02 or 13.03, elected an annuity form of payment, the Committee
shall direct the Trustee to purchase for such Participant an annuity, which may
provide for a continuance of annuity payments after the Participant's death to a
beneficiary, in such amount as may be purchased with an amount equal to the cash
amount such Participant would otherwise have been entitled to receive (the
"Annuity Purchase Amount"), provided that if such Participant is married on the
date on which distribution is to be made, the Committee shall direct the Trustee
to purchase for such Participant an annuity in accordance with the provisions of
Section 11.03(a) unless the Participant has made an effective election pursuant
to Section 11.03(c). If the beneficiary under the annuity contract is other than
the Participant's spouse, the actuarial value of the benefit (at the time the
contract is purchased) payable to the Participant shall be greater than the
actuarial value of the benefit payable to the beneficiary. No annuity form of
payment shall be available to any Participant hired on or after October 1, 1994.
Section 11.03 (a) If an annuity is to be purchased pursuant to Section
11.02 for a Participant (including for purposes of this Section 11.03 an
Inactive Participant or Former Participant) and the Participant is married as of
the date on which distribution is to be made, the Committee shall direct the
Trustee to purchase with the Annuity Purchase Amount applicable to such
Participant an annuity which shall be in the form of a joint and survivor
annuity pursuant to which such Participant will receive monthly payments
commencing on his retirement date, or attainment of his normal retirement date
in the case of distribution pursuant to Section 13.01, and continuing during his
life with the provision that after his death, 50% of the amount of his monthly
payments will continue during the life of and be paid to his spouse, if such
spouse shall survive him. A purchase of a joint and survivor annuity by the
Trustee will not be directed as provided in this Section 11.03(a) with respect
to a married Participant who has elected not to
22
take a joint and survivor annuity in accordance with the provisions of Section
11.03(c), accompanied by the required written consent of the spouse of such
Participant.
(b) If a distribution is to be made pursuant to Section 13.02 by reason of
the death of a Participant and the Participant had elected the purchase of an
annuity contract in the event of his death, and at the time of his death is
survived by his spouse, the Committee shall direct the Trustee to purchase with
the Annuity Purchase Amount applicable to such Participant an annuity for the
life of his surviving spouse which may provide for payment for a term certain or
a modified cash refund.
(c) A Participant may elect not to have benefits paid in the manner set
forth under Sections 11.02, 11.03(a) or (b) and to have benefits paid as
provided in Article 13. A Participant may also subsequently revoke any such
election. Such an election or revocation must be made in the form and manner
prescribed by the Committee and shall be effective only if made during the
applicable following periods:
(i) In the case of a benefit described in Sections 11.02 and
11.03(a), the 90-day period ending on the day reduced annuity payments to the
Participant commence (or where applicable, such extended period as may be
permitted under regulations promulgated by the Secretary of the Treasury);
(ii) In the case of a benefit described in Section 11.03(b), the
period beginning with the first day of the Plan Year in which the Participant
attains age 35 and ending on the date of his death, but in the case of a
Participant whose employment with the Company has terminated, the period shall
begin not later than the day his employment with the Company terminates.
A Participant's election to waive a joint and survivor annuity under
Section 11.03(a) or his election to waive the survivor's benefit under Section
12.3(b) shall be effective only if it is accompanied by the written consent of
his spouse who is entitled to receive such a survivor annuity. Such written
consent shall acknowledge the effect of the election and must be witnessed by a
representative of the Committee or by a Notary Public. However, such written
consent is not necessary if: (1) there is no spouse, (2) the written consent
cannot be obtained because the spouse cannot be located, or (3) there exists any
other circumstances that, under rules established by the Secretary of the
Treasury, relieve a Participant from the requirement of obtaining the consent of
his spouse.
Within the period prior to commencement of annuity payments to the
Participant (as established under regulations promulgated by the Secretary of
the Treasury), each Participant shall be furnished with a written explanation of
the terms and conditions of the survivor annuities described under Sections
11.02, 11.03(a) and (b). Such explanation shall also describe the Participant's
right to make or revoke, and the general financial effect of, an election not to
receive benefits in a manner described under such paragraphs, the requirement
that the consent of his spouse be obtained before he can make the election
described above with respect to such spouse, and the rights of his spouse. With
regard to the survivor annuities described in Section 11.03(b), such explanation
shall be provided during the period beginning with the first day of the Plan
Year in which the Participant attains age 32 and ending with the last day of the
Plan Year
23
preceding the Plan Year in which he attains age 35, except that if an Employee
becomes a Participant on or after the date in which he attains age 35, such
explanation shall be provided as soon as it is practicable to do so after the
date on which such Employee becomes a Participant under the Plan.
ARTICLE 12
WITHDRAWALS AND LOANS FROM ACCOUNT
Section 12.01 Withdrawal of After-Tax Contributions, Employing Company
Contributions, and Rollover Contributions. Subject to the provisions of this
Article 12 and to the first sentence of Section 11.01(a), a Participant (which
term for purposes of this Article 12 shall include an Inactive Participant) who
remains in employment may make withdrawals from his account of Employing Company
Contributions, and earnings and appreciation thereon, no more than a total of 1
time in any one Plan Year (other than a withdrawal made pursuant to Section
12.04), and withdrawals from his account of After-Tax Contributions and Rollover
Contributions, and earnings and appreciation thereon, no more than a total of 4
times in any one Plan Year (other than a withdrawal made pursuant to Section
12.04). Withdrawals shall be for not less than $300.00 except that the entire
value of a Participant's After-Tax Contributions may be withdrawn. Any
withdrawal by a Participant shall be counted as a withdrawal under the preceding
sentence unless such withdrawal is made pursuant to Sections 12.02 or 12.04 of
the Plan. Withdrawals pursuant to this Section 12.01 shall be made in the
following order of priority:
(a) FIRST, from After-Tax Contributions made prior to January 1, 1987
which shall not exceed the lesser of (i) the amount of all After-Tax
Contributions from his Annual Benefit, Salary or Wages made prior to January 1,
1987 (but not any earnings thereon), adjusted for the amount of any previous
distributions or withdrawals which have been made from the Plan up to but not
exceeding the amount of such After-Tax Contributions, or (ii) the amount in his
account attributable to such After-Tax Contributions.
(b) SECOND, from After-Tax Contributions which are made on and after
January 1, 1987 and the earnings and appreciation on such After-Tax
Contributions, so long as the Participant has withdrawn or requested withdrawal
of the entire amount available to him under Section 12.01(a), which amount shall
not exceed the total of (i) the lesser of (x) the amount of all After-Tax
Contributions from his Annual Benefit, Salary or Wages made on and after January
1, 1987 (but not any earnings thereon), adjusted for the amount of any previous
distributions or withdrawals which have been made with respect to such After-Tax
Contributions, or (y) the amount in his account attributable to such After-Tax
Contributions and (ii) the amount in his account attributable to the earnings
and appreciation on such After-Tax Contributions.
(c) THIRD, from After-Tax Contributions made prior to January 1, 1987
which are not included in paragraph (a) and the earnings and appreciation on
After-Tax Contributions made prior to January 1, 1987, so long as the
Participant has withdrawn or requested withdrawal of the entire amount available
to him under Sections 12.01(a) and (b) of this, which amount shall not
24
exceed the total of (i) the lesser of (x) the amount of all After-Tax
Contributions from his Annual Benefit, Salary or Wages made prior to January 1,
1987 and not included under paragraph (a) (but not any earnings thereon),
adjusted for the amount of any previous distributions or withdrawals which have
been made with respect to such After-Tax Contributions, or (y) the amount in his
account attributable to such After-Tax Contributions and (ii) the amount in his
account attributable to the earnings and appreciation on such After-Tax
Contributions.
(d) FOURTH, from Rollover Contributions plus earnings and appreciation
thereon, so long as the Participant has withdrawn or requested withdrawal of the
entire amount available to him under Section 12.01(a), (b) and (c), which shall
not exceed the amount in his account attributable to Rollover Contributions plus
earnings and appreciation thereon.
(e) FIFTH, from Employing Company Contributions plus earnings and
appreciation thereon, so long as the Participant has withdrawn or requested
withdrawal of the entire amount available to him under Sections 12.01(a), (b),
(c) and (d), which shall not exceed the amount in his account attributable to
Employing Company Contributions plus earnings and appreciation thereon. A
Participant may not make a withdrawal under this subsection (e) unless (i) he is
100% vested in the total amount in his account and (ii) except for withdrawals
because of financial emergencies made under Section 12.04 of this Plan, he has
not made a withdrawal under this Section or any predecessor provision during the
calendar year. No Employing Company Contributions will be made for six months
following a withdrawal under this Section 12.01(e) unless the Participant has
demonstrated a Financial Hardship (as provided in Section 12.02) or, in the case
of Employing Company Contributions subject to the restrictions under Section
8.04 applicable to Participants who have not attained age 55, a financial
emergency (as provided in Section 12.04).
(f) Qualified Nonelective Contributions plus earnings and appreciation
thereon may not be withdrawn at any time on account of hardship.
Section 12.02 Withdrawals of Pre-Tax Contributions. (a) A Participant may,
upon proof of Financial Hardship satisfactory to the Committee, elect to
withdraw such portion of his account that is attributable to his Pre-Tax
Contributions (excluding earnings and appreciation attributable thereto after
December 31, 1988) as is needed on account of such Financial Hardship provided
he (i) has withdrawn to the maximum extent possible all amounts enumerated in
Sections 12.01(a)-(f) hereof, (ii) has taken a nontaxable loan from the Plan to
the maximum extent possible, and (iii) has not attained age 59 1/2 and is not
disabled and entitled to receive disability payments under a disability pay plan
maintained by his Employing Company. Withdrawals under this Article 12 shall be
permitted, according to the specific rules adopted by the Committee which shall
be uniformly applied and consistently followed. The term "Financial Hardship"
means an immediate and heavy financial need of the Participant resulting from:
(1) the purchase of a primary residence; (2) tuition expenses for the next
semester or quarter for post-secondary education for the Participant or his
dependents; (3) payments to prevent eviction or foreclosure on the Participant's
primary residence; (4) medical expenses not covered by insurance for the
Participant or his dependents; (5) payment of taxes for which either a
deficiency notice, a proposed deficiency notice along with a statement that such
proposal will not be contested, or other assessment has been issued by the
Internal Revenue Service; or (5) any other hardship consistent with regulations
or other guidelines issued by the Internal Revenue
25
Service. A Financial Hardship withdrawal hereunder is limited to the amount of
actual financial need that is unavailable to the Participant from the
Participant's other sources. The Committee may require the Participant to
furnish a financial statement disclosing the amount of liquid assets otherwise
available to him. The determination with respect to the Financial Hardship shall
be made by the Committee, shall be made on a non-discriminatory basis, and
applied uniformly to all Participants under similar circumstances. The Committee
will make a determination that a withdrawal is necessary to meet a Financial
Hardship of a Participant provided that the Participant satisfies one of the
following:
(i) The Participant certifies that the Financial Hardship will place
him and his immediate family in heavy financial need and that the need cannot be
relieved:
(1) through reimbursement or compensation by insurance or
otherwise,
(2) by reasonable liquidation of his assets, to the extent such
liquidation would not itself cause an immediate and heavy
financial need,
(3) by cessation of his Pre-Tax Contributions and After-Tax
Contributions to the Plan, or
(4) by other distributions or nontaxable (at the time of the loan)
loans from plans maintained by Zimmer or by any other
employer, or by borrowing from commercial sources on
reasonable commercial terms.
(ii) The Participant satisfies the following conditions:
(1) the Participant has obtained all other available distributions
and nontaxable loans available under this Plan or any other
plan maintained by an Employing Company,
(2) for the twelve month period following the Financial Hardship
withdrawal all Pre-Tax Contributions under this Plan or any
other plan maintained by an Employing Company shall be
suspended, and
(3) the maximum Pre-Tax Contribution for the Plan Year following
the Plan Year in which the Financial Hardship withdrawal
occurs is reduced by the amount of a Participant's Pre-Tax
Contributions and After-Tax Contributions made in the Plan
Year in which the Financial Hardship withdrawal occurred.
(b) A Participant who has attained age 59 1/2, who is disabled and
entitled to receive disability payments under a disability pay plan maintained
by his Employing Company, who is no longer employed by any Employing Company or
Affiliate (a "terminated vested Participant") or who is retired may withdraw, in
whole or in part, his Pre-Tax Contributions and earnings and appreciation
thereon (provided he has withdrawn to the maximum extent possible all amounts
enumerated in Section 12.01(a)-(f) hereof) in an amount of cash specified by the
Participant which shall not exceed the total of (i) the lesser (x) of the amount
of all Pre-Tax Contributions from his Annual Benefit Salary or Wages (but not
any earnings thereon), adjusted for the amount
26
of any previous distributions or withdrawals which have been made with respect
to such Pre-Tax Contributions, or (y) the amount in his account attributable to
such Pre-Tax Contributions and (ii) the amount in his account attributable to
the earnings and appreciation on Pre-Tax Contributions. A Participant other than
a terminated vested Participant or a retired Participant may make no more than a
total of 4 withdrawals in any one Plan Year from his Pre-Tax Contributions under
the Plan other than a withdrawal made under Sections 12.02(a) or 12.04.
Section 12.03 Manner of Making Withdrawal. A Participant may make
withdrawals from his account pursuant to Section 12.01 by giving Telephonic
Notification to the Administrative Agent. A Participant may make withdrawals
from his account pursuant to Sections 12.02 and 12.04, effective as of the
Valuation Date following approval by the Committee or its designee of such
withdrawal, by giving at least thirty days (or such lesser number of days as the
Committee may specify) prior written notice to his Employing Company on a form
provided by it for such purpose. Payment to a Participant pursuant to a
withdrawal election shall be made in cash (except as provided in Section
11.01(a)) as soon as practicable thereafter and shall be made pro rata from the
Investment Funds, including the Zimmer Stock Fund, in which the Participant's
account is invested.
Section 12.04 Withdrawal Because of Financial Emergency. If a Participant
shall establish to the satisfaction of the Committee in accordance with
principles and procedures established by the Committee which are applicable to
all persons similarly situated that a withdrawal to be made by him pursuant to
this Article 12 is to be made by reason of a financial emergency such as
extraordinary medical expense incurred by reason of illness of the Participant
or a member of his immediate family, educational expense of a member of the
Participant's immediate family or the need for funds to be used for the purchase
of a home for the Participant, the limitations on the number of withdrawals in
any one Plan Year prescribed by Section 12.01 (including subsections (e) and (f)
thereof) shall not be applicable to such withdrawal. The term "financial
emergency" shall not include the loss of an opportunity to realize monetary
gain.
Section 12.05 Post-1986 After-Tax Contributions. For purposes of the Plan,
all After-Tax Contributions contributed to the Plan on and after January 1, 1987
and the earnings and appreciation on such After-Tax Contributions shall be
treated as a separate contract for purposes of Section 72 of the Code.
Section 12.06 Loans to Participants. Upon Telephonic Notification to the
Administrative Agent a Participant who is an Employee may request a loan from
the Participant Loan Fund. As soon as practicable after receipt of a loan
request containing all required information (subject to, in the case of loans
for a period in excess of 60 months, the completion of such documentation as the
Committee may require and approval by the Committee) such loan shall be granted,
subject to the following terms and conditions:
(a) The minimum amount of any loan hereunder shall be $1,000. The maximum
amount of any loan hereunder (when added to the outstanding balance or all other
loans from the Plan) shall be the lesser of (i) fifty percent (50%) of the
Participant's entire vested interest under the Plan, determined as of the
Valuation Date coinciding with or next preceding the date of the loan request,
and (ii) $50,000, reduced by the excess (if any) of (A) the highest outstanding
27
balance of loans from the Participant during the one-year period ending on the
day before the loan was made, over (B) the outstanding balance of loans from the
Plan on the date of the loan.
(b) The interest rate charged on a loan made pursuant to this Section
12.06 for any calendar month shall be a rate fixed by the Committee at the time
the loan is made in accordance with its loan administrative procedures. In no
instance shall the rate of interest exceed that permitted by law.
(c) The principal amount of each loan must be repaid within a period
permissible under the Committee's loan administrative procedures through equal
periodic payments of principal (not less frequently than quarterly), together
with interest on the unpaid principal amount at the rate determined in
accordance with Section 12.06(b). With the exception of a loan used to purchase
a principal residence for a Participant, the repayment period shall not exceed
60 months.
(d) A Participant who has made repayments with respect to an outstanding
loan from the Plan for a period of at least 12 calendar months may prepay the
entire outstanding balance of such loan at any time (but may not make a partial
prepayment).
(e) Each loan to a Participant shall be secured by fifty percent (50%) of
his entire vested interest under the Plan.
(f) No distribution shall be made to any Participant or Inactive
Participant, Former Participant or to a Beneficiary unless and until all unpaid
loans, including accrued interest thereon, have been liquidated. If the loan is
not repaid, the outstanding loan principal and accrued interest shall be treated
as a distribution to the Participant.
(g) On the date the loan is made, if the Participant is (i) married and
(ii) has elected an annuity form of payment on or prior to such date, pursuant
to Sections 11.02 and 11.03 of the Plan, the written consent of the spouse who
is entitled to receive such survivor annuity shall be required. Such written
consent must be witnessed by a representative of the Committee or by a Notary
Public.
(h) Upon repayment by a Participant of the principal and interest of any
loan, whether in whole or in part, amounts credited to the Participant Loan Fund
shall to the extent of such repayment be reduced, and the cash received shall be
reinvested in accordance with the then current investment directions of the
Participant applicable to the contributions which were the source of loan.
(i) Each Participant to whom a loan is made agrees, by endorsement of the
check representing the proceeds of the loan, (i) that such loan shall be secured
by fifty percent (50%) of his entire vested interest in the Plan, (ii) to repay
such loan as provided herein by payroll deduction or otherwise and (iii) that he
accepts the terms and conditions of such loan as set forth herein and/or as
disclosed by the Committee. Loans for a term of not more than 60 months may be
effectuated by Telephonic Notification to the Administrative Agent. If, within
three days after receipt of the check representing the proceeds of the loan the
Participant decides not to enter into such loan, he shall return the proceeds of
the loan to the Trustee, such loan shall be immediately canceled, and the funds
segregated for such loan shall be reinvested as soon as
28
practicable in the Investment Fund from which funds were withdrawn for the
purpose of making such loan.
(j) The Committee may prescribe such other terms and conditions for loans
not inconsistent with the foregoing requirements as the Committee deems
appropriate.
ARTICLE 13
DISTRIBUTION UPON TERMINATION OF EMPLOYMENT
Section 13.01 Retirement. (a) If a Participant or Inactive Participant
retires pursuant to a retirement plan of an Employing Company or of an
Affiliate, he may elect, in the form and manner prescribed by the Committee, to
receive distribution of his entire account (regardless of the number of his
Years of Service) in a single payment upon retirement as provided in Section
13.04. If a Participant or Inactive Participant retires as set forth above and
fails to make such election prior to his retirement, payment in respect of his
account will be made in a single sum as of the Valuation Date concurrent with or
immediately following (i) his attainment of age 65 or (ii) his retirement if his
retirement is at or after age 65. For purposes of this Plan, any Employee who
terminates his employment after attaining age 55 with ten years of service will
be deemed to have terminated his employment due to early retirement.
(b) If the value of a Participant's vested account balance (determined as
of the applicable Valuation Date) is more $5,000, in lieu of a single payment, a
Participant (which term shall include for purposes of this Section 13.01(b) an
Inactive Participant or a Former Participant) may elect to receive payment with
respect to his account either (i) in a single payment as of the last Valuation
Date of any month subsequent to his retirement date as he shall specify, (ii)
over a period specified by him not exceeding 15 years in monthly, quarterly or
annual installments consisting of an amount approximately equal to the amount in
his account divided by the number of installments then remaining (including the
installment in question) each year payable commencing as of the last Valuation
Date of any month following such retirement and as of the last Valuation Date of
the same month in each month, quarter or year thereafter until payment of all
such installments is made and payment of each such installment shall be made in
the manner and on the basis of valuation provided for in Section 11.01 ("15 year
installment method") or (iii) with respect to Participants described in Section
11.02, through the purchase of an annuity. Any payment pursuant to this
paragraph (b) shall be subject to the following:
(i) no single sum payment may be made and no payment in installments
shall commence later than the date upon which such payments must commence under
the provisions of Section 13.04(b) hereof, and
(ii) if pursuant to a Participant's election, payment of
installments shall commence after the Participant's attainment of age 65, then
the specified payment period shall not exceed such period as determined by the
Committee which, on an actuarial basis, (A) will provide that the present value
of the payments to be made to the Participant is more than 50 percent of the
present value of the total payments to be made to the Participant and his
29
beneficiaries and (B) will not extend beyond the life expectancy of such
Participant and his designated beneficiary.
An election under this paragraph (b) shall be made on a form to be
provided for the purpose and shall be signed by the Participant and delivered to
the Administrative Agent at any time before or after his retirement. A
Participant who has elected to defer payment of his account or to receive
installment payments may at any time change his election and either accelerate
or defer within the limitations prescribed by this paragraph (b), the time or
payment of part or all of the remaining amounts in his account. If a Participant
should die before complete payment of his account in accordance with this
paragraph (b), the amount remaining in his account at his death shall be
distributed as soon as practicable to the Beneficiary unless such Participant,
Inactive Participant or Former Participant had elected installment payments and
had further elected that upon his death prior to receipt of all such amounts,
such installment payments shall be continued to the Beneficiary until payment of
all remaining installments has been made. In the event such Participant had
elected installment payments but had not made a further election, then, if the
Participant dies before complete payment of his account, installment payments
may be continued to the Beneficiary until payment of all remaining installments
is made, if so elected by such Beneficiary. The purchase of an annuity shall be
treated as the complete distribution of the balance of the account of the
Participant.
Section 13.02 Death. In the case of the death of a Participant (which term
shall include for the purposes of this Section 13.02 an Inactive Participant or
a Former Participant), the amount in his account as of the Valuation Date
(regardless of the number of his Years of Service) will, except as otherwise
provided in Sections 13.02(b) or (c):
(a) be distributed in a lump sum to the Participant's Beneficiary; or
(b) if the Participant shall have so elected prior to his death:
(i) be distributed to such Participant's Beneficiary over a period
of not less than two years nor more than five years in monthly, quarterly or
annual installments consisting of an amount approximately equal to the amount in
the Participant's account divided by the number of installments then remaining
(including the installment in question), or
(ii) subject to Sections 11.02 and 11.03, the amount in his account
as of the Valuation Date coincident with or next following the date on which the
Committee determines the Beneficiary is due an annuity benefit shall be applied
to the purchase of an annuity (if available in the light of the amount to be
used for the purchase) for the life of such Participant's Beneficiary (other
than the Participant's executors or administrators), which annuity may provide
for a term certain or a modified cash refund, or
(c) if the Participant has not prior to his death made an election in
accordance with Section 13.02(b), such Participant's Beneficiary may, within 60
days after the death of such Participant, elect that all of the amounts in the
account of such deceased Participant be applied in accordance with Section
13.02(b) as soon as practicable after receipt of such election. Notwithstanding
anything in this Section 13.02 to the contrary, if the value of the
Participant's vested account balance is not more than $5,000 (the "cash-out
limit"), distribution of his vested
30
account balance under this Section 13.02 shall be made to the Beneficiary in a
single payment as soon as practicable. In the case that distribution is to be
made in a lump sum or in installments to the Participant's Beneficiary, such
Beneficiary may, within 60 days after the death of such Participant, elect that
commencement of such distribution be delayed to a future Valuation Date;
provided, however, that the account of such deceased Participant shall be
distributed within five years after the death of such Participant. If any person
entitled to a distribution which is to be made in installments shall die before
all installments to which he is entitled have been received by him, the
remaining installments shall be paid to his executor or administrator. An
election by such Participant in accordance with Section 13.02(b) shall be made
in the form and manner prescribed by the Committee and may be similarly revoked
at any time prior to his death. An election in accordance with Section 13.02(c)
shall be made in the form and manner prescribed by the Committee.
Section 13.03 Termination of Employment for Any Reason Other Than
Retirement or Death. (a) If the employment of a Participant or Inactive
Participant terminates for any reason other than retirement, death or transfer
to another Employing Company or to any Affiliate which is not an Employing
Company, the vested amount in his account shall continue to be held in his
account for his benefit and shall be distributed in accordance with Article 11,
or Article 18 in the event of his death, at the earlier of (i) his normal
retirement date pursuant to a retirement plan of an Employing Company, or an
Affiliate which is not an Employing Company, or (ii) his death, unless: either
(1) the Participant or Inactive Participant makes an election in the manner
provided under Section 13.01(b) (except that the term "termination date" shall
be substituted for the term "retirement date" therein) or (2) the value of his
vested account balance (determined as of the Valuation Date on which the
Participant's or Inactive Participant's employment terminated) is not more than
$5,000 (the "cash-out limit"), in which case distribution of his vested account
balance shall be made to him in a single payment as soon as practicable as
provided in Section 13.04. Notwithstanding any Plan provision to the contrary,
in the event of a sale or disposition by Zimmer or by an Affiliate to a
purchaser, which is an unrelated employer within the meaning of Treas. Reg. ss.
1.401(k)-1(d)(4)(iv)(B), of all or substantially all of the assets used in a
trade or business by Zimmer or of the shares of a subsidiary, no termination of
employment will occur on the date of such sale or disposition with respect to a
Participant who continues in employment with such unrelated employer where the
purchaser agrees in connection with the sale or disposition to maintain the Plan
as it applies to such Participant and be substituted for Zimmer as the sponsor
of the Plan or to establish a defined contribution plan that is qualified under
Section 401(a) of the Code to which assets in the amount of the Participant's
account balance under the Plan will be transferred.
(b) Upon a Participant's or Inactive Participant's termination of
employment as provided in 13.03 (a), his account balance attributable to
Employing Company Contributions which has not vested in accordance with Article
10 shall be forfeited provided that (i) upon his reemployment as an Employee
prior to 5 consecutive One Year Breaks in Service if he has not received
distribution of his account, or (ii) upon his reemployment as an Employee and
repayment of the distribution as provided in Section 13.06(a) if he has received
distribution of his account, his Employing Company shall restore to his account
an amount equal to the amount which at the date of termination of his employment
was not vested and was forfeited. Such amount shall be invested in the Zimmer
Stock Fund and shall constitute the beginning balance in the Participant's
account attributable to Employing Company Contributions.
31
Section 13.04 Timing of Distributions. (a) Distributions under this
Article 13 shall be made in respect of the Participant's, Inactive Participant's
or Former Participant's account as soon as practicable after the Valuation Date
corresponding with or immediately preceding the event covering such
distribution.
(b) Notwithstanding any other provision of the Plan with respect to the
time of making a distribution under the Plan but subject to the second sentence
of this Section 13.04(b), unless the Participant, Inactive Participant or Former
Participant elects otherwise pursuant to the provisions of the Plan, a
distribution to be made in accordance with Section 13.01 or 13.03 shall be made
or commenced no later than the 60th day next following the close of the calendar
year in which the Participant attains age 65 or, if later, his employment with
an Employing Company, or with an Affiliate, is terminated. Notwithstanding
anything in the Plan to the contrary, the distribution of the vested account
balance of a Participant, Inactive Participant or Former Participant, including
incidental death benefits under Section 401(a)(9)(G) of the Code, if any, may be
made under a method of payment which, as of the "required beginning date" (as
defined in Section 401(a)(9) of the Code and applicable regulations promulgated
thereunder), satisfies the minimum distribution requirements under Section
401(a)(9) of the Code and any applicable regulations.
(i) With respect to a Participant, Inactive Participant or Former
Participant who attains age 70 1/2 before January 1, 1988 and who, at no time at
or after attaining age 66 1/2, was a 5-Percent Owner, the required beginning
date shall be no later than the April 1 of the calendar year following the
calendar year in which he attains age 70 1/2 or the calendar year in which he
retires, whichever is later. For purposes of this Section, 5-Percent Owner shall
have the same meaning as that set forth in section 416(i) of the Code and
applicable regulations.
(ii) With respect to a Participant, Inactive Participant or Former
Participant who attains age 70 1/2 after December 31, 1987 but before the
Transition Period, the required beginning date shall be no later than the April
1 of the calendar year following the calendar year in which he attains age 70
1/2. For purposes of this Section, the Transition Period is the period beginning
on January 1, 1997 and ending on December 31, 1999.
(iii) During the Transition Period, each Participant or Inactive
Participant who attained age 70 1/2 while employed by an Employing Company or
Affiliate and who was not a 5-Percent Owner shall elect a required beginning
date that is no later than the later of the April 1 of the calendar year
following the calendar year in which he attains age 70 1/2, or his retirement
date.
(iv) Each Participant, Inactive Participant or Former Participant
who attains age 70 1/2 on or after January 1, 2000 and who is not a 5-Percent
Owner shall have a required beginning date that is no later than the April 1 of
the calendar year following the later of the calendar year in which such
Participant attains age 70 1/2 or his retirement date.
(v) For each Participant, Inactive Participant or Former Participant
who is a 5-Percent Owner, the required beginning date shall be no later than the
April 1 of the calendar year following the calendar year in which he attains age
70 1/2.
32
With respect to distributions under the Plan made on or after the
Effective Date for calendar years beginning on or after January 1, 2001, the
Plan will apply the minimum distribution requirements of section 401(a)(9) of
the Internal Revenue Code in accordance with the regulations under section
401(a)(9) that were proposed on January 17, 2001 (the "2001 Proposed
Regulations"), notwithstanding any provision of the Plan to the contrary. If the
total amount of required minimum distributions made to a Participant for 2001
prior to the Effective Date is equal to or greater than the amount of required
minimum distributions determined under the 2001 Proposed Regulations, then no
additional distributions are required for such participant for 2001 on or after
such date. If the total amount of required minimum distributions made to a
Participant for 2001 prior to the Effective Date is less than the amount
determined under the 2001 Proposed Regulations, then the amount of required
minimum distributions for 2001 on or after such date will be determined so that
the total amount of required minimum distributions for 2001 is the amount
determined under the 2001 Proposed Regulations. This provision shall continue in
effect until the last calendar year beginning before the effective date of the
final regulations under section 401(a)(9) or such other date as may be published
by the Internal Revenue Service.
Section 13.05 Use of Forfeitures. Except as provided in Section 13.08, all
amounts forfeited under the Plan by a Participant shall be applied as a credit
to reduce subsequent contributions of the Employing Company by which the
Participant is employed at the time of forfeiture. In the event the Plan is
terminated, any forfeiture not applied prior thereto to reduce an Employing
Company Contributions shall be credited ratably to the accounts of its
participating Employees in proportion to the amount of its contributions to such
accounts for the last payroll period with respect to which it made
contributions.
Section 13.06 Reinstatement of Accounts. (a) If a Participant or Inactive
Participant who terminates employment receives a distribution of his account
pursuant to Section 13.03 which is less than the entire balance in his account
as of the date of such distribution and if prior to incurring 5 consecutive One
Year Breaks in Service he is reemployed by an Employing Company as an Employee,
he may, within 30 days after his reemployment (which shall, for the purposes of
this paragraph (a), include reinstatement to status as a disabled Employee),
repay in cash to the Trustee an amount equal to the cash he received and an
amount equal to the value (as of the Valuation Date on which his termination of
employment occurred) of the Zimmer Stock distributed to him. The amount repaid
shall be invested by the Trustee in such Investment Funds as determined by the
Participant in the manner specified by the Committee, provided that any
Employing Company Contributions so reinvested shall be invested in the Zimmer
Stock Fund. Such amounts shall be allocated to the Participant's or Inactive
Participant's Employing Company Contributions account and to his account
attributable to his After-Tax Contributions in the same proportion as was the
amount in one account was to the amount in the other account which was redeemed
to make distribution of his accounts, and the amount so allocated shall
constitute the beginning balances in such accounts. Any non-vested amount in his
account at the time of termination of his employment which shall be restored to
his account as provided in Section 13.03(b) shall constitute the beginning
balance in his account attributable to Employing Company Contributions.
(b) If a Participant or Inactive Participant who terminates employment
receives a distribution of his account pursuant to Section 13.03 which
represents the full value of his
33
account as of the date of such distribution and if prior to incurring a One Year
Break in Service he is reemployed by an Employing Company as an Employee, he
may, within 30 days after his reemployment, repay in cash to the Trustee an
amount equal to the cash he received and an amount equal to the value (as of the
last day of the month in which his termination of employment occurred) of the
Zimmer Stock distributed to him. The amount repaid shall be invested by the
Trustee in such Investment Funds as determined by the Participant and in the
manner specified by the Committee, provided that any Employing Company
Contributions so reinvested shall be invested in the Zimmer Stock Fund. Such
amounts shall be allocated to the Participant's or Inactive Participant's
Employing Company Contributions account and to his account attributable to his
After-Tax Contributions in the same proportion as was the amount in one account
to the amount in the other account which was redeemed to make distribution of
his accounts, and the amount so allocated shall constitute the beginning
balances in such accounts.
Section 13.07 Payment of Eligible Rollover Distributions. Any individual
who is entitled to receive a distribution of benefits under the Plan (excluding
any Beneficiary who is not the Participant's surviving spouse but including any
Participant's spouse or an alternate payee under a qualified domestic relations
order within the meaning of Section 414(p) of the Code) may elect to have all or
a portion of the taxable amount of such benefit distribution that qualifies as
an eligible rollover distribution under Section 402(c)(4) of the Code paid
directly to a single eligible retirement plan specified by such individual. For
purposes of this Section 13.08, an "eligible retirement plan" is an individual
retirement account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code (other than an
endowment contract), an annuity plan described in Section 403(a) of the Code or
a plan that is qualified under Section 401(a) of the Code, the terms of which
permit acceptance of such direct rollover distributions. Notwithstanding the
foregoing, in the case of an eligible rollover distribution to the surviving
spouse of a Participant, an "eligible retirement plan" is an individual
retirement account or individual retirement annuity. The Committee shall
establish uniform procedures for making such direct rollover elections. If a
distribution is one to which Sections 401(a)(11) and 417 of the Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(a) the Committee clearly informs the Participant that the Participant has
a right to a period of at least 30 days after receiving the notice to consider
the decision of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively elects a
distribution.
Section 13.08 Inability to Locate Payee. Where amounts become
distributable under the Plan and the Committee is unable for a period of
twenty-four months from the date the Participant's account becomes eligible for
distribution to locate the Participant or Beneficiary to whom the distribution
is payable, all such amounts shall be reallocated among the other Participants
as of the last day of such month. In the event the Participant or his
Beneficiary thereafter makes proper claim to the Committee, the amount payable
to such Participant or Beneficiary shall be distributable from amounts forfeited
by other Participants in accordance with Section 13.03(b) of the Plan.
34
Section 13.09 Terminated Vested Participants. In the case of any Former
Participant who has not received a distribution of the vested account balance
pursuant to any section of this Plan, such Former Participant may elect to make
withdrawals during the period of deferral in the same manner and in the same
priorities as withdrawals may be made by a Participant or Inactive Participant
who remains in employment pursuant to Article 12. Notwithstanding the election
by a Former Participant to make withdrawals during the period of deferral
pursuant to this Section 13.09, the method of payment upon withdrawal shall be
as provided in Article 11.
ARTICLE 14
TRANSFER OF A PARTICIPANT
Section 14.01 Transfer to Employing Company. If a Participant shall cease
to be employed by one Employing Company and shall become employed as an Employee
by another Employing Company, his participation in the Plan shall not be
affected.
Section 14.02 Transfer to Affiliate. If a Participant shall cease to be
employed as an Employee and shall become employed by an Affiliate which is not
an Employing Company, or in a division or branch of an Employing Company or
employee classification which is not participating in the Plan, he shall, except
as provided in Section 14.03, be deemed to have given notice to suspend the
making of Pre-Tax Contributions and After-Tax Contributions from his Annual
Benefit Salary or Wages effective with his last payroll period ending in the
month of his transfer. The suspension shall continue so long as he remains in
the employ of any Affiliate which is not an Employing Company or of a division
or branch of an Employing Company which is not participating in the Plan or is
included in an employee classification, which employee classification is not
covered by the participation provisions of the Plan. Such Inactive Participant's
period of employment by any such Affiliate, division, or branch, or in any such
ineligible employee classification, shall be taken into account in determining
his Years of Service for purposes of Section 10.02 in the same manner and to the
same extent as if such employment had been employment as an Employee with an
Employing Company without taking into account any suspension in the making of
Pre-Tax Contributions and After-Tax Contributions from his Annual Benefit Salary
or Wages as the result of this Section 14.02. Should he terminate his employment
with any such Affiliate, division or branch, or while in any such ineligible
employee classification and not become an Employee of an Employing Company, his
employment shall be deemed to have terminated for purposes of the Plan at the
time of such termination. The Committee, in its discretion, may determine that a
Participant will be deemed to have terminated his employment for purposes of the
Plan upon the sale of an Employing Company or of substantially all the assets of
a division of Zimmer or of an Employing Company which employs such Participant.
Section 14.03 Transfer to Foreign Affiliate. If a Participant who is a
United States citizen shall become employed by a foreign affiliate of an
Employing Company (as the term "foreign affiliate" is defined in Section
3121(l)(6) of the Code) and all of the conditions which permit him to be deemed
to be an Employee of such Employing Company exist at the time of his transfer of
employment and continue to exist during his employment by such foreign
affiliate, his
35
transfer of employment shall not affect his participation in the Plan. If, at
any time while he remains in the employment of such foreign affiliate, the
conditions which permit him to be deemed to be an Employee cease for any reason,
he shall at such time be regarded as having been transferred to an Affiliate
which is not an Employing Company. Should he terminate his employment with any
such foreign affiliate and not become an Employee of an Employing Company, his
employment shall be deemed to have terminated for purposes of the Plan at the
time of such termination.
ARTICLE 15
SUSPENSION OF CONTRIBUTIONS
Section 15.01 Voluntary Suspension. A Participant, by Telephonic
Notification to the Administrative Agent, may voluntarily suspend the making of
both his Pre-Tax Contributions and After-Tax Contributions from his Annual
Benefit Salary or Wages effective with his next payroll period. A Participant
may terminate such a suspension of his Pre-Tax Contributions and After-Tax
Contributions effective with his next payroll period by Telephonic Notification
to the Administrative Agent. Anything to the contrary notwithstanding, a
Participant's election not to make After-Tax Contributions shall not be deemed a
suspension for any period during which Pre-Tax Contributions are being made and
a Participant's election not to make Pre-Tax Contributions shall not be deemed a
suspension for any period in which After-Tax Contributions are being made.
ARTICLE 16
EFFECT OF SUSPENSION OF CONTRIBUTIONS
Section 16.01 Procedures for Suspension. Whenever the making of Pre-Tax
Contributions and After-Tax Contributions is suspended for any reason, all
Employing Company Contributions made on behalf of the Participant under the Plan
shall be suspended. If an event causing suspension under the Plan occurs during
a period when a suspension is already in effect, the periods of suspension shall
run concurrently. When all suspensions are ended, unless the participation of
the Participant has been terminated, the making of After-Tax Contributions
and/or Pre-Tax Contributions from Annual Benefit Salary or Wages shall be
resumed (if the Employee elects to resume) beginning with the Participant's
first payroll period commencing after all suspensions are ended, and Employing
Company Contributions also shall be resumed. There shall be no makeup of Pre-Tax
Contributions or After-Tax Contributions from Annual Benefit Salary or Wages or
of Employing Company Contributions with respect to a period of suspension.
ARTICLE 17
36
LEAVE OF ABSENCE, LAYOFF, ABSENCE ON DISABILITY AND REEMPLOYMENT
Section 17.01 Leave of Absence. (a) A Participant's temporary absence
pursuant to any leave of absence (including a family care and adoption
assistance leave) granted in accordance with his Employing Company's established
leave policies which shall be applied in a uniform and non-discriminatory manner
to all Participants under similar circumstances, will not be considered a
termination of employment and, except for months during which the Participant is
on a personal leave and in respect of which he made no allotments, shall be
considered a period of active employment with his Employing Company in
determining his Years of Service for purposes of Section 10.02, provided the
Participant returns to employment with an Employing Company as an employee prior
to or upon expiration of the period of leave or, in the case of a Participant
who has been granted a leave of absence for military service, within 90 days
after the time he first becomes eligible for release or discharge from active
duty (or such longer period as may be prescribed by law for the protection of
reemployment rights). If a Participant is granted a leave of absence for
military service (including a paid leave of absence as described in subsection
(c) hereof) and does not return to employment within such 90-day period, his
employment for purposes of this Plan shall be deemed to have terminated as of
the expiration of such 90-day period.
(b) If a Participant is granted a leave of absence without pay (including
unpaid leave for military or governmental service, and a family care and
adoption assistance leave) by his Employing Company, there shall be no Pre-Tax
Contributions or After-Tax Contributions from his Annual Benefit Salary or Wages
during the period of such leave of absence, except as provided in Section 17.03.
(c) If a Participant is granted a leave of absence with pay for military
service under a policy of his Employing Company which provides for such paid
leave, such Participant may make Pre-Tax Contributions and/or After-Tax
Contributions from his Annual Benefit Salary or Wages during such leave of
absence; provided, however, that for purposes of the foregoing, the
Participant's Annual Benefit Salary or Wages during a period of military service
shall be deemed to be that in effect at the time he commenced such service less
the amount of his base military pay for such period. A Participant who is
receiving payments pursuant to a paid military leave policy of his Employing
Company may at any time, if he so elects, suspend Pre-Tax Contributions and
After-Tax Contributions from such payments in accordance with Article 15. In the
event a Participant's period of military service exceeds the period for which he
is entitled to payment by his Employing Company pursuant to its paid military
leave policy, such Participant shall, as of the day on which such entitlement
ceases, be deemed to be granted a leave of absence without pay for military
service.
(d) Any provision of this Plan to the contrary notwithstanding,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.
Section 17.02 Layoff. If a Participant is laid off, there shall be no
Pre-Tax Contributions or After-Tax Contributions from his Annual Benefit Salary
or Wages during the period of layoff. If a Participant or Inactive Participant
is laid off and returns as an Employee in active service within 6 months of his
layoff, the period of his layoff shall be considered as a period of active
37
employment with his Employing Company in determining his Years of Service for
purposes of Section 10.02. If the Participant or Inactive Participant returns as
an Employee in active service after 6 months but within 12 months of his layoff,
his employment shall not be deemed to have terminated by reason of such layoff
for purposes of the Plan but the period of his layoff shall not be considered in
determining his Years of Service under the Plan. If at the end of 12 months the
Participant or Inactive Participant has not returned as an Employee in active
service, then, notwithstanding any other provision of the Plan, his employment
shall be deemed to have terminated at such time for purposes of the Plan.
Section 17.03 Disability. If a Participant is entitled to receive
disability payments under a disability pay plan maintained by his Employing
Company, he shall be considered to be on a leave of absence which shall be
deemed to continue so long as he continues to be entitled to receive monthly
disability payments under such a disability pay plan, and the Annual Benefit
Salary or Wages of such Participant shall be deemed to be that in effect at the
time he commenced to receive monthly disability payments. Pre-Tax Contributions
and/or After-Tax Contributions will be made from such disability payments, and
whenever Pre-Tax Contributions and/or After-Tax Contributions made from Annual
Benefit Salary or Wages are referred to in the Plan, the reference shall include
Pre-Tax Contributions and/or After-Tax Contributions from such disability
payments. A Participant who is receiving disability payments may at any time, if
he so elects, suspend Pre-Tax Contributions and After-Tax Contributions from
disability payments in accordance with Article 15. If immediately following the
end of the period during which the Participant is entitled to receive disability
payments he is neither an Employee in active service nor on leave of absence,
his employment shall be deemed to have terminated at such time for purposes of
the Plan.
Section 17.04 Reemployment. (a) If the service of an Employee is
terminated and he is reemployed by an Employing Company as an Employee, he may
elect, in accordance with Article 2, to participate in the Plan on an Enrollment
Date following the date of his reemployment (which shall, for the purposes of
this paragraph (a), include reinstatement to status as a disabled Employee) if
prior to his termination of service he had completed at least six months of
service with an Employing Company.
(b) If an Employee's service is terminated and he again becomes an
Employee (which shall, for the purposes of this Section 17.04(b), include
reinstatement to status as a disabled Employee), his Years of Service prior to
the termination of his service shall be restored. Any Year of Service so
restored shall be taken into account for purposes of determining the
Participant's vested percentage of the amount attributable to Employing Company
Contributions made in respect of the period subsequent to his reemployment.
ARTICLE 18
DESIGNATION OF BENEFICIARIES IN THE EVENT OF DEATH
Section 18.01 Beneficiary Designation. A Participant may designate a
Beneficiary or Beneficiaries to receive all or part of the amount in his account
in case of his death if such
38
beneficiary or beneficiaries shall be living at the time of his death, however,
a married Participant may not designate a beneficiary other than his spouse
unless the Committee has received a written consent to such designation from the
Participant's spouse in accordance with the provisions of Section 11.03(c). A
Participant may, subject to the preceding sentence, change or revoke a
designation of Beneficiary and such designation, change or revocation shall be
on a form to be provided for the purpose and shall be signed by the Participant
and delivered to the designated agent of Zimmer prior to his death. In case of
the death of the Participant, the amount in his account with respect to which a
designation of Beneficiary has been made (to the extent it is valid and
enforceable under applicable law) shall be distributed in accordance with the
Plan to the surviving designated Beneficiary or Beneficiaries. The amount in the
Participant's account distributable upon death and not subject to such a
designation, or if no Beneficiary shall be living at the death of the
Participant, shall be distributed following his death to the person or persons
in the first of the following classes of successive preference:
(a) The Participant's surviving spouse.
(b) To such one or more of the Participant's surviving children as the
Committee shall determine and in such proportions as the Committee determines.
(c) The Participant's surviving parents, equally.
(d) To such one or more of the Participant's surviving brothers and
sisters as the Committee shall determine and in such proportions as the
Committee determines.
(e) The Participant's executors or administrators.
Section 18.02 Beneficiary Payments and Reinvestment Elections. Payment to
such one or more Beneficiaries shall completely discharge the Plan and the
Trustee with respect to the amount so paid. Prior to the date of such payment,
such Beneficiary may (upon provision of such documentation as the Committee may
require) request inter-Investment Fund transfers pursuant to Section 8.03.
ARTICLE 19
TRUSTEE OF THE PLAN
Section 19.01 Trust Agreement. The assets of the Plan shall be held in a
trust or trusts by a trustee(s) appointed by the Board of Directors. If the
Board of Directors so determines, Zimmer may enter into a trust agreement or
trust agreements with additional trustees. Any trust agreement may be amended by
Zimmer from time to time in accordance with its terms. Any trust agreement shall
provide, among other things, that all funds received by the Trustee thereunder
will be held, administered, invested and distributed by the Trustee, and that no
part of the corpus or income of the trust held by the Trustee shall be used for,
or diverted to, purposes other than for the exclusive benefit of Participants,
Inactive Participants or Former Participants or their Beneficiaries. Any trust
agreement may also provide that the investment and reinvestment of any
Investment Fund or part thereof may be carried out in accordance with directions
given to the Trustee by any investment advisor or advisors which may be
designated by the Committee and which shall qualify as an Investment Manager.
Zimmer may remove any
39
Trustee or any successor Trustee, and any Trustee or any successor Trustee may
resign. Upon removal or resignation of a Trustee, Zimmer shall appoint a
successor Trustee.
Section 19.02 Trustee's Authority. The Trustee shall have the powers
provided in the Trust Agreement forming a part of the Plan, provided that such
powers shall be exercised as the Committee shall from time to time direct.
Section 19.03 Purchases of Zimmer Stock. As soon as practicable after
receipt of funds for investment in the Zimmer Stock Fund, the Trustee shall
purchase Zimmer Stock, or cause such Stock to be purchased, on the open market
or by private purchase, provided that no private purchase may be made at any
price greater than the last sale price or highest current independent bid price,
whichever is higher, for Zimmer Stock on the New York Stock Exchange.
Notwithstanding the foregoing, the Trustee may hold in cash, and may temporarily
invest in short-term United States Government obligations, commercial paper or
other investments of a short-term nature, funds allocated to the Zimmer Stock
Fund pending investment of such funds in Zimmer Stock or for liquidity purposes.
Section 19.04 Purchases of Securities for the Investment Funds. As soon as
practicable after the Trustee receives funds for investment in the Investment
Funds, the Trustee shall invest such funds in the Investment Fund designated for
such investment or, if the Trust Agreement so provides, the Trustee shall invest
such funds as directed by an Investment Manager or the Committee. Purchases in
respect of the Investment Funds may be made on the open market or directly from
the issuer.
Section 19.05 Voting of Zimmer Stock and Bristol-Myers Squibb Stock.
Before each annual or special meeting of shareholders of the Zimmer or
Bristol-Myers Squibb, there shall be sent to each Participant any portion of
whose account balance is invested in the Zimmer Stock Fund or Bristol-Myers
Squibb Stock Fund a copy of the proxy soliciting material for the meeting,
together with a form requesting instructions to the Trustee on how to vote the
Zimmer Stock or Bristol-Myers Squibb Stock held on his behalf in the Zimmer
Stock Fund or Bristol-Myers Squibb Stock Fund on the Valuation Date immediately
preceding the record date of the Zimmer Stock or Bristol-Myers Squibb Stock.
Zimmer may appoint a person or persons to solicit and/or tabulate the votes of
Participants and to communicate the results thereof to the Trustee. Upon receipt
of such instructions, the Trustee shall vote such Zimmer Stock or Bristol-Myers
Squibb Stock as instructed by the Participant. All Zimmer Stock or Bristol-Myers
Squibb Stock for which the Trustee does not receive instructions shall be voted
by the Trustee on each issue in the same proportion as those shares for which it
has received instructions from Participants.
Section 19.06 Tendering of Zimmer Stock - The Trustee may not take any
action in response to a tender offer except as otherwise provided in this
Section 19.05. Each Participant, a named fiduciary within the meaning of Section
403(a)(1) of ERISA, may direct the Trustee in writing to sell, exchange or
transfer the Zimmer Stock in his account in accordance with the terms of such
tender offer. To the extent to which Participants do not instruct the Trustee or
do not issue valid or timely directions to the Trustee to sell, exchange or
transfer the Zimmer Stock in their accounts, Participants shall be deemed to
have directed the Trustee that such shares be retained and not be disposed of
under the terms of the tender offer. Zimmer and the Trustee shall
40
not interfere in any manner with a Participant's decision as to whether to sell,
exchange or transfer the Zimmer Stock in his account. The Trustee shall arrange
for Participant directions or instructions to be made on a confidential basis
and Zimmer shall communicate to Participants the provisions of this Section
19.05. The Trustee shall use its best efforts to distribute or cause to be
distributed to Participants all communications directed generally to the owners
of Zimmer Stock, except to the extent Zimmer distributes such communications
directly to Participants. Any cash proceeds received by the Trustee as a result
of the sale of Zimmer Stock pursuant to a tender offer shall be reinvested by
the Trustee in Zimmer Stock if such stock is available for purchase provided
such Zimmer Stock continues to be traded on a national securities exchange. If
Zimmer Stock is no longer traded on a national securities exchange, then the
proceeds of such sale shall be invested as directed by the Committee.
Section 19.07 Voting of Shares in Certain Investment Funds. Before each
annual or special meeting of shareholders of an Investment Fund which is
registered under the Investment Company Act of 1940, there shall be sent to each
Participant any portion of whose account balance is invested in such Investment
Fund a copy of the proxy soliciting material for the meeting, together with a
form requesting instructions to the Trustee on how to vote the shares of the
Investment Fund held on his behalf on the Valuation Date immediately preceding
the record date of the Investment Fund. The Administrative Agent shall solicit
and/or tabulate the votes of Participants and communicate the results thereof to
the Trustee. Upon receipt of such instructions, the Trustee shall vote such
Investment Fund shares as instructed by the Participant. All shares of the
Investment Fund for which the Administrative Agent does not receive instructions
shall not be voted.
Section 19.08 Uninvested Funds. The Trustee may keep uninvested an amount
of cash sufficient in its opinion to enable it to carry out the purposes of the
Plan. No income shall accrue to an account of any Participant on such uninvested
funds.
Section 19.09 Audit. Zimmer shall select a firm of independent public
accountants to examine and report annually on the financial position and the
results of operations of the trust forming a part of the Plan.
ARTICLE 20
ADMINISTRATION OF THE PLAN
Section 20.01 Benefits Committee. The Plan shall be administered by a
benefits committee (the "Committee"), consisting of such number of persons, not
less than three, as shall from time to time be determined by the Board of
Directors. Members shall be appointed by the Board of Directors. Any member of
the Committee may resign or be removed by the Board of Directors and new members
may be appointed by the Board of Directors.
Section 20.02 Resignation of Committee Member. Any member of the Committee
may resign by delivering his written resignation to the Board of Directors and
such resignation shall become effective upon delivery or upon any later date
specified therein.
41
Section 20.03 Selection of Chairman. The Committee shall select a Chairman
and may select a Secretary (who may, but need not, be a member of the Committee)
to keep its records or to assist it in the doing of any act or thing to be done
or performed by the Committee.
Section 20.04 Quorum. A majority of the members of the Committee at the
time in office shall constitute a quorum for the transaction of business at any
meeting. Any determination or action of the Committee may be made or taken by a
majority of the members present at any meeting thereof, or without a meeting by
a resolution or written memorandum concurred in by a majority of the members
then in office.
Section 20.05 Authority of the Committee. The Committee shall:
(a) control and manage the operation and administration of the Plan, and
it shall be deemed the "Administrators" of the Plan as the term "Administrator"
is defined in ERISA and shall be, in its capacity as "Administrator" with
respect to the Plan, a "named fiduciary" as that term is defined in ERISA; and
(b) be a "named fiduciary" with respect to control or management of the
assets of the Plan so as to permit the Committee to delegate authority to
manage, acquire, or dispose of assets of the Plan to one or more Investment
Managers as provided in Section 402(c)(3) of ERISA.
Section 20.06 Delegation of Authority. For the purpose of carrying out its
duties as Administrator, the Committee may, in its discretion, designate persons
other than members of the Committee to carry out such responsibilities of the
Committee under the Plan as it may see fit, including, but not limited to, the
determination of questions concerning the eligibility of any employee to
participate in or receive benefits under the Plan, the interpretation and
construction of the provisions of the Plan and the resolution of ambiguities,
inconsistencies and omissions therein, and the resolution and determination of
any appeal of the denial of a claim for benefits under the Plan. The delegation
of responsibilities will be effected by written instrument executed by the
Committee.
Section 20.07 Appointment of Investment Manager. If a trust agreement
forming a part of the Plan so provides, the Committee shall have the authority
to appoint an Investment Manager or Investment Managers to manage (including the
power to acquire and dispose of) some part or all of the assets of the Plan held
by a trustee, to retain in the Committee the power to invest such assets or to
delegate such responsibility to the trustee, as shall be provided in the trust
agreement.
Section 20.08 Fiduciary Obligations. It is intended, that to the maximum
extent permitted by ERISA, each person who is a "fiduciary" with respect to the
Plan as that term is defined in ERISA shall be responsible for the proper
exercise of his own powers, duties, responsibilities and obligations under the
Plan and the trust forming a part thereof, and any other funding medium, as
shall each person designated by any fiduciary to carry out any fiduciary
responsibility with respect to the Plan, the trust or other funding medium, and
no fiduciary or other person to whom fiduciary responsibilities are allocated
shall be liable for any act or omission of any other fiduciary or of any other
person delegated to carry out any fiduciary or other responsibility under the
Plan or any trust or any other funding medium.
42
Section 20.09 Appointment of Advisors and Legal Counsel. The Committee may
employ such independent "qualified public accountants" as such term is defined
in ERISA, legal counsel who may be of counsel to Zimmer , other specialists and
other persons as the Committee deems necessary or desirable in connection with
the administration of the Plan, and the Committee, and any person to whom it may
delegate any duty or power in connection with the administration of the Plan,
Zimmer and the officers and directors thereof shall be entitled to rely
conclusively upon and shall be fully protected in any action omitted, taken or
suffered by them in good faith in reliance upon any independent qualified public
accountant, counsel or other specialist or other person selected by the
committee or in reliance upon any evaluations, certificates, opinions or reports
which shall be furnished by any of them or by any Trustee or any insurance
company.
Section 20.10 Determination of the Committee. The determination of the
Committee as to any question involving the general administration and
interpretation of the Plan and such determinations made by each person to whom
the Committee may delegate its responsibilities under the Plan, shall be final,
conclusive and binding upon all persons claiming any interest in or under the
Plan, except as otherwise provided by law, and may be relied upon by Zimmer, all
Employing Companies, the Trustee, Administrative Agent and Participants and
their beneficiaries. (The term "Participants" includes Inactive Participants,
Former Participants and Beneficiaries wherever used in this Article 20). Any
discretionary actions to be taken under the Plan by the Committee, and such
actions taken by each person to whom the Committee may delegate its
responsibilities under the Plan, shall be uniform in their nature and applicable
to all persons similarly situated, shall not be subject to de novo review if
challenged in court, by arbitration or in any other forum and shall be upheld
unless found to be an abuse of discretion. Without limiting the generality of
the foregoing, the Committee shall have the following discretionary authority
and responsibilities in addition to those provided elsewhere herein:
(a) to grant or deny claims for benefits under the Plan;
(b) to require any person to furnish such information as it may request
for the purpose of the proper administration of the Plan as a condition of
receiving any benefit under the Plan;
(c) to make and enforce such rules and regulations for the administration
of the Plan consistent with the provisions thereof and to prescribe the use of
such forms and other methods of communication and notification as it shall deem
necessary for the efficient administration of the Plan;
(d) to interpret and construe the provisions of the Plan, and to resolve
ambiguities, inconsistencies and omissions therein;
(e) to decide such questions as may arise in connection with the operation
of the Plan including, but not limited to, questions concerning the eligibility
of any Employee to participate in or receive benefits under the Plan; and
(f) to determine the amount of benefits which shall be payable to any
person in accordance with the provisions of the Plan and to authorize payment of
such benefits.
43
Section 20.11 Spouse's Release. The Committee, in its discretion, may
require as a condition of receiving any payment under the Plan, the filing with
the Committee of an authorization or release by the spouse of a Participant
divesting such spouse of any rights in the Plan or in any payments thereunder
which such spouse may have by operation of law under the laws of his matrimonial
domicile, or otherwise.
Section 20.12 Participant Accounts and Statements. The Committee shall
maintain or cause to be maintained accounts which accurately reflect the
interest of each Participant. The Committee shall mail to Participants reports
to be furnished to Participants in accordance with the Plan or as required by
ERISA. Any notice, reports or statements to be given, furnished, made or
delivered to a Participant shall be deemed duly given, furnished, made or
delivered when addressed to the Participant and delivered to the Participant in
person or mailed by ordinary mail to his address last appearing on the books of
Zimmer or of his Employing Company.
Section 20.13 Participant Notices. Consistent with the requirements of
ERISA and the regulations thereunder of the Secretary of Labor from time to time
in effect, the Committee shall:
(a) provide adequate notice in writing to any Employee, former Employee,
retired Employee or Beneficiary under the Plan (each being hereinafter in this
Section 20.13 referred to as "participant") whose claim for benefits under the
plan has been denied, setting forth specific reasons for such denial, written in
a manner calculated to be understood by such participant; and
(b) afford a reasonable opportunity to any participant whose claim for
benefits has been denied for a full and fair review of the decision denying the
claim.
Section 20.14 Committee Expenses. Unless otherwise agreed to by Zimmer,
the members of the Committee shall serve without compensation for their services
as such, but all reasonable expenses incurred in the performance of their duties
shall be paid by Zimmer. Unless otherwise determined by the laws of the United
States or by the Board of Directors, no member of the Committee shall be
required to give any bond or other security in any jurisdiction. No member of
the Committee shall be personally liable under any contract, agreement, bond or
other instrument made or executed by him or on his behalf as a member of the
Committee.
Section 20.15 Expenses of Administering the Plan. Expenses incurred with
respect to the management of an Investment Fund or the administration and
recordkeeping of Participants' accounts, including Trustees' fees, may be
charged appropriately against the accounts of Participants, as directed by the
Committee. Brokerage fees, transfer taxes and other expenses incident to the
purchase or sale of securities by the Trustee shall be deemed to be part of the
cost of such securities or deducted in computing the proceeds therefrom, as the
case may be. Transfer taxes in connection with distribution of Zimmer Stock or
Bristol-Myers Squibb Stock to Participants or their beneficiaries shall be borne
by the Participant. Taxes, if any, on any assets held or income received by the
Trustee shall be charged appropriately against the accounts of Participants as
the Committee shall determine.
Section 20.16 Fiduciary Capacity. Any person or group of persons may serve
in more than one fiduciary capacity with respect to the Plan and fiduciaries
with respect to the Plan may
44
serve as a fiduciary with respect to the Plan in addition to being an officer,
employee, agent or other representative of a "party in interest" as that term is
defined in ERISA.
Section 20.17 Notification and Election Procedures. Whenever a Plan
provision or Plan administrative procedure requires that the Participant (or
Inactive Participant, Former Participant or Beneficiary) give directions or
prior notice to the Committee or Administrative Agent, such direction or notice
shall be provided to the Committee or Administrative Agent sufficiently in
advance to implement the Participant's instructions in accordance with the
Committee's or Administrative Agent's standard procedures with respect to the
type of instruction being implemented, and in such manner (written or otherwise)
as the Committee shall communicate to Participants.
Section 20.18 Committee Authority to Make Contributions. The Committee
shall have the authority to determine whether a Qualified Nonelective
Contribution shall be made on behalf of a Participant or whether a Participant
may elect to make additional Basic Contributions or Supplementary Contributions
in order to correct an Administrative Error.
ARTICLE 21
TOP HEAVY PROVISIONS
Section 21.01 Top Heavy Plan Requirements. Notwithstanding any other
provisions of the Plan, if for any Plan Year the Plan is determined to be a Top
Heavy Plan (as defined in Section 21.03) within the meaning of Section 416(g) of
the Code, then the following requirements shall apply:
(a) The top heavy minimum contribution requirement of Section 416(c) of
the Code set forth in Section 21.04; and
(b) The top heavy limitation on compensation requirement of Section 416(d)
of the Code set forth in Section 21.05.
Section 21.02 Definitions. For purposes of this Article 21, the following
terms shall have the respective meanings set forth below:
"Aggregation Group" means either a Required Aggregation or a Permissive
Aggregation Group.
"Compensation" means the annual remuneration paid or accrued for personal
service rendered to an Employing Company during the Plan Year as reported on
Form W-2 and shall also include any authorized Pre-Tax Contributions pursuant to
Section 2.01 of the Plan and any authorized salary reduction amount pursuant to
a plan established under Section 125 of the Code.
"Determination Date" means, with respect to any Plan Year, (i) the last
day of the immediately preceding Plan Year, or (ii) in the case of the first
Plan Year of the Plan, the last day of such Plan Year.
45
"Key Employee" means, for any Plan Year, an Employee within the meaning of
Section 416(i)(1) of the Code.
"Non-Key Employee" means any employee of Zimmer or an Affiliate or
beneficiary of such employee who is not a Key Employee, within the meaning of
Section 416(i)(2) of the Code and the regulations thereunder.
"Pension Plan" means any defined benefit plan or any defined contribution
plan.
"Permissive Aggregation Group" means a Required Aggregation Group that
also includes a Pension Plan of Zimmer or an Affiliate which, although not
required to be included in the Required Aggregation Group, is treated by Zimmer
or an Affiliate as being part of such Required Aggregation Group, provided that
such Required Aggregation Group would continue to meet the requirements of
Sections 401(a)(4) and 410 of the Code with such Pension Plan being taken into
account.
"Required Aggregation Group" means (i) each Pension Plan of Zimmer or an
Affiliate in which a Key Employee is a member, and (ii) each other Pension Plan
of Zimmer or an Affiliate which enables any Pension Plan described in the
immediately preceding clause (i) to meet the requirements of Section 401(a)(4)
or 410 of the Code.
"Top Heavy Group" means, with respect to any Plan Year, an Aggregation
group if, as of the Determination Date with respect to such Plan Year, (i) the
sum of (1) the present value of the cumulative accrued benefits (determined, in
accordance with Section 416(g) of the Code and the regulations thereunder, as of
the most recent date which is within a twelve (12) month period ending on such
Determination Date that is used for computing Defined Benefit Plan costs for
minimum funding) for Key Employees under all defined benefit plans included in
such Aggregation Group, and (2) the aggregate of the accounts (determined, in
accordance with Section 416(g) of the Code and the regulations thereunder, as of
the valuation date (as provided in Section 9.03 coincident with or immediately
preceding such Determination Date) of Key Employees under all defined
contributions plans included in such Aggregation Group, exceeds (ii) sixty
percent (60%) of a similar sum determined for Key Employees and Non-Key
Employees; provided, however, that if any employee is a Non-Key Employee with
respect to any Pension Plan for any Plan Year, but such employee was a Key
Employee with respect to such Pension Plan for any prior Plan Year, any accrued
benefits for such employee and any account of such employee shall not be taken
into account for purposes of the foregoing determination.
Section 21.03 Determination of Top Heavy Plan. The Plan shall be a Top
Heavy Plan for any Plan Year, in which the Plan is included in a Top Heavy
Group.
Section 21.04 Top Heavy Contribution Requirement. For any Plan Year with
respect to which the Plan is determined to be a Top Heavy Plan, if the benefits
accrued, or contributions made, under all defined benefit plans and all other
defined contribution plans for Non-Key Employees is not at least equal to those
stated in Section 416(c) of the Code, the Employing Company Contributions for
such Plan Year for each Participant who is a Non-Key Employee, regardless of
whether such Non-Key Employee has completed 1,000 Hours of Service during such
Plan Year but only if such Non-Key Employee has not separated from service with
the
46
Employing Company on the last day of such Plan Year, as a percentage of such
Participant's annual Compensation, shall not be less than the lesser of:
(a) three percent (3%), or
(b) the highest percentage at which contributions are made for a Key
Employee; provided, however, that this paragraph (b) shall not apply if this
Plan and a defined benefit plan are required to be included in an Aggregation
Group and if this Plan enables such other plan to meet the qualification
requirements of the Code. If for any Plan Year, a Non-Key Employee participates
in one or more top-heavy qualified defined contribution plans and one or more
top-heavy defined benefit plans of Zimmer or an Affiliate, the minimum
contribution requirements set forth in this Section 21.04 will be deemed met if
the retirement benefit provided under the qualified defined benefit plan or
plans is at least equal to the minimum amount required under section 416(c)(1)
of the Code.
ARTICLE 22
AMENDMENT AND MODIFICATION OF THE PLAN
Section 22.01 Amendment and Exclusive Use of Benefits. The Plan may be
amended or modified by the Board of Directors acting in accordance with its
normal procedures at any time and from time to time; provided, however, that no
such amendment or modification, except in the case of an amendment or
modification respecting a qualified domestic relations order as defined under
Section 414(p) of the Code or as may otherwise be prescribed by law, shall make
it possible for any part of the corpus or income of the trust fund to be used
for or diverted to purposes other than for the exclusive benefit of
Participants, Inactive Participants, Former Participants or their Beneficiaries
under the Plan. Any such amendment or modification may make any changes in the
Plan, including retroactive changes, which may be deemed necessary or desirable
to qualify the Plan and the trust forming a part thereof, or to continue the
qualified status of the Plan and the trust forming a part thereof, or to
continue the qualified status of the Plan and the exempt status of the trust,
under Sections 401(a), 401(k) and 501(a) of the Code, or any similar successor
provisions of law or of ERISA, or to conform to governmental regulations. No
amendment to the Plan shall divest any Participant of any right theretofore
accrued nor shall any amendment eliminate a benefit payment option under the
Plan except as otherwise provided by law or regulation.
ARTICLE 23
SUSPENSION, TERMINATION, MERGER OR CONSOLIDATION OF PLAN
Section 23.01 Suspension and Termination. It is the intention of Zimmer to
continue the Plan indefinitely, however, the Board of Directors may at any time
and for any reason suspend or terminate the Plan or discontinue or suspend the
making of Pre-Tax Contributions and/or After-Tax Contributions from Annual
Benefit Salary or Wages of all Participants and of contributions
47
by all Employing Companies. Any Employing Company may, by action of its Board of
Directors, suspend or terminate the making of Pre-Tax Contributions and/or
After-Tax Contributions from Annual Benefit Salary or Wages of Participants in
the employ of such Employing Company and of contributions by such Employing
Company. In the event of termination or partial termination of the Plan, or upon
complete discontinuance of contributions under the Plan by all Employing
Companies or by any Employing Company, all amounts in the account of each
Participant or Inactive Participant whose Employing Company shall be affected by
such termination, partial termination or discontinuance shall be nonforfeitable
and shall be distributed to him in a single distribution as soon as practicable
after such termination, partial termination or discontinuance, or if a
Participant shall so elect, in accordance with procedures prescribed by the
Committee.
Section 23.02 Merger and Consolidation. The Plan shall not be merged or
consolidated with, or any of its assets or liabilities transferred to, any other
plan unless each Participant, Inactive Participant and Former Participant would
(if the Plan then terminated) receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan then terminated).
Section 23.03 Merger of Another Plan. In the event another profit sharing
or stock bonus plan is merged into the Plan, the Committee shall direct the
Trustee to accept all assets held thereunder as of the date on which such merger
is effective and to invest such assets in accordance with Section 8.08, and
shall instruct the Trustee to maintain accounts of former participants in the
merged plan identical to the accounts maintained for all other Participants in
this Plan or in such other manner as the Committee in its sole discretion deems
appropriate. From and after the effective time of any such merger, amounts
transferred to the Trust maintained hereunder shall, except as specifically
provided herein to the contrary, be characterized as follows for all purposes of
this Plan:
(a) Amounts attributable to elective deferrals pursuant to a cash or
deferred arrangement subject to Section 401(k) of the Code when made shall be
deemed to be Pre-Tax Contributions, and the earnings and appreciation on such
elective deferrals shall be deemed earnings and appreciation on Pre-Tax
Contributions;
(b) Amounts attributable to employee contributions shall be deemed to be
After-Tax Contributions, and the earnings and appreciation on such employee
contributions shall be deemed to be earnings and appreciation on After-Tax
Contributions;
(c) Amounts attributable to matching contributions (as such term is
defined in Section 401(m)(4) of the Code) when made shall be deemed to be
Employing Company contributions, and the earnings and appreciation on such
matching contributions shall be deemed to be earnings and appreciation on
Employing Company Contributions;
(d) Amounts attributable to qualified nonelective contributions (as such
term is defined in Section 401(m)(4) of the Code) when made shall be deemed to
be Qualified Nonelective Contributions, and the earnings and appreciation on
such qualified nonelective
48
contributions shall be deemed to be earnings and appreciation on Qualified
Nonelective Contributions;
(e) Amounts attributable to any rollover contribution to the merged plan,
which rollover contribution was subject to Section 402(c), 403(a)(4), or
408(d)(3) of the Code (or any predecessor provision thereof) when made, shall be
deemed to be Rollover Contributions, and the earnings and appreciation on such
rollover contribution shall be deemed to be earnings and appreciation on
Rollover Contributions;
(f) Any other amounts transferred, to the extent vested immediately prior
to the merger, shall be deemed to be Rollover Contributions, and, to the extent
not vested at such time, shall be deemed to be Employing Company Contributions.
For purposes of Article 12 hereof, the amounts described in Sections
23.03(a)-(f) shall be deemed to have been contributed or credited to the
Participant's account under this Plan at the time at which such amounts were
contributed or credited to the Participant's account under the merged plan. In
addition, any outstanding loan from the merged plan to a participant thereunder
which is assumed by this Plan shall be deemed to be a loan from this Plan;
provided, however, that the Plan may give effect to any lawful terms of such
loan which are not otherwise permitted in the case of loans from this Plan.
ARTICLE 24
GENERAL PROVISIONS
Section 24.01 Plan Not an Employment Contract. The Plan shall not be
deemed to constitute a contract between an Employing Company and any Employee
nor shall anything herein contained be deemed to give any Employee any right to
be retained in the employ of an Employing Company, or to interfere with the
right of an Employing Company to discharge any Employee at any time and to treat
him without regard to the effect which such treatment might have upon him as a
Participant.
Section 24.02 Assignment and Attachment of Distributions Not Permitted.
Except in the case of a qualified domestic relations order as defined under
Section 414(p) of the Code or as may otherwise be prescribed by law, no
distribution or payment under the Plan to any Participant, Inactive Participant,
Former Participant or Beneficiary, or any other person entitled to payment under
the Plan, may be anticipated, assigned (either at law or in equity), alienated
or subject to attachment, garnishment, levy, execution, or other legal or
equitable process. If any such person is adjudicated bankrupt or purports to
anticipate, assign or alienate any such distribution or payment, the Committee,
in its discretion, may hold or apply or cause to be held or applied such
distribution or payment, or any part thereof, for the benefit of such person in
such manner as the Committee shall direct.
Section 24.03 Payments to Minors and Incompetent Persons. If the Committee
determines that any person entitled to a distribution or payment from the trust
fund under the Plan is an infant or incompetent or is unable to care for his
affairs by reason of physical or
49
mental disability, it may cause all distributions or payments thereafter
becoming due to such person to be made to any other person for his benefit,
without responsibility to follow the application of payments so made. Payments
made pursuant to this provision shall completely discharge an Employing Company,
the Trustee, and the Committee with respect thereto.
Section 24.04 Distributions Paid from Trust. The trust fund established
under the Plan shall be the sole source of the payments or distributions to be
made in accordance with the Plan.
Section 24.05 Plan Intended to be a Qualified Plan. Zimmer and each
Employing Company intends that the Plan (including the trust forming a part
thereof) shall be a plan of an employer for the exclusive benefit of its
employees or their beneficiaries as provided for in Sections 401(a) and 501(a)
of the Code and as may be provided for in any similar provisions of subsequent
revenue laws, and that the trust shall be a qualified trust under such
provisions and exempt under Section 501(a) of the Code and as may be provided
for in any similar provisions of subsequent revenue laws. Zimmer and each
Employing Company intend that the Plan shall meet the requirements of Sections
401(k) and (m) of the Code.
Section 24.06 Return of Contribution. Upon request of Zimmer, the Trustee
shall return:
(a) to the Employing Company which has made contributions, any
contributions made under this Plan (adjusted to reflect any earnings and any
appreciation or depreciation attributable thereto) if the Internal Revenue
Service refuses to issue an initial determination letter to the effect that this
Plan and the trust meet the requirements of the Code. Such contributions will be
returned within one year after the date of such denial of qualification and this
Plan and the trust will then terminate.
(b) to the Employing Company, any contribution by such Employing Company
made under a mistake of fact. The amount which may be returned may not exceed
the excess of the amount contributed (reduced to reflect any loss or
depreciation attributable thereto) over the amount that would have been
contributed had there not occurred a mistake of fact. Appropriate reductions
will be made in the accounts of Participants to reflect the return of any
contributions previously credited to such accounts. However, no contribution
will be returned to the extent that such reduction would reduce the account of a
Participant to an amount less than the balance that would have been credited to
his account had the contributions not been made. No contribution made by the
Employing Company under a mistake of fact will be returned after the expiration
of one year from the date of contribution.
(c) to the Employing Company, any contribution by such Employing Company
conditioned upon its deductibility under Section 404 of the Code. All
contributions by the Employing Company under the Plan are expressly made
conditional upon their deductibility for federal income tax purposes. The amount
that may be returned may not exceed the excess of the amount contributed
(reduced to reflect any loss or depreciation attributable thereto) over the
amount that would have been contributed had there not occurred a mistake in
determining the deduction. Appropriate reductions will be made in the accounts
of Participants to reflect the return of any contributions previously credited
to such accounts. However, no contribution will be returned to the extent that
such reduction would reduce the account of a Participant to an amount less than
the balance that would have been credited to his account had the contribution
50
not been made. Any contribution conditioned on its deductibility which is
returned to Zimmer will be returned within one year after it is disallowed as a
deduction.
Section 24.07 Governing Law. The provisions of the Plan shall be
construed, administered and governed under the laws of the State of Indiana,
except as such laws may have been superseded by ERISA.
51