-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, STj/Qx6kGYwfrzcZ9DAOvLMXRxxITJ/fY2qfrZmsNnpWb0D4FMZ5G9EDLNRSUd6h RCuF0UE5Ipv+j9VUf/VRtA== 0001005477-01-500328.txt : 20010807 0001005477-01-500328.hdr.sgml : 20010807 ACCESSION NUMBER: 0001005477-01-500328 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20010806 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20010806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZIMMER HOLDINGS INC CENTRAL INDEX KEY: 0001136869 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 134151777 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16407 FILM NUMBER: 1699157 BUSINESS ADDRESS: STREET 1: 345 EAST MAIN STREET CITY: WARSAW STATE: IN ZIP: 46580 BUSINESS PHONE: 2192676131 MAIL ADDRESS: STREET 1: 345 EAST MAIN STREET CITY: WARSAW STATE: IN ZIP: 46580 8-K 1 d01-33971.txt CURRENT REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 6, 2001 ZIMMER HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 001-16407 13-4151777 (State or Other (Commission File (IRS Employer Jurisdiction of Number) Identification Incorporation) Number) 345 East Main Street Warsaw, IN, 46580 (Address of Principal Executive Office) Registrant's telephone number, including area code: (219) 267-6131 ================================================================================ ITEM 5. OTHER EVENTS (A) APPOINTMENT OF NEW DIRECTORS In anticipation of the expected completion of the distribution on August 6, 2001 by Bristol-Myers Squibb Company of all of the outstanding shares of the registrant as a tax-free dividend to Bristol-Myers Squibb common stockholders of record on July 27, 2001, on August 6, 2001, the registrant issued the press release attached hereto as Exhibit 99.1 announcing the appointments of John L. McGoldrick, effective August 1, 2001, and Regina E. Herzlinger, Augustus A. White, III, M.D., Ph.D., and Larry C. Glasscock, effective August 6, 2001, as directors of Zimmer Holdings, Inc. Mr. McGoldrick has been appointed a Class 3 director for a term to expire at the annual meeting of stockholders to be held in 2004. Ms. Herzlinger has been appointed a Class 1 director for a term to expire at the annual meeting of stockholders to be held in 2002. Dr. White has been appointed a Class 2 director with a term to expire at the annual meeting of stockholders to be held in 2003. Mr. Glasscock has been appointed a Class 3 director for a term to expire at the annual meeting of stockholders to be held in 2004. In addition, effective August 1, 2001, Mr. Elliott has been designated Chairman of the Board and a Class 1 director with a term to expire at the annual meeting of stockholders to be held in 2002. John L. McGoldrick, age 60, has served Bristol-Myers Squibb, the parent of the registrant prior to the distribution, as Executive Vice President and General Counsel since 2000, President, Medical Devices Group, a division of Bristol-Myers Squibb, since 1998, and Vice Chairman of the Executive Committee, with responsibility for Global Policy, since May 9, 2001. From 2000 until May 9, 2001, Mr. McGoldrick also served Bristol-Myers Squibb as a member of the Office of the Chairman and Corporate Operating Committee. From 1998 until 2000, in addition to serving as President, Medical Devices Group, a division of Bristol-Myers Squibb, Mr. McGoldrick served Bristol-Myers Squibb as General Counsel and Senior Vice President, Corporate Staff. From 1997 until 1998, he served Bristol-Myers Squibb as General Counsel and Senior Vice President, Law and Strategic Planning, Corporate Staff. From 1995 until 1997, Mr. McGoldrick served Bristol-Myers Squibb as General Counsel and Senior Vice President, Corporate Staff. Regina E. Herzlinger, age 57, has been a Professor of Business Administration at Harvard Business School since 1971. Ms. Herzlinger currently serves as a director of Cardinal Health, Inc., a healthcare distributor, C. R. Bard, Inc., a healthcare products company, Deere & Company, an equipment manufacturer, Nanogen, Inc., a biotechnology company, Noven Pharmaceuticals, a pharmaceuticals company, and Schering-Plough Corporation, a pharmaceuticals company. The terms of her directorships at Cardinal Health and C.R. Bard expire during 2001. Augustus A. White, III, M.D., Ph.D., age 65, was a Professor of Orthopaedic Surgery at Yale Medical School, and has been a Professor of Orthopaedic Surgery at Harvard Medical School since 1978. Dr. White is also Orthopaedic Surgeon in Chief Emeritus at Beth Israel Deaconess Medical Center and Master of the Oliver Wendell Holmes Society, Harvard Medical School. He is a former director of American Shared Hospital Services, an imaging equipment leasing company. He currently serves as a director of OrthoLogic, an orthopaedics products company. Larry C. Glasscock, age 53, has served as President and Chief Executive Officer of Anthem Insurance Companies, Inc., a Blue Cross and Blue Shield licensee, since October 1999. Mr. Glasscock joined Anthem in April 1998 as Senior Executive Vice President and Chief Operating Officer and was named President and Chief Operating Officer in April 1999. Prior to 1 joining Anthem, Mr. Glasscock served as Chief Operating Officer of Care First, Inc., and insurance company, from January 1998 until April 1998, and as Chief Executive Officer of Group Hospitalization and Medical Services, Inc., an insurance company, from August 1993 until January 1998. OWNERSHIP OF STOCK The following table sets forth information with respect to the projected beneficial ownership by Mr. McGoldrick, Ms. Herzlinger, Dr. White and Mr. Glasscock of the registrant's outstanding common stock, immediately following completion of the distribution by Bristol-Myers Squibb. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible within 60 days of this current report on Form 8-K into shares of Bristol-Myers Squibb common stock are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage of ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. The projections below are based on the number of shares of Bristol-Myers Squibb common stock beneficially owned by each director as of August 1, 2001. The share amounts in the table reflect the distribution ratio of a share of the registrant's common stock compared to ten shares of Bristol-Myers Squibb beneficially owned by the listed director. The percentage ownership of the registrant's common stock of each listed director immediately following the distribution will be approximately the same as such director's percentage ownership of Bristol-Myers Squibb's outstanding common stock immediately prior to the distribution and is calculated based on the number of shares of Bristol-Myers Squibb's common stock outstanding as of August 1, 2001. None of the listed directors beneficially owns one percent or more of Bristol-Myers Squibb's outstanding common stock. Except as otherwise noted in the footnotes below, the individual director or his or her family members had sole voting and investment power with respect to such securities. Upon completion of the distribution, we expect to have outstanding an aggregate of 193,760,191 shares of our common stock based upon the shares of Bristol-Myers Squibb common stock outstanding on August 1, 2001, excluding treasury stock and assuming no exercise of options. DIRECTORS' OWNERSHIP AFTER THE DISTRIBUTION
NAME AND ADDRESS OF OUR COMMON STOCK OUR OTHER COMMON PERCENTAGE OF CLASS AFTER BENEFICIAL OWNER* BENEFICIALLY OWNED(1) STOCK EQUIVALENTS(2) THE DISTRIBUTION John L. McGoldrick 8,332 147 ** DIRECTOR Regina E. Herzlinger 40(3) -- ** DIRECTOR Augustus A. White, III -- -- ** DIRECTOR Larry C. Glasscock 40(4) -- ** DIRECTOR
2 * Unless otherwise indicated, the address for each individual listed is c/o Zimmer Holdings, Inc., 345 East Main Street, Warsaw, IN 46580. ** Represents holdings of less than one percent of the outstanding shares of our common stock. (1) The amounts included in this column represent the shares of the registrant's common stock which will be beneficially owned by the listed individuals based on the distribution ratio of one share of common stock to be received for every ten shares of Bristol-Myers Squibb common stock beneficially owned by such individuals. (2) Represents share units of the registrant's common stock which will be beneficially owned by the listed individuals based on the distribution ratio of one share of common stock to be received for every ten shares of Bristol-Myers Squibb common stock beneficially owned by such individuals in the Bristol-Myers Squibb Savings and Investment Program. (3) Represents shares owned jointly by Ms. Herzlinger and her spouse with respect to which voting and investment decisions are shared. (4) Represents shares held in a trust, the voting and investment decisions with respect to which require Mr. Glasscock's consent. (B) NEW CREDIT FACILITY On July 31, 2001, Bristol-Myers Squibb and the registrant and certain subsidiaries of the registrant entered into a $600 million three year competitive advance and revolving credit facility agreement with The Chase Manhattan Bank, Bank of America, N.A. and the other lenders named therein. A copy of this credit agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The credit facility provides for borrowings, in U.S. dollars and up to an aggregate of the equivalent of $150 million in Japanese Yen and $50 million in Euro, on a revolving credit basis and provides a procedure pursuant to which lenders may be invited to bid on borrowings on an uncommitted basis. At the option of the borrower, borrowings will bear interest at either a base rate or a LIBO rate plus, in either case, an applicable spread determined by reference to the registrant's senior unsecured non-credit enhanced long-term debt rating and amounts drawn under the facility. Commitments of each lender under the facility are subject to certain fees, including a facility fee which will accrue at a rate determined by reference to the registrant's applicable debt rating. The credit agreement contains customary restrictions, covenants and events of default for an unsecured financing. In addition, the credit agreement provides for unconditional and irrevocable guarantees by the registrant and each domestic wholly-owned subsidiary of the registrant, as primary obligors, of the obligations of all borrowers under the facility. On August 2, 2001, Bristol-Myers Squibb borrowed $290 million, and, on August 6, 2001, borrowed an additional $22 million under this credit facility that the registrant will assume and for which the registrant will not receive any proceeds. In addition, on August 2, 2001, the registrant borrowed, directly or through one of its subsidiaries, under the credit facility an additional amount of approximately $140 million of which approximately $90 million was used to satisfy inter-company obligations due to Bristol-Myers Squibb and approximately $50 million will be retained as working capital. The registrant may borrow, directly or through one of its subsidiaries, up to an additional $48 million under the facility after the distribution date which will be used to fund costs and expenses expected to be incurred in connection with the separation. Upon the distribution, Bristol-Myers Squibb will 3 be relieved of all obligations under the credit facility and the registrant will become obligated to satisfy all payments and other requirements under this credit facility. After the distribution date the registrant may incur up to $100 million of additional debt under this credit facility to fund the registrant's capital expenditure requirements and provide additional working capital. (C) ADOPTION OF ZIMMER EMPLOYEE BENEFIT PLANS On July 21, 2001, the board of directors of the registrant, acting by unanimous written consent, approved and ratified the adoption of the benefit plans listed below. Certain of these plans had previously been approved by Bristol-Myers Squibb, acting as sole shareholder. STOCK BASED PLANS o Zimmer Holdings, Inc. Savings and Investment Program o Zimmer Holdings, Inc. 2001 Stock Incentive Plan o Zimmer Holdings, Inc. TeamShare Stock Option Plan o Zimmer Holdings, Inc. Stock Plan for Non-Employee Directors o Zimmer Puerto Rico Savings and Investment Program OTHER BENEFIT PLANS o Zimmer Holdings, Inc. Executive Performance Incentive Plan o Zimmer Holdings, Inc. Deferred Compensation Plan for Non-Employee Directors o Zimmer Holdings, Inc. Retirement Income Plan o Zimmer Puerto Rico Retirement Income Plan o Zimmer Holdings, Inc. Short Term Disability Plan o Zimmer Holdings, Inc. Long-Term Disability Income Plan o Zimmer Holdings, Inc. Health and Welfare Plan o Benefits Equalization Plan of Zimmer Holdings, Inc. and Its Subsidiary or Affiliated Corporations Participating in the Zimmer Holdings, Inc. Retirement Income Plan or the Zimmer Puerto Rico Retirement Income Plan 4 o Benefits Equalization Plan of Zimmer Holdings, Inc. and Its Subsidiary or Affiliated Corporations Participating in the Zimmer Holdings, Inc. Savings and Investment Program o Zimmer Holdings, Inc. Long-Term Disability Income Plan for Highly Compensated Employees The material provisions of the stock based plans and the plans in which the registrant's officers or directors are the primary participants are described in the Information Statement, dated July 12, 2001, which was included as exhibit 99.1 to Amendment No. 4 of the Form 10 filed by the registrant with the Securities and Exchange Commission on July 12, 2001. The Zimmer Holdings Inc. Stock Plan for Non-Employee Directors as adopted includes a provision under which options will become fully exercisable in the event that the board membership of a participating director is involuntarily terminated during the three-year period following a change of control of the registrant. A change of control occurs if any person becomes a 20% owner of the registrant, the shareholders approve a merger, consolidation, liquidation or sale of substantially all the assets of the registrant, or if there is a change in the majority of the board of directors within two years after the effective date of the plan. An involuntary termination occurs if a director ceases to be a member of the board for any reason other than death, disability, voluntary resignation, willful misconduct or activity deemed detrimental to the interests of the registrant. (D) OPTION AWARDS The registrant has increased the awards of options to purchase shares of the registrant's common stock granted to the registrant's executive officers in connection with the registrant's separation from Bristol-Myers Squibb Company. The aggregate economic value of the awards of our stock options, which will be granted by September 5, 2001 with an exercise price equal to the fair market value on the date of grant, has been increased from $9,525,000 to $12,460,000. The awards to J. Raymond Elliott, Roy D. Crowninshield, Bruce E. Peterson, John S. Loveman-Krelle and Paul D. Schoenle have been increased to $3,150,000, $615,000, $1,020,000, $615,000 and $360,000, respectively. As previously disclosed in the registrant's Information Statement dated July 12, 2001, filed as part of its Registration Statement on Form 10 (File No. 001-16407), the actual economic value of the options at the time of grant will be based on generally accepted valuation methodology and will vest in equal annual installments over a four-year period. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.1 Three Year Competitive Advance and Revolving Credit Facility among Zimmer Holdings, Inc., Zimmer, Inc., Zimmer K.K., Zimmer LTD. and the lenders named therein 10.2 Zimmer Holdings, Inc. Savings and Investment Program 10.3 Zimmer Holdings, Inc. 2001 Stock Incentive Plan 10.4 Zimmer Holdings, Inc. TeamShare Stock Option Plan 10.5 Zimmer Holdings, Inc. Executive Performance Incentive Plan 10.6 Zimmer Holdings, Inc. Stock Plan for Non-Employee Directors 10.7 Zimmer Holdings, Inc. Deferred Compensation Plan for Non-Employee Directors 99.1 Press Release dated August 6, 2001 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Zimmer Holdings, Inc. By: /s/ Paul D. Schoenle ------------------------------------ Name: Paul D. Schoenle Title: Vice President and Senior Counsel Date: August 6, 2001 6 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.1 Three Year Competitive Advance and Revolving Credit Facility among Zimmer Holdings, Inc., Zimmer, Inc., Zimmer K.K., Zimmer LTD. and the lenders named therein 10.2 Zimmer Holdings, Inc. Savings and Investment Program 10.3 Zimmer Holdings, Inc. 2001 Stock Incentive Plan 10.4 Zimmer Holdings, Inc. TeamShare Stock Option Plan 10.5 Zimmer Holdings, Inc. Executive Performance Incentive Plan 10.6 Zimmer Holdings, Inc. Stock Plan for Non-Employee Directors 10.7 Zimmer Holdings, Inc. Deferred Compensation Plan for Non- Employee Directors 99.1 Press Release dated August 6, 2001 7 EX-10.1 3 ex10-1.txt THREE YEAR COMPETITIVE ADVANCE AND REVOLVING Exhibit 10.1 EXECUTION COPY ================================================================================ $600,000,000 THREE YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT among ZIMMER HOLDINGS, INC., ZIMMER, INC., ZIMMER K. K., ZIMMER LTD., THE BORROWING SUBSIDIARIES, BRISTOL-MYERS SQUIBB COMPANY, THE LENDERS NAMED HEREIN, THE CHASE MANHATTAN BANK, as General Administrative Agent, THE CHASE MANHATTAN BANK, TOKYO BRANCH, as Japanese Administrative Agent, CHASE MANHATTAN INTERNATIONAL LIMITED, as Euro Administrative Agent, BANK OF AMERICA, N.A., as Syndication Agent, ABN AMRO BANK N.V., as Co-Documentation Agent, FLEET NATIONAL BANK, as Co-Documentation Agent, and SUNTRUST BANK, as Co-Documentation Agent Dated as of July 31, 2001 ================================================================================ J. P. Morgan Securities Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Bookrunners TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS..........................................................1 SECTION 1.1. Defined Terms..............................................1 SECTION 1.2. Classification of Loans and Borrowings....................22 SECTION 1.3. Terms Generally...........................................22 SECTION 1.4. Accounting Terms; GAAP....................................22 ARTICLE II AMOUNT AND TERMS OF THE U.S. COMMITMENTS...........................22 SECTION 2.1. U.S. Commitments..........................................22 SECTION 2.2. U.S. Revolving Loans and Borrowings.......................23 SECTION 2.3. Requests for U.S. Revolving Borrowings....................23 SECTION 2.4. Pre Spin-Off Loans........................................24 SECTION 2.5. U.S. Revolving Loans to Bristol-Myers Squibb..............24 SECTION 2.6. Borrowing Subsidiaries....................................25 ARTICLE III AMOUNT AND TERMS OF THE JAPANESE COMMITMENTS......................25 SECTION 3.1. Japanese Commitment.......................................25 SECTION 3.2. Japanese Revolving Loans and Borrowings...................26 SECTION 3.3. Requests for Japanese Revolving Borrowings................26 ARTICLE IV AMOUNT AND TERMS OF THE EURO COMMITMENTS...........................27 SECTION 4.1. Euro Commitments..........................................27 SECTION 4.2. Euro Revolving Loans and Borrowings.......................27 SECTION 4.3. Requests for Euro Revolving Borrowings....................28 ARTICLE V COMPETITIVE BID LOANS...............................................29 SECTION 5.1. Competitive Bid Procedure.................................29 ARTICLE VI LETTERS OF CREDIT..................................................32 SECTION 6.1. Letters of Credit.........................................32 ARTICLE VII SWINGLINE.........................................................35 SECTION 7.1. Swingline Loans...........................................35 ARTICLE VIII GENERAL PROVISIONS APPLICABLE TO LOANS...........................37 SECTION 8.1. Funding of Borrowings.....................................37 ii SECTION 8.2. Interest Elections........................................38 SECTION 8.3. Termination and Reduction of Commitments..................39 SECTION 8.4. Repayment of Loans; Evidence of Debt......................40 SECTION 8.5. Prepayment of Loans.......................................41 SECTION 8.6. Fees......................................................42 SECTION 8.7. Interest..................................................43 SECTION 8.8. Alternate Rate of Interest................................44 SECTION 8.9. Increased Costs...........................................45 SECTION 8.10. Break Funding Payments...................................46 SECTION 8.11. Taxes....................................................47 SECTION 8.12. Payments Generally; Pro Rata Treatment; Sharing of Setoffs...............................................50 SECTION 8.13. Mitigation Obligations; Replacement of Lenders...........51 ARTICLE IX REPRESENTATIONS AND WARRANTIES.....................................52 SECTION 9.1. Organization; Powers......................................52 SECTION 9.2. Authorization.............................................52 SECTION 9.3. Enforceability............................................53 SECTION 9.4. Governmental Approvals....................................53 SECTION 9.5. Financial Statements; No Material Adverse Effect..........53 SECTION 9.6. Litigation; Compliance with Laws..........................53 SECTION 9.7. Federal Reserve Regulations...............................53 SECTION 9.8. Taxes.....................................................54 SECTION 9.9. Employee Benefit Plans....................................54 SECTION 9.10. Environmental and Safety Matters.........................54 SECTION 9.11. Properties...............................................54 SECTION 9.12. Investment and Holding Company Status....................55 SECTION 9.13. Spin-Off.................................................55 SECTION 9.14. Japanese Borrower Financial Statements...................55 SECTION 9.15. Bristol-Myers Squibb.....................................55 ARTICLE X CONDITIONS..........................................................55 SECTION 10.1. Bristol-Myers Squibb Effective Date......................55 SECTION 10.2. Pre Spin-Off Effective Date..............................56 SECTION 10.3. Zimmer Effective Date....................................56 SECTION 10.4. Each Credit Event........................................57 SECTION 10.5. Initial Borrowing by Each Borrowing Subsidiary...........58 ARTICLE XI AFFIRMATIVE COVENANTS..............................................58 SECTION 11.1. Existence................................................58 SECTION 11.2. Business and Properties..................................58 SECTION 11.3. Financial Statements, Reports, Etc.......................59 SECTION 11.4. Insurance................................................60 SECTION 11.5. Obligations and Taxes....................................60 SECTION 11.6. Litigation and Other Notices.............................60 iii SECTION 11.7. Books and Records........................................60 SECTION 11.8. Subsidiary Guarantor.....................................61 SECTION 11.9. Use of Proceeds..........................................61 ARTICLE XII NEGATIVE COVENANTS................................................61 SECTION 12.1. Consolidations, Mergers, and Sales of Assets.............61 SECTION 12.2. Liens....................................................61 SECTION 12.3. Limitation on Sale and Leaseback Transactions............63 SECTION 12.4. Financial Condition Covenants............................63 SECTION 12.5. Indebtedness.............................................64 SECTION 12.6. Transactions with Affiliates.............................64 SECTION 12.7. Restricted Payments......................................64 SECTION 12.8. Investments..............................................64 ARTICLE XIII EVENTS OF DEFAULT................................................65 ARTICLE XIV THE ADMINISTRATIVE AGENTS.........................................68 ARTICLE XV MISCELLANEOUS......................................................70 SECTION 15.1. Notices..................................................70 SECTION 15.2. Survival of Agreement....................................71 SECTION 15.3. Binding Effect...........................................72 SECTION 15.4. Successors and Assigns...................................72 SECTION 15.5. Expenses; Indemnity......................................75 SECTION 15.6. Applicable Law...........................................75 SECTION 15.7. Waivers; Amendment.......................................76 SECTION 15.8. Entire Agreement.........................................76 SECTION 15.9. Severability.............................................76 SECTION 15.10. Counterparts............................................77 SECTION 15.11. Headings................................................77 SECTION 15.12. Right of Setoff.........................................77 SECTION 15.13. Jurisdiction; Consent to Service of Process.............77 SECTION 15.14. Waiver of Jury Trial....................................78 SECTION 15.15. Conversion of Currencies................................78 SECTION 15.16. Guaranty................................................78 SECTION 15.17. Loan Conversion/Participation...........................81 SECTION 15.18. Confidentiality.........................................82 iv SCHEDULES: Schedule 2.1 Commitments Schedule 12.2 Existing Liens Schedule 12.6 Transactions with Affiliates Schedule 12.8 Existing Investments EXHIBITS: Exhibit A-1 Form of Competitive Bid Request Exhibit A-2 Form of Notice of Competitive Bid Request Exhibit A-3 Form of Competitive Bid Exhibit A-4 Form of Competitive Bid Accept/Reject Letter Exhibit A-5 Form of Borrowing Request Exhibit B Form of Assignment and Acceptance Exhibit C-1 Form of Opinion of Cravath, Swaine & Moore Exhibit C-2 Form of Opinion of Cravath, Swaine & Moore Exhibit D Form of Administrative Questionnaire Exhibit E Form of Borrowing Subsidiary Agreement Exhibit F Form of Borrowing Subsidiary Termination v THREE YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT (the "Agreement") dated as of July 31, 2001, among ZIMMER HOLDINGS, INC., a Delaware corporation (the "Company"), ZIMMER, INC., a Delaware corporation ("Zimmer" and together with the Company, the "U.S. Borrowers"), ZIMMER K.K., a company organized under the laws of Japan (the "Japanese Borrower"), ZIMMER LTD., a company incorporated under the laws of England and Wales (the "Euro Borrower"), BRISTOL-MYERS SQUIBB COMPANY, a Delaware corporation ("Bristol-Myers Squibb"), the BORROWING SUBSIDIARIES (as defined herein), the lenders listed in Schedule 2.1 (the "Lenders"), THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent for the Lenders (in such capacity, the "General Administrative Agent"), THE CHASE MANHATTAN BANK, TOKYO BRANCH, as administrative agent for the Japanese Lenders (in such capacity, the "Japanese Administrative Agent"), CHASE MANHATTAN INTERNATIONAL LIMITED, as administrative agent for the Euro Lenders (in such capacity, the "Euro Administrative Agent"), BANK OF AMERICA, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent"), THE CHASE MANHATTAN BANK, as competitive advance facility agent (in such capacity, the "Advance Agent"), ABN AMRO BANK N.V., as co-Documentation Agent, FLEET NATIONAL BANK, as co-Documentation Agent and SUNTRUST BANK, as co-Documentation Agent. The Borrowers and Bristol-Myers Squibb have requested that the Lenders, on the terms and subject to the conditions herein set forth (i) extend credit to the Borrowers and Bristol-Myers Squibb to enable them to borrow on a standby revolving credit basis on and after the date hereof and at any time and from time to time prior to the Maturity Date (such term and each other capitalized term used but not defined herein having the meaning assigned to it in Article I) a principal amount not in excess of $600,000,000 (or $380,000,000, in the case of Bristol-Myers Squibb) and (ii) provide a procedure pursuant to which the Borrowers may invite the Lenders to bid on an uncommitted basis on short-term borrowings by the Borrowers. The proceeds of such borrowings are to be used in the case of the Company and its Subsidiaries, for working capital and other general corporate purposes (other than funding hostile acquisitions), and in the case of Bristol-Myers Squibb, for general corporate purposes (other than funding hostile acquisitions). The Lenders are willing to extend such credit on the terms and subject to the conditions herein set forth. Accordingly, the parties hereto agree as follows: ARTICLE I Definitions SECTION 1.1. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. 2 "Adjusted Revolving Credit Exposure" shall mean, with respect to each Lender, the Revolving Credit Exposure of such Lender, plus the amount of any participating interests purchased by such Lender pursuant to Section 15.17, minus the amount of any participating interests sold by such Lender pursuant to Section 15.17. "Administrative Agents" shall mean the collective reference to the General Administrative Agent, the Japanese Administrative Agent and the Euro Administrative Agent; each, individually, an "Administrative Agent". "Administrative Fees" shall have the meaning assigned to such term in Section 8.6(b). "Administrative Questionnaire" shall mean an administrative questionnaire delivered by a Lender pursuant to Section 15.4 in the form of Exhibit D. "Advance Agent" shall have the meaning set forth in the preamble. "Affiliate" shall mean, when used with respect to a specified Person, another Person that directly, or indirectly, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" shall mean for any day, a rate per annum equal to the greatest of (a) the rate of interest per annum publicly announced from time to time by Chase as its base rate in effect at its principal office in New York City, (b) 1/2 of one percent above the Federal Funds Effective Rate and (c) the Base CD Rate in effect for such day plus 1%. If for any reason Chase shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or Federal Funds Effective Rate, or both, specified in clause (b) or (c), respectively, of the first sentence of this definition, for any reason, including, without limitation, the inability or failure of Chase to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate shall be effective on the effective date of any change in such rate. "Alternative Currency" shall mean at any time, Euro, Japanese Yen and any currency (other than Dollars) that is readily available, freely traded and convertible into Dollars in the London market and as to which a Dollar Equivalent can be calculated. "Applicable Margin" shall mean, for each Loan, the applicable rate per annum determined pursuant to the Pricing Grid. "Applicable Percentage" shall mean, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitments. If the Commitments have terminated or expired, Applicable Percentage shall mean, with respect to any Lender, the percentage of the aggregate outstanding principal amount of the Revolving Credit Exposures and Competitive Loans represented by the aggregate outstanding principal amount of such Lender's Revolving Credit Exposures and Competitive Loans. 3 "Assessment Rate" shall mean, for any day, the net annual assessment rate (rounded upwards, if necessary, to the next higher Basis Point) as most recently estimated by the General Administrative Agent for determining the then current annual assessment payable by Chase to the Federal Deposit Insurance Corporation (or any successor) for insurance by such Corporation (or such successor) of time deposits made in Dollars at Chase's domestic offices. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee in the form of Exhibit B. "Availability Period" shall mean the period from and including the Zimmer Effective Date to (but excluding) the earlier of the Maturity Date and the date of termination of the Commitments. "Base CD Rate" shall mean the sum of (a) the product of (i) the Average Weekly Three-Month Secondary CD Rate times (ii) a fraction of which the numerator is 100% and the denominator is 100% minus the aggregate rates of (A) basic and supplemental reserve requirements in effect on the date of effectiveness of such Average Weekly Three-Month Secondary CD Rate, as set forth below, under Regulation D of the Board applicable to certificates of deposit in units of $100,000 or more issued by a "member bank" located in a "reserve city" (as such terms are used in Regulation D) and (B) marginal reserve requirements in effect on such date of effectiveness under Regulation D applicable to time deposits of a "member bank" and (b) the Assessment Rate. "Average Weekly Three-Month Secondary CD Rate" shall mean the three-month secondary certificate of deposit ("CD") rate for the most recent weekly period covered therein in the Federal Reserve Statistical release entitled "Weekly Summary of Lending and Credit Measures (Averages of daily figures)" released in the week during which occurs the day for which the CD rate is being determined. The CD rate so reported shall be in effect, for the purposes of this definition, for each day of the week in which the release date of such publication occurs. If such publication or a substitute containing the foregoing rate information is not published by the Federal Reserve for any week, such average rate shall be determined by Chase on the basis of quotations received by it from three New York City negotiable certificate of deposit dealers of recognized standing on the first Business Day of the week succeeding such week for which such rate information is not published. "Basis Point" shall mean 1/100th of 1%. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America. "Board of Directors" shall mean either the board of directors of the Company or any duly authorized committee thereof or any committee of officers of the Company acting pursuant to authority granted by the board of directors of the Company or any committee of such board. "Borrower" shall mean the U.S. Borrower, the Euro Borrower, the Japanese Borrower or any Borrowing Subsidiary. "Borrower Obligations" shall mean the due and punctual payment of (i) the principal of and interest on any Loans made by the Lenders to the Borrowers pursuant to this 4 Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities (including, without limitation, the obligations described in Section 2.6) of the Borrowers to the Lenders under this Agreement and the other Loan Documents. "Borrowing" shall mean (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect or (c) a Swingline Loan or group of Swingline Loans of the same Type made on the same date. "Borrowing Request" shall mean a request by any Borrower for a Revolving Borrowing in accordance with Section 2.3, 3.3 or 4.3. "Borrowing Subsidiary" shall mean any Subsidiary of the Company designated as a Borrowing Subsidiary by the Company pursuant to Section 2.6. "Borrowing Subsidiary Agreement" shall mean a Borrowing Subsidiary Agreement substantially in the form of Exhibit E. "Borrowing Subsidiary Termination" shall mean a Borrowing Subsidiary Termination substantially in the form of Exhibit F. "Bristol-Myers Squibb Effective Date" shall mean the date on which the conditions specified in Section 10.1 are satisfied (or waived in accordance with Section 15.7). "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City; provided, however, that, when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market, or in the city which is the principal financial center of the country of issuance of the applicable Alternative Currency. "Capital Lease Obligations" of any Person, shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Cash Equivalents" shall mean (a) marketable direct obligations issued by, or unconditionally guaranteed or insured by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits, bankers' acceptances or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof whose short-term commercial paper rating at the time of acquisition is at least B or the equivalent thereof by Fitch IBCA, A-3 or the 5 equivalent thereof by S&P, or P-3 or the equivalent thereof by Moody's (c) commercial paper of an issuer rated at least A-2 or the equivalent thereof at the time of acquisition by S&P or at least P-2 or the equivalent thereof at the time of acquisition by Moody's, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities or marketable direct obligations with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change in Control" shall be deemed to have occurred if (a) after the Zimmer Effective Date, any Person or group of Persons (other than (i) the Company, (ii) any Subsidiary or (iii) any employee or director benefit plan or stock plan of the Company or a Subsidiary or any trustee or fiduciary with respect to any such plan when acting in that capacity or any trust related to any such plan) shall have acquired beneficial ownership of shares representing more than 20% of the combined voting power represented by the outstanding Voting Shares of the Company (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder) or (b) during any period of 12 consecutive months, commencing before or after the date of this Agreement, individuals who on the first day of such period were directors of the Company (together with any replacement or additional directors who were nominated or elected by a majority of directors then in office) cease to constitute a majority of the Board of Directors of the Company. "Change in Law" shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 8.9, by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Chase" shall mean The Chase Manhattan Bank, a New York banking corporation. "Class" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are U.S. Revolving Loans, Japanese Revolving Loans, Euro Revolving Loans, Swingline Loans or Competitive Loans. 6 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Commitments" shall mean the collective reference to the U.S. Commitments, the Japanese Commitments and the Euro Commitments. The initial aggregate amount of the Commitments is $600,000,000. "Committed Exposure Percentage" shall mean, on any date with respect to any Lender, the percentage which the Adjusted Aggregate Committed Exposure of such Lender constitutes of the Adjusted Aggregate Committed Exposure of all Lenders. "Company" shall have the meaning set forth in the preamble. "Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan pursuant to Article V. "Competitive Bid Accept/Reject Letter" shall mean a notification made by the Company pursuant to Section 5.1(d) in the form of Exhibit A-4. "Competitive Bid Rate" shall mean, as to any Competitive Bid, the Competitive Loan Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request" shall mean a request made pursuant to Article V in the form of Exhibit A-1. "Competitive Borrowing" shall mean a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted under the bidding procedure described in Article V. "Competitive Loan" shall mean a Loan made pursuant to Article V. Each Competitive Loan shall be a Eurocurrency Competitive Loan or a Fixed Rate Loan. "Competitive Loan Exposure" shall mean, with respect to any Lender at any time, the sum of (a) the aggregate principal amount of the outstanding Competitive Loans of such Lender denominated in Dollars and (b) the sum of the Dollar Equivalent of the aggregate principal amounts of the outstanding Competitive Loans of such Lender denominated in Alternative Currencies. "Competitive Loan Margin" shall mean, with respect to any Competitive Loan bearing interest at a rate based on the Eurocurrency Rate, the marginal rate of interest, if any, to be added to or subtracted from the Eurocurrency Rate in order to determine the interest rate applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "Conduit Lender": means any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument subject to the consent of the 7 Company (such consent not to be unreasonably withheld); provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 8.9, 8.10, 8.11, or 15.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment. "Consolidated EBITDA" shall mean, for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs (e) any extraordinary, unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business) and (f) any other non-cash charges, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income, (b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) any other non-cash income, all as determined on a consolidated basis. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a "Reference Period") pursuant to any determination of the Consolidated Leverage Ratio, (i) if at any time during such Reference Period the Company or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (ii) if during such Reference Period the Company or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. As used in this definition, "Material Acquisition" means any acquisition of property or series of related acquisitions of property that (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (b) involves the payment of consideration by the Borrower and its Subsidiaries in excess of $25,000,000; and "Material Disposition" means any Disposition of property or series of related Dispositions of property that yields gross proceeds to the Borrower or any of its Subsidiaries in excess of $25,000,000. "Consolidated Interest Coverage Ratio" shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period. 8 "Consolidated Interest Expense" shall mean, for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of the Company and its Subsidiaries for such period with respect to all outstanding Debt of the Company and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, minus interest income on cash equivalent investments. "Consolidated Leverage Ratio" shall mean, as at the last day of any period, the ratio of (a) the sum of (i) Consolidated Total Debt plus, to the extent not included in the definition of Consolidated Total Debt, (ii) the aggregate amount of financing provided by third-parties in connection with Permitted Receivables Securitizations on such day to (b) Consolidated EBITDA for such period. "Consolidated Net Income" shall mean, for any period, the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded, without duplication, (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Company) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Company to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary. "Consolidated Net Tangible Assets" shall mean, with respect to the Company, the total amount of its assets (less applicable reserves and other properly deductible items) after deducting (i) all current liabilities (excluding the amount of those which are by their terms extendable or renewable at the option of the obligor to a date more than 12 months after the date as of which the amount is being determined) and (ii) all goodwill, tradenames, trademarks, patents, unamortized debt discount and expense and other like intangible assets, all as set forth on the most recent balance sheet of the Company and its consolidated subsidiaries and determined on a consolidated basis in accordance with GAAP. "Consolidated Total Debt" shall mean, at any date, the aggregate stated balance sheet amount of all Debt of the Company and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP, minus cash and cash equivalent investments held in the United States provided that such cash and cash equivalent investments are free of any Liens. "Contractual Obligation" shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership 9 of voting securities, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Conversion Date" shall mean any date on which either (a) an Event of Default under paragraph (g) or (h) of Article XIII has occurred with respect to a Borrower or (b) the Commitments shall have been terminated prior to the Maturity Date and/or the Loans shall have been declared immediately due and payable, in either case pursuant to Article XIII. "Converted Loans" shall have the meaning set forth in Section 15.17. "Credit Party" shall mean any Borrower or any Subsidiary Guarantor. "Currency" shall mean Dollars or any Alternative Currency. "Debt" of any Person, shall mean, without duplication, (i) all obligations of such Person represented by notes, bonds, debentures or similar evidences of indebtedness; (ii) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services other than, in the case of any such deferred purchase price, on normal trade terms, (iii) all rental obligations of such Person as lessee under leases which shall have been or should be recorded as Capital Lease Obligations, (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations, contingent or otherwise, of such Person as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (vi) the liquidation value of all preferred capital stock of such Person which is redeemable at the option of the holder thereof or which may become (by scheduled or mandatory redemption) due within one year of the final Maturity Date, (vii) all Guarantees of such Person in respect of obligations of the kind referred to in clauses (i) through (vi) above, (viii) all obligations of the kind referred to in clauses (i) through (vii) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by the applicable Person, whether or not such Person has assumed or become liable for the payment of such obligation and (ix) for the purposes of paragraph (f) of Article XIII only, all obligations in respect of Hedge Agreements. The Debt of any Person shall include Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefore as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Debt expressly provide that such Person is not liable therefor. "Default" shall mean any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Dollar Equivalent" shall mean, with respect to an amount denominated in any Alternative Currency, the equivalent in Dollars of such amount determined at the Exchange Rate determined by the General Administrative Agent on the date of determination of such equivalent. In making any determination of the Dollar Equivalent for purposes of calculating the amount of Loans to be borrowed from the respective Lenders on any date, the General Administrative 10 Agent, the Japanese Administrative Agent or the Euro Administrative Agent, as the case may be, shall use the relevant Exchange Rate in effect on the date on which the relevant Borrower delivers a borrowing notice for such Loans pursuant to the provisions of this Agreement. With respect to any principal amount of any Competitive Loan denominated in an Alternative Currency, the equivalent in Dollars of such amount shall be determined by the General Administrative Agent using the Exchange Rate in effect for such Alternative Currency at approximately 11:00 a.m. London time on the date of the Competitive Bid Request that resulted in the making of such Competitive Loan. "Dollars" or "$" shall mean lawful money of the United States of America. "Domestic Wholly Owned Subsidiary" shall mean a Wholly Owned Subsidiary that is incorporated or organized under the laws of the United States or any state or political subdivision thereof. "Environmental and Safety Laws" shall mean any and all applicable current and future treaties, laws (including without limitation common law), regulations, enforceable requirements, binding determinations, orders, decrees, judgments, injunctions, permits, approvals, authorizations, licenses, permissions, or binding agreements issued, promulgated or entered by any Governmental Authority, relating to the environment, to employee health or safety as it pertains to the use or handling of, or exposure to, any Hazardous Substance, to preservation or reclamation of natural resources or to the management, release or threatened release of any Hazardous Substance, including without limitation the Hazardous Materials Transportation Act, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, the Clean Air Act of 1970, as amended, the Toxic Substances Control Act of 1976, the Occupational Safety and Health Act of 1970, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the Safe Drinking Water Act of 1974, as amended, any similar or implementing state law, all amendments of any of them, and any regulations promulgated under any of them. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Company, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 or ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Termination Event" shall mean (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (other than a "Reportable Event" not subject to the provision for 30-day notice to the PBGC under such regulations), or (ii) the withdrawal of the Company or any of its ERISA Affiliates from a "single employer" Plan during a plan year in which it was a "substantial employer", both of such terms as defined in Section 4001(a) of ERISA, or (iii) the incurrence of liability under Title IV of ERISA with respect to the termination of a Plan, or (iv) the institution of proceedings to terminate a Plan by 11 the PBGC or (v) the receipt by the Company or any ERISA Affiliate of any notice (whether or not written) from the PBGC of any event or condition which the PBGC asserts is reasonably likely to constitute grounds under Section 4042 of ERISA to terminate, or to appoint a trustee to administer, any Plan or (vi) the partial or complete withdrawal of the Company or any ERISA Affiliate of the Company from, or the Insolvency or Reorganization of, a Multiemployer Plan as defined in Section 4001(a)(3) of ERISA. "Euro" and "(euro)" shall mean the single currency of the participating member states of the European Union as constituted by the Treaty of Rome of March 25, 1957 (as amended by the Single European Act 1986, the Maastricht Treaty (which was signed at Maastricht on February 7, 1992 and came into force on November 1, 1993), the Amsterdam Treaty (which was signed at Amsterdam on October 2, 1997 and came into force on May 1, 1999) and the Nice Treaty (which was signed on February 26, 2001), each as amended from time to time and as referred to in legislative measures of the European Union for the introduction of, changeover to or operating of the Euro in one or more member states. "Euro Administrative Agent" shall mean Chase Manhattan International Limited, together with its affiliates (it being understood that any notices required to be delivered to the Euro Administrative Agent under this Agreement need not be delivered to such affiliates), as administrative agent for the Euro Lenders under this Agreement and the other Loan Documents, and any successor thereto appointed pursuant to Article XIV. "Euro Borrower" shall have the meaning set forth in the preamble. "Euro Commitment" as to any Euro Lender at any time, its obligation to make Euro Revolving Loans to the Euro Borrower and the Company in an aggregate Dollar Equivalent amount not to exceed at any one time outstanding the amount set forth opposite such Euro Lender's name in Part C of Schedule 2.1 under the heading "Euro Revolving Commitment". The initial aggregate amount of the Euro Commitments is $50,000,000. "Euro Lenders" shall mean the Lenders listed in Part C of Schedule 2.1 hereto. "Euro Revolving Credit Exposure" shall mean, as at any date of determination with respect to any Euro Lender, an amount equal to the Dollar Equivalent of the Euro Revolving Loans of such Lender on such date. "Euro Revolving Loan" shall have the meaning given such term in Section 4.1. "Eurocurrency" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to a Eurocurrency Rate. "Eurocurrency Rate" shall mean (a) with respect to any Eurocurrency Borrowing (other than Borrowings denominated in Euro or Japanese Yen) for any Interest Period, the rate appearing on Page 3740 or Page 3750, as the case may be, of Dow Jones Markets (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the General Administrative Agent from time to time for purposes of providing 12 quotations of interest rates applicable to deposits in Dollars or the applicable Alternative Currency in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits in Dollars or the applicable Alternative Currency with a maturity comparable to such Interest Period, (b) with respect to any Eurocurrency Borrowing denominated in Euro for any Interest Period, the rate appearing on page 248 of Dow Jones Markets (it being understood that this rate is the Euro interbank offered rate (known as the "EURIBOR Rate") sponsored by the Banking Federation of the European Union (known as the "FBE") and the Financial Markets Association (known as the "ACI")) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits in Euro with a maturity comparable to such Interest Period and (c) with respect to any Eurocurrency Borrowing denominated in Japanese Yen for any Interest Period, the rate appearing on the TIBM Page under the caption "Average 10 Banks" of Reuters (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by General Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in Japanese Yen in the Tokyo interbank market) at approximately 11:00 a.m., Tokyo time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits in Japanese Yen with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "Eurocurrency Rate" with respect to such Eurocurrency Borrowing for such Interest Period shall be the rate per annum (rounded upwards, if necessary, to the next Basis Point) equal to the arithmetic average of the rates at which deposits in Dollars or the applicable Alternative Currency approximately equal in principal amount to such Borrowing and for a maturity comparable to such Interest Period are offered (x) with respect to any Eurocurrency Borrowing (other than Borrowings denominated in Japanese Yen), to the principal London offices of the Reference Lenders (or, if any Reference Lender does not at the time maintain a London office, the principal London office of any Affiliate of such Reference Lender) in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period and (y) with respect to any Eurocurrency Borrowing denominated in Japanese Yen, to the principal Tokyo offices of the Reference Lenders (or, if any Reference Lender does not at the time maintain a Tokyo office, the principal Tokyo office of any Affiliate of such Reference Lender) in immediately available funds in the Tokyo interbank market at approximately 11:00 a.m., Tokyo time, two Business Days prior to the commencement of such Interest Period; provided, however, that, if only two Reference Lenders notify the General Administrative Agent of the rates offered to such Reference Lenders (or any Affiliates of such Reference Lenders) as aforesaid, the Eurocurrency Rate with respect to such Eurocurrency Borrowing shall be equal to the arithmetic average of the rates so offered to such Reference Lenders (or any such Affiliates). "Event of Default" shall have the meaning assigned to such term in Article XIII. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Rate" shall mean, with respect to any Alternative Currency on a particular date, the rate at which such Alternative Currency may be exchanged into Dollars, as set forth on such date on the applicable Reuters currency page with respect to such Alternative 13 Currency; provided that, the Company may make a one time election with the approval of the General Administrative Agent (such approval not to be unreasonably withheld) to use Bloomberg currency pages to determine the Exchange Rate instead of the Reuters currency pages. In the event that such rate does not appear on the applicable Reuters currency page or Bloomberg currency page, as the case may be, the Exchange Rate with respect to such Alternative Currency shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the General Administrative Agent and the Company or, in the absence of such agreement, such Exchange Rate shall instead be Chase's spot rate of exchange in the London interbank or other market where its foreign currency exchange operations in respect of such Alternative Currency are then being conducted, at or about 10:00 A.M., local time, at such date for the purchase of Dollars with such Alternative Currency, for delivery two Business Days later; provided, however, that if at the time of any such determination, for any reason, no such spot rate is being quoted, the General Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error. "Facility" shall mean (a) the credit facility constituted by the U.S. Commitments (the "U.S. Facility"), (b) the credit facility constituted by the Euro Commitments (the "Euro Facility") and (c) the credit facility constituted by the Japanese Commitments (the "Japanese Facility"). "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as released on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so released for any day which is a Business Day, the arithmetic average (rounded upwards, if necessary, to the next 1/100th of 1%), as determined by the Administrative Agent, of the quotations for the day of such transactions received by the General Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financial Officer" of any corporation shall mean the chief financial officer, principal accounting officer, vice president of finance, controller or treasurer of such corporation. "Fixed Rate" shall mean, with respect to any Competitive Loan (other than a Eurocurrency Competitive Loan), the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" shall mean a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" shall mean, with respect to any Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which such Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Form 10 Filing" shall mean the filing on Form 10 filed on July 12, 2001 by Bristol-Myers Squibb with the SEC with respect to the Spin-Off. 14 "GAAP" shall mean generally accepted accounting principles in the United States of America. "General Administrative Agent" shall mean Chase, together with its affiliates (it being understood that any notices required to be delivered under this Agreement to the General Administrative Agent need not be delivered to such affiliates), as arranger of the Commitments and as general administrative agent for the Lenders under this Agreement and the other Loan Documents, and any successor thereto appointed pursuant to Article XIV. "Governmental Authority" shall mean the government of any nation, including, but not limited to, the United States of America, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Debt or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Guarantor" shall mean the collective reference to the Company and the Subsidiary Guarantors. "Hazardous Substances" shall mean any toxic, radioactive, mutagenic, carcinogenic, noxious, caustic or otherwise hazardous substance, material or waste, including petroleum, its derivatives, by-products and other hydrocarbons, including, without limitation, polychlorinated biphenyls ("PCBs"), asbestos or asbestos-containing material, and any substance, waste or material regulated or that could reasonably be expected to result in liability under Environmental and Safety Laws. "Hedge Agreements" shall mean all interest rate swaps, caps or collar agreements or similar arrangements dealing with interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Insolvency" shall mean with respect to any Multiemployer Plan, the condition that such plan is insolvent within the meaning of Section 4245 of ERISA. "Interest Election Request" shall mean a request by the Company to convert or continue a U.S. Revolving Borrowing in accordance with Section 8.2 or a request by a Japanese 15 Borrower or the Euro Borrower to continue a Japanese Revolving Borrowing or a Euro Revolving Borrowing, as the case may be, in accordance with Section 8.2. "Interest Payment Date" shall mean (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period and (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing. "Interest Period" shall mean (a) as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is 1, 2, 3 or 6 (or, with the consent of all Lenders making such Loan, 9 or 12) months thereafter, as the applicable Borrower may elect, and (b) as to any Fixed Rate Borrowing, the period (which shall not be less than seven days or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurocurrency Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Investment Grade Standing" shall exist at any time when the actual Ratings are at or above BBB- from S&P and at or above Baa3 from Moody's. If either of S&P or Moody's shall change its system of classifications after the date of this Agreement, Investment Grade Standing shall exist at any time when the actual Rating is at or above the new Rating which most closely corresponds to the above-specified level under the previous rating system. "Issuing Lender" shall mean Chase in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Article VI. "Japanese Administrative Agent" shall mean The Chase Manhattan Bank, Tokyo Branch, together with its affiliates (it being understood that any notices required to be delivered to the Japanese Administrative Agent under this Agreement need not be delivered to such affiliates), as administrative agent for the Japanese Lenders under this Agreement and the other Loan Documents, and any successor thereto appointed pursuant to Article XIV. 16 "Japanese Borrower" shall have the meaning set forth in the preamble. "Japanese Commitment" shall mean, as to any Japanese Lender at any time, its obligation to make Japanese Revolving Loans to the Japanese Borrower and the Company in an aggregate Dollar Equivalent amount not to exceed at any one time outstanding the amount set forth opposite such Japanese Lender's name in Part B of Schedule 2.1 under the heading "Japanese Commitment". The initial aggregate amount of the Japanese Commitments is $150,000,000. "Japanese Lenders" shall mean the Lenders listed in Part B of Schedule 2.1 hereto. "Japanese Revolving Credit Exposure" shall mean, as at any date of determination with respect to any Japanese Lender, an amount equal to the Dollar Equivalent of the Japanese Revolving Loans of such Lender on such date. "Japanese Revolving Loan" shall have the meaning given to such term in Section 3.1. "Japanese Yen" and "(yen)" shall mean lawful money of Japan. "LC Disbursement" shall mean a payment made by the Issuing Lender pursuant to a Letter of Credit. "LC Exposure" shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any U.S. Lender at any time shall be its U.S. Commitment Percentage of the total LC Exposure at such time. "Lenders" shall mean (a) the financial institutions listed on Part A, Part B and Part C of Schedule 2.1 (other than any such financial institution that has ceased to be a party hereto, pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance; provided, that unless the context requires otherwise, each reference herein to the Lenders shall be deemed to include any Conduit Lender. "Letter of Credit" shall mean any Letter of Credit issued pursuant to Article VI. "Lien" shall mean any mortgage, lien, pledge, encumbrance, charge or security interest. "Loan Documents" means this Agreement, each Borrowing Subsidiary Agreement, each Borrowing Subsidiary Termination and each promissory note held by a Lender pursuant to Section 8.4(g). "Loans" shall mean the loans made by the Lenders to the Borrowers and Bristol-Myers Squibb pursuant to this Agreement. 17 "Loans to be Converted" shall have the meaning set forth in Section 15.17(a). "Majority Lenders" of any Facility, shall mean at any time, Lenders having Revolving Credit Exposures and unused Commitments representing at least 51% of the sum of the total Revolving Credit Exposures and unused Commitments under such Facility. "Margin Regulations" shall mean Regulations T, U and X of the Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Material Adverse Effect" shall mean a material adverse effect on the business, operations, properties or financial condition of the Company and its consolidated Subsidiaries, taken as a whole. "Maturity Date" shall mean July 31, 2004. "Moody's" shall mean Moody's Investors Service, Inc. or any successor thereto. "Net Cash Proceeds" shall mean (a) in the case of a Permitted Receivables Securitization, the gross cash proceeds obtained from third-party financing sources net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith and (b) in the case of a Permitted Securities Issuance, the gross cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "Notice of Competitive Bid Request" shall mean a notification made pursuant to Article V in the form of Exhibit A-2. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Debt" shall mean (i) Debt of any Subsidiary to any Credit Party, (ii) Guarantees by any Subsidiary of Debt of any Credit Party (other than the Company) and Guarantees by the Company of any Debt of any Subsidiary, (iii) any Debt incurred pursuant to Sale and Leaseback Transactions permitted under Section 12.3, (iv) Debt of any Subsidiary as an account party in respect of trade letters of credit, to the extent that such letters of credit are not drawn upon, (v) Debt assumed in connection with any Investment permitted under Section 12.8, (vi) Debt secured by any Lien permitted pursuant to Section 12.2(q), (vii) Debt consisting of guarantees of loans made to officers, directors or employees of any Subsidiary, (viii) unsecured trade accounts payable and other unsecured current Debt incurred in the ordinary course of business and not more than 120 days past due (but excluding any Debt for borrowed money), (ix) any Permitted Receivables Securitization, (x) any Permitted Securities Issuance, (xi) Debt with respect to surety, appeal and performance bonds obtained by any Subsidiary in the ordinary course of business, and (xii) any replacement, renewal, refinancing or extension of any Debt referenced above that does not exceed the aggregate principal amount (plus associated fees and expenses) of the Debt being replaced, renewed, refinanced or extended (except that accrued and 18 unpaid interest not delinquent in accordance with its terms may be part of any refinancing pursuant to this clause) and that otherwise complies with this Agreement. "Permitted Receivables Securitization" shall mean the incurrence of Debt in respect of any receivables securitization of the Company or any Subsidiary, provided that the aggregate principal amount of all Permitted Receivables Securitizations outstanding at any time shall not exceed $100,000,000. "Permitted Securities Issuance" shall mean the issuance or incurrence by the Company or any Subsidiary of any Debt for borrowed money in respect of debt securities issued in a public offering or a private placement, provided that the aggregate principal amount of all Permitted Securities Issuances outstanding at any time shall not exceed $250,000,000, and provided further, that any debt securities issued or incurred pursuant to any Permitted Securities Issuance shall be subordinated to, or pari passu with, the Loans or Guarantees thereof. "Person" shall mean any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan as defined in Section 4001(a)(3) of ERISA), subject to the provisions of Title IV of ERISA or Section 412 of the Code that is maintained for current or former employees, or any beneficiary thereof, of the Company or any ERISA Affiliate. "Pre Spin-Off Effective Date" shall mean the date on which each of the conditions set forth in Section 10.2 shall have been satisfied. The Pre Spin-Off Effective Date shall be no more than two Business Days prior to the scheduled Zimmer Effective Date. "Pricing Grid" shall mean the Facility Fee and Applicable Margin Pricing Grid set forth below.
- -------------------------------------------------------------------------------------------------------- S&P/Moody's Rating Equivalent of the Facility Fee Applicable Margin for Applicable Margin Company's senior unsecured non-credit (in Basis Eurocurrency Loans for ABR Loans (in enhanced long-term debt Points) in (Basis Points) Basis Points) - -------------------------------------------------------------------------------------------------------- A-/A3 10.0 27.5 0 - -------------------------------------------------------------------------------------------------------- BBB+/Baa1 12.5 37.5 0 - -------------------------------------------------------------------------------------------------------- BBB/Baa2 15.0 47.5 0 - -------------------------------------------------------------------------------------------------------- BBB-/Baa3 17.5 82.5 0 - -------------------------------------------------------------------------------------------------------- Lower than BBB-/Baa3 25.0 125.0 25.0 - --------------------------------------------------------------------------------------------------------
The higher Rating will determine the Facility Fee and Applicable Margin unless the S&P and Moody's Ratings are more than one level apart, in which case the Rating one level below the higher Rating will be determinative. In the event that the Company's senior unsecured long-term debt is rated by only one of S&P and Moody's, then that single Rating shall be determinative. The Company hereby agrees that at all times it shall maintain a Rating from 19 either S&P or Moody's. Each change in a Rating by a Rating Agency shall be effective on the date such change is announced by such Rating Agency. The Applicable Margin for the Loans shall be increased by 25.0 Basis Points for each day that the sum of the Revolving Credit Exposures and the Competitive Loan Exposures exceeds 33% of the total Commitments. "Rating Agencies" shall mean Moody's and S&P. "Ratings" shall mean the ratings from time to time established by the Rating Agencies for senior, unsecured, non-credit-enhanced long-term debt of the Company. "Reference Lenders" shall mean Chase and Bank of America. "Register" shall have the meaning set forth in Section 15.4(d). "Reorganization" shall mean with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Required Lenders" shall mean, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing at least 51% of the sum of the Revolving Credit Exposures and unused Commitments at such time; provided that, for purposes of declaring the Loans to be due and payable pursuant to Article XIII, and for all purposes after the loans become due and payable pursuant to Article XIII or the Commitments shall have expired or terminated, the Competitive Loan Exposures of the Lenders shall be included in their respective Revolving Credit Exposures in determining the Required Lenders. "Revolving Credit Exposure" shall mean, as at any date of determination with respect to any Lender, an amount in Dollars equal to the sum of (a) U.S. Revolving Credit Exposure of such Lender, (b) the Japanese Revolving Credit Exposure of such Lender and (c) the Euro Revolving Credit Exposure of such Lender. "Revolving Loans" shall mean the collective reference to the U.S. Revolving Loans, the Japanese Revolving Loans and the Euro Revolving Loans; each, individually, a "Revolving Loan". "Rights Agreement" shall mean that certain Rights Agreement to be entered into between the Company and Mellon Investor Services LLC, as rights agent, substantially in the form attached as Exhibit 4.4 to Amendment No. 3 to the Form 10 of the Company, as filed with the SEC on July 6, 2001. "Sale and Leaseback Transaction" shall mean any arrangement with any Person pursuant to which the Company or any Subsidiary leases any property that has been or is to be sold or transferred by the Company or the Subsidiary to such Person, other than (i) temporary leases for a term, including renewals at the option of the lessee, of not more than three years, (ii) leases between the Company and a Subsidiary or between Subsidiaries, (iii) leases of property executed by the time of, or within 12 months after the latest of, the acquisition, the 20 completion of construction or improvement, or the commencement of commercial operation, of such property and (iv) arrangements pursuant to any provision of law with an effect similar to that under former Section 168(f)(8) of the Internal Revenue Code of 1954. "S&P" shall mean Standard & Poor's Ratings Group or any successor thereto. "SEC" shall mean the Securities and Exchange Commission. "Spin-Off" shall mean the distribution of all of the shares of the Company to existing shareholders of Bristol-Myers Squibb in a tax-free spin-off transaction substantially in accordance with the description thereof set forth in the Form 10 Filing. "subsidiary" shall mean, with respect to any Person (the "parent") at any date, (a) for purposes of Sections 12.3 and 12.6 only, any Person the majority of the outstanding Voting Stock (or equivalent voting securities of any Person which is not a corporation) of which is owned, directly or indirectly, by the parent or one or more subsidiaries of the parent of such Person and (b) for all other purposes under this Agreement, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held. "Subsidiary" shall mean a subsidiary of the Company. "Subsidiary Guarantor" shall mean each Domestic Wholly Owned Subsidiary that has executed a counterpart of this Agreement and has become a guarantor of the Borrower Obligations. "Swingline Lender" shall mean Chase in its capacity as lender of Swingline Loans hereunder. "Swingline Loan" shall mean a Loan made pursuant to Article VII. "Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority and all liabilities with respect thereto. "Transactions" means the consummation of the Spin-Off, the execution and delivery by the Credit Parties of this Agreement (or, in the case of the Borrowing Subsidiaries, the Borrowing Subsidiary Agreements), the performance by the Credit Parties of this Agreement, the borrowing of the Loans and the use of the proceeds thereof. "Type" when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is 21 determined. For purposes hereof, "Rate" shall include the Eurocurrency Rate, the Alternate Base Rate and the Fixed Rate. "U.S. Borrower" shall have the meaning set forth in the preamble. "U.S. Commitment" shall mean, as to any U.S. Lender at any time, its obligation to make U.S. Revolving Loans to, and/or participate in Swing Line Loans made to and Letters of Credit issued for the account of, the U.S. Borrower and the Borrowing Subsidiaries in an aggregate amount not to exceed at any time outstanding the Dollar amount set forth opposite such U.S. Lender's name in Part A of Schedule 2.1 under the heading "U.S. Commitment", as such amount may be reduced from time to time pursuant to Section 8.3 and the other applicable provisions hereof. The initial aggregate amount of the U.S. Commitments is $400,000,000. "U.S. Commitment Percentage" shall mean, as to any U.S. Lender at any time, the percentage which such U.S. Lender's U.S. Commitment then constitutes of the aggregate U.S. Commitments of all U.S. Lenders. "U.S. Lender" shall mean the Lenders listed in Part A of Schedule 2.1. "U.S. Revolving Credit Exposure" shall mean, as at any date of determination with respect to any U.S. Lender, an amount in Dollars equal to the sum of (a) the aggregate unpaid principal amount of such U.S. Lender's U.S. Revolving Loans on such date, (b) such U.S. Lender's U.S. Commitment Percentage of the aggregate unpaid principal amount of all Swing Line Loans on such date and (c) such U.S. Lender's LC Exposure. "U.S. Revolving Loan" shall have the meaning set forth in Section 2.1(a). "Value" shall mean, with respect to a Sale and Leaseback Transaction, an amount equal to the present value of the lease payments with respect to the term of the lease (reduced by the amount of rental obligations of any sublessee of all or part of the same property) remaining on the date as of which the amount is being determined, without regard to any renewal or extension options contained in the lease, discounted at an interest rate determined by the Company at the time of the consummation of such Sale and Leaseback Transaction as long as such interest rate is customary for leases of such type. "Voting Stock" shall mean, as applied to the stock of any corporation, stock of any class or classes (however designated) having by the terms thereof ordinary voting power to elect a majority of the members of the board of directors (or other governing body) of such corporation other than stock having such power only by reason of the happening of a contingency. "Wholly Owned Subsidiary" of any Person, a subsidiary of such Person of which securities (except for directors' qualifying shares) or other ownership interests representing 100% of the equity are, at the time any determination is being made, owned by such Person or one or more wholly owned subsidiaries of such Person or by such Person and one or more wholly owned subsidiaries of such Person. "Zimmer" shall have the meaning set forth in the preamble. 22 "Zimmer Effective Date" shall mean the date on which each of the conditions set forth in Section 10.3 shall have been satisfied. The Zimmer Effective Date shall be no more than two Business Days after the Bristol-Myers Squibb Effective Date. SECTION 1.2. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type (e.g., a "Eurocurrency Revolving Loan") or by Class, Type and Commitment (e.g., a "U.S. Eurocurrency Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving Borrowing") or by Class, Type and Commitment (e.g., a "U.S. Eurocurrency Revolving Borrowing"). SECTION 1.3. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.4. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time. ARTICLE II Amount and Terms of the U.S. Commitments SECTION 2.1. U.S. Commitments. Subject to the terms and conditions set forth herein, each U.S. Lender agrees to make revolving loans ("U.S. Revolving Loans") to the U.S. Borrowers and any Borrowing Subsidiary which is organized and existing under the laws of the United States of America or any State thereof from time to time during the Availability Period in Dollars in an aggregate principal amount that will not result in (a) such Lender's U.S. Revolving Credit Exposure exceeding such Lender's U.S. Commitment, (b) the sum of the total U.S. Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total U.S. Commitments and (c) the sum of the total Revolving Credit Exposures plus the total Competitive 23 Loan Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the U.S. Borrowers and each applicable Borrowing Subsidiary may borrow, prepay and reborrow U.S. Revolving Loans. SECTION 2.2. U.S. Revolving Loans and Borrowings. (a) Each U.S. Revolving Loan shall be made as part of a Borrowing consisting of U.S. Revolving Loans made by the U.S. Lenders ratably in accordance with their respective U.S. Commitments. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 5.1. The failure of any U.S. Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the U.S. Commitments and Competitive Bids of the U.S. Lenders are several and no U.S. Lender shall be responsible for any other U.S. Lender's failure to make such Loans as required. (b) Subject to Section 8.8, (i) each U.S. Revolving Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Company (on its own behalf or on behalf of any other applicable Borrower) may request in accordance herewith, and (ii) each Competitive Borrowing shall be comprised entirely of Eurocurrency Loans or Fixed Rate Loans as the Company (on its own behalf or on behalf of any other Borrower) may request in accordance herewith. Each U.S. Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such U.S. Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total U.S. Commitments. Each Competitive Borrowing denominated in Dollars shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000, and each Competitive Borrowing denominated in an Alternative Currency shall be in an aggregate principal amount that is not less than the Dollar Equivalent of $5,000,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 20 Eurocurrency U.S. Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Company (on its own behalf or on behalf of any other Borrower) shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.3. Requests for U.S. Revolving Borrowings. To request a U.S. Revolving Borrowing, the Company (on its own behalf or on behalf of any other Borrower) shall notify the General Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 1:30 p.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or 24 telecopy to the General Administrative Agent of a written Borrowing Request in the form of Exhibit A-5. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; (iv) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; (v) the location and number of the account of the applicable U.S. Borrower or any Borrowing Subsidiary to which funds are to be disbursed, which shall comply with the requirements of Section 8.1; and (vi) the applicable Borrower. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Company shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the General Administrative Agent shall advise each U.S. Lender of the details thereof and of the amount of such U.S. Lender's Loan to be made as part of the requested Borrowing. SECTION 2.4. Pre Spin-Off Loans. On the Pre Spin-Off Effective Date, (a) each U.S. Lender agrees to make U.S. Revolving Loans to the U.S. Borrowers, ratably in accordance with its Applicable Percentage, in an aggregate principal amount not exceeding the U.S. Commitments (as requested in an irrevocable written notice delivered to the General Administrative Agent by the U.S. Borrowers pursuant to Section 2.3 hereof) and (b) each Japanese Lender agrees to make Japanese Revolving Loans to the Japanese Borrower, ratably in accordance with its Applicable Percentage, in an aggregate principal amount not exceeding the Japanese Commitments (as requested in an irrevocable written notice delivered to the Japanese Administrative Agent by the Japanese Borrower pursuant to Section 3.3 hereof); provided that if the Zimmer Effective Date does not occur within two Business Days of the Pre-Spin-Off Effective Date, such Loans shall be repaid in full on the date that is two Business Days following the Pre Spin-Off Effective Date. Bristol-Myers Squibb agrees to guarantee such Loans and the related Borrower Obligations to the same extent as if Bristol-Myers Squibb were a Guarantor of the Borrower Obligations pursuant to Section 15.16, the terms of which are imported by reference herein mutatis mutandis. SECTION 2.5. U.S. Revolving Loans to Bristol-Myers Squibb. On the Bristol-Myers Squibb Effective Date, each U.S. Lender agrees to make U.S. Revolving Loans to Bristol-Myers Squibb, ratably in accordance with its Applicable Percentage, in an aggregate principal 25 amount not exceeding $380,000,000 (as requested in an irrevocable written notice delivered to the General Administrative Agent by Bristol-Myers Squibb in the manner contemplated by Section 2.3 hereof). The payment and performance obligations (including the obligation to pay any accrued interest) of Bristol-Myers Squibb under this Agreement in respect of such Loans will be absolutely and unconditionally assumed in their entirety by the Company (and the Company hereby absolutely and unconditionally agrees to assume such obligations) on the Zimmer Effective Date (it being understood and agreed that upon the assumption of such Loans (and the obligation to pay any accrued interest) by the Company on the Zimmer Effective Date, Bristol-Myers Squibb shall be released from all obligations under this Agreement, including, without limitation, its guarantee of the Loans to be made pursuant to Section 2.4); provided that if the Zimmer Effective Date does not occur, such Loans shall be repaid not later than two business Days following the Bristol-Myers Squibb Effective Date. Bristol-Myers Squibb agrees that the provisions of Sections 8.9, 8.10 and 8.11 shall apply to the U.S. Revolving Loans made to Bristol-Myers Squibb pursuant to this Section. SECTION 2.6. Borrowing Subsidiaries. The Company may designate any Wholly Owned Subsidiary of the Company as a Borrowing Subsidiary under the U.S. Commitments. Upon the receipt by the General Administrative Agent of a Borrowing Subsidiary Agreement executed by such a Wholly Owned Subsidiary and the Company, such Wholly Owned Subsidiary shall be a Borrowing Subsidiary and a party to this Agreement. A Subsidiary shall cease to be a Borrowing Subsidiary hereunder at such time as no Loans, fees or any other amounts due in connection therewith pursuant to the terms hereof shall be outstanding to such Subsidiary and such Subsidiary and the Company shall have executed and delivered to the General Administrative Agent a Borrowing Subsidiary Termination; provided that, notwithstanding anything herein to the contrary, no Borrowing Subsidiary shall cease to be a Borrowing Subsidiary solely because it no longer is a Wholly Owned Subsidiary of the Company so long as such Borrowing Subsidiary and the Company shall not have executed and delivered to the General Administrative Agent a Borrowing Subsidiary Termination and the Guarantors' guarantee of the Borrower Obligations of such Borrowing Subsidiary pursuant to Section 15.16 has not been released. ARTICLE III Amount and Terms of the Japanese Commitments SECTION 3.1. Japanese Commitment. Subject to the terms and conditions set forth herein, each Japanese Lender agrees to make revolving loans ("Japanese Revolving Loans") from time to time during the Availability Period to the Japanese Borrower in Japanese Yen or to the U.S. Borrowers in Dollars in an aggregate principal amount that will not result in (a) such Lender's Japanese Revolving Credit Exposure exceeding such Lender's Japanese Commitment, (b) the sum of the total Japanese Revolving Credit Exposures exceeding the total Japanese Commitments and (c) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Japanese Borrower and the U.S. Borrowers may borrow, prepay and reborrow the Japanese Revolving Loans. 26 SECTION 3.2. Japanese Revolving Loans and Borrowings. (a) Each Japanese Revolving Loan shall be made as part of a Borrowing consisting of Japanese Revolving Loans made by the Japanese Lenders to the Japanese Borrower or the U.S. Borrowers, as the case may be, ratably in accordance with their respective Japanese Commitments. The failure of any Japanese Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Japanese Commitments of the Japanese Lenders are several and no Japanese Lender shall be responsible for any other Japanese Lender's failure to make such Loans as required. (b) Subject to Section 8.8, each Japanese Revolving Borrowing shall be composed entirely of ABR Loans or Eurocurrency Loans, in the case of Borrowings denominated in Dollars, or Eurocurrency Loans, in the case of Borrowings denominated in Japanese Yen. Each Japanese Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Japanese Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Japanese Borrower or the U.S. Borrowers to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be in an aggregate amount that is (i) in the case of a Eurocurrency Revolving Borrowing denominated in Japanese Yen, a minimum principal amount the Dollar Equivalent of which is $2,000,000 or (ii) in the case of (A) a Eurocurrency Revolving Borrowing denominated in Dollars, an integral multiple of $1,000,000 and not less than $5,000,000 or (B) an ABR Revolving Borrowing, an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Japanese Commitments. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Japanese Revolving Borrowings outstanding. (d) Notwithstanding any other provisions of this Agreement, the U.S. Borrowers and the Japanese Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 3.3. Requests for Japanese Revolving Borrowings. To request a Japanese Revolving Borrowing, the Japanese Borrower or the Company (on its own behalf or on behalf of any other U.S. Borrower), as the case may be, shall notify the Japanese Administrative Agent and the General Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing denominated in Dollars, not later than 1:30 p.m., New York City time, three Business Days before the date of the proposed Borrowing, (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, on the date of the proposed Borrowing or (c) in the case of a Eurocurrency Borrowing denominated in Japanese Yen, not later than 1:30 p.m., Tokyo time, three Business Days prior to the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Japanese Administrative Agent and the General Administrative Agent of a written Borrowing Request in the form of Exhibit A-5. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 3.2: 27 (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be denominated in Japanese Yen or Dollars and, if denominated in Dollars, whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; (iv) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; (v) the location and number of the account of the Japanese Borrower or the applicable U.S. Borrower to which funds are to be disbursed, which shall comply with the requirements of Section 8.1; and (vi) the applicable Borrower. If no election as to the Type of Revolving Borrowing is specified (in the case of Revolving Borrowings denominated in Dollars), then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Japanese Borrower or the U.S. Borrowers, as the case may be, shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Japanese Administrative Agent shall advise each Japanese Lender of the details thereof and of the amount of such Japanese Lender's Loan to be made as part of the requested Borrowing. ARTICLE IV Amount and Terms of the Euro Commitments SECTION 4.1. Euro Commitments. Subject to the terms and conditions set forth herein, each Euro Lender agrees to make revolving loans ("Euro Revolving Loans") from time to time during the Availability Period to the Euro Borrower in Euro, or to the U.S. Borrowers or any Borrowing Subsidiary in Dollars, in an aggregate principal amount that will not result in (a) such Lender's Euro Revolving Credit Exposure exceeding such Lender's Euro Commitment, (b) the sum of the total Euro Revolving Credit Exposures exceeding the total Euro Commitments and (c) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Euro Borrower and the U.S. Borrowers and any Borrowing Subsidiary may borrow, prepay and reborrow the Euro Revolving Loans. SECTION 4.2. Euro Revolving Loans and Borrowings. (a) Each Euro Revolving Loan shall be made as part of a Borrowing consisting of Euro Revolving Loans made by the Euro Lenders to the Euro Borrower or the U.S. Borrowers or any Borrowing Subsidiary, as the case may be, ratably in accordance with their respective Euro Commitments. The failure of any Euro Lender to make any Loan required to be made by it shall not relieve any other 28 Lender of its obligations hereunder; provided that the Euro Commitments of the Euro Lenders are several and no Euro Lender shall be responsible for any other Euro Lender's failure to make such Loans as required. (b) Subject to Section 8.8, each Euro Revolving Borrowing shall be composed entirely of ABR Loans or Eurocurrency Loans, in the case of Borrowings denominated in Dollars, or Eurocurrency Loans, in the case of Borrowings denominated in Euro. Each Euro Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Euro Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Euro Borrower or the U.S. Borrowers or any Borrowing Subsidiary to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be in an aggregate amount that is (i) in the case of a Eurocurrency Revolving Borrowing denominated in Euro, a minimum principal amount the Dollar Equivalent of which is $2,000,000 or (ii) in the case of (A) a Eurocurrency Revolving Borrowing in Dollars, an integral multiple of $1,000,000 and not less than $5,000,000 or (B) an ABR Revolving Borrowing, an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Euro Commitments. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Euro Revolving Borrowings outstanding. (d) Notwithstanding any other provisions of this Agreement, the U.S. Borrowers, the Borrowing Subsidiaries and the Euro Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 4.3. Requests for Euro Revolving Borrowings. To request a Euro Revolving Borrowing, the Euro Borrower or the Company (on its own behalf or on behalf of any other Borrower), as the case may be, shall notify the Euro Administrative Agent and the General Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing denominated in Dollars, not later than 1:30 p.m., New York City time, three Business Days before the date of the proposed Borrowing, (b) in the case of an ABR Borrowing denominated in Dollars, not later than 12:00 noon, New York City time, on the date of the proposed Borrowing or (c) in the case of a Eurocurrency Borrowing denominated in Euro, not later than 12:00 noon, London time, three Business Days prior to the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Euro Administrative Agent and the General Administrative Agent of a written Borrowing Request in the form of Exhibit A-5. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 4.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; 29 (iii) whether such Borrowing is to be denominated in Euro or Dollars and, if denominated in Dollars, whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; (iv) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; (v) the location and number of the account of the Euro Borrower, the applicable U.S. Borrower or any Borrowing Subsidiary to which funds are to be disbursed, which shall comply with the requirements of Section 8.1; and (vi) the applicable Borrower. If no election as to the Type of Revolving Borrowing is specified (in the case of Revolving Borrowings denominated in Dollars), then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Euro Borrower, the U.S. Borrowers or the Borrowing Subsidiaries, as the case may be, shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Euro Administrative Agent shall advise each Euro Lender of the details thereof and of the amount of such Euro Lender's Loan to be made as part of the requested Borrowing. ARTICLE V Competitive Bid Loans SECTION 5.1. Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period the Company (on its own behalf or on behalf of any other Borrower) may request Competitive Bids and the Company (on its own behalf or on behalf of any other Borrower) may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that no Competitive Loan may be requested that would result in (a) the sum of the total U.S. Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total U.S. Commitments and (b) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. To request Competitive Bids, the Company (on its own behalf or on behalf of any other Borrower) shall hand deliver or telecopy to the Advance Agent a duly completed Competitive Bid Request in the form of Exhibit A-1 hereto, to be received by the Advance Agent, in the case of a Eurocurrency Borrowing, not later than 10:00 a.m., New York City time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, two Business Days before the date of the proposed Borrowing. A Competitive Bid Request that does not conform substantially to Exhibit A-1 may be rejected in the Advance Agent's sole discretion, and the Advance Agent shall promptly notify the Company of such rejection by telecopy. Each Competitive Bid Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; 30 (ii) the Currency of the requested Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be a Eurocurrency Borrowing or a Fixed Rate Borrowing; (v) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period"; (vi) the location and number of the account of the Borrower to which funds are to be disbursed, which shall comply with the requirements of Section 8.1; and (vii) the applicable Borrower. If no election as to the Currency of a Borrowing is specified in any Competitive Bid Request, then the applicable Borrower shall be deemed to have requested a Borrowing in Dollars. Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Advance Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to such Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be received by the Advance Agent by telecopy, in the form of Exhibit A-3 hereto, in the case of a Eurocurrency Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 11:30 a.m., New York City time, one Business Day before the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the format of Exhibit A-3 may be rejected by the Advance Agent, and the Advance Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount of the Competitive Loan or Loans that the Lender is willing to make (which, in the case of a Competitive Borrowing denominated in Dollars, shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and, in the case of a Competitive Borrowing denominated in an Alternative Currency, shall be a minimum principal amount the Dollar Equivalent of which is equal to $5,000,000, and which may equal the entire principal amount of the Competitive Borrowing Request by such Borrower), (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The Advance Agent shall promptly notify such Borrower by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph, such Borrower may accept or reject any Competitive Bid. Such Borrower shall notify the Advance Agent by telephone, confirmed by telecopy in the form of a Competitive Bid Accept/Reject Letter, 31 whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurocurrency Competitive Borrowing, not later than 2:00 p.m., New York City time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 2:00 p.m., New York City time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of such Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) such Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if the Company rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by such Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, such Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is, in the case of a Competitive Borrowing denominated in Dollars, in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000 and, in the case of a Competitive Borrowing denominated in an Alternative Currency, in a minimum principal amount the Dollar Equivalent of which is $5,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 or an amount in an Alternative Currency of which the Dollar Equivalent is less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $5,000,000 or an amount in an Alternative Currency of which the Dollar Equivalent is $5,000,000 or any integral multiple of $1,000,000 thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner which shall be in the discretion of such Borrower. A notice given by such Borrower pursuant to this paragraph (d) shall be irrevocable. (e) The Advance Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If the Advance Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Company (on its own behalf or on behalf of any other Borrower) at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Advance Agent pursuant to paragraph (b) of this Section 5.1. (g) All notices required by this Section 5.1 shall be given in accordance with Section 15.1. 32 ARTICLE VI Letters of Credit SECTION 6.1. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, each U.S. Borrower and the Company (on behalf of any Borrowing Subsidiary) may request the issuance under the U.S. Commitments of Letters of Credit for its own account (including for the account of any Borrowing Subsidiary), in a form reasonably acceptable to the General Administrative Agent and the Issuing Lender, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by a U.S. Borrower or the Company (on behalf of any Borrowing Subsidiary) to, or entered into by a U.S. Borrower or the Company (on behalf of any Borrowing Subsidiary) with, the Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control. At the request of a U.S. Borrower or the Company (on behalf of any Borrowing Subsidiary), any Letter of Credit may be issued for the joint and several account of such Borrower and another Borrower. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), a U.S. Borrower or the Company (on behalf of any Borrowing Subsidiary) shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and the General Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section 6.1), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Lender, such U.S. Borrower or the Company (on behalf of any Borrowing Subsidiary) also shall submit a letter of credit application on the Issuing Lender's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit, the Borrowers shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $50,000,000, (ii) the sum of the total U.S. Revolving Credit Exposures plus the total Competitive Loan Exposures shall not exceed the total U.S. Commitments and (iii) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures shall not exceed the total Commitments. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date. 33 (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Lender or the U.S. Lenders, the Issuing Lender hereby grants to each U.S. Lender, and each U.S. Lender hereby acquires from the Issuing Lender, a participation in such Letter of Credit equal to such U.S. Lender's U.S. Commitment Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each U.S. Lender hereby absolutely and unconditionally agrees to pay to the General Administrative Agent, for the account of the Issuing Lender, such U.S. Lender's U.S. Commitment Percentage of each LC Disbursement made by the Issuing Lender and not reimbursed on or before the date due as provided in paragraph (e) of this Section 6.1, or of any reimbursement payment required to be refunded to the Borrowers for any reason. Each U.S. Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the U.S. Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the applicable Borrower shall reimburse such LC Disbursement by paying to the General Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if such Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by such Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that such Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt or (ii) the Business Day immediately following the day that receives such notice, if such notice is not received prior to such time on the day of receipt; provided that such U.S. Borrower or the Company (on behalf of the applicable Borrowing Subsidiary) may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.3 that such payment be financed with a U.S. Revolving Loan or Swingline Loan in an equivalent amount and, to the extent so financed, such Borrower's obligation to make such payment shall be discharged and replaced by the resulting U.S. Revolving Loan or Swingline Loan. If such Borrower fails to make such payment when due, the General Administrative Agent shall notify each U.S. Lender of the applicable LC Disbursement, the payment then due from such Borrower in respect thereof and such U.S. Lender's U.S. Commitment Percentage thereof. Promptly following receipt of such notice, each U.S. Lender shall pay to the General Administrative Agent its U.S. Commitment Percentage or of the payment then due from such Borrower, in the same manner as provided in Section 8.1 with respect to U.S. Revolving Loans made by such U.S. Lender (and Section 8.1 shall apply, mutatis mutandis, to the payment obligations of the U.S. Lenders), and the General Administrative Agent shall promptly pay to the Issuing Lender the amounts so received by it from the U.S. Lenders. Promptly following receipt by the General Administrative Agent of any payment from such Borrower pursuant to this paragraph, the General Administrative Agent shall distribute such payment to the Issuing Lender or, to the extent that U.S. Lenders have made payments pursuant to this paragraph to reimburse the Issuing Lender, then to such U.S. Lenders and the Issuing Lender as their interests may appear. Any payment made by a U.S. Lender pursuant to this paragraph to reimburse the Issuing 34 Lender for any LC Disbursement (other than the funding of U.S. Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve such Borrower of its obligation to reimburse such LC Disbursement. (f) Obligations Absolute. Each applicable Borrower's obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section 6.1 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or this Agreement; (iii) the existence of any claim, setoff, defense or other right that any Borrower, any other party guaranteeing, or otherwise obligated with, any Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, the Issuing Lender, the General Administrative Agent or any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of the Issuing Lender, the Lenders, the General Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 6.1, constitute a legal or equitable discharge of such Borrower's obligations hereunder. Neither the General Administrative Agent, the Lenders nor the Issuing Lender nor any of their Affiliates, directors, officers, employees and agents, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder, including any of the circumstances specified in clauses (i) through (vi) above, as well as any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Lender; provided that the foregoing shall not be construed to excuse the Issuing Lender from liability to such Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by such Borrower that are caused by the Issuing Lender's failure to 35 exercise the agreed standard of care (as set forth below) in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that the Issuing Lender shall have exercised the agreed standard of care in the absence of gross negligence or willful misconduct on the part of the Issuing Lender. Without limiting the generality of the foregoing, it is understood that the Issuing Lender may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit, without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit; provided that the Issuing Lender shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. The Issuing Lender shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Lender shall promptly notify the General Administrative Agent and such Borrower for whose account such Letter of Credit was issued by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve such Borrower of its obligation to reimburse the Issuing Lender and the U.S. Lenders with respect to any such LC Disbursement. (h) Interim Interest. If the Issuing Lender shall make any LC Disbursement, then, unless the Borrowers shall reimburse (including with the proceeds of Loans as provided in Section 6.1(e)) such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrowers reimburse such LC Disbursement at the rate per annum specified in Section 8.7(a) provided that, if the Borrowers fail to reimburse (including with the proceeds of Loans as provided in Section 6.1(e)) such LC Disbursement when due pursuant to paragraph (e) of this Section 6.1, then Section 8.7(d) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Lender, except that interest accrued on and after the date of payment by any U.S. Lender pursuant to paragraph (e) of this Section 6.1 to reimburse the Issuing Lender shall be for the account of such U.S. Lender to the extent of such payment. ARTICLE VII Swingline SECTION 7.1. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans under the U.S. Commitments to the U.S. Borrowers or any Borrowing Subsidiary from time to time during the Availability Period in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $50,000,000, (ii) the sum of the total U.S. Revolving Credit Exposures 36 plus the total Competitive Loan Exposures exceeding the total U.S. Commitments or (iii) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the U.S. Borrowers or any Borrowing Subsidiary may borrow, prepay and reborrow Swingline Loans. Swingline Loans shall be in an aggregate amount that is not less than $100,000. Swingline Loans shall be ABR Loans. (b) To request a Swingline Loan, a U.S. Borrower or the Company (on behalf of any Borrowing Subsidiary) shall notify the General Administrative Agent of such request by telephone (confirmed by telecopy), not later than 3:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The General Administrative Agent will promptly advise the Swingline Lender of any such notice received from such U.S. Borrower or the Company (on behalf of any Borrowing Subsidiary). The Swingline Lender shall make each Swingline Loan available to such Borrower by means of a credit to the general deposit account of such Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 6.1, by remittance to the Issuing Lender) by 4:00 p.m., New York City time, on the requested date of such Swingline Loan. (c) The Swingline Lender may by written notice given to the General Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the U.S. Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which U.S. Lenders will participate. Promptly upon receipt of such notice, the General Administrative Agent will give notice thereof to each U.S. Lender, specifying in such notice such U.S. Lender's U.S. Commitment Percentage of such Swingline Loan or Loans. Each U.S. Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the General Administrative Agent, for the account of the Swingline Lender, such U.S. Lender's U.S. Commitment Percentage of such Swingline Loan or Loans. Each U.S. Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each U.S. Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 8.1 with respect to U.S. Revolving Loans made by such U.S. Lender (and Section 8.1 shall apply, mutatis mutandis, to the payment obligations of the U.S. Lenders), and the General Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the U.S. Lenders. The General Administrative Agent shall notify the Company of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the General Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from a Borrower (or other party on behalf of such Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the General Administrative Agent; any such amounts received by the General Administrative Agent shall be promptly remitted by the General Administrative 37 Agent to the U.S. Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrowers of any default in the payment thereof. ARTICLE VIII General Provisions Applicable to Loans SECTION 8.1. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds in the applicable Currency to the account of the General Administrative Agent or an Affiliate thereof in the case of U.S. Revolving Loans, Japanese Revolving Loans denominated in Dollars, Euro Revolving Loans denominated in Dollars and Competitive Loans, the Japanese Administrative Agent or an Affiliate thereof in the case of Japanese Revolving Loans denominated in Japanese Yen, or the Euro Administrative Agent or an Affiliate thereof in the case of Euro Revolving Loans denominated in Euro, as the case may be, most recently designated by it for such purpose by notice to the Lenders, by 2.00 p.m., local time (or, (i) in the case of the Japanese Lenders, by 12:00 noon, local time, and (ii) in the case of any Competitive Loan with respect to which a Borrower shall have requested funding in another jurisdiction, to such account in such jurisdiction as the Advance Agent shall designate for such purpose by notice to the applicable Lenders, by 2:00 p.m., local time). The applicable Administrative Agent will make such Loans available to such Borrower by promptly crediting the amounts so received, in like funds, to an account of such Borrower maintained with the applicable Administrative Agent in the relevant jurisdiction (or, in the case of any Competitive Loan with respect to which a Borrower shall have requested funding in another jurisdiction, to such account in such jurisdiction as such Borrower shall have designated in the applicable Competitive Bid Request). (b) Unless the applicable Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the applicable Administrative Agent such Lender's share of such Borrowing, the applicable Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section 8.1 and may, in reliance upon such assumption, make available to such Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the applicable Administrative Agent, then the applicable Lender and the applicable Borrower severally agree to pay to the applicable Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to such Borrower to but excluding the date of payment to the applicable Administrative Agent, at (i) in the case of such Lender, (A) in the case of Borrowings denominated in Dollars, the greater of the Federal Funds Effective Rate and a rate determined by the applicable Administrative Agent in accordance with banking industry rules on interbank compensation and (B) in the case of Borrowings denominated in any Alternative Currency, the interest rate reasonably determined by the applicable Administrative Agent to reflect its cost of funds for the amount advanced by such Administrative Agent on behalf of such Lender, or (ii) in the case of such Borrower, the interest rate on the applicable Borrowing; provided that no repayment by such Borrower 38 pursuant to this sentence shall be deemed to be a prepayment for purposes of Section 8.10. If such Lender pays such amount to the applicable Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 8.2. Interest Elections. (a) Each U.S. Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Company (on its own behalf or on behalf of any other Borrower) may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency U.S. Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Company (on its own behalf or on behalf of any other Borrower) may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the U.S. Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued. (b) Each Revolving Borrowing denominated in Japanese Yen or Euro shall have an initial Interest Period as specified in the applicable Borrowing Request. Thereafter, the applicable Borrower may elect to continue such Borrowing and may elect Interest Periods thereafter, all as provided in this Section. The Japanese Borrower or the Euro Borrower, as the case may be, may elect different Interest Periods with respect to different portions of the affected Borrowing, in which case such portion shall be allocated ratably among the Japanese Lenders or Euro Lenders, as the case may be, holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (c) To make an election pursuant to this Section, the Company (on its own behalf or on behalf of any other Borrower), the Japanese Borrower or the Euro Borrower, as the case may be, shall notify applicable Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3, 3.3 or 4.3, as the case may be, if the Company (on its own behalf or on behalf of any other Borrower), the Japanese Borrower or the Euro Borrower, as the case may be, were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the applicable Administrative Agent of a written Interest Election Request in a form approved by the applicable Administrative Agent and signed by the Company or the applicable Borrower. (d) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.3, 3.3 or 4.3, as the case may be: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; 39 (iii) in the case of Borrowings denominated in Dollars, whether the resulting Borrowing is to be an ABR Borrowing or Eurocurrency Borrowing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Company (on its own behalf or on behalf of any other Borrower), the Japanese Borrower or the Euro Borrower, as the case may be, shall be deemed to have selected an Interest Period of one month's duration. (e) Promptly following receipt of an Interest Election Request, the applicable Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (f) If the Company or the applicable Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued as such with an Interest Period of one month if it is denominated in an Alternative Currency. SECTION 8.3. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) The Company may at any time terminate, or from time to time reduce, the U.S. Commitments; provided that (i) each reduction of the U.S. Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Company shall not terminate or reduce the U.S. Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 8.5, the sum of the Revolving Credit Exposures plus the Competitive Loan Exposures would exceed the total Commitments. (c) The Company or the Japanese Borrower may at any time terminate, or from time to time reduce, the Japanese Commitments; provided that (i) each reduction of the Japanese Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000 and (ii) the Company and the Japanese Borrower shall not terminate or reduce the Japanese Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 8.5, the sum of the Japanese Revolving Credit Exposures would exceed the total Japanese Commitments. (d) The Company or the Euro Borrower may at any time terminate, or from time to time reduce, the Euro Commitments; provided that (i) each reduction of the Euro Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000 and (ii) the Company and the Euro Borrower shall not terminate or reduce the Euro Commitments if, after giving effect to any concurrent prepayments of the Loans in accordance with Section 8.5, the sum of the Euro Revolving Credit Exposures would exceed the total Euro Commitments. 40 (e) The Company, the Japanese Borrower or the Euro Borrower, as the case may be, shall notify the applicable Administrative Agent, of any election to terminate or reduce the Commitments under paragraph (b), (c) or (d) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the applicable Administrative Agent shall advise the applicable Lenders of the contents thereof. Each notice delivered by the applicable Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of any Commitments delivered by a Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the applicable Borrower (by notice to the applicable Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of any Commitments shall be made ratably among the applicable Lenders in accordance with their respective applicable Commitments. SECTION 8.4. Repayment of Loans; Evidence of Debt. (a) Each of the U.S. Borrowers and each Borrowing Subsidiary hereby unconditionally promises to pay (i) to the General Administrative Agent for the account of each U.S. Lender the then unpaid principal amount of its U.S. Revolving Loans on the Maturity Date and (ii) to the General Administrative Agent for the account of each U.S. Lender the then unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan. (b) Each of the Borrowers hereby unconditionally promises to pay to the Japanese Administrative Agent for the account of each Japanese Lender the then unpaid principal amount of its Japanese Revolving Loans on the Maturity Date. (c) Each of the Borrowers hereby unconditionally promises to pay to the Euro Administrative Agent for the account of each Euro Lender the then unpaid principal amount of its Euro Revolving Loans on the Maturity Date. (d) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (e) Each Administrative Agent shall maintain a Register pursuant to subsection 15.4(d) and an account for each applicable Lender in which it shall record (i) the amount of each Loan made hereunder and any promissory note evidencing such Loan, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by such Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (f) The entries made in the Register and the accounts of each Lender maintained pursuant to paragraphs (d) and (e) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or any Administrative Agent to maintain such accounts or any error therein shall not in 41 any manner affect the obligation of any Borrower to repay the Loans in accordance with the terms of this Agreement. (g) Any Lender may request that Loans made by it be evidenced by a promissory note for its Competitive Loans and a promissory note for its Revolving Loans. In such event, the applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the General Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 15.4) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its assigns). SECTION 8.5. Prepayment of Loans. (a) A Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section; provided that no Borrower shall have the right to prepay any Competitive Loan without the prior consent of the Lender thereof. (b) A Borrower shall notify the General Administrative Agent, the Japanese Administrative Agent or the Euro Administrative Agent, as the case may be, by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Revolving Borrowing in Dollars, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Revolving Borrowing (including Swingline Loans), not later than 12:00 noon, New York City time, one Business Day before the date of prepayment, (iii) in the case of a prepayment of a Eurocurrency Revolving Borrowing denominated in Japanese Yen, not later than 12:00 noon, Tokyo time, three Business Days before the date of prepayment and (iv) in the case of a prepayment of a Eurocurrency Revolving Borrowing denominated in Euro, not later than 12:00 noon, London time, three Business Days before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of any Commitments as contemplated by Section 8.3, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 8.3. Promptly following receipt of any such notice relating to a Revolving Borrowing, the applicable Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.2, 3.2 and 4.2. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 8.7. (c) Upon receipt by the Company or any Subsidiary of Net Cash Proceeds from a Permitted Receivables Securitization, the aggregate Commitments will be automatically and permanently reduced by the amount of such Net Cash Proceeds received therefrom, such reduction to be applied ratably to the total U.S. Commitments, the total Japanese Commitments and the total Euro Commitments. 42 (d) Upon receipt by the Company or any Subsidiary of Net Cash Proceeds from a Permitted Securities Issuance, the aggregate Commitments will be automatically and permanently reduced by the amount of such Net Cash Proceeds received therefrom less the aggregate amount, as of the date of such Permitted Securities Issuance, by which the Commitments have been reduced or terminated pursuant to Section 8.3(b), (c) or (d), such reduction to be applied ratably to the total U.S. Commitments, the total Japanese Commitments and the total Euro Commitments. (e) If on the last day of any fiscal quarter of the Company for any reason the sum of the total U.S. Revolving Credit Exposures plus the total Competitive Loan Exposures exceeds the total U.S. Commitments then in effect by more than 5%, the Borrowers shall, as soon as practicable but in no event later than three Business Days after learning thereof, or, as soon as practicable but in no event later than three Business Days after the request of the General Administrative Agent, prepay U.S. Revolving Loans and cancel or reduce Letters of Credit, in an aggregate principal amount equal to the amount of such excess. (f) If on the last day of any fiscal quarter of the Company for any reason the sum of the total Japanese Revolving Credit Exposures exceeds the total Japanese Commitments then in effect by more than 5%, the Japanese Borrower and the Company shall, as soon as practicable but in no event later than three Business Days after learning thereof, or, as soon as practicable but in no event later than three Business Days after the request of the General Administrative Agent, immediately prepay Japanese Revolving Loans in an aggregate principal amount equal to the amount of such excess. (g) If on the last day of any fiscal quarter of the Company for any reason the sum of the total Euro Revolving Credit Exposures exceeds the total Euro Commitments then in effect by more than 5%, the Euro Borrower and the Company shall, as soon as practicable but in no event later than three Business Days after learning thereof, or as soon as practicable but in no event later than three Business Days after the request of the General Administrative Agent, prepay Euro Revolving Loans in an aggregate principal amount equal to the amount of such excess. (h) The Company and the other Borrowers will use reasonable efforts to implement and maintain internal controls to monitor the Borrowings and repayments, with the object of preventing any request for a Borrowing that would cause conditions specified in the first sentence of each of Sections 2.1, 3.1 and 4.1 not to be satisfied. (i) The Administrative Agents shall not be obligated to calculate the Dollar Equivalent of any Alternative Currency but may do so from time to time in their sole discretion. SECTION 8.6. Fees. (a) The Company agrees to pay to the General Administrative Agent for the account of each Lender a facility fee, which shall accrue at the facility fee rate set forth in the Pricing Grid from time to time on the daily amount of the Commitments of such Lender (whether used or unused) during the period from and including the date hereof to but excluding the date on which such Commitments terminate; provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitments terminate, then such facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Commitments terminate to but 43 excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the date on which the Commitments terminate shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Company agrees to pay to the Administrative Agents, for their own account, the administrative, auction and other fees separately agreed upon between the Company and the Administrative Agents (collectively, the "Administrative Fees"). (c) The Company agrees to pay (i) to the General Administrative Agent for the account of each U.S. Lender (including the Issuing Lender) a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate per annum equal to the Applicable Margin applicable to interest on Eurocurrency Revolving Loans on the average daily amount of such U.S. Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Zimmer Effective Date to but excluding the date on which such U.S. Lender ceases to have any LC Exposure and (ii) to the Issuing Lender a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Zimmer Effective Date to but excluding the date on which there ceases to be any LC Exposure, as well as the Issuing Lender's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees shall be payable on the last day of March, June, September and December of each year, commencing on the first such date to occur after the Zimmer Effective Date; provided that all such fees shall be payable on the date on which the U.S. Commitments terminate and any such fees accruing after the date on which the U.S. Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lender pursuant to this paragraph shall be payable promptly after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the General Administrative Agent for distribution, in the case of facility fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 8.7. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin. (b) The Loans comprising each Eurocurrency Borrowing shall bear interest (i) in the case of a Eurocurrency Revolving Loan, at the Eurocurrency Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin or (ii) in the case of a Eurocurrency Competitive Loan, at the Eurocurrency Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Competitive Loan Margin applicable to such Loan. 44 (c) Each Fixed Rate Loan shall bear interest at the Fixed Rate applicable to such Loan. (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at time when the Alternate Base Rate is based on clause (a) of the first sentence of the definition of Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Eurocurrency Rate shall be determined by the General Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 8.8. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing: (a) the General Administrative Agent shall have determined (which determination shall be made in good faith and shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for the relevant Currency for such Interest Period; or (b) the General Administrative Agent is advised by the Required Lenders (or, in the case of a Eurocurrency Competitive Loan, the Lender that is required to make such Loan) that the Eurocurrency Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the General Administrative Agent shall give notice thereof to the Company (on its own behalf or on behalf of the applicable Borrower) and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the General Administrative Agent notifies the Company (on its own behalf or on behalf of the applicable Borrower) and the Lenders that the 45 circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurocurrency Borrowing shall be ineffective, (ii) if any Borrowing Request requests a Eurocurrency Revolving Borrowing, such Borrowing, if denominated in Dollars, shall be made as an ABR Borrowing and, if denominated in any Alternative Currency, shall be made as a Borrowing bearing interest at an interest rate reasonably determined by the General Administrative Agent to compensate the applicable Lenders for such Borrowing in such Currency for the applicable period and (iii) any request by the Company (on its own behalf or on behalf of any other Borrower) or any other Borrower for a Eurocurrency Competitive Borrowing shall be ineffective; provided that (x) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by the Company for Eurocurrency Competitive Borrowings may be made to Lenders that are not affected thereby and (y) if the circumstances giving rise to such notice affect only one Type of Borrowing, then the other Type of Borrowings shall be permitted. SECTION 8.9. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender; or (ii) impose on any Lender , the London interbank market or the Tokyo interbank market any other condition affecting this Agreement or Eurocurrency Loans or Fixed Rate Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan or Fixed Rate Loan (or of maintaining its obligation to make any such Loan) or issuing or participating in Letters of Credit by an amount deemed by such Lender to be material or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the applicable Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs actually incurred or reduction actually suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the applicable Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company as specified in paragraph (a) or (b) of this Section and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined, shall be delivered to the applicable Borrower and shall be conclusive 46 absent manifest error. The applicable Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender notifies such Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof. (e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. The obligations of the Borrowers under this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 8.10. Break Funding Payments. In the event of (a) the payment or prepayment of any principal of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 8.5(b) and is revoked in accordance therewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan or (e) the assignment of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by any Borrower pursuant to Section 8.13, then, in any such event, the applicable Borrower shall compensate each Lender for the out-of-pocket loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the present value of the excess, if any, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, refinanced or not borrowed (assumed to be the Eurocurrency Rate applicable thereto) for the period from the date of such payment, prepayment, refinancing or failure to borrow or refinance to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or refinance the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid or not borrowed or refinanced for such period or Interest Period, as the case may be. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined shall be delivered to the applicable Borrower and shall be conclusive absent manifest error. Such Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. The obligations of the 47 Borrowers under this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 8.11. Taxes . (a) Any and all payments to the Lenders or the Administrative Agents hereunder by a Borrower or on behalf of any Borrower shall be made free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) Taxes imposed on any Administrative Agent or any Lender (or participant) as a result of a present or former connection between such Administrative Agent or such Lender (or participant) and the jurisdiction of the Governmental Authority imposing such Tax or any political subdivision or taxing authority thereof or therein (other than as a result of entering into this Agreement, performing any obligations hereunder, receiving any payments hereunder or enforcing any rights hereunder) and (ii) any taxes that are attributable solely to the failure of any Non-U.S. Lender (as defined in Section 8.11(g) below) to comply with Section 8.11(g) or 8.11(h) (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, "Non-Excluded Taxes"). If the relevant Borrower shall be required to deduct any Non-Excluded Taxes from or in respect of any sum payable hereunder to any Lender or any Administrative Agent, (i) the sum payable shall be increased by the amount (an "Additional Amount") necessary so that after making all required deductions (including deductions applicable to Additional Amounts payable under this Section 8.11) such Lender or such Administrative Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the relevant Borrower shall make such deductions and (iii) the relevant Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the relevant Borrower (or the Guarantors, as applicable) shall pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp, intangibles or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document that are imposed by a Governmental Authority in a jurisdiction in which the relevant Borrower (or Guarantor, as applicable) is incorporated, organized, managed and controlled or considered to have its seat or otherwise has a connection (other than as a result of entering into this Agreement, performing any obligations hereunder, receiving any payments hereunder or enforcing any rights hereunder ("Other Taxes"). (c) The relevant Borrower (or the Guarantors, as applicable) shall indemnify each Lender (or participant) and each Administrative Agent for the full amount of Non-Excluded Taxes and Other Taxes paid by such Lender (or participant) or such Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses (including reasonable attorney's fees and expenses)) arising therefrom or with respect thereto, whether or not such Non-Excluded Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared by a Lender, or an Administrative Agent on its behalf and setting forth in reasonable detail the manner in which such amount shall have been determined, absent manifest error, shall be final, conclusive and binding for all purposes. Such indemnification shall be made within 30 days after the date the Lender or the Administrative Agent, as the case may be, makes written demand 48 therefor, which written demand shall be made within 60 days of the date such Lender or Administrative Agent receives written demand for payment of such Taxes or Other Taxes from the relevant Governmental Authority. (d) If a Lender (or participant) or an Administrative Agent receives a refund, which in its reasonable judgment is in respect of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by the relevant Borrower or with respect to which the relevant Borrower has paid Additional Amounts pursuant to this Section 8.11, it shall within 30 days from the date of such receipt pay over such refund to the relevant Borrower (but only to the extent of indemnity payments made, or Additional Amounts paid, by the relevant Borrower under this Section 8.11 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Lender (or participant) or such Administrative Agent and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the relevant Borrower, upon the request of such Lender (or participant) or such Administrative Agent, agrees to repay the amount paid over to the relevant Borrower (plus penalties, interest or other charges) to such Lender (or participant) or such Administrative Agent in the event such Lender (or participant) or such Administrative Agent is required to repay such refund to such Governmental Authority. (e) As soon as practicable after the date of any payment of Non-Excluded Taxes or Other Taxes by the relevant Borrower to the relevant Governmental Authority, the relevant Borrower will deliver to the applicable Administrative Agent at its address referred to in Section 15.1, the original or a certified copy of a receipt issued by such Governmental Authority evidencing payment thereof. (f) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 8.11 shall survive the payment in full of the principal of and interest on all Loans made hereunder. (g) Each Lender (or participant) that is not a United States Person as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Company, the applicable Administrative Agent and, if Bristol-Myers Squibb is legally obligated to make any payment under this Agreement at the time the Lender (or participant) becomes a party (or participant) to this Agreement, Bristol-Myers Squibb, two copies of either United States Internal Revenue Service Form W-8BEN or W8ECI (or successor forms), or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8BEN, or any subsequent or substitute versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8BEN, a certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c)(3)(A) of the Code, is not a 10 percent shareholder (within the meaning of Section 881(c)(3)(B) of the Code) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of Section 881(c)(3)(C) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax on payments by the Company or Bristol-Myers Squibb, as applicable, under this Agreement. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of a participant, on or before the date such participant becomes a participant hereunder) and on or 49 before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Notwithstanding any other provision of this Section 8.11(g), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 8.11(g) that such Non-U.S. Lender is not legally able to deliver. (h) A Lender (or participant) that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which a Borrower (other than the Company) is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to such Borrower (with a copy to the applicable Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by such Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender (or participant) is legally entitled to complete, execute and deliver such documentation and in such Lender's reasonable judgment such completion, execution or submission would not materially prejudice the legal position of such Lender (or participant). (i) The relevant Borrower shall not be required to indemnify any Lender, or to pay any Additional Amounts to any Lender, in respect of any withholding tax pursuant to paragraph (a) or (c) above to the extent that (i) the obligation to withhold amounts with respect to such withholding tax was in effect and would apply to amounts payable to such Lender on the date such Lender became a party to this Agreement (or, in the case of a participant, on the date such participant became a participant hereunder) or, with respect to payments to a New Lending Office, the date such Non-U.S. Lender designated such New Lending Office with respect to a Loan or, with respect to payments by a Borrower pursuant to a Competitive Loan, as of the date the Company accepts a Competitive Bid pursuant to Section 5.1(d); provided, however, that this clause (i) shall not apply to any Lender (or participant) if the assignment, participation, transfer or designation of a New Lending Office was made at the request of the relevant Borrower; and provided further, however, that this clause (i) shall not apply to the extent the indemnity payment or Additional Amounts any Lender (or participant) would be entitled to receive (without regard to this clause (i)) do not exceed the indemnity payment or Additional Amounts that the Lender (or participant) making the assignment, participation, transfer or designation of such New Lending Office would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (ii) the obligation to pay such Additional Amounts would not have arisen but for a failure by such Lender (or participant) to comply with the provisions of paragraph (g) or (h) of this Section 8.11. (j) Any Lender (or participant) claiming any indemnity payment or Additional Amounts payable pursuant to this Section 8.11 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document reasonably requested in writing by the relevant Borrower or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such indemnity payment or Additional Amounts that may thereafter accrue and would not, in the sole determination of such Lender (or participant), be otherwise disadvantageous to such Lender (or participant). 50 (k) Nothing contained in this Section 8.11 shall require any Lender (or participant) or any Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). SECTION 8.12. Payments Generally; Pro Rata Treatment; Sharing of Setoffs. (a) Each Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or of amounts payable under Section 8.9, 8.10 or 8.11, or otherwise) prior to 3:00 p.m., local time at the place of payment, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the applicable Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the applicable Administrative Agent at its offices referred to in Section 15.1, or such other location as such Administrative Agent shall designate from time to time, except that payments pursuant to Sections 8.9, 8.10 or 8.11 and 15.5 shall be made directly to the Persons entitled thereto. The General Administrative Agent, the Japanese Administrative Agent or the Euro Administrative Agent, as the case may be, shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in the Currency in which the applicable payment obligation is due. (b) If at any time insufficient funds are received by and available to the General Administrative Agent, the Japanese Administrative Agent or the Euro Administrative Agent, as the case may be, to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal (including reimbursement of LC Disbursements) then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or in respect of its interest in any Letters of Credit resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon or its interest in Letters of Credit than the proportion received by any other Lender participating in such Revolving Loan or Letters of Credit, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and Letters of Credit of such other Lenders to the extent necessary so that the benefit of all such payments shall be shared by such Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and Letters of Credit; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the 51 assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Company or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation. (d) Unless the General Administrative Agent, the Japanese Administrative Agent or the Euro Administrative Agent, as the case may be, shall have received notice from a Borrower prior to the date on which any payment is due to the applicable Administrative Agent for the account of the Lenders hereunder that such Borrower will not make such payment, the applicable Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if such Borrower has not in fact made such payment, then each of the applicable Lenders severally agrees to repay to the applicable Administrative Agent forthwith on demand the amount so distributed to such Lenders with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the applicable Administrative Agent, (i) if the relevant amount is denominated in Dollars, at the greater of the Federal Funds Effective Rate and a rate determined by the applicable Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) if the relevant amount is denominated in any other Currency, at the interest rate reasonably determined by the applicable Administrative Agent to reflect the cost of funds for the amount paid by such Administrative Agent on behalf of such Borrower. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 8.1(b) or 8.12(d), then the applicable Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by such Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 8.13. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 8.9, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 8.11, then such Lender shall use reasonable efforts to file any certificate or document requested by the applicable Borrower (consistent with legal and regulatory restrictions), to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such filing, designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 8.9 or 8.11, as the case may be, in the future and (ii) would not otherwise be disadvantageous to such Lender. (b) If any Lender requests compensation under Section 8.9, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 8.11, or if any Lender defaults in its obligation to fund Loans hereunder, then such Borrower may, upon notice to such Lender and the applicable Administrative Agent, require such Lender to assign and delegate, without recourse 52 (in accordance with and subject to the restrictions contained in Section 15.4), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it and any and all rights and interests related thereto) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such Borrower shall have received the prior written consent of the Administrative Agents which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or such Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 8.9 or payments required to be made pursuant to Section 8.10, such assignment will result in a reduction in such compensation or payments. ARTICLE IX Representations and Warranties The Company (and in the case of Section 9.14, the Japanese Borrower) represents and warrants to each of the Lenders and each of the Administrative Agents that (provided that the representations and warranties in Section 9.15 are made solely by Bristol-Myers Squibb): SECTION 9.1. Organization; Powers. Each Credit Party (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted and (c) is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify would not result in a Material Adverse Effect. Each Credit Party has the corporate power and authority to execute and deliver this Agreement (or, in the case of the Borrowing Subsidiaries, the Borrowing Subsidiary Agreements), to perform its obligations under this Agreement and to borrow hereunder. SECTION 9.2. Authorization. The Transactions (a) are within each Credit Party's corporate powers and have been duly authorized by all requisite corporate action and (b) do not (i) violate (A) any provision of any law, statute, rule or regulation (including, without limitation, the Margin Regulations), (B) any provision of the certificate of incorporation or other constitutive documents or by-laws of the Company or any Subsidiary, (C) any order of any Governmental Authority or (D) any provision of any indenture, agreement or other instrument to which the Company or any Subsidiary is a party or by which it or any of its property is or may be bound, (ii) conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any lien upon any property or assets of the Company or any Subsidiary other than, in the case of clauses (i)(A), (i)(C), (i)(D), (ii) and (iii), any such violations, conflicts, breaches, defaults or liens that, individually or in the aggregate, would not have a Material Adverse Effect. 53 SECTION 9.3. Enforceability. Each Loan Document constitutes or, when executed and delivered, will constitute a legal, valid and binding obligation of each Credit Party party thereto, enforceable in accordance with its terms (subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity)). SECTION 9.4. Governmental Approvals. No action, consent or approval of, registration or filing with or other action by any Governmental Authority is required in connection with the Transactions. SECTION 9.5. Financial Statements; No Material Adverse Effect. (a) The Company has heretofore furnished to the Administrative Agents and the Lenders copies of (i) its audited consolidated financial statements for the years ended December 31, 1999 and December 31, 2000, respectively, which were included in the Form 10 Filing and (ii) its unaudited consolidated financial statements for the quarter ended March 31, 2001, which was included in the Form 10 Filing. Such financial statements present fairly, in all material respects, the financial condition and the results of operations of the Company and the Subsidiaries, taken as a whole, as of, and for accounting periods ending on, such dates in accordance with GAAP (subject, in the case of unaudited statements, to normal year-end audit adjustments and the absence of footnotes). (b) There has been no material adverse effect on the business, operations, properties or financial condition of the Company and its Subsidiaries, taken as a whole, from those reflected in the Form 10 Filing. SECTION 9.6. Litigation; Compliance with Laws. (a) There are no actions, proceedings or investigations filed or (to the knowledge of the Company) threatened against Bristol-Myers Squibb or the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal which question the validity or legality of this Agreement, the Transactions or any action taken or to be taken pursuant to this Agreement and no order or judgment has been issued or entered restraining or enjoining the Company from the execution, delivery or performance of this Agreement nor is there any other action, proceeding or investigation filed or (to the knowledge of the Company) threatened against Bristol-Myers Squibb or the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable likelihood of an adverse determination and that, if adversely determined, would be reasonably likely to result in a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would be reasonably likely to result in a Material Adverse Effect. SECTION 9.7. Federal Reserve Regulations. No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Margin Regulations. 54 SECTION 9.8. Taxes. The Company and the Subsidiaries have filed or caused to be filed all Federal and material state, local and foreign Tax returns which are required to be filed by them, and have paid or caused to be paid all material Taxes required to have been paid by them, other than any Taxes or assessments the validity of which is being contested in good faith by appropriate proceedings, and with respect to which appropriate accounting reserves have, to the extent required by GAAP, been set aside. SECTION 9.9. Employee Benefit Plans. The present aggregate value of accumulated benefit obligations of each Plan and each foreign employee pension benefit plan required to be funded (based on those assumptions used for disclosure of such obligations in corporate financial statements in accordance with GAAP) did not, as of the most recent statements available, exceed the aggregate value of the assets for each plan by an amount in the aggregate for all such plans that would reasonably be expected to have a Material Adverse Effect. Except as would not individually or in the aggregate be reasonably expected to have a Material Adverse Effect, (a) no ERISA Termination Event has occurred or (b) each Plan has been established and administered in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations. SECTION 9.10. Environmental and Safety Matters. Other than exceptions to any of the following that would not in the aggregate have a Material Adverse Effect: (a) the Company and the Subsidiaries comply and have complied with all applicable Environmental and Safety Laws; (b) there are and have been no Hazardous Substances at any property owned, leased or operated by the Company now or in the past, or at any other location, that could reasonably be expected to result in liability of the Company or any Subsidiary under any Environmental and Safety Law or result in costs to any of them arising out of any Environmental and Safety Law; (c) there are no past, present, or, to the knowledge of the Company and the Subsidiaries, anticipated future events, conditions, circumstances, practices, plans, or legal requirements that could reasonably be expected to prevent the Company or any of the Subsidiaries from, or increase the costs to the Company or any of the Subsidiaries of, complying with applicable Environmental and Safety Laws or obtaining or renewing all material permits, approvals, authorizations, licenses or permissions required of any of them pursuant to any such law; and (iv) neither the Company nor any of the Subsidiaries has retained or assumed, by contract or operation of law, any liability, fixed or contingent, under any Environmental and Safety Law. SECTION 9.11. Properties. (a) Each of the Company and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property that are material to the business of the Company and its Subsidiaries taken as a whole, except for defects in title that could not reasonably be expected to result in a Material Adverse Effect. (b) Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property that are material to the business of the Company and its Subsidiaries taken as a whole, and the use thereof by the Company and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 55 SECTION 9.12. Investment and Holding Company Status. Neither the Company nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 9.13. Spin-Off. The Spin-Off has been consummated. SECTION 9.14. Japanese Borrower Financial Statements. The Japanese Borrower has delivered to the Japanese Lenders such financial statements as are required to be delivered to the Japanese Lenders under applicable Japanese laws and regulations. SECTION 9.15. Bristol-Myers Squibb. Bristol-Myers Squibb represents and warrants that (a) it has the corporate power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to borrow hereunder, (b) it has duly authorized its execution, delivery and performance of this Agreement and (c) this Agreement constitutes its legal, valid and binding obligation, enforceable in accordance with its terms (subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity)). ARTICLE X Conditions SECTION 10.1. Bristol-Myers Squibb Effective Date. The obligations of the U.S. Lenders to make U.S. Revolving Loans to Bristol-Myers Squibb hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 15.7): (a) The General Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the General Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The General Administrative Agent shall have received a favorable written opinion (addressed to the General Administrative Agent and the Lenders and dated the Bristol-Myers Squibb Effective Date) of Cravath, Swaine & Moore, special counsel to Bristol-Myers Squibb to the effect set forth in Exhibit C-1. Bristol-Myers Squibb hereby requests such counsel to deliver such opinion. (c) The General Administrative Agent shall have received such other documents and certificates as the General Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of Bristol-Myers Squibb and the authorization of the Borrowing by Bristol-Myers Squibb, all in form and substance reasonably satisfactory to the General Administrative Agent and its counsel. 56 (d) The Administrative Agents shall have received all fees and other amounts due and payable on or prior to the Bristol-Myers Squibb Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Company hereunder. The General Administrative Agent shall notify the Company and the Lenders of the Bristol-Myers Squibb Effective Date, and such notice shall be conclusive and binding. SECTION 10.2. Pre Spin-Off Effective Date. The obligations of the U.S. Lenders to make Loans to the U.S. Borrowers and the obligations of the Japanese Lenders to make Loans to the Japanese Borrower hereunder (in each case at any time prior to the Zimmer Effective Date) shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 15.7): (a) The General Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the General Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The General Administrative Agent shall have received a favorable written opinion (addressed to the General Administrative Agent and the Lenders and dated the Pre Spin-Off Effective Date) of Cravath, Swaine & Moore, special counsel to the Credit Parties to the effect set forth in Exhibit C-2. The Company hereby requests such counsel to deliver such opinion. (c) The General Administrative Agent shall have received such documents and certificates as the General Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each U.S. Borrower and of the Japanese Borrower, and the authorization of the Borrowing by the U.S. Borrowers and the Japanese Borrower, all in form and substance reasonably satisfactory to the General Administrative Agent and its counsel. (d) The Administrative Agents shall have received all fees and other amounts due and payable on or prior to the Pre Spin-Off Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Company hereunder. (e) The Company shall have an Investment Grade Standing (with a stable outlook from Moody's and no negative outlook from S&P). The General Administrative Agent shall notify the Company and the Lenders of the Pre Spin-Off Effective Date, and such notice shall be conclusive and binding. SECTION 10.3. Zimmer Effective Date. The obligations of the Lenders to make Loans to the Euro Borrower (and in the event that the Pre Spin-Off Effective Date has not occurred, the U.S. Borrowers and the Japanese Borrower) hereunder shall not become effective 57 until the date on which each of the following conditions is satisfied (or waived in accordance with Section 15.7): (a) The General Administrative Agent shall have received evidence reasonably satisfactory to it that the Spin-Off shall have been consummated. (b) In the event that the Pre Spin-Off Effective Date has not occurred, the General Administrative Agent shall have received a favorable written opinion (addressed to the General Administrative Agent and the Lenders and dated the Zimmer Effective Date) of Cravath, Swaine & Moore, special counsel to the Credit Parties) to the effect set forth in Exhibit C-2. The Company hereby requests such counsel to deliver such opinions. (c) The General Administrative Agent shall have received such documents and certificates as the General Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Credit Party and the authorization of the Transactions, all in form and substance reasonably satisfactory to the General Administrative Agent and its counsel. (d) The General Administrative Agent shall have received a certificate, dated the Zimmer Effective Date and signed by the President, a Vice President or a Financial Officer of the Company, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 10.4. (e) The Administrative Agents shall have received all fees and other amounts due and payable on or prior to the Zimmer Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Company hereunder. (f) The General Administrative Agent shall have received (with sufficient copies for each Lender) a form of the Contribution and Distribution Agreement to be executed and delivered in connection with the Spin-Off. (g) The Company shall have an Investment Grade Standing (with a stable outlook from Moody's and no negative outlook from S&P). (h) The General Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the General Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. The General Administrative Agent shall notify the Company and the Lenders of the Zimmer Effective Date, and such notice shall be conclusive and binding. SECTION 10.4. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (other than a Borrowing made solely to refinance outstanding Borrowings that does not increase the aggregate principal amount of the Loans of 58 any Lender outstanding) or to issue or participate in a Letter of Credit is subject to the satisfaction of the following conditions: (a) The representations and warranties set forth in this Agreement (other than those set forth in Sections 9.5(b), 9.6(a), 9.9 and 9.10 at any time the Commitments are used to support payment of commercial paper issued by the Company or a Subsidiary) shall be true and correct in all material respects (provided that such representations and warranties qualified as to materiality shall be true and correct) on and as of the date of such Borrowing or issuance, as the case may be, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. Notwithstanding the foregoing, it is agreed that (i) any representations and warranties with respect to Bristol-Myers Squibb set forth in Sections 9.6 and 9.15 shall cease to apply after the Zimmer Effective Date shall have occurred and (ii) the representations and warranties set forth in Section 9.13 shall not apply until the Zimmer Effective Date. (b) At the time of and immediately after giving effect to such Borrowing or such issuance, no Default shall have occurred and be continuing. Each Borrowing and the issuance of each Letter of Credit shall be deemed to constitute a representation and warranty by the Company on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. SECTION 10.5. Initial Borrowing by Each Borrowing Subsidiary. The obligation of each Lender to make a Loan on the occasion of the first Borrowing by each Borrowing Subsidiary is subject to the satisfaction of the condition that the General Administrative Agent (or their counsel) shall have received a Borrowing Subsidiary Agreement properly executed by such Borrowing Subsidiary and the Company. ARTICLE XI Affirmative Covenants The Company covenants and agrees with each Lender and each Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any fees or any other amounts payable hereunder shall be unpaid or any Letter of Credit remains outstanding, unless the Required Lenders shall otherwise consent in writing, it will, and will cause each of the Subsidiaries to, on and after the Zimmer Effective Date: SECTION 11.1. Existence. Do or cause to be done all things necessary to preserve and keep in full force and effect its corporate, partnership and/or limited liability company existence and its rights and franchises that are material to the business of the Company and its Subsidiaries as a whole, except as expressly permitted under Section 12.1 or 12.6 and except, in the case of any Subsidiary, where the failure to do so would not result in a Material Adverse Effect. SECTION 11.2. Business and Properties. Comply in all respects with all applicable laws, rules, regulations and orders of any Governmental Authority (including 59 Environmental and Safety Laws and ERISA), whether now in effect or hereafter enacted except instances that could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect; and at all times maintain and preserve all property material to the conduct of the business of the Company and its Subsidiaries as a whole and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times, except where the failure to do so would not result in a Material Adverse Effect. SECTION 11.3. Financial Statements, Reports, Etc. Furnish to the Administrative Agents for distribution to each Lender (except in the case of the materials required by paragraphs (d) below, which shall only be furnished to the General Administrative Agent, the Japanese Administrative Agent and the Japanese Lenders): (a) within 105 days after the end of each fiscal year, its annual report on Form 10-K as filed with the SEC, including its consolidated balance sheet and the related consolidated earnings statement showing its consolidated financial condition as of the close of such fiscal year and the consolidated results of its operations during such year, all audited by Price Waterhouse Coopers LLP or other independent certified public accountants of recognized national standing selected by the Company and accompanied by an opinion of such accountants to the effect that such consolidated financial statements fairly present the Company's financial condition and results of operations on a consolidated basis in accordance with GAAP; (b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, its quarterly report on Form 10-Q as filed with the SEC, including its unaudited consolidated balance sheet and related consolidated earnings statement, showing its consolidated financial condition as of the close of such fiscal quarter and the consolidated results of its operations during such fiscal quarter and the then elapsed portion of the fiscal year (and each delivery of such statements shall be deemed a representation that such statements fairly present the Company's financial condition and results of operations on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes); (c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) demonstrating in reasonable detail calculation of the covenants set forth in Section 12.4 as of the last day of the period covered by such financial statements; (d) concurrently with the delivery of the financial statements required by Section 9.14 hereof, copies of all such financial statements; (e) promptly after the same become publicly available, copies of all reports on Form 8-K filed by it with the SEC, or any Governmental Authority succeeding to any of or all the functions of the SEC, or copies of all reports distributed to its shareholders, as the case may be; and 60 (f) promptly, from time to time, such other information as any Lender shall reasonably request through the General Administrative Agent (it being understood that the Company shall not be required to provide any information or documents which are subject to confidentiality provisions the nature of which prohibit such disclosure). Information required to be delivered pursuant to this Section shall be deemed to have been delivered on the date on which the Company provides notice (reasonably identifying where the applicable disclosure may be obtained) to the General Administrative Agent that such information has been posted on the Company's website on the internet at www.zimmer.com, at www.sec.gov or at another website identified in such notice and accessible by the Lenders without charge. SECTION 11.4. Insurance. Keep its insurable properties adequately insured at all times by financially sound and reputable insurers (which may include captive insurers), and maintain such other insurance or self insurance (including product liability insurance), to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies similarly situated and in the same or similar businesses. SECTION 11.5. Obligations and Taxes. Pay and discharge promptly when due all material taxes, assessments and governmental charges imposed upon it or upon its income or profits or in respect of its property, in each case before the same shall become delinquent or in default and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings and adequate reserves with respect thereto shall, to the extent required by GAAP, have been set aside. SECTION 11.6. Litigation and Other Notices. Give the General Administrative Agent written notice of the following within ten Business Days after any executive officer of the Company obtains knowledge thereof: (a) the filing or commencement of any action, suit or proceeding which the Company reasonably expects to result in a Material Adverse Effect; (b) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and (c) any change in any of the Ratings. provided, that in each case the Company shall not be required to provide separate notice of any event disclosed in any report promptly filed with the SEC if the Company has provided notice to the General Administrative Agent in accordance with the last paragraph of Section 11.3 as long as the Company has provided notice reasonably identifying where the applicable disclosure may be obtained to the General Administrative Agent that such information has been posted. SECTION 11.7. Books and Records. (a) Keep proper books of record and account in which full, true and correct entries are made of all material dealings and transactions in relation to its business and activities and (b) permit any representatives designated by the General Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, 61 finances and condition with its officers and (in the presence of officers of a Credit Party, whether by phone or in person) its independent accountants (in each case subject to the Company's obligations under applicable confidentiality provisions), all at such reasonable times and as often as reasonably requested, all at the expense of the applicable Lenders; provided that during the continuation of any Default (x) any expense of the Lenders in connection with the foregoing shall be for the account of the Company and (y) Lenders shall be permitted to discuss the affairs, finances and condition of the Company and its Subsidiaries without officers of the Credit Parties being present. SECTION 11.8. Subsidiary Guarantor. Cause each Domestic Wholly Owned Subsidiary (other than a special purpose subsidiary organized to facilitate a Permitted Receivables Securitization) to execute and deliver a counterpart to this Agreement thereby assuming the obligations of a Subsidiary Guarantor under Section 15.16 on the Zimmer Effective Date, or, if later, on the date such Person becomes a Domestic Wholly Owned Subsidiary. SECTION 11.9. Use of Proceeds. All proceeds of the Loans shall be used for the purposes referred to in the recitals to this Agreement. ARTICLE XII Negative Covenants The Company covenants and agrees with each Lender and each Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any fees or any other amounts payable hereunder shall be unpaid or any Letter of Credit remains outstanding, unless the Required Lenders shall otherwise consent in writing, it will not, and will not permit any of the Subsidiaries to, on and after the Zimmer Effective Date: SECTION 12.1. Consolidations, Mergers, and Sales of Assets. (a) Consolidate or merge with or into any other Person or liquidate, wind up or dissolve (or suffer any liquidation or dissolution) or (b) sell, or otherwise transfer (in one transaction or a series of transactions), or permit any Subsidiary to sell, or otherwise transfer (in one transaction or a series of transactions), all or substantially all of the assets of the Company and the Subsidiaries, taken as a whole, to any other Person; provided that (i) the Company may merge or consolidate with another Person if the Company is the corporation surviving such merger or consolidation, (ii) a Subsidiary may merge or consolidate with another Person if (A) the Company is the surviving corporation if the Company is a party to such merger or consolidation or (B) the survivor of such merger or consolidation (in the event that it is not the Subsidiary) shall assume all of the payment and performance obligations of such Subsidiary on terms reasonably satisfactory to the General Administrative Agent and (iii) immediately after giving effect to any such merger or consolidation, no Default or Event of Default shall have occurred and be continuing; provided, however, that the foregoing restrictions of this Section 12.1 shall not apply to transactions permitted under Section 12.6 or 12.8. SECTION 12.2. Liens. Create, assume or suffer to exist any Lien upon any property, except that the foregoing shall not prevent the Company or any Subsidiary from creating, assuming or suffering to exist any of the following Liens: 62 (a) Liens existing on the date hereof and set forth on Schedule 12.2 hereof; (b) any Lien existing on property owned or leased by any Person at the time it becomes a Subsidiary, provided that such Lien was not created in anticipation of such person becoming a Subsidiary; (c) any Lien existing on property at the time of the acquisition thereof by the Company or any Subsidiary, provided that such Lien was not created in anticipation of such acquisition; (d) Liens on property acquired, constructed or improved by the Company or any Subsidiary; provided that the Debt secured thereby does not exceed 80% of the cost of acquiring, constructing or improving such property and such Liens do not apply to any other property of the Company or any Subsidiary; (e) Liens on receivables and the proceeds thereof securing any Permitted Receivables Securitization; (f) any Liens securing Debt of the Company owing to a Subsidiary or a Subsidiary owing to the Company or to another Subsidiary; (g) Liens for taxes, assessments or governmental charges or levies not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Company or its Subsidiaries, as the case may be, in conformity with GAAP; (h) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not more than 60 days delinquent in accordance with their terms or that are being contested in good faith by appropriate proceedings; (i) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (j) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (k) easements, rights-of-way, restrictions, licenses, reservations, utility easements and other similar encumbrances imposed by law or incurred in the ordinary course of business that, do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Company and its Subsidiaries, considered as a whole; (l) any interest or title of a lessor under any lease entered into by the Company or any Subsidiary in the ordinary course of its business and covering only the assets so leased; 63 (m) attachment or judgment Liens in respect of judgments or decrees that have been vacated, discharged or stayed within 30 days from the entry thereof; and attachment or judgment Liens in respect of judgments or decrees that have been bonded pending appeal within 30 days from the entry thereof and which do not exceed $50,000,000 in the aggregate; (n) Liens arising from precautionary U.C.C. financing statement filings with respect to operating leases or consignment arrangements entered into by the Company or any Subsidiary in the ordinary course of business; (o) customary Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and that are within the general parameters customary in the banking industry; (p) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Lien referred to in clauses (a) through (o) above, so long as the principal amount of the Debt or other obligations secured thereby does not exceed the principal amount of Debt or obligations so secured at the time of such extension, renewal or replacement (except that, where an additional principal amount of Debt is incurred to provide funds for the completion of a specific project, the additional principal amount, and any related financing costs, may be secured by the Lien as well) and such Lien is limited to the same property subject to the Lien so extended, renewed or replaced (and improvements on such property); and (q) any Lien not permitted by clauses (a) through (p) above securing Debt which, together with the aggregate outstanding principal amount of all other Debt of the Company and its Subsidiaries which would otherwise be subject to the foregoing restrictions and the aggregate Value of existing Sale and Leaseback Transactions which would be subject to the restrictions of Section 5.10 but for this clause (q), does not at any time exceed 5% of Consolidated Net Tangible Assets. SECTION 12.3. Limitation on Sale and Leaseback Transactions. Enter into any Sale and Leaseback Transaction, or permit any Subsidiary to do so, unless the Company or such Subsidiary would be entitled to incur Debt, in a principal amount equal to the Value of such Sale and Leaseback Transaction, which is secured by Liens on the property to be leased without violating Section 12.2. SECTION 12.4. Financial Condition Covenants (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Company (or, if less, the number of full fiscal quarters subsequent to the Zimmer Effective Date) to exceed 3.0 to 1.0. (b) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Company (or, if less, the number of full fiscal quarters subsequent to the Closing Date) to be less than 3.5 to 1.0. 64 SECTION 12.5. Indebtedness. Permit Subsidiaries of the Company to create, issue, incur, assume, become liable in respect of or suffer to exist any Debt (other than Permitted Debt) in an aggregate principal amount exceeding $75,000,000 outstanding at any time. SECTION 12.6. Transactions with Affiliates. Enter into any material transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate, except any such transaction which is (a) otherwise permitted under this Agreement, in the ordinary course of business of the relevant Affiliate and upon fair and reasonable terms no less favorable to the relevant Affiliate than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate, (b) entered into prior to the date hereof or contemplated by any agreement identified on Schedule 12.6 hereof, (c) between or among the Company or any Subsidiary exclusively, (d) any Restricted Payment permitted under Section 12.7, (e) any transactions in connection with any Permitted Receivables Securitization or (f) any arrangements with officers, directors, representatives or other employees of the Company or any Subsidiary relating specifically to employment as such. SECTION 12.7. Restricted Payments. At any time that the Company does not have an Investment Grade Standing, declare or pay any dividend (other than (i) dividends payable solely in common stock of the Person making such dividend or options, warrants or rights to purchase shares of such common stock or (ii) dividends or other distributions made pursuant to the Rights Agreement) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any capital stock of any Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Subsidiary (collectively, "Restricted Payments"), except that any Subsidiary may make Restricted Payments to the Company and its other equity holders, pro rata in accordance with their respective equity interests in such Subsidiary. SECTION 12.8. Investments. At any time that the Company does not have an Investment Grade Standing, make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any capital stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), except: (a) investments in Cash Equivalents; (b) extensions of trade credit in the ordinary course of business; (c) Loans and advances to employees of the Company or any Subsidiary in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount for such employees not to exceed $3,000,000 at any one time outstanding; (d) Loans to employees of the Company or any Subsidiary solely for the purpose of exercising options to purchase the common stock of the Company or any Subsidiary; 65 (e) intercompany Investments by the Company or any Subsidiary in the Company or any Person that, prior to such investment, is a Guarantor, including Guarantees by the Company of any Debt of any Subsidiary; (f) extensions, renewals or replacements of Investments existing on the Zimmer Effective Date and set forth on Schedule 12.8 (provided the aggregate amount of the Investment is not increased); and (g) in addition to Investments otherwise expressly permitted by this Section 12.8, Investments by the Company or any of its Subsidiaries in an aggregate amount (valued at cost) at any time invested not to exceed $110,000,000; and (h) Investments made or committed to be made when the Company has Investment Grade Status. ARTICLE XIII Events of Default In case of the happening of any of the following events (each an "Event of Default"): (a) any representation or warranty made or deemed made in or in connection with the execution and delivery of this Agreement or the Borrowings hereunder or under any Borrowing Subsidiary Agreement shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan or LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or any fee or any other amount (other than an amount referred to in paragraph (b) above) due hereunder, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; (d) default shall be made in the due observance or performance of any covenant, condition or agreement contained in Section 11.6 or Article XII; (e) default shall be made in the due observance or performance of any covenant, condition or agreement contained herein (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from any Administrative Agent or any Lender to the Company; (f) the Company or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of one or more items of Debt in an aggregate principal amount greater than or equal to $50,000,000, when and as the same shall become due 66 and payable (giving effect to any applicable grace period) or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Debt if the effect of any failure referred to in this clause (ii) is to cause such Debt to become due prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or any Subsidiary, or of a substantial part of the property or assets of the Company or any Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of the property or assets of the Company or any Subsidiary or (iii) the winding up or liquidation of the Company or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of the property or assets of the Company or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more judgments for the payment of money in an aggregate amount equal to or greater than $50,000,000 (exclusive of any amount thereof reasonably expected to be covered by insurance) shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor (whose liquidated judgment, along with those of any other judgment creditors, exceeds $50,000,000) to levy upon assets or properties of the Company or any Subsidiary to enforce any such judgment; (j) (i) a Plan of any Borrower shall fail to maintain the minimum funding standard required by Section 412 of the Code for any plan year or a waiver of such standard is sought or granted under Section 412(d) or (ii) an ERISA Termination Event shall have occurred with respect to any Borrower or an ERISA Affiliate has incurred, or in the reasonable opinion of the Required Lenders is reasonably likely to incur, a liability to or on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA or (iii) any Person shall engage in any prohibited transaction described in Sections 406 of ERISA or 4975 of the Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the United States Department of Labor or (iv) any Borrower or any ERISA 67 Affiliate shall fail to pay any required installment or any other payment required to be paid by such entity under Section 412 of the Code on or before the due date for such installment or other payment (taking into account any extensions granted) or (v) any Borrower or any ERISA Affiliate shall fail to make any contribution or payment to any Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA) which any Borrower or any ERISA Affiliate is required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto (taking into account any extensions granted), and, in the event of the occurrence of any of the events described in clauses (i) through (v) above, there shall result from any such event or events either a liability or a material risk of incurring a liability which is reasonably expected to have a Material Adverse Effect; (k) a Change in Control shall occur; or the Company shall cease to own beneficially all of the capital stock (or equivalent equity interests) of each of the Japanese Borrower and the Euro Borrower; or (l) the guarantee in Section 15.16 shall cease to be, or shall be asserted by the any Credit Party not to be, a valid and binding obligation on the part of any Guarantor; then, and in every such event (other than an event with respect to any Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the General Administrative Agent, at the request of the Required Lenders, shall, by notice to the Company or any other Borrower (which notice to any other Borrower may be given to the Company), take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrowers accrued hereunder (including all amounts of LC Exposure, whether or not the beneficiary of the then outstanding Letters of Credit shall have presented the documents required therein), shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding; and, in any event with respect to any Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrowers accrued hereunder (including all amounts of LC Exposure, whether or not the beneficiary of the then outstanding Letters of Credit shall have presented the documents required therein) shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the U.S. Borrower shall at such time deposit in a cash collateral account opened by the General Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the General Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the U.S. Borrower hereunder and under the other Loan Documents. The General Administrative Agent shall have exclusive 68 dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the General Administrative Agent and at the U.S. Borrower risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. After all such Letters of Credit shall have expired or been fully drawn upon, all reimbursement obligations shall have been satisfied and all other obligations of the U.S. Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the U.S. Borrower (or such other Person as may be lawfully entitled thereto). ARTICLE XIV The Administrative Agents In order to expedite the transactions contemplated by this Agreement, Chase is hereby appointed to act as the General Administrative Agent on behalf of the U.S. Lenders, The Chase Manhattan Bank, Tokyo Branch is hereby appointed to act as Japanese Administrative Agent on behalf of the Japanese Lenders, Chase Manhattan International Limited is hereby appointed to act as Euro Administrative Agent on behalf of the Euro Lenders and Chase is hereby appointed to act as Advance Agent on behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes each Administrative Agent (which term, for purposes of this Article XIV shall be deemed to include the Advance Agent) to take such actions on behalf of such Lender or holder and to exercise such powers as are specifically delegated to the Administrative Agents or an Administrative Agent individually, as the case may be, by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. Each Administrative Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans, payments in respect of the Letters of Credit and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Credit Parties of any Event of Default of which such Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by any Credit Party pursuant to this Agreement as received by such Administrative Agent. Neither the Administrative Agents nor any of their respective directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his or her own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by any Borrower of any of the terms, conditions, covenants or agreements contained in this Agreement. The Administrative Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or other instruments or agreements. The Administrative Agents may deem and treat the Lender which makes any Loan or issues or participates in any Letter of Credit as the holder of the indebtedness resulting therefrom for all purposes hereof until it shall have received notice 69 from such Lender, given as provided herein, of the transfer thereof. The Administrative Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. The Administrative Agents shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper Person or Persons. Neither the Administrative Agents nor any of their respective directors, officers, employees or agents shall have any responsibility to any Borrower on account of the failure of or delay in performance or breach by any Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or any Borrower of any of their respective obligations hereunder or in connection herewith. The Administrative Agents may execute any and all duties hereunder by or through their Affiliates, agents or employees and shall be entitled to rely upon the advice of legal counsel selected by them with due care with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by them in accordance with the advice of such counsel. The Lenders hereby acknowledge that the Administrative Agents shall be under no duty to take any discretionary action permitted to be taken by them pursuant to the provisions of this Agreement unless they shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, any Administrative Agent may resign at any time by notifying the Lenders, the other Administrative Agents and the Company. Upon any such resignation of an Administrative Agent, the Required Lenders shall have the right to appoint a successor Administrative Agent acceptable to the Company. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank having a combined capital and surplus of at least $500,000,000 (or any Affiliate of such bank), (x) with, in the case of the U.S. Commitments, an office in New York, New York, (y) with, in the case of the Japanese Commitments, an office in Tokyo, Japan or (z) with the case of with, in the case of the Euro Commitments, an office in London. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any Administrative Agent's resignation hereunder, the provisions of this Article XIV and Section 15.5 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. With respect to the Loans made by, or Letters of Credit issued by or participated in by, them hereunder, each Administrative Agent in its individual capacity and not as Administrative Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Administrative Agent, and such Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Company or any Subsidiary or other Affiliate thereof as if it were not an Administrative Agent. 70 Each Lender agrees (i) to reimburse the Administrative Agents, on demand, in the amount of its Applicable Percentage of any expenses incurred for the benefit of the Lenders by the Administrative Agents, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Administrative Agents and any of their respective directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against either of them in its capacity as an Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by either of them under this Agreement to the extent the same shall not have been reimbursed by the Borrowers; provided that no Lender shall be liable to any Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of such Administrative Agent or any of its directors, officers, employees or agents. Each Lender acknowledges that it has, independently and without reliance upon any Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any related agreement or any document furnished hereunder or thereunder. ARTICLE XV Miscellaneous SECTION 15.1. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy, as follows: (i) if to the Company, to Zimmer Holdings, Inc., 345 Main Street, Warsaw, IN 46581, Attention of Sam Leno, Senior Vice President and Chief Financial Officer (Telecopy No.: 219-372-4793; (ii) if to Zimmer, to Zimmer, Inc., 345 Main Street, Warsaw, IN 46581, Attention of Sam Leno, Senior Vice President and Chief Financial Officer (Telecopy No.: 219-372-4793); (iii) if to the Japanese Borrower, to Zimmer K.K., 27F, I-Landtower, 5-1, Nishishinjuku 6 - Chome, Shinjuku - KU, Tokyo, 163-1327, Attention of Rob Pullan, Director, Finance & IM, (Telecopy No.: 81-3-5323-8509; with a copy to Zimmer Holdings, Inc., 345 Main Street, Warsaw, IN 46581, Attention of Sam Leno, Senior Vice President and Chief Financial Officer (Telecopy No.: 219-372-4793); 71 (iv) if to Zimmer U.K., to Zimmer LTD., The Courtyard, Lancaster Place, Southmarston Park, Swindon, Wiltshire SN3 4UQ, Attention of Christine Moore, Controller (Telecopy No.: 44-1793-584-653); with a copy to Zimmer Holdings, Inc., 345 Main Street, Warsaw, IN 46581, Attention of Sam Leno, Senior Vice President and Chief Financial Officer (Telecopy No.: 219-372-4793); (v) if to Bristol-Myers Squibb, to Bristol-Myers Squibb Company, 345 Park Avenue, New York, New York 10154, Attention of the Treasurer (Telecopy No.: 212-605-9632) and the General Counsel (Telecopy No. 212-546-9562); (vi) if to the General Administrative Agent, to The Chase Manhattan Bank, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Anne Bowles (Telecopy No. 212-552-7500); with a copy of all documents to be delivered pursuant to Section 11.3 to JPMorgan Chase, 270 Park Avenue, 48th Floor, New York, New York 10017, Attention of Lyette Proctor, (Telecopy No. 212-270-2901); (vii) if to the Euro Administrative Agent, to Chase Manhattan International Limited, Trinity Tower, 9 Thomas More Street, London, England E19YT, Attention of Stephen Clark (telecopy No.: 44-171-777-3840); (viii) if to the Japanese Administrative Agent, to The Chase Manhattan Bank, Tokyo Branch, 5-2-20, Akasaka, Minato-ku, Tokyo, Japan 107-6117, Attention of Naoko Morimoto (telecopy No.: 813-5570-7539); (ix) if to a Lender, to it at its address (or telecopy number) set forth in Schedule 2.1 or in the Assignment and Acceptance pursuant to which such Lender became a party hereto; and (x) if to any other Borrowing Subsidiary, to it at the address (or telecopy number) set forth above for the Company. Each Borrower (other than the Company) hereby irrevocably appoints the Company as its agent for the purpose of giving on its behalf any notice and taking any other action provided for in this Agreement (whether or not this Agreement expressly authorizes the Company to take any such action on behalf of such Borrower) and hereby agrees that it shall be bound by any such notice or action given or taken by the Company hereunder irrespective of whether or not any such notice shall have in fact been authorized by such Borrower and irrespective of whether or not the agency provided for herein shall have theretofore been terminated. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy to such party as provided in this Section or in accordance with the latest unrevoked direction from such party given in accordance with this Section. SECTION 15.2. Survival of Agreement. All covenants, agreements, representations and warranties made by any Credit Party herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders 72 of the Loans regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or the Commitments have not been terminated. SECTION 15.3. Binding Effect. This Agreement shall become effective when it shall have been executed by the Company, the Euro Borrower, the Japanese Borrower, Bristol-Myers Squibb and the Administrative Agents and when the Administrative Agents shall have received copies hereof (telecopied or otherwise) which, when taken together, bear the signature of each Lender, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Borrower shall have the right to assign any rights hereunder or any interest herein, except in accordance with Section 12.1, without the prior consent of all the Lenders. SECTION 15.4. Successors and Assigns. (a) Whenever in this Agreement any of the parties is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any party that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. (b) Each Lender other than any Conduit Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that, except in the case of an assignment to another Lender or an Affiliate of a Lender, (i) each of the Company, (so long as no Event of Default shall have occurred and be continuing with respect to any Borrower under clause (g) or (h) of Article XIII of this Agreement) and the General Administrative Agent must give its prior written consent to such assignment (which consent in each case shall not be unreasonably withheld), (ii) the amount of the Commitments of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the General Administrative Agent) shall not be less than $5,000,000 unless it shall be the entire amount of such Lender's Commitments and (iii) an assignment by a Lender of any of its U.S. Commitments shall include an assignment by such Lender of its proportionate interest in Swing Line Loans and LC Exposure. The parties to each assignment shall execute and deliver to the General Administration Agent an Assignment and Acceptance, and a processing and recordation fee of $3,500. Upon acceptance and recording pursuant to paragraph (e) of this Section 15.4, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (y) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall (i) continue to be entitled to the benefits of Sections 8.9, 8.10, 8.11 and 15.5, as well as to any fees accrued for its account hereunder and not yet paid and (ii) continue to be subject to the confidentiality provisions hereof). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at 73 such time, and in such case shall retain its rights hereunder in respect of any Loans so retained until such Loans have been repaid in full in accordance with this Agreement. Notwithstanding the foregoing, any Conduit Lender may assign at any time to its designating Lender hereunder without the consent of the Company or the General Administrative Agent any or all of the Loans it may have funded hereunder and pursuant to its designation agreement and without regard to the limitations set forth in the first sentence of this Section 15.4(b). (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the financial condition of the Borrowers or the performance or observance by the Borrowers of any obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 11.3 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon any Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the General Administrative Agent, the Japanese Administrative Agent and the Euro Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agents by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) Each of the Administrative Agents shall maintain at its office referred to in Section 15.1 a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and the principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time and any promissory notes evidencing such Loans (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and the Company, the other Borrowers, the Administrative Agents and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. No assignment or transfer of any Loan (or portion thereof) or any Note evidencing such Loan shall be effected unless and until it has been recorded in the Register as provided in this subsection 15.4(d). Notwithstanding any other provision of this Agreement, any assignment or transfer of all or part of a promissory note shall be registered on the Register only upon surrender for registration of assignment or transfer of the promissory note (and each promissory note shall expressly so provide), accompanied by a duly executed Assignment and 74 Acceptance, and thereupon one or more new promissory notes in the same aggregate principal amount shall be issued to the designated Assignee and the old promissory notes shall be returned by the applicable Administrative Agent to the Company marked "cancelled". The Register shall be available for inspection by each party hereto, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee together with an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Company to such assignment, the relevant Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. (f) Each Lender other than any Conduit Lender may sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto or thereto for the performance of such obligations, (iii) each participating bank or other entity shall be entitled to the benefit of the cost protection provisions contained in Sections 8.9, 8.10 and 8.11 to the same extent as if it was the selling Lender (and limited to the amount that could have been claimed by the selling Lender had it continued to hold the interest of such participating bank or other entity, it being further agreed that the selling Lender will not be permitted to make claims against the Borrowers under Section 8.9(b) for costs or reductions resulting from the sale of a participation), except that all claims made pursuant to such Sections shall be made through such selling Lender and (iv) the Borrowers, the Administrative Agents and the other Lenders shall continue to deal solely and directly with such selling Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrowers relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or thereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending the final scheduled maturity of the Loans or any date scheduled for the payment of interest on the Loans or extending the Commitments). (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 15.4, disclose to the assignee or participant or proposed assignee or participant any information relating to the Company or the other Borrowers furnished to such Lender; provided that, prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall be subject to the confidentiality provisions contained herein. (h) The Borrowers shall not assign or delegate any rights and duties hereunder, except in accordance with Section 12.1, without the prior written consent of all Lenders. (i) Any Lender may at any time pledge or otherwise assign all or any portion of its rights under this Agreement to a Federal Reserve Bank; provided that no such pledge shall 75 release any Lender from its obligations hereunder. In order to facilitate such an assignment to a Federal Reserve Bank, the relevant Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made by the assigning Lender hereunder. (j) Each party hereto hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance. SECTION 15.5. Expenses; Indemnity. (a) The Company agrees to pay all reasonable out-of-pocket expenses incurred by the Administrative Agents and the Syndication Agent in connection with entering into this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (including the reasonable fees, disbursements and other charges of a single counsel), or incurred by the Administrative Agents, the Syndication Agent or any Lender in connection with the enforcement of their rights in connection with this Agreement or in connection with the Loans made hereunder or thereunder, including the fees and disbursements of counsel for the Administrative Agents and the Syndication Agent and, in the case of enforcement, each Lender. (b) The Company agrees to indemnify each Administrative Agent, the Syndication Agent, each Lender, each of their Affiliates and the directors, officers, employees and agents of the foregoing (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, incurred by or asserted against any Indemnitee arising out of (i) the consummation of the transactions contemplated by this Agreement, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that (x) such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses result from the gross negligence or willful misconduct of such Indemnitee and (y) such indemnity shall not apply to losses, claims, damages, liabilities or related expenses that result from disputes solely between Lenders. (c) The provisions of this Section 15.5 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of the Administrative Agents, the Syndication Agent or any Lender. All amounts due under this Section 15.5 shall be payable on written demand therefor. SECTION 15.6. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 76 SECTION 15.7. Waivers; Amendment. (a) No failure or delay of any Administrative Agent or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agents and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or consent to any departure therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Company or any other Borrower in any case shall entitle such party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or reimbursement obligation with respect to an LC Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan, or amend or modify Section 15.16, without the prior written consent of each Lender directly affected thereby, (ii) increase the Commitments or decrease the facility fees or fees in respect of Letters of Credit of any Lender (with the exception of fronting fees payable to the Issuing Lender, which shall require the consent of the Issuing Lender) without the prior written consent of such Lender or (iii) amend or modify the provisions of Section 8.12 or Section 15.4(h), the provisions of this Section 15.7 or the definition of the "Required Lenders", or release any Guarantor from its obligations under Section 15.16 hereof except for the release of a Subsidiary Guarantor in connection with the consummation of a transaction permitted under Section 12.1, without the prior written consent of each Lender; provided further, however, that no such agreement shall amend, modify or otherwise affect the rights or duties of (x) any Administrative Agent hereunder without the prior written consent of such Administrative Agent, (y) the Swingline Lender without the prior written consent of the Swingline Lender or (z) any Issuing Lender without the prior written consent of such Issuing Lender. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 15.7 and any consent by any Lender pursuant to this Section 15.7 shall bind any assignee of its rights and interests hereunder. SECTION 15.8. Entire Agreement. This Agreement constitutes the entire contract among the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 15.9. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to 77 replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 15.10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 15.3. SECTION 15.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 15.12. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or obligations of each Credit Party now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify the Company after such setoff and application made by such Lender, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section 15.12 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have. SECTION 15.13. Jurisdiction; Consent to Service of Process. (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Subject to the foregoing and to paragraph (b) below, nothing in this Agreement shall affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement against any other party hereto in the courts of any jurisdiction. (b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or thereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 15.1. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 78 (d) Each Borrower hereby irrevocably appoints the Company as its agent for the service of process in any action referred to in Section 15.13(a) and agrees that service of process in any such proceeding may be made by mailing or delivering a copy thereof to it care of the Company at its address for notice set forth in Section 15.1. (e) Each Credit Party waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section for any special, exemplary, punitive or consequential damages. SECTION 15.14. Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement. Each party hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certification in this Section 15.14. SECTION 15.15. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of each Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrowers contained in this Section 15.15 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. SECTION 15.16. Guaranty. In order to induce the Lenders to make Loans to the Company and the other Borrowers, each Guarantor hereby unconditionally and irrevocably guarantees as a primary obligor the Borrower Obligations of all the Borrowers. Each Guarantor further agrees that the Borrower Obligations may be extended and renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its agreement hereunder notwithstanding any extension or renewal of any Borrower Obligation. Each Guarantor waives promptness, diligence, presentment to, demand of payment from and protest to the Borrowers of any Borrower Obligations, and also waives notice 79 of acceptance of its obligations and notice of protest for nonpayment. The obligations of each Guarantor hereunder shall be absolute and unconditional and not be affected by, and each Guarantor waives any defense it may now or hereafter have arising out of (a) the failure of any Lender or the Administrative Agents to assert any claim or demand or to enforce any right or remedy against any Borrower under the provisions of this Agreement or any of the other Loan Documents or otherwise; (b) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any other Loan Documents or any other agreement; (c) the failure of any Lender to exercise any right or remedy against any Borrower; (d) the invalidity or unenforceability of any Loan Document; (e) the validity, legality or enforceability of this Agreement or any Loan or Letter of Credit or any document or instrument relating thereto or given in connection therewith; or (f) any other circumstance which might otherwise constitute a defense available to or discharge of a Borrower or a guarantor (other than indefeasible payment). Each Guarantor further agrees that its agreements hereunder constitutes a promise of payment when due and not of collection, and waives any right to require that any resort be had by any Lender to any balance of any deposit account or credit on the books of any Lender in favor of any Borrower or any other Person. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Borrower Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agents or any Lender to assert any claim or demand or to enforce any remedy under this Agreement or under any other Loan Document or any other agreement, by any waiver or modification in respect of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Borrower Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of the Guarantors (or any of them) or otherwise operate as a discharge of the Guarantors (or any of them) as a matter of law or equity. Each Guarantor further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Borrower Obligation is rescinded or must otherwise be restored by the Administrative Agents or any Lender upon the bankruptcy or reorganization of any Borrower or otherwise. In furtherance of the foregoing and not in limitation of any other right which the Administrative Agents or any Lender may have at law or in equity against the Guarantors (or any of them) by virtue hereof, upon the failure of any Borrower to pay any Borrower Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will, upon receipt of written demand by the General Administrative Agent, forthwith pay, or cause to be paid, in cash the amount of such unpaid Borrower Obligation. In the event that, by reason of the bankruptcy of any Borrower (i) acceleration of Loans made to such Borrower is prevented and (ii) the Guarantors shall not have prepaid the outstanding Loans and other amounts due hereunder owed 80 by such Borrower, the Guarantors will forthwith purchase such Loans and other amounts at a price equal to the principal amount thereof plus accrued interest thereon and any other amounts due hereunder with respect thereto. Each Guarantor further agrees that if payment in respect of any Borrower Obligation shall be due in a currency other than Dollars and/or at a place of payment other than New York and if, by reason of any Change in Law, disruption of currency or foreign exchange markets, war or civil disturbance or similar event, payment of such Borrower Obligations in such currency or such place of payment shall be impossible or, in the judgment of any applicable Lender, not consistent with the protection of its rights or interests, then, at the election of any applicable Lender, the Guarantors shall make payment of such Borrower Obligation in Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Lender against any losses or expenses that it shall sustain as a result of such alternative payment. Following indefeasible payment in full in cash of all Borrower Obligations and the termination of the Commitments hereunder, upon payment by any Guarantor of any Borrower Obligations, each Lender shall, in a reasonable manner, assign the amount of such Borrower Obligations owed to it and paid by such Guarantor pursuant to this guarantee to such Guarantor, such assignment to be pro tanto to the extent to which the Borrower Obligations in question were discharged by such Guarantor, or make such disposition thereof as such Guarantor shall direct (all without recourse to any Lender and without any representation or warranty by any Lender except with respect to the amount of the Borrower Obligations so assigned). Each Subsidiary Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Subsidiary Guarantor hereunder which has not paid its proportionate share of such payment. Each Subsidiary Guarantor's right of contribution shall be subject to the terms and conditions of the immediately following paragraph. The provisions of this paragraph shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Administrative Agents and the Lenders and each Subsidiary Guarantor shall remain liable to the Administrative Agents and the Lenders for the full amount guaranteed by such Subsidiary Guarantor hereunder. Upon payment by any Guarantor of any sums as provided above, all rights of the Guarantors against any Borrower arising as a result thereof by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Borrower Obligations to the Lenders and termination of the Commitments. Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Subsidiary Guarantor in its capacity as a guarantor under this Section 15.16 shall in no event exceed the amount which can be guaranteed by such Subsidiary Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established above). Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 15.16 or affecting the rights and remedies of the Administrative Agent or any Lender hereunder. 81 SECTION 15.17. Loan Conversion/Participation. (a)(i) On any Conversion Date, to the extent not otherwise prohibited by a Requirement of Law or otherwise, all Loans outstanding in any currency other than Dollars ("Loans to be Converted") shall be converted into Dollars (calculated on the basis of the relevant Exchange Rates as of the Business Day immediately preceding the Conversion Date) ("Converted Loans"), and (ii) on the Conversion Date (A) each Lender severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in the total Revolving Credit Exposure under each Facility in an amount equal to its Applicable Percentage (calculated immediately prior to the termination or expiration of the Commitments) of the total Revolving Credit Exposure and (B) to the extent necessary to cause the Committed Exposure Percentage of each Lender, after giving effect to the purchase and sale of participating interests under the foregoing clause (ii), to equal its Applicable Percentage (calculated immediately prior to the termination or expiration of the Commitments), each Lender severally, unconditionally and irrevocably agrees that it shall purchase or sell a participating interest in its Revolving Credit Exposure under each Facility then outstanding. Each Lender will immediately transfer to the appropriate Administrative Agent, in immediately available funds, the amounts of its participation(s), and the proceeds of such participation(s) shall be distributed by such Administrative Agent to each Lender from which a participating interest is being purchased in the amount(s) provided for in the preceding sentence. All Converted Loans shall be ABR Loans. The Company agrees to indemnify each Lender for any loss, cost or expense arising out of the conversion of Loans from one Currency to another pursuant to this Section. (b) If, for any reason, the Loans to be Converted may not be converted into Dollars in the manner contemplated by paragraph (a) of this Section 15.17, (i) the General Administrative Agent shall determine the Dollar Equivalent of the Loans to be Converted (calculated on the basis of the Exchange Rate as of the Business Day immediately preceding the date on which such conversion would otherwise occur pursuant to paragraph (a) of this Section 15.17), (ii) effective on such Conversion Date, each Lender severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Loans to be Converted in an amount equal to its Applicable Percentage of such Loans to be Converted and (iii) each Lender shall purchase or sell participating interests as provided in paragraph (a)(ii) of this Section 15.17. Each Lender will immediately transfer to the appropriate Administrative Agent, in immediately available funds, the amount(s) of its participation(s), and the proceeds of such participation(s) shall be distributed by such Administrative Agent to each relevant Lender in the amount(s) provided for in the preceding sentence. (c) To the extent any Taxes are required to be withheld from any amounts payable by a Lender (the "First Lender") to another Lender (the "Other Lender") in connection with its participating interest in any Converted Loan, each Borrower, with respect to the relevant Loans made to it, shall be required to pay increased amounts to the Other Lender receiving such payments from the First Lender to the same extent they would be required under Section 8.11 if such Borrower were making payments with respect to the participating interest directly to the Other Lender. (d) To the extent not prohibited by any Requirement of Law or otherwise, at any time after the actions contemplated by paragraph (a) or (b) of this Section 15.17 have been taken, upon the notice of any Lender to the Company the following shall occur: (i) the Company 82 (through the guarantee contained in Section 15.16) shall automatically be deemed to have assumed the Converted Loans in which such Lender holds a participation, (ii) any Loans outstanding in any currency other than Dollars shall be converted into Dollars on the dates of such assumption (calculated on the basis of the Exchange Rate on the Business Day immediately preceding such date of assumption) and such Loans shall bear interest at the rate which would otherwise be applicable to ABR Loans and (iii) such Loans shall be assigned by the relevant Lender holding such Loans or obligations to the Lender who gave the notice requesting such assumption by the Company. SECTION 15.18. Confidentiality. Each of the Administrative Agents and the Lenders expressly agrees, for the benefit of the Company, the Subsidiaries and Bristol-Myers Squibb, to maintain the confidentiality of the Confidential Information (as defined below), except that Confidential Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and instructed to keep such Confidential Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an express agreement for the benefit of the Company, the Subsidiaries and Bristol-Myers Squibb containing provisions substantially the same as those of this Section, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or to any direct or indirect counter party to a Hedge Agreement, (g) with the consent of the Company, the Subsidiaries or Bristol-Myers Squibb, as applicable, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized ratings agency, or (i) to the extent such Confidential Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Administrative Agent or any Lender on a nonconfidential basis from a source other than the Company, the Subsidiaries or Bristol-Myers Squibb. For the purposes of this Section, "Confidential Information" means all information, including material nonpublic information within the meaning of Regulation FD promulgated by the SEC ("Regulation FD"), received from the Company, the Subsidiaries or Bristol-Myers Squibb relating to such entities or their respective businesses, other than any such information that is available to any Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by such entities; provided that, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Confidential Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person customarily accords to its own confidential information; provided, however, that with respect to disclosures pursuant to clauses (b) and (c) of this Section, unless prohibited by law or applicable court order, each Lender and each Administrative Agent shall attempt to notify the Company, the Subsidiaries and Bristol-Myers Squibb of any request by any governmental agency or representative thereof or other Person for disclosure of Confidential Information after receipt of such request, and if reasonable, practicable and permissible, before disclosure of such Confidential Information. It is understood and agreed that the Company, the Subsidiaries, 83 Bristol-Myers Squibb and their respective Affiliates may rely upon this Section 15.18 for any purpose, including without limitation to comply with Regulation FD. [Rest of page left intentionally blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. ZIMMER HOLDINGS, INC., as a Borrower and a Guarantor By: /s/ J. Raymond Elliott ------------------------------------ Name: John Raymond Elliott Title: President and CEO ZIMMER, INC., as a Borrower and a Guarantor By: /s/ J. Raymond Elliott ------------------------------------ Name: John Raymond Elliott Title: President and CEO ZIMMER K.K. By: /s/ John Stephen Loveman-Krelle ------------------------------------ Name: John Stephen Loveman-Krelle Title: Representative Director ZIMMER LTD. By: /s/ Humphrin, M.D. ------------------------------------ Name: Humphrin, M.D. Title: Director BRISTOL-MYERS SQUIBB COMPANY By: /s/ Harrison M. Bains, Jr. ------------------------------------ Name: Harrison M. Bains, Jr. Title: Treasurer By: /s/ Sandra Leung ------------------------------------ Name: Sandra Leung Title: Secretary THE CHASE MANHATTAN BANK, individually and as General Administrative Agent By: /s/ Dawn Lee Lum ------------------------------------ Name: Dawn Lee Lum Title: Vice President BANK OF AMERICA, N.A., individually and as Syndication Agent By: /s/ Philip Durand ------------------------------------ Name: Philip Durand Title: Principal THE CHASE MANHATTAN BANK, TOKYO BRANCH, as Japanese Administrative Agent By: /s/ Makoto Yamamoto ------------------------------------ Name: Makoto Yamamoto Title: Vice President CHASE MANHATTAN INTERNATIONAL LIMITED, as Euro Administrative Agent By: /s/ Nichola Hall /s/ C. Walsh ------------------------------------ Name: Nichola Hall C. Walsh Title: Senior Loans Assistant Assistant Treasurer ABN AMRO BANK N.V., as Documentation Agent By: /s/ Alex Miller ------------------------------------ Name: Alex Miller Title: Vice President By: /s/ Todd J. Miller ------------------------------------ Name: Todd J. Miller Title: Credit Officer FLEET NATIONAL BANK, as Documentation Agent By: /s/ William R. Rogers ------------------------------------ Name: William R. Rogers Title: Director SUNTRUST BANK, as Documentation Agent By: /s/ Brooks Hubbard ------------------------------------ Name: Brooks Hubbard Title: Vice President BNP PARIBAS By: /s/ Rosalie C. Hawley ------------------------------------ Name: Rosalie C. Hawley Title: Director By: /s/ Jo Ellen Bender ------------------------------------ Name: Jo Ellen Bender Title: Director DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: /s/ Lain Stewart ------------------------------------ Name: Lain Stewart Title: Vice President By: /s/ Stephanie Strohe ------------------------------------ Name: Stephanie Strohe Title: Vice President SUMITOMO MITSUI BANKING CORPORATION By: /s/ Peter R C. Knight ------------------------------------ Name: Peter R C. Knight Title: Senior Vice President THE FUJI BANK, LIMITED By: /s/ Peter L. Chinnici ------------------------------------ Name: Peter L. Chinnici Title: Senior Vice President and Group Head BANK OF CHINA, NEW YORK BRANCH By: /s/ Bailin Zheng ------------------------------------ Name: Bailin Zheng Title: General Manager BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH By: /s/ Giulio Giovine ------------------------------------ Name: Giulio Giovine Title: Vice President By: /s/ Carlo Vecchi ------------------------------------ Name: Carlo Vecchi Title: Senior Vice President BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Catherine Moeser ------------------------------------ Name: Catherine Moeser Title: Attorney-in-fact BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH By: /s/ Laura A. De Persis ------------------------------------ Name: Laura A. De Persis Title: Director By: /s/ Diane B. Vaccaro ------------------------------------ Name: Diane B. Vaccaro Title: Associate Director COMERICA BANK By: /s/ Kathleen M. Kasperek ------------------------------------ Name: Kathleen M. Kasperek Title: Assistant Vice President CREDIT LYONNAIS, NEW YORK BRANCH By: /s/ Charles Heidsieck ------------------------------------ Name: Charles Heidsieck Title: Senior Vice President KEY BANK NATIONAL ASSOCIATION By: /s/ Mark A. Lo Schiavo ------------------------------------ Name: Mark A. Lo Schiavo Title: Assistant Vice President NATIONAL CITY BANK OF INDIANA By: /s/ Lawrence J. Mayers ------------------------------------ Name: Lawrence J. Mayers Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION By: /s/ Michael Nardo ------------------------------------ Name: Michael Nardo Title: Managing Director THE BANK OF NEW YORK By: /s/ Jonathan Rollins ------------------------------------ Name: Jonathan Rollins Title: Vice President THE NORINCHUKIN BANK, NEW YORK BRANCH By: /s/ Fumiaki Ono ------------------------------------ Name: Fumiaki Ono Title: General Manager THE SANWA BANK, LIMITED, NEW YORK BRANCH By: /s/ Lee E. Prewitt ------------------------------------ Name: Lee E. Prewitt Title: Vice President FIRSTAR BANK, N.A. By: /s/ James M. Ferrell ------------------------------------ Name: James M. Ferrell Title: AVP THE NORTHERN TRUST COMPANY By: /s/ Tracy J. Toulouse ------------------------------------ Name: Tracy J. Toulouse Title: Vice President FIFTH THIRD BANK By: /s/ David W. O'Neil ------------------------------------ Name: David W. O'Neil Title: Vice President UNICREDITO ITALIANO By: /s/ Christopher Eldin ------------------------------------ Name: Christopher Eldin Title: Vice President By: /s/ Saiyed A. Abbas ------------------------------------ Name: Saiyed A. Abbas Title: Vice President BANK HAPOALIM B.M. By: /s/ James P. Surless ------------------------------------ Name: James P. Surless Title: Vice President By: /s/ Laura Anne Raffa ------------------------------------ Name: Laura Anne Raffa Title: Senior Vice President & Corporate Manager EX-10.2 4 ex10-2.txt ZIMMER HOLDINGS, INC. SAVINGS AND INVESTMENT 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 EX-10.3 5 ex10-3.txt ZIMMER HOLDINGS, INC. 2001 STOCK INCENTIVE PLAN Exhibit 10.3 ZIMMER HOLDINGS, INC. 2001 STOCK INCENTIVE PLAN 1. Purpose: The purpose of the 2001 Stock Incentive Plan is to secure for the Company and its stockholders the benefits of the incentive inherent in common stock ownership by the officers and key employees of the Company who will be largely responsible for the Company's future growth and continued financial success and by providing long-term incentives in addition to current compensation to certain key executives of the Company who contribute significantly to the long-term performance and growth of the Company. It is intended that the former purpose will be effected through the granting of stock options, stock appreciation rights, dividend equivalents, restricted stock and deferred stock unit awards under the Plan and that the latter purpose will be effected through an award conditionally granting performance units or performance shares under the Plan, either independently or in conjunction with and related to a nonqualified stock option grant under the Plan. 2. Definitions: For purposes of this Plan: (a) "Affiliate" shall mean any entity in which the Issuer has, directly or indirectly, an ownership interest of at least 20%. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Common Stock" shall mean the Issuer's common stock. (d) "Company" shall mean the Issuer (Zimmer Holdings, Inc.) and its Subsidiaries and Affiliates. (e) "Disability" or "Disabled" shall mean qualifying for and receiving payments under a disability pay plan of the Company. (f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (g) "Fair Market Value" shall mean the average of the high and low sale prices of a share of Common Stock on the New York Stock Exchange composite tape on the date of measurement or on any date as determined by the Committee and, if there were no trades on such date, on the day on which a trade occurred next preceding such date. (h) "Issuer" shall mean Zimmer Holdings, Inc. (i) "Prior Plans" shall mean the Bristol-Myers Squibb Company 1997 Stock Incentive Plan and the Bristol-Myers Squibb Company 1983 Stock Option Plan. (j) "Retirement" shall mean termination of the employment of an employee with the Company on or after (i) the employee's 65th birthday or (ii) the employee's 55th birthday if the employee has completed 10 years of service with the Company. For purposes of this Section 2(j) and all other purposes of this Plan, Retirement shall also mean termination of employment of an employee with the Company for any reason (other than the employee's death, Disability, resignation, willful misconduct or activity deemed detrimental to the interests of the Company) where, on termination, the employee's age plus years of service (rounded up to the next higher whole number) equals at least 70 and the employee has completed 10 years of service with the Company and, where applicable, the employee has executed a general release, a covenant not to compete and/or a covenant not to solicit. For purposes of this Plan, service with Bristol-Myers Squibb and its subsidiaries and affiliates before the effective date of the Plan shall be included as service with the Company. (k) "Subsidiary" shall mean any corporation which at the time qualifies as a subsidiary of the Issuer under the definition of "subsidiary corporation" in Section 424 of the Code. 3. Amount of Stock: (a) Annual Limitation. With respect to each calendar year, the amount of stock which may be made subject to grants of options and awards under the Plan shall not exceed an amount equal to 1.9% of the outstanding shares of the Common Stock on January 1 of such year (or, in the case of the 2001 year, on the effective date of the Plan) plus (i) in any year the number of shares equal to the amount of shares that were available for options and awards under the Plan in the prior year but were not made subject to an option or award in such prior year, (ii) the number of shares that were subject to options or awards granted hereunder that terminated, expired or were cancelled, forfeited, exchanged or surrendered in the prior year without being exercised, (iii) the number of shares participants tendered in the prior year to pay the purchase price of options in accordance with Section 7(b)(5), and (iv) the number of shares the Company retained or caused participants to surrender in the prior year to satisfy Withholding Tax requirements in accordance with Section 13. Options and awards granted under Sections 6 and 20 shall not be considered in applying this limitation, to the extent provided in Sections 6 and 20. (b) Individual Participant Limitation. No individual may be granted options or awards under Section 7, 8, 9 or 10, in the aggregate, in respect of more than 2,000,000 shares of the Common Stock over the life of the Plan. Options and awards granted under Sections 6 and 20 shall not be included in applying this limitation, to the extent provided in Sections 6 and 20. (c) Performance Unit, Performance Share, Restricted Stock and Deferred Stock Unit Awards Limitation. The aggregate number of shares issued under performance units and performance share awards made pursuant to Section 8, restricted stock awards made pursuant to Section 9 and deferred stock unit awards made pursuant to Section 10 may not exceed 25% of the available shares over the life of the Plan. (d) Maximum Number of Incentive Stock Options. The maximum number of shares with respect to which incentive stock options may be granted under the Plan shall not exceed 5,000,000 shares. Any shares subject to incentive stock options granted under this Plan that terminate, expire or are cancelled, forfeited, exchanged or surrendered without being exercised may again be subjected to an option or award under the Plan. (e) Adjustment. The limitations under Section 3(a), (b), (c) and (d) are subject to adjustment in number and kind pursuant to Section 12. 2 (f) Treasury or Market Purchased Shares. Common Stock issued hereunder may be authorized and unissued shares or issued shares acquired by the Company on the market or otherwise. 4. Administration: The Plan shall be administered under the supervision of the Board of Directors of the Issuer, which may exercise its powers, to the extent herein provided, through the agency of a Compensation and Management Development Committee (the "Committee"), which shall be appointed by the Board of Directors of the Issuer. The Compensation and Management Development Committee shall consist of not less than two (2) members of the Board who are intended to meet the definition of "outside director" under the provisions of Section 162(m) of the Code and the definition of "non-employee directors" under the provisions of the Exchange Act or rules or regulations promulgated thereunder. In addition, the Board of Directors or the Committee may delegate in writing any or all of its authority hereunder to one or more other committees or subcommittees, and the initial grants to be made at the time of the spin-off of the Issuer's stock from Bristol-Myers Squibb Company may be made by the Compensation and Management Development Committee of the Board of Directors of Bristol-Myers Squibb Company. To the extent that the Board of Directors or a committee administers the Plan, references to the Committee shall mean the Board of Directors or such committee. The Committee, from time to time, may adopt rules and regulations ("Regulations") for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate. The interpretation and construction of any provision of the Plan by the Committee shall, unless otherwise determined by the Board of Directors, be final and conclusive. The Committee shall maintain a written record of its proceedings. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the Committee. 5. Eligibility: Options and awards may be granted only to present or future officers and key employees of the Company, including Subsidiaries and Affiliates which become such after the adoption of the Plan. Any officer or key employee of the Company shall be eligible to receive one or more options or awards under the Plan. Any director who is not an officer or employee of the Company shall be ineligible to receive an option or award under the Plan. The adoption of this Plan shall not be deemed to give any officer or employee any right to an award or to be granted an option to purchase Common Stock, except to the extent and upon such terms and conditions as may be determined by the Committee. 6. Grants as of Effective Date: (a) On the effective date of the Plan, the Issuer shall assume from Bristol-Myers Squibb Company options and awards granted under the Prior Plans that are outstanding immediately before the effective date of this Plan with respect to the Company's officers and key employees (the "Prior Awards"). Except as described below, the terms of the Prior Plans and the option and award agreements in effect pursuant to the Prior Plans will continue to govern the Prior Awards. However, as a result of the assumption, the Prior Awards will be converted into options and 3 awards with respect to the Common Stock of the Issuer, and the number of shares and, with respect to options, the exercise price and other appropriate terms will be adjusted to reflect the spin-off of the Issuer from Bristol-Myers Squibb Company. On and after the spin-off date, references in the option and award agreements to Bristol-Myers Squibb will mean the Issuer. Any shares of the Issuer's Common Stock that are subject to options and awards pursuant to the Prior Awards will be issued under this Plan but will not be counted against the limitations provided under Section 3 of the Plan. The Committee will administer the Prior Awards, as converted into Common Stock of the Issuer. (b) As an alternative, the Committee may determine, as a result of certain laws, rules or regulations in countries outside the United States, not to have the Issuer assume certain Prior Awards. 7. Stock Options: Stock options under the Plan shall consist of incentive stock options under Section 422 of the Code or nonqualified stock options (options not intended to qualify as incentive stock options), as the Committee shall determine. In addition, the Committee may grant stock appreciation rights in conjunction with an option, as set forth in Section 7(b)(11), or may grant awards in conjunction with an option, as set forth in Section 7(b)(10) (an "Associated Option"). Each option shall be subject to the following terms and conditions: (a) Grant of Options. The Committee shall (1) select the officers and key employees of the Company to whom options may from time to time be granted, (2) determine whether incentive stock options or nonqualified stock options are to be granted, (3) determine the number of shares to be covered by each option so granted, (4) determine the terms and conditions (not inconsistent with the Plan) of any option granted hereunder (including but not limited to restrictions upon the options, conditions of their exercise, or restrictions on the shares of Common Stock issuable upon exercise thereof), (5) determine whether nonqualified stock options or incentive stock options granted under the Plan shall include stock appreciation rights and, if so, the Committee shall determine the terms and conditions thereof in accordance with Section 7(b)(11) hereof, (6) determine whether any nonqualified stock options granted under the Plan shall be Associated Options, and (7) prescribe the form of the instruments necessary or advisable in the administration of options. (b) Terms and Conditions of Option. Any option granted under the Plan shall be evidenced by a Stock Option Agreement entered into by the Company and the optionee, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan, and in the case of an incentive stock option not inconsistent with the provisions of the Code applicable to incentive stock options, as the Committee shall prescribe: (1) Number of Shares Subject to an Option. The Stock Option Agreement shall specify the number of shares of Common Stock subject to the Agreement. If the option is an Associated Option, the number of shares of Common Stock subject to such Associated Option shall initially be equal to the number of performance units or performance shares 4 subject to the award, but one share of Common Stock shall be canceled for each performance unit or performance share paid out under the award. (2) Option Price. The purchase price per share of Common Stock purchasable under an option will be determined by the Committee but will be not less than the Fair Market Value of a share of Common Stock on the date of the grant of the option, except as provided in Section 6, 19 or 20. (3) Option Period. The period of each option shall be fixed by the Committee, but no option shall be exercisable after the expiration of ten years from the date the option is granted. (4) Consideration. Unless the Committee determines otherwise, each optionee, as consideration for the grant of an option, shall remain in the continuous employ of the Company for at least one year from the date of the granting of such option, and no option shall be exercisable until after the completion of such one year period of employment by the optionee. (5) Exercise of Option. An option may be exercised in whole or in part from time to time during the option period (or, if determined by the Committee, in specified installments during the option period) by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such written notice must be accompanied by payment in full of the purchase price and Withholding Taxes (as defined in Section 13 hereof), unless an election to defer receipt of shares is made under Section 15, due either (i) by certified or bank check, (ii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, (iii) in shares of Common Stock owned by the optionee having a Fair Market Value at the date of exercise equal to such purchase price, provided that payment in shares of Common Stock will not be permitted unless at least 100 shares of Common Stock are required and delivered for such purpose, (iv) in any combination of the foregoing, or (v) by any other method that the Committee approves. At its discretion, the Committee may modify or suspend any method for the exercise of stock options, including any of the methods specified in the previous sentence. Delivery of shares for exercising an option shall be made either through the physical delivery of shares or through an appropriate certification or attestation of valid ownership. Shares of Common Stock used to exercise an option shall have been held by the optionee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the option. No shares shall be issued until full payment therefor has been made. An optionee shall have the rights of a stockholder only with respect to shares of stock that have been recorded on the Company's books on behalf of the optionee or for which certificates have been issued to the optionee. Notwithstanding anything in the Plan to the contrary, the Committee may, in its sole discretion, allow the exercise of a lapsed grant if the Committee determines that: (i) the lapse was solely the result of the Company's inability to execute the exercise of an option award due to conditions beyond the Company's control and (ii) the optionee made valid and reasonable efforts to exercise the award. In the event the Committee makes 5 such a determination, the Company shall allow the exercise to occur as promptly as possible following its receipt of exercise instructions subsequent to such determination. (6) Nontransferability of Options. No option or stock appreciation right granted under the Plan shall be transferable by the optionee other than by will or by the laws of descent and distribution, and such option or stock appreciation right shall be exercisable, during the optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the Committee may set forth in a Stock Option Agreement at the time of grant or thereafter, that the options (other than Incentive Stock Options) may be transferred to members of the optionee's immediate family, to one or more trusts solely for the benefit of such immediate family members and to partnerships in which such family members or trusts are the only partners. For this purpose, immediate family means the optionee's spouse, parents, children, stepchildren, grandchildren and legal dependants. Any transfer of options under this provision will not be effective until notice of such transfer is delivered to the Company. (7) Retirement and Termination of Employment Other than by Death or Disability. If an optionee shall cease to be employed by the Company for any reason (other than termination of employment by reason of death or Disability) after the optionee shall have been continuously so employed for one year after the granting of the option, or as otherwise determined by the Committee, the option shall be exercisable only to the extent that the optionee was otherwise entitled to exercise it at the time of such cessation of employment with the Company, unless otherwise determined by the Committee. If the cessation of employment is on account of Retirement, the option shall remain exercisable for the remainder of the option period set forth therein. If the cessation of employment is not on account of Retirement or death, the option shall remain exercisable for three months after such cessation of employment (or, if earlier, the end of the option period), unless the Committee determines otherwise. The Plan does not confer upon any optionee any right with respect to continuation of employment by the Company. (8) Disability of Optionee. An optionee who ceases to be employed by reason of Disability shall be treated as though the optionee remained in the employ of the Company until the earlier of (i) cessation of payments under a disability pay plan of the Company, (ii) the optionee's death, or (iii) the optionee's 65th birthday. (9) Death of Optionee. Except as otherwise provided in subsection (13), in the event of the optionee's death (i) while in the employ of the Company, (ii) while Disabled as described in subsection (8) or (iii) after cessation of employment due to Retirement, the option shall be fully exercisable by the executors, administrators, legatees or distributees of the optionee's estate, as the case may be, at any time following such death. In the event of the optionee's death after cessation of employment for any reason other than Disability or Retirement, the option shall be exercisable by the executors, administrators, legatees or distributees of the optionee's estate, as the case may be, at any time during the twelve month period following such death. Notwithstanding the foregoing, unless the Committee determines otherwise, in no event shall an option be 6 exercisable unless the optionee shall have been continuously employed by the Company for a period of at least one year after the option grant, and no option shall be exercisable after the expiration of the option period set forth in the Stock Option Agreement. In the event any option is exercised by the executors, administrators, legatees or distributees of the estate of a deceased optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the option are the duly appointed legal representatives of the deceased optionee's estate or the proper legatees or distributees thereof. (10) Long-Term Performance Awards. The Committee may from time to time grant nonqualified stock options under the Plan in conjunction with and related to an award of performance units or performance shares made under a Long-Term Performance Award as set forth in Section 8(b)(11). In such event, notwithstanding any other provision hereof, (i) the number of shares to which the Associated Option applies shall initially be equal to the number of performance units or performance shares granted by the award, but such number of shares shall be reduced on a one-share-for-one unit or share basis to the extent that the Committee determines, pursuant to the terms of the award, to pay to the optionee or the optionee's beneficiary the performance units or performance shares granted pursuant to such award, and (ii) such Associated Option shall be cancelable in the discretion of the Committee, without the consent of the optionee, under the conditions and to the extent specified in the award. (11) Stock Appreciation Rights. In the case of any option granted under the Plan, either at the time of grant or by amendment of such option at any time after such grant there may be included a stock appreciation right which shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall impose, including the following: (A) A stock appreciation right shall be exercisable to the extent, and only to the extent, that the option in which it is included is at the time exercisable, and may be exercised within such period only at such time or times as may be determined by the Committee; (B) A stock appreciation right shall entitle the optionee (or any person entitled to act under the provisions of subsection (9) hereof) to surrender unexercised the option in which the stock appreciation right is included (or any portion of such option) to the Company and to receive from the Company in exchange therefor that number of shares having an aggregate value equal to (or, in the discretion of the Committee, less than) the excess of the value of one share (provided such value does not exceed such multiple of the option price per share as may be specified by the Committee) over the option price per share specified in such option times the number of shares called for by the option, or portion thereof, which is so surrendered. The Committee shall be entitled to cause the Company to settle its obligation, arising out of the exercise of a stock appreciation right, by the payment of cash equal to the aggregate value of the shares the Company would otherwise be obligated to deliver or partly by the payment of cash and partly by the delivery of shares. Any such election shall be made within 7 30 business days after the receipt by the Committee of written notice of the exercise of the stock appreciation right. The value of a share for this purpose shall be the Fair Market Value thereof on the last business day preceding the date of the election to exercise the stock appreciation right; (C) No fractional shares shall be delivered under this subsection (11) but in lieu thereof a cash adjustment shall be made; (D) If a stock appreciation right included in an option is exercised, such option shall be deemed to have been exercised to the extent of the number of shares called for by the option or portion thereof which is surrendered on exercise of the stock appreciation right and no new option may be granted covering such shares under this Plan; and (E) If an option which includes a stock appreciation right is exercised, such stock appreciation right shall be deemed to have been canceled to the extent of the number of shares called for by the option or portion thereof is exercised and no new stock appreciation rights may be granted covering such shares under this Plan. (12) Incentive Stock Options. Incentive stock options may only be granted to employees of the Issuer and its Subsidiaries and parent corporations, as defined in Section 424 of the Code. In the case of any incentive stock option granted under the Plan, the aggregate Fair Market Value of the shares of Common Stock (determined at the time of grant of each option) with respect to which incentive stock options granted under the Plan and any other plan of the Issuer or its parent or a Subsidiary which are exercisable for the first time by an employee during any calendar year shall not exceed $100,000 or such other amount as may be required by the Code. (13) Rights of Transferee. Notwithstanding anything to the contrary herein, if an option has been transferred in accordance with Section 7(b)(6), the option shall be exercisable solely by the transferee. The option shall remain subject to the provisions of the Plan, including that it will be exercisable only to the extent that the optionee or optionee's estate would have been entitled to exercise it if the optionee had not transferred the option. In the event of the death of the optionee prior to the expiration of the right to exercise the transferred option, the period during which the option shall be exercisable will terminate on the date one year following the date of the optionee's death. In the event of the death of the transferee prior to the expiration of the right to exercise the option, the period during which the option shall be exercisable by the executors, administrators, legatees and distributees of the transferee's estate, as the case may be, will terminate on the date one year following the date of the transferee's death. In no event will the option be exercisable after the expiration of the option period set forth in the Stock Option Agreement. The option shall be subject to such other rules as the Committee shall determine. 8 8. Long-term Performance Awards: Awards under the Plan shall consist of the conditional grant to the participants of a specified number of performance units or performance shares. The conditional grant of a performance unit to a participant will entitle the participant to receive a specified dollar value, variable under conditions specified in the award, if the performance objectives specified in the award are achieved and the other terms and conditions thereof are satisfied. The conditional grant of a performance share to a participant will entitle the participant to receive a specified number of shares of Common Stock, or the equivalent cash value, if the objectives specified in the award are achieved and the other terms and conditions thereof are satisfied. Each award will be subject to the following terms and conditions: (a) Grant of Awards. The Committee shall (1) select the officers and key executives of the Company to whom awards may from time to time be granted, (2) determine the number of performance units or performance shares covered by each award, (3) determine the terms and conditions of each performance unit or performance share awarded and the award period and performance objectives with respect to each award, (4) determine the periods during which a participant may request the Committee to approve deferred payment of a percentage (not less than 25%) of an award (the "Deferred Portion") and the interest or rate of return thereon or the basis on which such interest or rate of return thereon is to be determined, (5) determine whether payment with respect to the portion of an award which has not been deferred (the "Current Portion") and the payment with respect to the Deferred Portion of an award shall be made entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock, (6) determine whether the award is to be made independently of or in conjunction with a nonqualified stock option granted under the Plan, and (7) prescribe the form of the instruments necessary or advisable in the administration of the awards. (b) Terms and Conditions of Award. Any award conditionally granting performance units or performance shares to a participant shall be evidenced by a Performance Unit Agreement or Performance Share Agreement, as applicable, executed by the Company and the participant, in such form as the Committee shall approve, which Agreement shall contain in substance the following terms and conditions applicable to the award and such additional terms and conditions as the Committee shall prescribe: (1) Number and Value of Performance Units. The Performance Unit Agreement shall specify the number of performance units conditionally granted to the participant. If the award has been made in conjunction with the grant of an Associated Option, the number of performance units granted shall initially be equal to the number of shares which the participant is granted the right to purchase pursuant to the Associated Option, but one performance unit shall be canceled for each share of the Issuer's Common Stock purchased upon exercise of the Associated Option or for each stock appreciation right included in such option that has been exercised. The Performance Unit Agreement shall specify the threshold, target and maximum dollar values of each performance unit and corresponding performance objectives as provided under Section 8(b)(5). No payout under a performance unit award to an individual Participant may exceed .625% of the pre-tax earnings of the Company for the fiscal year which coincides with the final year of the performance unit period. 9 (2) Number and Value of Performance Shares. The Performance Share Agreement shall specify the number of performance shares conditionally granted to the participant. If the award has been made in conjunction with the grant of an Associated Option, the number of performance shares granted shall initially be equal to the number of shares which the participant is granted the right to purchase pursuant to the Associated Option, but one performance share shall be canceled for each share of the Issuer's Common Stock purchased upon exercise of the Associated Option or for each stock appreciation right included in such option that has been exercised. The Performance Share Agreement shall specify that each Performance Share will have a value equal to one (1) share of Common Stock. (3) Award Periods. For each award, the Committee shall designate an award period with a duration to be determined by the Committee in its discretion, but in no event less than three calendar years, within which specified performance objectives are to be attained. There may be several award periods in existence at any one time and the duration of performance objectives may differ from each other. (4) Consideration. Each participant, as consideration for the award of performance units or performance shares, shall remain in the continuous employ of the Company for at least one year after the date of the making of such award, and no award shall be payable until after the completion of such one year of employment by the participant, except as otherwise determined by the Committee. (5) Performance Objectives. The Committee shall establish performance objectives with respect to the Company for each award period on the basis of such criteria and to accomplish such objectives as the Committee may from time to time determine. Performance criteria for awards under the Plan shall include one or more of the following measures of operating performance: a. Earnings d. Financial return ratios b. Revenue e. Total Shareholder Return c. Operating or net cash flows f. Market share. The Committee shall establish the specific targets for the selected criteria. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index. These targets may be based upon the total Company, one or more businesses units of the Company, or a defined business unit which the executive has responsibility for or influence over. (6) Determination and Payment of Performance Units or Performance Shares Earned. As soon as practicable after the end of an award period, the Committee shall determine the extent to which awards have been earned on the basis of the Company's actual performance in relation to the established performance objectives as set forth in the Performance Unit Agreement or Performance Share Agreement and certify these results in writing. The Performance Unit Agreement or Performance Share Agreement shall specify that as soon as practicable after the end of each award period, the Committee shall determine whether the conditions of Sections 8(b)(4) and 8(b)(5) hereof have been 10 met and, if so, shall ascertain the amount payable or shares which should be distributed to the participant in respect of the performance units or performance shares. As promptly as practicable after it has determined that an amount is payable or should be distributed in respect of an award, the Committee shall cause the Current Portion of such award to be paid or distributed to the participant or the participant's beneficiaries, as the case may be, in the Committee's discretion, either entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock. The Deferred Portion of an award shall be contingently credited and payable to the participant over a deferred period and shall be credited with interest, rate of return, or other valuation as determined by the Committee. The Committee, in its discretion, shall determine the conditions upon, and method of, payment of such Deferred Portions and whether such payment will be made entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock. In making the payment of an award in Common Stock hereunder, the cash equivalent of such Common Stock shall be determined by the Fair Market Value of the Common Stock on the day the Committee designates the performance units shall be payable. (7) Nontransferability of Awards and Designation of Beneficiaries. No award under this Section of the Plan shall be transferable by the participant other than by will or by the laws of descent and distribution, except that a participant may designate a beneficiary pursuant to the provisions hereof. If any participant or the participant's beneficiary shall attempt to assign the participant's rights under the Plan in violation of the provisions thereof, the Company's obligation to make any further payments to such participant or the participant's beneficiaries shall forthwith terminate. A participant may name one or more beneficiaries to receive any payment of an award to which the participant may be entitled under the Plan in the event of the participant's death, on a form to be provided by the Committee. A participant may change the participant's beneficiary designation from time to time in the same manner. If no designated beneficiary is living on the date on which any payment becomes payable to a participant's beneficiary, or if no beneficiary has been specified by the participant, such payment will be payable to the person or persons in the first of the following classes of successive preference: (i) Widow or widower, if then living, (ii) Surviving children, equally, (iii) Surviving parents, equally, (iv) Surviving brothers and sisters, equally, (v) Executors or administrators and the term "beneficiary" as used in the Plan shall include such person or persons. (8) Retirement and Termination of Employment Other Than by Death or Disability. In the event of the Retirement prior to the end of an award period of a participant who has satisfied the one year employment requirement of Section 8(b)(4) with respect to an award prior to Retirement, or as otherwise determined by the 11 Committee, the participant, or his estate, shall be entitled to a payment of such award at the end of the award period, pursuant to the terms of the Plan and the participant's Performance Unit Agreement or Performance Share Agreement, provided, however, that the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such award as the number of months of the award period which have elapsed since the first day of the calendar year in which the award was made to the end of the month in which the participant's Retirement occurs, bears to the total number of months in the award period, subject to the attainment of performance objectives associated with the award as certified by the Committee. The participant's right to receive any remaining performance units or performance shares shall be canceled and forfeited. Subject to Section 8(b)(6) hereof, the Performance Unit Agreement or Performance Share Agreement shall specify that the right to receive the performance units or performance shares granted to such participant shall be conditional and shall be canceled, forfeited and surrendered if the participant's continuous employment with the Company shall terminate for any reason, other than the participant's death, Disability or Retirement, prior to the end of the award period, or as otherwise determined by the Committee. (9) Disability of Participant. For the purposes of any award, a participant who becomes Disabled shall be deemed to have suspended active employment by reason of Disability commencing on the date the participant becomes entitled to receive payments under a disability pay plan of the Company and continuing until the date the participant is no longer entitled to receive such payments. In the event a participant becomes Disabled during an award period, but only if the participant has satisfied the one year employment requirement of Section 8(b)(4) with respect to an award prior to becoming Disabled, or as otherwise determined by the Committee, upon the determination by the Committee of the extent to which an award has been earned pursuant to Section 8(b)(6), the participant shall be deemed to have earned that proportion (to the nearest whole unit) of the value of the performance units granted to the participant under such award as the number of months of the award period in which the participant was not Disabled bears to the total number of months in the award period, subject to the attainment of the performance objectives associated with the award as certified by the Committee. The participant's right to receive any remaining performance units shall be canceled and forfeited. (10) Death of Participant. In the event of the death prior to the end of an award period of a participant who has satisfied the one year employment requirement with respect to an award prior to the date of death, or as otherwise determined by the Committee, the participant's beneficiaries or estate, as the case may be, shall be entitled to a payment of such award upon the end of the award period, pursuant to the terms of the Plan and the participant's Performance Unit Agreement or Performance Share Agreement, provided, however, that the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such award as the number of months of the award period which have elapsed since the first day of the calendar year in which 12 the award was made to the end of the month in which the participant's death occurs, bears to the total number of months in the award period. The participant's right to receive any remaining performance units or performance shares shall be canceled and forfeited. The Committee may, in its discretion, waive, in whole or in part, such cancellation and forfeiture of any performance units or performance shares. (11) Grant of Associated Option. If the Committee determines that the conditional grant of performance units or performance shares under the Plan is to be made to a participant in conjunction with the grant of a nonqualified stock option under the Plan, the Committee shall grant the participant an Associated Option under the Plan subject to the terms and conditions of this subsection (11). In such event, such award under the Plan shall be contingent upon the participant's being granted such an Associated Option pursuant to which: (i) the number of shares the optionee may purchase shall initially be equal to the number of performance units or performance shares conditionally granted by the award, (ii) such number of shares shall be reduced on a one-share-for-one-unit or share basis to the extent that the Committee determines, pursuant to Section 8(b)(6) hereof, to pay to the participant or the participant's beneficiaries the performance units or performance shares conditionally granted pursuant to the award, and (iii) the Associated Option shall be cancelable in the discretion of the Committee, without the consent of the participant, under the conditions and to the extent specified herein and in Section 8(b)(6) hereof. If no amount is payable in respect of the conditionally granted performance units or performance shares, the award and such performance units or performance shares shall be deemed to have been canceled, forfeited and surrendered, and the Associated Option, if any, shall continue in effect in accordance with its terms. If any amount is payable in respect of the performance units or performance shares and such units or shares were granted in conjunction with an Associated Option, the Committee shall, within 30 days after the determination of the Committee referred to in the first sentence of Section 8(b)(6), determine, in its sole discretion, either: (A) to cancel in full the Associated Option, in which event the value of the performance units or performance shares payable pursuant to Sections 8(b)(5) and (6) shall be paid or the performance shares shall be distributed; (B) to cancel in full the performance units or performance shares, in which event no amount shall be paid to the participant in respect thereof and no shares shall be distributed but the Associated Option shall continue in effect in accordance with its terms; or (C) to cancel some, but not all, of the performance units or performance shares, in which event the value of the performance units payable pursuant to Sections 8(b)(5) and (6) which have not been canceled shall be paid or the performance shares shall be distributed and the Associated Option shall be canceled with respect to that number of shares equal to the number of 13 conditionally granted performance units or performance shares that remain payable. Any action taken by the Committee pursuant to the preceding sentence shall be uniform with respect to all awards having the same award period. If the Committee takes no such action, it shall be deemed to have determined to cancel in full the award in accordance with clause (B) above. 9. Restricted Stock: Restricted stock awards under the Plan shall consist of grants of shares of Common Stock of the Issuer subject to the terms and conditions hereinafter provided. (a) Grant of Awards: The Committee shall (i) select the officers and key employees to whom restricted stock may from time to time be granted, (ii) determine the number of shares to be covered by each award granted, (iii) determine the terms and conditions (not inconsistent with the Plan) of any award granted hereunder, and (iv) prescribe the form of the agreement, legend or other instrument necessary or advisable in the administration of awards under the Plan. (b) Terms and Conditions of Awards: Any restricted stock award granted under the Plan shall be evidenced by a Restricted Stock Agreement executed by the Issuer and the recipient, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan as the Committee shall prescribe: (1) Number of Shares Subject to an Award: The Restricted Stock Agreement shall specify the number of shares of Common Stock subject to the Award. (2) Restriction Period: The period of restriction applicable to each Award shall be established by the Committee but may not be less than one year, unless the Committee determines otherwise. The Restriction Period applicable to each Award shall commence on the Award Date. (3) Consideration: Each recipient, as consideration for the grant of an award, shall remain in the continuous employ of the Company for at least one year from the date of the granting of such award, or as otherwise determined by the Committee, and any shares covered by such an award shall lapse if the recipient does not remain in the continuous employ of the Company for at least one year from the date of the granting of the award, except as otherwise determined by the Committee. (4) Restriction Criteria: The Committee shall establish the criteria upon which the Restriction Period shall be based. Restrictions shall be based upon either or both of (i) the continued employment of the recipient or (ii) the attainment by the Company of one or more of the following measures of operating performance: a. Earnings d. Financial return ratios b. Revenue e. Total Shareholder Return c. Operating or net cash flows f. Market share. 14 The Committee shall establish the specific targets for the selected criteria. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index. These targets may be based upon the total Company, one or more business units of the Company or a defined business unit which the executive has responsibility for or influence over. In cases where objective performance criteria are established, the Committee shall determine the extent to which the criteria have been achieved and the corresponding level to which restrictions will be removed from the Award or the extent to which a participant's right to receive an Award should be lapsed in cases where the performance criteria have not been met and shall certify these determinations in writing. The Committee may provide for the determination of the attainment of such restrictions in installments where deemed appropriate. (c) Terms and Conditions of Restrictions and Forfeitures: The shares of Common Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions: (1) During the Restriction Period, the participant will not be permitted to sell, transfer, pledge or assign restricted stock awarded under this Plan. (2) Except as provided in Section 9(c)(1), or as the Committee may otherwise determine, the participant shall have all of the rights of a stockholder of the Issuer, including the right to vote the shares and receive dividends and other distributions provided that distributions in the form of stock shall be subject to the same restrictions as the underlying restricted stock. (3) In the event of a participant's Retirement, death or Disability prior to the end of the Restriction Period for a participant who has satisfied the one year employment requirement of Section 9(b)(3) with respect to an award prior to Retirement, death or Disability, or as otherwise determined by the Committee, the participant, or the participant's estate, shall be entitled to receive that proportion (to the nearest whole share) of the number of shares subject to the Award granted as the number of months of the Restriction Period which have elapsed since the Award date to the date at which the participant's Retirement, death or Disability occurs, bears to the total number of months in the Restriction Period. The participant's right to receive any remaining shares shall be canceled and forfeited and the shares will be deemed to be reacquired by the Issuer. (4) In the event of a participant's Retirement, death, Disability or in cases of special circumstances as determined by the Committee, the Committee may, in its sole discretion when it finds that such an action would be in the best interests of the Company, accelerate or waive in whole or in part any or all remaining time based restrictions with respect to all or part of such participant's restricted stock. (5) Upon termination of employment for any reason during the Restriction Period, subject to the provisions of paragraph (3) above or in the event that the participant fails promptly to pay or make satisfactory arrangements as to the withholding taxes as 15 provided in the following paragraph, all shares still subject to restriction shall be forfeited by the participant and will be deemed to be reacquired by the Company. (6) A participant may, at any time prior to the expiration of the Restriction Period, waive all rights to receive all or some of the shares of a restricted stock Award by delivering to the Company a written notice of such waiver. (7) Notwithstanding the other provisions of this Section 9, the Committee may adopt rules which would permit a gift by a participant of restricted shares to members of the participant's immediate family (spouse, parents, children, stepchildren, grandchildren or legal dependants) or to a trust whose beneficiary or beneficiaries shall be either such a person or persons or the participant. (8) Any attempt to dispose of restricted stock in a manner contrary to the restrictions shall be ineffective. 10. Deferred Stock Units: Deferred stock units under the Plan will consist of grants of the right to receive a payment based upon the value of the Common Stock subject to the terms and conditions hereinafter provided. (a) Grant of Awards: The Committee shall (i) select the officers and key employees to whom deferred stock units may from time to time be granted, (ii) determine the number of shares to be covered by each Award, (iii) determine the terms and conditions (not inconsistent with the Plan) of any Award, and (iv) prescribe the form of the agreement or other instrument necessary or advisable in the administration of Awards. (b) Terms and Conditions of Deferred Stock Units: Deferred stock units granted pursuant to the Plan shall be subject to the following restrictions and conditions: (1) Any deferred stock unit granted under the Plan shall be evidenced by a Deferred Stock Unit Agreement executed by the Issuer and the recipient, in such form as the Committee shall approve. The Deferred Stock Unit Agreement shall specify: (i) the number of shares of Common Stock subject to the Award; (ii) the period of restriction applicable to the Award, if any; (iii) the criteria upon which any restrictions shall be based; and (iv) such additional terms and conditions not inconsistent with the Plan as the Committee deems appropriate. (2) In the event of a participant's Retirement, death, Disability or other termination, as specified by the Committee, the participant's deferred stock units will be distributed in a lump sum payment or in such other manner as the Committee determines. The Committee shall determine whether payment shall be made in cash, Common Stock, or a combination of the two. Unless the Committee determines otherwise, payment will be equal to the number of deferred stock units multiplied by (i) the market value of a share of Common Stock at the time of the participant's Retirement, death, Disability or termination, plus (ii) the sum of all dividends credited on a share of Common Stock during the period commencing on the date of the deferred stock unit award and ending on the date of the participant's Retirement, death, Disability or termination. 16 (3) The Committee may, in its sole discretion when it finds that such an action would be in the best interests of the Company, accelerate or waive in whole or in part any or all remaining time-based restrictions with respect to the deferred stock units of a participant who terminates employment during the Restriction Period due to Retirement, death, Disability or in cases of special circumstances. (4) Deferred stock units are not transferable, except that a participant may designate a beneficiary to receive any amount payable with respect to deferred stock units on the participant's death. 11. Determination of Breach of Conditions: The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination or reduction of the Company's obligations in accordance with the provisions of the Plan shall be conclusive. 12. Adjustment in the Event of Change in Stock: In the event of changes in the outstanding Common Stock by reason of stock dividends, recapitalization, mergers, consolidations, stock splits, combinations or exchanges of shares and the like, the aggregate number and class of shares available under the Plan, the aggregate number and class of shares subject to individual limits under the Plan, and the number, class and the price of shares subject to outstanding options and awards and the number of performance units and the dollar value of each unit shall be appropriately adjusted by the Committee, whose determination shall be conclusive. 13. Taxes: (a) Each participant shall, no later than the Tax Date (as defined below), pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Withholding Tax (as defined below) with respect to an option or award, and the Company shall, to the extent permitted by law, have the right to deduct such amount from any payment of any kind otherwise due to the participant. The Company shall also have the right to retain or sell without notice, or to demand surrender of, shares of Common Stock in value sufficient to cover the amount of any Withholding Tax, and to make payment (or to reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the participant. For purposes of the paragraph, the value of shares of Common Stock so retained or surrendered shall be the average of the high and low sales prices per share on the New York Stock Exchange composite tape on the date that the amount of the Withholding Tax is to be determined (the "Tax Date") and the value of shares of Common Stock so sold shall be the actual net sale price per share (after deduction of commissions) received by the Company. (b) Notwithstanding the foregoing, if the stock options have been transferred, the optionee shall provide the Company with funds sufficient to pay such Withholding Tax. If such optionee does not satisfy the optionee's tax payment obligation and the stock options have been transferred, the transferee may provide the funds sufficient to enable the Company to pay such taxes. However, if the stock options have been transferred, the Company shall have no right to retain or sell without notice, or to demand surrender from the transferee of, shares of Common Stock in order to pay such Withholding Tax. 17 (c) The term "Withholding Tax" means the minimum required withholding amount applicable to the participant, including federal, state and local income taxes, Federal Insurance Contribution Act taxes and other governmental impost or levy. (d) Notwithstanding the foregoing, the participant shall be entitled to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Company with funds sufficient to enable the Company to pay such Withholding Tax or by requiring the Company to retain or to accept upon delivery thereof by the participant shares of Common Stock having a Fair Market Value sufficient to cover the amount of such Withholding Tax. Each election by a participant to have shares retained or to deliver shares for this purpose shall be subject to the following restrictions: (i) the election must be in writing and be made on or prior to the Tax Date; (ii) the election must be irrevocable; (iii) the election shall be subject to the disapproval of the Committee. 14. Change in Control. In the event an optionee's employment with the Company terminates pursuant to a qualifying termination (as defined below) during the three (3) year period following a change in control of the Issuer (as defined below) and prior to the exercise of options granted under this Plan, all outstanding options shall become immediately fully vested and exercisable notwithstanding any provisions of the Plan or of the applicable Stock Option Agreement to the contrary. In addition, in the event of a change in control of the Issuer, the Committee may (i) determine that outstanding options shall be assumed by, or replaced with comparable options by, the surviving corporation (or a parent or subsidiary of the surviving corporation) and that outstanding awards shall be converted to similar awards of the surviving corporation (or a parent or subsidiary of the surviving corporation), or (ii) take such other actions with respect to outstanding options and awards as the Committee deems appropriate. The following definitions shall apply for purposes of the Plan: (a) For the purpose of this Plan, a change in control shall be deemed to have occurred on the earlier of the following dates: (1) The date any person (as defined in Section 14(d)(3) of the Exchange Act) shall have become the direct or indirect beneficial owner of twenty percent (20%) or more of the then outstanding common shares of the Issuer; (2) The date the shareholders of the Issuer approve a merger or consolidation of the Issuer with any other corporation other than (i) a merger or consolidation which would result in the voting securities of the Issuer outstanding immediately prior thereto continuing to represent at least 75% of the combined voting power of the voting securities of the Issuer or the surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Issuer in which no Person acquires more than 50% of the combined voting power of the Issuer's then outstanding securities; 18 (3) The date the shareholders of the Issuer approve a plan of complete liquidation of the Issuer or an agreement for the sale or disposition by the Issuer of all or substantially all the Issuer's assets; (4) The date there shall have been a change in a majority of the Board of Directors of the Issuer within a two (2) year period beginning after the effective date of the Plan, unless the nomination for election by the Issuer's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the two (2) year period. (b) For purposes of this Plan provision, a qualifying termination shall be deemed to have occurred under the following circumstances: (1) A Company-initiated termination for reasons other than the employee's death, Disability, resignation without good cause, willful misconduct or activity deemed detrimental to the interests of the Company, provided the optionee executes a general release and, where applicable, a non-solicitation and/or non-compete agreement with the Company; (2) The optionee resigns with good cause, which includes (i) a substantial adverse alteration in the nature or status of the optionee's responsibilities, (ii) a reduction in the optionee's base salary or levels of entitlement or participation under any incentive plan, award program or employee benefit program without the substitution or implementation of an alternative arrangement of substantially equal value, or (iii) the Company requiring the optionee to relocate to a work location more than fifty (50) miles from the optionee's work location prior to the change in control. 15. Deferral Election: Notwithstanding the provisions of Section 13, any optionee or participant may elect, with the concurrence of the Committee and consistent with any rules and regulations established by the Committee, to defer the delivery of the proceeds of the exercise of any stock option not transferred under the provisions of Section 7(b)(6) or stock appreciation rights. (a) Election Timing: The election to defer the delivery of the proceeds from any eligible award must be made at least six months prior to the date such award is exercised or at such other time as the Committee may specify. Deferrals will only be allowed for exercises which occur while the optionee or participant is an active employee of the Company. Any election to defer the delivery of proceeds from an eligible award shall be irrevocable as long as the optionee or participant remains an employee of the Company. (b) Stock Option Deferral: The deferral of the proceeds of stock options may be elected by an optionee subject to the Regulations established by the Committee. The proceeds from such an exercise shall be credited to the optionee's deferred stock option account as the number of deferred share units equivalent in value to those proceeds. Deferred share units shall be valued at the Fair Market Value on the date of exercise. Subsequent to exercise, the deferred share units shall be valued at the Fair Market Value of Common Stock. Deferred share units shall accrue dividends at the rate paid upon the Common Stock, which shall be credited in the 19 form of additional deferred share units. Deferred share units shall be distributed in shares of Common Stock upon the termination of employment of the participant or at such other date as may be approved by the Committee over a period of no more than ten (10) years. (c) Stock Appreciation Right Deferral: Upon such exercise, the Company will credit the optionee's deferred stock option account with the number of deferred share units equivalent in value to the difference between the Fair Market Value of a share of Common Stock on the exercise date and the exercise price of the Stock Appreciation Right multiplied by the number of shares exercised. Deferred share units shall be valued at the Fair Market Value on the date of exercise. Subsequent to exercise, the deferred share units shall be valued at the Fair Market Value of Common Stock. Deferred share units shall accrue dividends at the rate paid upon the Common Stock, which shall be credited in the form of additional deferred share units. Deferred share units shall be distributed in shares of Common Stock upon the termination of employment of the participant or at such other date as may be approved by the Committee over a period of no more than ten (10) years. (d) Accelerated Distributions: The Committee may, at its sole discretion, allow for the early payment of an optionee's or participant's deferred share units account in the event of an "unforeseeable emergency" or in the event of the death or Disability of the optionee or participant. An "unforeseeable emergency" is defined as an unanticipated emergency caused by an event beyond the control of the optionee or participant that would result in severe financial hardship if the distribution were not permitted. Such distributions shall be limited to the amount necessary to sufficiently address the financial hardship. Any distributions under this provision shall be consistent with the Regulations established under the Code. Additionally, the Committee may use its discretion to cause deferred share unit accounts to be distributed when continuing the deferral program is no longer in the best interest of the Company. (e) Assignability: No rights to deferred share unit accounts may be assigned or subject to any encumbrance, pledge or charge of any nature except that an optionee or participant may designate a beneficiary pursuant to any rules established by the Committee. 16. Amendment of the Plan: The Board of Directors may amend or suspend the Plan at any time and from time to time; provided, however, that the Board of Directors shall not amend the Plan without shareholder approval if such approval is required in order to comply with Section 162(m) or 422 of the Code or other applicable law, or to comply with applicable stock exchange requirements. A termination or amendment of the Plan that occurs after an option or award is granted shall not materially impair the rights of an optionee or participant unless the optionee or participant consents in writing. Notwithstanding the foregoing, if an option has been transferred in accordance with Section 7(b)(6), written consent of the transferee (and not the optionee) shall be necessary to alter or impair any option or award previously granted under the Plan. 17. Miscellaneous: (a) By accepting any benefits under the Plan, each optionee or participant and each person claiming under or through such optionee or participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or made to be 20 taken or made under the Plan by the Company, the Board, the Committee or any other Committee appointed by the Board. (b) No participant or any person claiming under or through him shall have any right or interest, whether vested or otherwise, in the Plan or in any option, or stock appreciation right or award thereunder, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Agreement that affect such participant or such other person shall have been complied with. (c) Nothing contained in the Plan or in any Agreement shall require the Company to segregate or earmark any cash or other property. (d) Neither the adoption of the Plan nor its operation shall in any way affect the rights and powers of the Company to dismiss or discharge any employee at any time. 18. Term of the Plan: The Plan is effective as of August 6, 2001. The Plan shall expire on the day before the fifth anniversary of the effective date of the Plan, unless suspended or discontinued earlier by action of the Board of Directors. The expiration of the Plan, however, shall not affect the rights of optionees under options theretofore granted to them or the rights of participants under awards theretofore granted to them, and all unexpired options and awards shall continue in force and operation after termination of the Plan except as they may lapse or be terminated by their own terms and conditions. 19. Employees Based Outside of the United States: Notwithstanding any provision of the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws in other countries in which the Company operates or has Employees, the Committee, in its sole discretion, shall have the power and authority to (i) determine which employees employed outside the United States are eligible to participate in the Plan, (ii) modify the terms and conditions of options granted to employees who are employed outside the United States, (iii) establish subplans, modified option exercise procedures and other terms and procedures to the extent such actions may be necessary or advisable, and (iv) grant to employees employed in countries wherein the granting of stock options is impossible or impracticable, as determined by the Committee, stock appreciation rights with terms and conditions that, to the fullest extent possible, are substantially identical to the stock options granted hereunder. 20. Grants in Connection with Corporate Transactions and Otherwise: Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including grants to employees thereof who become employees of the Company, or for other proper corporate purposes, or (ii) limit the right of the Company to grant options or make other awards outside of this Plan. Without limiting the foregoing, the Committee may make a grant to an employee of another corporation who becomes an employee of the Company by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for an option or award granted by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by the Plan 21 and from those of the substituted stock incentives. The Committee shall prescribe the provisions of the substitute grants. Any options or awards that are converted into Company options or awards as a result of a merger or acquisition will not count against the limitations provided under Section 3. 21. Governing Law: The validity, construction, interpretation and effect of the Plan and agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Indiana, without giving effect to the conflict of laws provisions thereof. 22 EX-10.4 6 ex10-4.txt ZIMMER HOLDINGS, INC. TEAMSHARE STOCK OPTION PLAN Exhibit 10.4 ZIMMER HOLDINGS, INC. TEAMSHARE STOCK OPTION PLAN 1. Purpose: The purpose of the Zimmer Holdings, Inc. TeamShare Stock Option Plan (the "Plan") is to advance the interests of Zimmer Holdings, Inc. and its Subsidiaries and Affiliates by giving substantially all Employees a stake in the Company's future growth, in the form of stock options, thereby improving such Employees' long-term incentives and aligning their interests with those of the Company's shareholders. 2. Definitions: For purposes of this Plan: (a) "Affiliate" shall mean any entity in which the Company has an ownership interest of more than 50%. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Common Stock" shall mean the Company's common stock. (d) "Company" shall mean Zimmer Holdings, Inc. (e) "Disability" or "Disabled" shall mean qualifying for and receiving payments under a long-term disability pay plan maintained by the Company or any Subsidiary or Affiliate or as required by or available under applicable local law. (f) "Employee" shall mean any individual employed by the Company or any Subsidiary or Affiliate, excluding leased employees within the meaning of Section 414(n) of the Code and key executives of the Company or any of its Subsidiaries or Affiliates. Employee shall also exclude any person who performs services for the Company if the Company treats the person for tax or labor law purposes as an independent contractor. If such person is subsequently determined to be an employee of the Company by the Internal Revenue Service or any other federal, state or local governmental agency or competent court of authority, such person will become an Employee on the date that this determination is finally adjudicated or otherwise accepted by the Company as long as he or she meets the other requirements of this Section 2(f). Such person shall not, under any circumstances, be treated as an Employee for the period of time during which the Company treated the person as an independent contractor for federal tax purposes even if the determination of the employee status has retroactive effect. In addition, any person who performs services for the Company, regardless of whether such person is an employee or independent contractor, shall not be an Employee for any period of time during which he or she has agreed in writing that he or she is not entitled to participate in the Company's employee benefit plans. (g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (h) "Fair Market Value" shall mean the average of the high and low sale prices of a share of Common Stock on the New York Stock Exchange composite tape on the date of measurement or on any date as determined by the Committee, or if there were no trades on such date, on the day on which a trade occurred next preceding such date. (i) "Retirement" and "Retire" shall mean termination of the employment of an Employee with the Company or any Subsidiary or Affiliate on or after (i) the Employee's 65th birthday or (ii) the Employee's 55th birthday if the Employee has completed 10 years of service with the Company, its Subsidiaries and its Affiliates. For the purposes of this Section 2(i) and all other purposes of this Plan, Retirement shall also mean termination of employment of an Employee with the Company or a Subsidiary or Affiliate for any reason (other than the Employee's death, disability, resignation, willful misconduct or activity deemed detrimental to the interests of the Company) where, on termination, the Employee's age plus years of service (rounded up to the next higher whole number) equals at least 70 and the Employee has completed 10 years of service with the Company, its Subsidiaries and its Affiliates and, where applicable, the Employee has executed a general release, a covenant not to compete and/or a covenant not to solicit. For purposes of this Plan, service with Bristol-Myers Squibb and its subsidiaries and affiliates before the Effective Date shall be included as service with the Company. (j) "Subsidiary" shall mean any corporation which at the time qualifies as a subsidiary of the Company under the definition of "subsidiary corporation" in Section 424 of the Code. 3. Shares Available for Options: The amount of shares of the Company's stock which may be issued for options granted under the Plan shall not exceed 1,000,000 shares, subject to adjustment under Section 10 hereof. If and to the extent options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised, the shares subject to such options shall again be available for purposes of the Plan. Options granted under Sections 6 and 17 of the Plan shall not count against the foregoing limitation, to the extent provided in Sections 6 and 17. The stock to be issued may be either authorized and unissued shares or issued shares acquired by the Company or its subsidiaries. 4. Administration: The Plan shall be administered under the supervision of the Board of Directors of the Company, which may exercise its powers, to the extent herein provided, through the agency of the Compensation and Management Development Committee (the "Committee"), which shall be appointed by the Board of Directors of the Company and shall consist of not less than two (2) directors who shall serve at the pleasure of the Board. In addition, the Board of Directors or the Committee may delegate in writing any or all of its authority hereunder to one or more other committees or subcommittees, and the initial grants to be made at the time of the spin-off of the Company's stock from Bristol-Myers Squibb Company may be made by the Compensation and Management Development Committee of the Board of Directors of Bristol-Myers Squibb Company. To the extent that the Board of Directors or a committee administers the Plan, references to the Committee shall mean the Board of Directors or such committee. The Committee, from time to time, may adopt rules and regulations for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate. The interpretation and 2 construction of any provision of the Plan by the Committee shall, unless otherwise determined by the Board of Directors, be final and conclusive. The Committee shall maintain a written record of its proceedings. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the Committee. 5. Eligibility: An option may be granted to an Employee who is actively employed with the Company or any Subsidiary or Affiliate on the grant date provided the Employee regularly works or is anticipated to regularly work at least 1,000 hours in a twelve (12) consecutive month period. The adoption of this Plan shall not be deemed to give any Employee any right to be granted an option to purchase Common Stock of the Company, except to the extent and upon such terms and conditions as may be determined by the Committee. 6. Grants as of Effective Date: (a) On the effective date of the Plan, the Company shall assume from Bristol-Myers Squibb Company options granted under the Bristol-Myers Squibb Company TeamShare Stock Option Plan that are in effect immediately before the effective date of this Plan with respect to employees of the Company and its Subsidiaries and Affiliates (the "Prior Options"). Except as described below, the terms of the Bristol-Myers Squibb Company TeamShare Stock Option Plan and the option agreements in effect pursuant to the Bristol-Myers Squibb Company TeamShare Stock Option Plan will continue to govern the Prior Options. However, as a result of the assumption, the Prior Options will be converted into options with respect to the Common Stock of the Company, and the number of shares and the exercise price will be adjusted to reflect the spin-off of the Company from Bristol-Myers Squibb Company. On and after the spin-off date, references in the option and award agreements to Bristol-Myers Squibb will mean the Company. Any shares of the Company's Common Stock that are subject to options pursuant to the Prior Options will be issued under this Plan but will not be counted against the limitations provided under Section 3 of the Plan. The Committee will administer the Prior Options, as converted into options to purchase Common Stock of the Company. (b) As an alternative, the Committee may determine, as a result of certain laws, rules or regulations in countries outside the United States, not to have the Company assume certain Prior Options. 7. Stock Options: Stock options under the Plan shall consist of nonqualified stock options. Each option shall be subject to the following terms and conditions: (a) Grant of Options. The Committee shall (1) determine the date(s) on which options may be granted, (2) select the Employees to whom options may be granted or offered subject to collective bargaining where required, (3) determine the number of shares to be covered by each option so granted, (4) determine the terms and conditions (not inconsistent with the Plan) of any option granted hereunder (including but not 3 limited to restrictions upon the options, conditions of their exercise, or on the shares of Common Stock issuable upon exercise thereof), and (5) prescribe the form of the instruments necessary or advisable in the administration of options. (b) Terms and Conditions of Option. Any option granted under the Plan shall be evidenced by a Stock Option Agreement executed by the Company and the optionee, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan. Unless the Optionee rejects such Stock Option Agreement in writing, the Optionee shall be deemed to have accepted the Stock Option Agreement and shall be bound by all of the terms and conditions of the Stock Option Agreement and the Plan. (1) Number of Shares Subject to an Option. The Stock Option Agreement shall specify the number of shares of Common Stock subject to the Agreement. (2) Option Price. The purchase price per share of Common Stock purchasable under an option will be determined by the Committee but will be not less than the Fair Market Value in U.S. dollars of a share of Common Stock on the date of the grant of the option, except as provided in Section 6, 12 or 17. (3) Option Period. The period of each option shall be fixed by the Committee, but no option shall be exercisable after the expiration of ten years from the date the option is granted. (4) Consideration. Each optionee, as consideration for the grant of an option, shall remain in the continuous employ of the Company or of one of its Subsidiaries or Affiliates for at least one year from the date of the granting of such option, and no option shall be exercisable until after the completion of such one year period of employment by the optionee. (5) Exercise of Option. (a) An option shall be exercised by delivering notice to the Company or its designee at such address and in such form as shall be designated by the Committee from time to time or pursuant to such other procedures that may be established by the Committee from time to time for the exercise of options. (b) The Committee shall have the discretion to establish one or more methods, and the accompanying procedures, that an optionee may use to exercise and pay the option exercise price including, without limitation, the designation of the brokerage firm or firms through which exercises shall be effected. At its discretion, the Committee may modify or suspend any method or procedure for the exercise or payment of stock options. 4 (c) The option exercise price shall be paid in full at the time of exercise, and the Company shall require the optionee to pay the Company at the time of exercise the amount of tax required to be withheld by the Company under applicable foreign, federal, state and local withholding tax laws. This payment may be in paid in U.S. dollars or in any other manner that the Committee in its sole discretion approves including, without limitation, the withholding of shares of Common Stock that would otherwise be distributed; provided, however, in no event may shares of Common Stock be withheld in an amount that exceeds the Company's minimum applicable withholding tax obligation for federal (including FICA), state, foreign and local tax liabilities with respect to the optionee. (d) Except as provided in subsections (7), (8), (9), and (10), an optionee must be an Employee at the time of exercise of an option. (e) Notwithstanding anything in the Plan to the contrary, the Committee may, in its sole discretion, allow the exercise of a lapsed grant if the Committee determines that: (i) the lapse was solely the result of the Company's inability to execute the exercise of an option award due to conditions beyond the Company's control and (ii) the optionee made valid and reasonable efforts to exercise the award. In the event the Committee makes such a determination, the Company shall allow the exercise to occur as promptly as possible following its receipt of exercise instructions subsequent to such determination. (6) Nontransferability of Options. No option granted under the Plan shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and such option shall be exercisable, during the optionee's lifetime, only by the optionee. (7) Termination. An optionee who terminates employment with the Company or any Subsidiary or Affiliate (other than by Retirement, Disability or death) may exercise the vested portion of such option (as such vesting is set forth in the Stock Option Agreement), until the earlier of three months from the optionee's termination date or the expiration of the option period set forth therein. In the case of an optionee who terminates employment prior to the full vesting of the award, the unvested portion of the option will lapse unless the Committee has exercised its discretionary authority to accelerate the vesting of all or part of such option. If an optionee is laid off or granted a leave of absence under a policy of the Company or any Subsidiary or Affiliate, the optionee's absence from work shall be treated as though the optionee remained in the employ of the Company, Subsidiary or Affiliate, provided that (i) in the case of a leave of absence, the optionee returns to work at the end of the approved period of absence and (ii) in the case of a layoff, the optionee returns to work within twelve months of the date the period of layoff commenced. An optionee who does not return to work as set 5 forth above shall be treated as if the optionee's employment terminated effective as of (i) the date the optionee was scheduled to return to work, in the case of an approved leave of absence and (ii) the expiration of the twelve month period, in the case of an optionee who is laid off. (8) Retirement. If an optionee shall cease to be employed by the Company on account of Retirement after the optionee has been continuously employed for one year or more after the grant of the option, or as otherwise determined by the Committee, the option shall be exercisable only to the extent that the optionee was otherwise entitled to exercise it at the time of such cessation of employment, unless otherwise determined by the Committee, and the option shall remain exercisable for the remainder of the option period set forth therein. (9) Disability. An optionee who ceases to be actively employed by reason of Disability shall be treated as though the optionee remained in the employ of the Company or a Subsidiary or Affiliate until the earlier of (i) cessation of payments under a disability pay plan of the Company, Subsidiary or Affiliate, (ii) the optionee's death, or (iii) the optionee's 65th birthday. (10) Death. In the event of the death of the optionee (a) while in the employ of the Company or of any of its Subsidiaries or Affiliates and provided the optionee shall have been continuously employed for one year after the granting of the option, the option shall be exercisable immediately by the executors, administrators, legatees or distributees of the optionee's estate, as the case may be, but in no event after the expiration of the option period set forth therein, (b) while in the employ of the Company or a Subsidiary or Affiliate but before the first anniversary of the grant, the option will immediately lapse, (c) after Retirement, as defined in Section 2(i), and provided the optionee shall have been continuously employed for one year after the granting of the option, the option shall be exercisable immediately by the executors, administrators, legatees or distributees of the optionee's estate, as the case may be, but in no event after the expiration of the option period set forth therein, (d) after termination, but within the three month period indicated in Section 7(b)(7), and provided the optionee shall have been continuously employed for three years after the granting of the option, the option shall be exercisable immediately by the executors, administrators, legatees or distributees of the optionee's estate, as the case may be, until the earlier of one year from the date of death or the expiration of the option period set forth therein. 6 In the event any option is exercised by the executors, administrators, legatees or distributees of the estate of a deceased optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the option are the duly appointed legal representatives of the deceased optionee's estate or the proper legatees or distributees thereof. (11) Optionees who become Subject to Section 16 of the Exchange Act. If, subsequent to the grant date, an optionee becomes subject to Section 16 of the Exchange Act, the option and all rights of the optionee thereunder, shall terminate effective as of the day prior to such designation. 8. Change in Control: In the event of a change in control of the Company prior to the exercise of options granted under this Plan, but after the optionee has completed one year of continuous employment subsequent to the date of the granting of an option, all outstanding options shall become immediately fully vested and exercisable notwithstanding any provisions of the Plan to the contrary. In addition, in the event of a change in control of the Company, the Committee may (i) determine that outstanding options shall be assumed by, or replaced with comparable options by, the surviving corporation (or a parent or subsidiary of the surviving corporation) or (ii) take such other actions with respect to outstanding options as the Committee deems appropriate. For the purpose of this Plan, a change in control shall be deemed to have occurred on the earlier of the following dates: The date any entity or person (including a "group" as defined in Section 13(d)(3) of the Exchange Act) shall have become the beneficial owner of, or shall have obtained voting control over, twenty percent (20%) or more of the outstanding common shares of the Company; (a) The date the shareholders of the Company approve a definitive agreement (i) to merge or consolidate the Company with or into another corporation, in which the Company is not the continuing or surviving corporation or pursuant to which any common shares of the Company would be converted into cash, securities or other property of another corporation, other than a merger of the Company in which holders of common shares immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (ii) to sell or otherwise dispose of substantially all the assets of the Company; or (b) The date there shall have been a change in a majority of the Board of Directors of the Company within a twelve (12) month period beginning after the effective date of the Plan, unless the nomination for election by the Company's shareholders of each new director was approved by the vote of three-fourths of the directors then still in office who were in office at the beginning of the twelve (12) month period. 7 9. Determination of Breach of Conditions: The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination or reduction of the Company's obligations in accordance with the provisions of the Plan shall be conclusive. 10. Adjustment in the Event of Change in Stock: In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, recapitalization, mergers, consolidations, stock splits, combinations or exchanges of shares and the like, the aggregate number and class of shares available under the Plan, the number, class and the price of shares subject to outstanding options shall be appropriately adjusted by the Committee, whose determination shall be conclusive. 11. Taxes: In connection with the transfer of shares of Common Stock to an optionee (or at such earlier date as may be required by local law), the Company may require the optionee to pay the amount required by any applicable governmental entity to be withheld or otherwise deducted and paid with respect to such transfer. Subject to Section 12 hereof, an optionee shall satisfy the obligation to pay withholding tax by providing the Company with funds (in U.S. dollars) sufficient to enable the Company to pay such Withholding Tax, or at the Company's discretion, the Company may retain or accept upon delivery thereof by the optionee shares of Common Stock sufficient in value to cover the amount of such withholding tax; provided that shares may not be withheld in excess of the Company's minimum applicable withholding tax for federal (including FICA), state, foreign and local tax liabilities with respect to the optionee. 12. Employees Based Outside of the United States: Notwithstanding any provision of the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws in other countries in which the Company, its Affiliates and its Subsidiaries operate or have Employees, the Committee, in its sole discretion, shall have the power and authority to (i) determine which Employees employed outside the United States are eligible to participate in the Plan, (ii) modify the terms and conditions of any options granted to Employees who are employed outside the United States, (iii) establish subplans, modified option exercise procedures and other terms and procedures to the extent such actions may be necessary or advisable, and (iv) grant to Employees employed in countries wherein the granting of stock options is impossible or impracticable, as determined by the Committee, stock appreciation rights with terms and conditions that, to the fullest extent possible, are substantially identical to the stock options granted hereunder. In addition, the Committee may grant such stock appreciation rights to individuals who provide services to the Company and who otherwise would be characterized as employees, but who are not permitted to be Employees of the Company pursuant to local laws of the country wherein the workers are employed. 13. Amendment of the Plan: The Board of Directors may amend or suspend the Plan at any time and from time to time. No such amendment of the Plan may, however, without the written consent of the optionee, alter or impair any option. 14. Miscellaneous: By accepting any benefits under the Plan, each optionee and each person claiming under or through such optionee shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or made to be taken or made under the Plan by the Company, the Board, the Committee or any other committee appointed by the Board. No participant or any person claiming under or through him or her shall have any 8 right or interest, whether vested or otherwise, in the Plan or in any option thereunder, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Agreement that affect such participant or such other person shall have been complied with. Nothing contained in the Plan or in any Agreement shall require the Company to segregate or earmark any cash or other property. Neither the adoption of the Plan nor its operation shall in any way affect the rights and powers of the Company or any of its Subsidiaries or Affiliates to dismiss and/or discharge any Employee at any time. 15. Conditions: The Company shall not be required to issue or deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of any option granted under the Plan prior to (i) the admission of such shares to listing on any stock exchange on which the stock may then be listed, (ii) the completion of any registration or other qualification of such shares under any state or federal law or rulings or regulations of any governmental regulatory body, (iii) the obtaining of any consent or approval or other clearance from any governmental agency, which the Company shall, in its sole discretion, determine to be necessary or advisable, and (iv) the payment to the Company, upon its demand, of any amount requested by the Company for the purpose of satisfying its liability, if any, to withhold federal, state or local income or earnings tax or any other applicable tax or assessment (plus interest or penalties thereon, if any caused by a delay in making such payment) incurred by reason of the exercise of any option granted under the Plan or the transfer of shares thereupon. 16. Term of the Plan: The Plan shall become effective as of August 6, 2001 by action of the Board of Directors. The Plan shall terminate on the date that is five years after the effective date of the Plan, or at such earlier date as may be determined by the Board of Directors. Termination of the Plan, however, shall not affect the rights of optionees under options theretofore granted to them, and all unexpired options shall continue in force and operation after termination of the Plan except as they may lapse or be terminated by their own terms and conditions. 17. Grants in Connection with Corporate Transactions and Otherwise: Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including grants to employees thereof who become employees of the Company, or for other proper corporate purposes, or (ii) limit the right of the Company to grant options or make other awards outside of this Plan. Without limiting the foregoing, the Committee may make a grant to an employee of another corporation who becomes an employee of the Company by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for an option or award granted by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives. The Committee shall prescribe the provisions of the substitute grants. Any options that are converted into Company options as a result of a merger or acquisition will not count against the limitations provided under Section 3. 18. Governing Law: This Plan, and the validity and construction of any options granted hereunder, shall be governed by the laws of the State of Indiana. 9 EX-10.5 7 ex10-5.txt ZIMMER HOLDINGS, INC. EXECUTIVE PERFORMANCE Exhibit 10.5 ZIMMER HOLDINGS, INC. EXECUTIVE PERFORMANCE INCENTIVE PLAN 1. Purpose: The purpose of the Executive Performance Incentive Plan (the "Plan") is to promote the interests of Zimmer Holdings, Inc. (the "Company") and its stockholders by providing additional compensation as incentive to certain key executives of the Company and its Subsidiaries and Affiliates who contribute materially to the success of the Company and such Subsidiaries and Affiliates. 2. Definitions: The following terms when used in the Plan shall, for the purposes of the Plan, have the following meanings: (a) "Affiliate" shall mean any entity in which the Company has an ownership interest of at least 20%. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Company" shall mean Zimmer Holdings, Inc., its Subsidiaries and Affiliates. (d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (e) "Retirement" shall mean termination of the employment of an employee with the Company or a Subsidiary or Affiliate on or after (i) the employee's 65th birthday or (ii) the employee's 55th birthday having completed 10 years of service with the Company. (f) "Subsidiary" shall mean any corporation which at the time qualifies as a subsidiary of the Company under the definition of "subsidiary corporation" in Section 424 of the Code. 3. Administration: The Plan shall be administered under the supervision of the Board of Directors of the Company (the "Board") which may exercise its powers, to the extent herein provided, through the agency of a Compensation and Management Development Committee (the "Committee") which shall be appointed by the Board. The Committee shall consist of not less than two (2) members of the Board who meet the definition of "outside directors" under the provisions of Section 162(m) of the Code and the definition of "non-employee directors" under the provisions of the Exchange Act or the regulations or rules promulgated thereunder. The Committee, from time to time, may adopt rules and regulations ("Regulations") for carrying out the provisions and purposes of the Plan and make such determinations, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate. The Committee may alter, amend or revoke any Regulation adopted. The interpretation and construction of any provision of the Plan by the Committee shall, unless otherwise determined by the Board, be final and conclusive. The Committee may delegate its responsibilities for administering the Plan to a committee of key executives as the Committee deems necessary. Any Awards under the Plan to members of this committee and to such other of the Participants as may be determined from time to time by the Board or the Committee shall be referred to the Committee or Board for approval. However, the Committee may not delegate its responsibilities under the Plan relating to any executive who is subject to the provisions of Section 162(m) of the Code or in regard to the issuance of any stock under Section 6(c). 4. Participation: "Participants" in the Plan shall be such key executives of the Company as may be designated by the Committee to participate in the Plan with respect to each fiscal year. 5. Performance Incentive Awards: (a) For each fiscal year of the Company, the Committee shall determine: (i) The Company, Subsidiaries and/or Affiliates to participate in the Plan for such fiscal year. (ii) The names of those key executives whom it considers should participate in the Plan for such fiscal year. (iii) The basis(es) for determining the amount of the Awards to such Participants, including the extent, if any, to which payment of all or part of an Award will be dependent upon the attainment by the Company or any Subsidiary or Affiliate or subdivision thereof of any specified performance goal or objective. Performance criteria for Awards under the Plan may include one or more of the following operating performance measures: a. Earnings d. Financial return ratios b. Revenue e. Total Shareholder Return c. Operating or net cash flows f. Market share For any Participant not subject to Section 162(m) of the Code, other performance measures or objectives, whether quantitative or qualitative, may be established. The Committee shall establish the specific targets for the selected measures. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index. 2 (iv) Whether a percentage of an Award shall be deferred or whether a Participant may request the Committee to approve deferred payment of a percentage (not less than 25%) of an Award (the "Deferred Portion"). Any Award or portion of Award of which the Committee does not require deferral or the Participant does not request deferral shall be paid subject to the provisions of Section 6 (the "Current Portion"). Any Award which includes a Deferred Portion shall be subject to the terms and conditions stated in Section 10 and in any Regulations established by the Committee. (b) At any time after the commencement of a fiscal year for which Awards have been determined, but prior to the close thereof, the Committee may, in its discretion, eliminate or add Participants, or increase or decrease the Award of any Participant; but the Committee may not alter any election made relative to establishing a Deferred Portion of an Award. Any changes or additions with respect to Awards of members of any committee established to oversee the Plan shall be referred to the Board or Committee, as appropriate, for approval. 6. Payment of Current Portion of Performance Incentive Awards: (a) Subject to such forfeitures of Awards and other conditions as are provided in the Plan, the Awards made to Participants shall be paid to them or their beneficiaries as follows: (i) As soon as practicable after the end of the fiscal year, the Committee shall determine the extent to which Awards have been earned on the basis of the actual performance in relation to the established performance objectives as established for that fiscal year. Such Awards are only payable to the extent that the Participants have performed their duties to the satisfaction of the Committee. (ii) While no Participant has an enforceable right to receive a Current Portion until the end of the fiscal year as outlined in (i) above, payments on account of the Current Portion may be provisionally made in accordance with the Regulations, based on tentative estimates of the amount of the Award. A Participant shall be required to refund any portion or all of such payments in order that the total payments may not exceed the Current Portion as finally determined, or if the Participant shall forfeit his or her Award for any reason during the fiscal year. (b) There shall be deducted from all payments of Awards any taxes required to be withheld by any government entity and paid over to any such government in respect of any such payment. Unless otherwise elected by the Participant, such deductions shall be at the established withholding tax rate. Participants may elect to have the deduction of taxes cover the amount of any applicable tax (the amount of withholding tax plus the incremental amount 3 determined on the basis of the highest marginal tax rate applicable to such Participant). (c) Form of Payment. The Committee shall determine whether payment with respect to the Current Portion of an Award, or to the payment of a Deferred Portion made under the provisions of Section 10, shall be made entirely in cash, entirely in Common Stock of the Company, or partially in cash and partially in Common Stock. Further, if the Committee determines that payment should be made in the form of Restricted Shares of Common Stock of the Company, the Committee shall designate the restrictions which will be placed upon the Common Stock and the duration of those restrictions. For any fiscal year, the Committee may not cause Awards to be made under this provision which would result in the issuance, either on a current or restricted basis, of more than three-tenths of one percent of the number of shares of Common Stock of the Company issued and outstanding as of January 1 of the fiscal year relating to the payment (or as of the effective date of the Plan, in the case of the 2001 fiscal year). 7. Maximum Payments under the Plan: Payments under the Plan shall be subject to the following maximum levels. (a) Total Payments. The total amount of Awards paid under the Plan relating to fiscal year may not exceed two and one-half percent of the pretax earnings for the Company in that fiscal year. (b) Maximum Individual Award. The maximum amount which any individual Participant may receive relating to any fiscal year may not exceed 0.625 percent of the pretax earnings for the Company in that fiscal year. 8. Conditions Imposed on Payment of Awards: Payment of each Award to a Participant or to the Participant's beneficiary shall be subject to the following provisions and conditions: (a) Rights to Awards. No Participant or any person claiming under or through the Participant shall have any right or interest, whether vested or otherwise, in the Plan or in any Award thereunder, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Regulations that effect such Participant or such other person shall have been complied with. Nothing contained in the Plan or in the Regulations shall require the Company to segregate or earmark any cash, shares or stock or other property. Neither the adoption of the Plan nor its operation shall in any way affect the rights and power of the Company or of any Subsidiary or Affiliate to dismiss and/or discharge any employee at any time. 4 (b) Assignment or Pledge of Rights of Participant. No rights under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature except that a Participant may designate a beneficiary pursuant to the provisions of Section 9 hereof. (c) Rights to Payments. No absolute right to any Award shall be considered as having accrued to any Participant prior to the close of the fiscal year with respect to which an Award is made and then such right shall be absolute only with respect to any Current Portion thereof; the Deferred Portion will continue to be forfeitable and subject to all of the conditions of the Plan. No Participant shall have any enforceable right to receive any Award made with respect to a fiscal year or to retain any payment made with respect thereto if for any reason (death included) the Participant, during such entire fiscal year, has not performed their duties to the satisfaction of the Company. 9. Designation of Beneficiary: A Participant may name a beneficiary to receive any payment to which the Participant may be entitled under the Plan in the event of their death, on a form to be provided by the Committee. A Participant may change their beneficiary from time to time in the same manner. If no designated beneficiary is living on the date on which any payment becomes payable to a Participant's beneficiary, such payment will be payable to the person or persons in the first of the following classes of successive preference: (a) Widow or Widower, if then living (b) Surviving children, equally (c) Surviving parents, equally (d) Surviving brothers and sisters, equally (e) Executors or administrators and the term "beneficiary" as used in the Plan shall include such person or persons. 10. Deferral of Payments: Any portion of an Award deemed the Deferred Portion under Section 5(a)(iv) shall be subject to the following: (a) The Committee will, in its sole discretion, determine whether or not a Deferred Portion may be elected by the Participant under an Award or if a Deferred Portion shall be required. If a Deferred Portion election is permitted for an Award, the Committee will establish guidelines regarding the date by which such deferral election by the Participant must be made in order to be effective. (b) Concurrent with the establishment of a Deferred Portion for any Award, the Participant shall determine, subject to the approval of the Committee, thc portion of any Participant's Deferred Portion that is to be valued by reference to the Performance Incentive Fixed Income Fund (hereinafter referred to as the "Fixed Income Fund"), the portion that is to be valued by reference to the Performance Incentive Equity Fund (hereinafter referred to as the "Equity Fund"), 5 the portion that is to be valued by reference to the Performance Incentive Company Stock Fund (hereinafter referred to as the "Stock Fund") and the portion that shall be valued by reference to any other fund(s) which may be established by the Committee for this purpose. (c) Prior to the beginning of each fiscal year, the Committee shall determine if the Fund(s) used to value the account of any Participant may be changed from the Fund currently used to any other Fund established for use under this Plan. Any such determination relating to an individual who is making determinations under this subsection (c), shall be referred to the Board (or such Committee of the Board as may be designated by the Board) for approval. (d) Payment of the total amount of a Participant's Deferred Portions shall be made to the Participant, or, in case of the death of the Participant prior to the commencement of payments on account of such total amount, to the Participant's beneficiary, in installments commencing as soon as practical after the Participant shall cease, by reason of death or otherwise, to be an employee of the Company, in case of the death of any Participant after the commencement payments on account of the total of the Deferred Portions, the then remaining unpaid balance thereof shall continue to be paid in installments, at such times and in such manner as if such Participant were living, to the beneficiary(ies) of the Participant. However, the Committee shall possess absolute discretion to accelerate the time of payment of any remaining unpaid balance of the Deferred Portions to any extent that it shall deem equitable and desirable under circumstances where the Participant at the time of payment shall no longer be an employee of the Company or shall have died. (e) Conduct of Participant Following Termination of Employment. If, following date on which a Participant shall cease to be an employee of the Company, the Participant shall at any time either discloses to unauthorized persons confidential information relative to thc business of any of the Company or otherwise act or conduct themselves in a manner which the Committee shall determine is inimical or contrary to the best interest of the Company, the Company's obligation to make any further payment on account of the Deferred Portions of such Participant shall forthwith terminate. (f) Assignment of Rights by Participant or Beneficiary. If any Participant or beneficiary of a Participant shall attempt to assign their rights under the Plan in violation of the provisions thereof, the Company's obligation to make any further payments to such Participant or beneficiary shall forthwith terminate. (g) Determination of Breach of Conditions. The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination or reduction of the Company's obligation in accordance with the foregoing provisions of this paragraph 10 shall be conclusive. 6 (h) Fund Composition and Valuation. Deferred Portions of Awards under the Plan shall be valued and maintained as follows: (i) In accordance with the provisions, and subject to the conditions, of the Plan and the Regulations, the Deferred Portion as established by the Committee shall be valued in reference to the Participant's account(s) in the Equity Fund, in the Fixed Income Fund, in the Company Stock Fund, and in any other Fund established under this Plan. Account balances shall be maintained as dollar values, units or share equivalents as appropriate based upon the nature of the fund. For unit or share-based funds, the number of units or shares credited shall be based upon the established unit or share value as of the last day of the quarter preceding the crediting of the Deferred Portion. (ii) Investment income credited to Participants' accounts under the Fixed Income Fund shall be determined by the Committee based upon the prevailing rates of return experienced by the Company. The investment income credited to Participants under the Equity Fund shall be established based upon an established market index reflecting the rate of return on equity investments. The Company shall advise Participants of the specific measures used and the current valuations of these Funds as appropriate to facilitate deferral decisions, investment choices and to communicate payout levels. The Company Stock Fund shall consist of units valued as one share of Common Stock of the Company (par value $.01). (iii) Nothing contained in the Fund definitions in subparagraphs 10(h)(i) and 10(h)(ii) above shall require the Company to segregate or earmark any cash, shares, stock or other property to determine Fund values or maintain Participant account levels. (iv) Alternative Funds. The establishment of the "Fixed Income Fund," the "Equity Fund" and the "Stock Fund" as detailed in subparagraphs (i) and (ii) of this paragraph shall not preclude the right of the Committee to direct the establishment of additional investment funds ("Funds"). In establishing such funds, the Committee shall determine the criteria to be used for determining the value of such Funds. (i) Accelerated Distributions. The Committee may, at its sole discretion, allow for the early payment of a Participant's Deferred Portion(s) in the event of an "unforeseeable emergency". An "unforeseeable emergency" is defined as an unanticipated emergency caused by an event beyond the control of the Participant that would result in severe financial hardship if the distribution were not permitted. Such distributions shall be limited to the amount necessary to 7 sufficiently address the financial hardship. Any distributions under this provision shall be consistent with all rules and regulations established under the Code. 11. Miscellaneous: (a) By accepting any benefits under the Plan, each Participant and each person claiming under or through him shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or made to be taken or made under the Plan by the Company, the Board, the Committee or any other committee appointed by the Board. (b) Any action taken or decision made by the Company, the Board, the Committee, or any other committee appointed by the Board arising out of or in connection with the construction, administration, interpretation or effect of the Plan or of the Regulations shall lie within its absolute discretion, as the case may be, and shall be conclusive and binding upon all Participants and all persons claiming under or through any Participation. (c) No member of the Board, the Committee, or any other committee appointed by the Board shall be liable for any act or failure to act of any other member, or of any officer, agent or employee of such Board or Committee, as the case may be, or for any act or failure to act, except on account of their own acts done in bad faith. The fact that a member of the Board shall then be, shall theretofore have been or thereafter may be a Participant in the Plan shall not disqualify such person from voting at any time as a director with regard to any matter concerning the Awards, or in favor of or against any amendment or alteration of the Plan, provided that such amendment or alteration shall provide no benefit for directors as such and provided that such amendment or alteration shall be of general application. (d) The Board, the Committee, or any other committee appointed by the Board may rely upon any information supplied to them by any officer of the Company or any Subsidiary and may rely upon the advice of counsel in connection with the administration of the Plan and shall be fully protected in relying upon information or advice. (e) Notwithstanding anything to the contrary in the Plan, neither the Board nor the Committee shall have any authority to take any action under the Plan where such action would affect the Company's ability to account for any business combination as a "pooling of interests." 12. Amendment or Discontinuance: The Board may alter, amend, suspend or discontinue the Plan, but may not, without approval of the holders of a majority of the Company's Common Stock make any alteration or amendment thereof which would permit the total payments under the Plan for any year to exceed the limitations provided in paragraph 7 hereof or to allow for the issuance of Company Common Stock in excess of the limitation provided in paragraph 6(c). 8 13. Effective Date: The Plan will be effective on August 6, 2001. 9 EX-10.6 8 ex10-6.txt ZIMMER HOLDINGS, INC. STOCK PLAN FOR NON-EMPLOYEE Exhibit 10.6 ZIMMER HOLDINGS, INC. STOCK PLAN FOR NON-EMPLOYEE DIRECTORS 1. Purpose. The purpose of the Zimmer Holdings, Inc. Stock Plan for Non-Employee Directors (the "Plan") is to secure for Zimmer Holdings, Inc. (the "Company") and its stockholders the benefits of the incentive inherent in increased Common Stock ownership by the members of the Board of Directors of the Company (the "Board") who are Eligible Directors as defined in the Plan. 2. Administration. The Plan shall be administered by the Board. The Board shall have all the powers vested in it by the terms of the Plan, such powers to include authority (within the limitations described herein) to prescribe the form of the agreement embodying awards of stock options ("Options"), restricted stock ("Restricted Stock") and restricted stock units ("Restricted Stock Units") made under the Plan (Options, Restricted Stock and Restricted Stock Units, in the aggregate, to be "Awards"). The Board shall, subject to the provisions of the Plan, grant Awards under the Plan and shall have the power to construe the Plan, to determine all questions arising thereunder and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. Any decision of the Board in the administration of the Plan, as described herein, shall be final and conclusive. No member of the Board shall be liable for anything done or omitted to be done by such member or by any other member of the Board in connection with the Plan, except for such member's own willful misconduct or as expressly provided by statute. 3. Amount of Stock. The stock which may be issued and sold under the Plan will be the common stock (par value $.01 per share) of the Company ("Common Stock"), of a total number not exceeding 2,000,000 shares, subject to adjustment as provided in Section 7 below. The stock to be issued may be either authorized and unissued shares or issued shares acquired by the Company or its subsidiaries. In the event that Awards granted under the Plan terminate or expire (without being exercised, in the case of Options) or are cancelled, forfeited, exchanged or surrendered, new Awards may be granted covering the shares not issued under such lapsed Awards. No more than 25% of the Awards will be in the form of Restricted Stock or Restricted Stock Units. 4. Eligible Directors. The members of the Board who are eligible to participate in the Plan ("Eligible Directors") are persons who serve as directors of the Company on or after the effective date of the Plan and: (a) who are not current or former employees of the Company and (b) who are not and, in the past, have not been eligible to receive options on Company stock by participation as an employee in another plan sponsored by the Company or under a contractual arrangement with the Company. -1- 5. Terms and Conditions of Options. Each Option granted under the Plan shall be evidenced by an agreement in such form as the Board shall prescribe from time to time in accordance with the Plan and shall comply with the following terms and conditions: (a) The Option exercise price shall be the fair market value of the Common Stock shares subject to such Option on the date the Option is granted, which shall be the average of the high and the low sales prices of a Common Stock share on the date of grant as reported on the New York Stock Exchange Composite Transactions Tape or, if the New York Stock Exchange is closed on that date, on the last preceding date on which the New York Stock Exchange was open for trading. (b) Each year, as of the date of the annual meeting of the stockholders of the Company ("Annual Meeting"), and at such other dates as the Board deems appropriate, the Board may award Options to purchase shares of Common Stock to Eligible Directors who have been elected or reelected or who are continuing as members of the Board. (c) For any calendar year, a participant may elect to convert all or any portion of the basic fee payable for services on the Board, except those amounts which are subject to the Mandatory Deferral (as defined in the Zimmer Holdings, Inc. Deferred Compensation Plan for Non-Employee Directors (the "Deferral Plan")), into Options to purchase shares of the Company's Common Stock ("Deferral Options"). The Deferral Options will be granted as of the date of the next Annual Meeting following the election to convert, or at such other time as the Board may determine. The Deferral Options will be issued at a conversion ratio equal to an option to purchase three shares of Common Stock for each Share Unit the participant would be entitled to receive if the participant chose to defer all or any portion of the basic fee payable into Share Units under the Deferral Plan. The Deferral Options will have an exercise price equal to the market value of a share of the Company's Common Stock on the date of grant. The Deferral Options will become fully exercisable on December 31st of the year in which the Deferral Options are granted if the participant continues as an Eligible Director of the Company, or at such earlier time as provided under this Plan. A participant's election to convert all or any portion of the basic fee payable into Deferral Options shall be made in accordance with the provisions of the Deferral Plan. (d) Each Eligible Director who is appointed to the Board before the effective date of the spin-off of the Company from Bristol-Myers Squibb Company (the "Distribution Date") shall receive, during the 90-day period commencing on the Distribution Date, Options to purchase a total of 50,000 shares. Each Eligible Director who is appointed to the Board on or after the Distribution Date and before the Company's first Annual Meeting shall receive, during the 90-day period commencing on the director's date of appointment, Options to purchase a total of 50,000 shares. These Options shall be granted by the Board during the applicable 90-day period in three installments of 16,667 shares, 16,667 shares and 16,666 shares. These Options will be collectively referred to herein as "Founder's Options". Except as specifically provided herein, Founder's Options will be subject to the same terms and conditions as all other Options. 2 (e) No Option granted under the Plan shall be transferable by the optionee other than by will or by the laws of descent and distribution, and such Option shall be exercisable, during the optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the Board may set forth in a Stock Option Agreement, at the time of grant or thereafter, that the Options may be transferred to members of the optionee's immediate family, to trusts solely for the benefit of such immediate family members and to partnerships in which such family members and/or trusts are the only partners. For this purpose, immediate family means the optionee's spouse, parents, children, stepchildren, grandchildren and legal dependants. Any transfer of Options made under this provision will not be effective until notice of such transfer is delivered to the Company. (f) No Option or any part of an Option shall be exercisable: (i) after the expiration of ten years from the date the Option was granted, (ii) unless written notice of the exercise is delivered to the Company specifying the number of shares to be purchased and payment in full is made for the shares of Common Stock being acquired thereunder at the time of exercise, such payment shall be made in such form or manner that the Board at its discretion may from time to time designate and that may include, without limitation, payment: (A) in United States dollars by certified check, or bank draft, or (B) by tendering to the Company Common Stock shares owned by person exercising the Option and having a fair market value equal to the cash exercise price applicable to such Option, such fair market value to be the average of the high and low sales prices of a Common Stock share on the date of exercise as reported on the New York Stock Exchange Composite Transactions Tape or, if the New York Stock Exchange is closed on that date, on the last preceding date on which the New York Stock Exchange was open for trading (shares of Common Stock used to exercise an option shall have been held by the optionee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the option) or (C) by a combination of United States dollars and Common Stock shares as aforesaid, and (iii) unless the person exercising the Option has been, at all times during the period beginning with the date of grant of the Option and ending on the date of such exercise, an Eligible Director of the Company, except that: (A) if such a person shall cease to be such an Eligible Director for reasons other than retirement or death, while holding an Option that has not expired and has not been fully exercised, such person, at any time within one year after the date he ceases to be such an Eligible Director (but in no event after the Option has expired under the provisions of Section 5(f)(i) above), may exercise the 3 Option with respect to any Common Stock shares as to which such person has not exercised the Option on the date the person ceased to be such an Eligible Director only to the extent that the Option is exercisable at the time of termination. (B) if such person shall cease to be such an Eligible Director by reason of retirement or death while holding an Option that has not expired and has not been fully exercised, such person, or in the case of death, the executors, administrators or distributees, as the case may be, may at any time following the date of retirement or death (but in no event after the expiration of the Option period set forth in Section 5(f)(i) above), exercise the Option with respect to any shares of Common Stock as to which such person has not exercised the Option on the date the person ceased to be such an Eligible Director, notwithstanding the provisions of Sections 5(c) and 5(g), (C) if any person who has ceased to be such an Eligible Director for reasons other than death, shall die holding an Option that has not been fully exercised, such person's executors, administrators, heirs or distributees, as the case may be, may, at any time within the greater of (1) one year after the date of death or (2) the remainder for the period in which such person could have exercised the Option had the person not died (but in no event under either (1) or (2) after the Option has expired under the provisions of Section 5(f)(i) above), exercise the Option with respect to any shares as to which the decedent could have exercised the Option at the time of death. In the event any Option is exercised by the executors, administrators, legatees or distributees of the estate of a deceased optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the Option are the duly appointed legal representatives of the deceased optionee's estate or the proper legatees or distributees thereof. (g) Except with respect to Founder's Options and Deferral Options, one-quarter (25%) of the total number of shares of Common Stock covered by the Option shall become exercisable on the first anniversary date of the grant of the Option; thereafter an additional one-quarter (25%) of the shares shall become exercisable annually on each subsequent anniversary date of the grant of the Option until the Option is fully exercisable. With respect to Founder's Options, the total number of shares of Common Stock covered by the Founder's Option shall become fully exercisable on the third anniversary date of the date of grant of the first installment of the optionee's Founder's Options. (h) Notwithstanding anything to the contrary herein, if an Option has been transferred in accordance with Section 5(e), the Option shall be exercisable solely by the transferee. The Option shall remain subject to the provisions of the Plan, including that it will be exercisable 4 only to the extent that the optionee or optionee's estate would have been entitled to exercise it if the optionee had not transferred the Option. In the event of the death of the transferee prior to the expiration of the right to exercise the Option, the Option shall be exercisable by the executors, administrators, legatees and distributees of the transferee's estate, as the case may be for a period of one year following the date of the transferee's death but in no event shall the Option be exercisable after the expiration of the Option period set forth in the Stock Option Agreement. The Option shall be subject to such other rules as the Board shall determine. 6. Terms and Conditions of Restricted Stock and Restricted Stock Units. Restricted Stock Awards under the Plan shall consist of grants of shares of Common Stock of the Company. The conditional grant of a Restricted Stock Unit to a participant will entitle the participant to receive a specified number of shares of Common Stock, if the objectives specified in the Award, if any, are achieved and the other terms and conditions thereof are satisfied. Each Award will be subject to the following terms and conditions: (a) The Board shall (i) select the members to whom Restricted Stock and Restricted Stock Unit Awards may from time to time be granted, (ii) determine the number of shares to be covered by each Award granted, (iii) determine the terms and conditions (not inconsistent with the Plan) of any Award granted hereunder, and (iv) prescribe the form of the agreement, legend or other instrument necessary or advisable in the administration of Awards under the Plan. (b) Any Restricted Stock and Restricted Stock Unit Award granted under the Plan shall be evidenced by an agreement executed by the Company and the recipient, in such form as the Board shall approve and with such terms and conditions as the Board shall prescribe. (c) The shares of Restricted Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions: (i) During the restriction period, the participant will not be permitted to sell, transfer, pledge or assign Restricted Stock awarded under this Plan. (ii) Except as the Board may otherwise determine, a participant holding Restricted Stock shall have all of the rights of a stockholder of the Company, including the right to vote the shares and receive dividends and other distributions, provided that distributions in the form of stock shall be subject to the same restrictions as the underlying Restricted Stock. 7. Adjustment in the Event of Change in Stock. In the event of changes in the outstanding Common Stock by reason of stock dividends, recapitalizations, mergers, consolidations, stock splits, combinations or exchanges of shares and the like, the aggregate number and class of shares available under the Plan, the number, class and the price of shares subject to outstanding Options and Awards of Restricted Stock and Restricted Stock Units shall be appropriately adjusted by the Board, whose determination shall be conclusive. 8. Miscellaneous Provisions. 5 (a) Except as expressly provided for in the Plan, no Eligible Director or other person shall have any claim or right to be granted an Award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Eligible Director any right to be retained in the service of the Company. (b) Except as provided for under Section 5(e), a participant's rights and interest under the Plan may not be assigned or transferred in whole or in part either directly or by operation of law or otherwise (except in the event of a participant's death, by will or the laws of descent and distribution), including, but not by way of limitations, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no such right or interest of any participant in the Plan shall be subject to any obligation or liability of such participant. (c) No Common Stock shares shall be issued hereunder unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable federal, state and other securities laws and regulations. (d) It shall be a condition to the obligation of the Company to issue Common Stock shares upon exercise of an Option or with respect to any other Award, that the participant (or any beneficiary or person entitled to receive the benefit of an Award) pay to the Company, upon its demand, such amount as may be requested by the Company for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue Common Stock shares. (e) The expenses of the Plan shall be borne by the Company. (f) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares in connection with an Award under the Plan and issuance of shares in connection with Awards shall be subordinate to the claims of the Company's general creditors. (g) By accepting any Award or other benefit under the Plan, each participant and each person claiming under or through such person shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, any action taken under the Plan by the Company or the Board. 9. Change in Control. In the event an Eligible Director's membership on the Board terminates pursuant to a qualifying termination (as defined below) during the three (3) year period following a change in control of the Company (as defined below) and prior to the exercise of Options granted under this Plan, all outstanding Options shall immediately become fully vested and exercisable notwithstanding any provisions of the Plan or of the applicable Option agreement to the contrary. In addition, in the event of a change in control of the Company, the Board may (i) determine that outstanding Options shall be assumed by, or replaced with comparable options by, the surviving corporation (or a parent or subsidiary of the surviving corporation) and that outstanding awards shall be converted to similar awards of the surviving corporation (or a parent or subsidiary of the surviving corporation), or (ii) take such other actions with respect to outstanding options and awards as the Board deems appropriate. 6 The following definitions shall apply for purposes of the Plan: (a) For the purpose of this Plan, a change in control shall be deemed to have occurred on the earlier of the following dates: (1) The date any person, as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 ("Person"), shall have become the direct or indirect beneficial owner of twenty percent (20%) or more of the then outstanding common shares of the Company; (2) The date the shareholders of the Company approve a merger or consolidation of the Company with any other corporation other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent at least 75% of the combined voting power of the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company in which no Person acquires more than 50% of the combined voting power of the Company's then outstanding securities; (3) The date the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; (4) The date there shall have been a change in a majority of the Board of Directors of the Company within a two (2) year period beginning after the effective date of the Plan, unless the nomination for election by the Company's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the two (2) year period. (b) For purposes of this Plan provision, a qualifying termination shall be deemed to have occurred if the Eligible Director ceases to be a member of the Board for any reason other than death, disability, voluntary resignation, willful misconduct or activity deemed detrimental to the interests of the Company. 10. Amendment or Discontinuance. The Plan may be amended at any time and from time to time by the Board as the Board shall deem advisable, including, but not limited to amendments necessary to qualify for any exemption or to comply with applicable law or regulations; provided, however, that except as provided in Section 7 above, the Board may not, without further approval by the stockholders of the Company, increase the maximum number of shares of Common Stock as to which Awards may be granted under the Plan, reduce the minimum Option exercise price described in Section 5(a) above, extend the period during which Awards may be granted or exercised under the Plan or change the class of persons eligible to receive Awards under the Plan. No amendment of the Plan shall materially and adversely affect any right of any participant with respect to any Award theretofore granted without such participant's written consent. 11. Termination. 7 This Plan shall terminate upon the earlier of the following dates or events to occur: (a) upon the adoption of a resolution of the Board terminating the Plan; or (b) ten years from the effective date of the Plan as provided in Section 12 below. 12. Effective Date of Plan. The Plan shall become effective as of August 6, 2001 or such later date as the Board may determine, provided that Bristol-Myers Squibb Company in its capacity as the Company's sole stockholder shall have adopted the Plan. 13. Governing Law. The validity, construction, interpretation and effect of the Plan and agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Indiana, without giving effect to the conflict of laws provisions thereof. 8 EX-10.7 9 ex10-7.txt ZIMMER HOLDINGS, INC. DEFERRED COMPENSATION PLAN Exhibit 10.7 ZIMMER HOLDINGS, INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS Section 1. Effective Date. The effective date of this Zimmer Holdings, Inc. Deferred Compensation Plan for Non-Employee Directors (the "Plan") is August 6, 2001 (the "Effective Date"). Section 2. Eligibility. Any member of the Board of Directors (the "Board") of Zimmer Holdings, Inc. (the "Company") who is not an officer or employee of the Company or a subsidiary thereof is eligible to participate in the Plan. Section 3. Deferred Compensation Account. There shall be established on the books of the Company for each participant a deferred compensation account in the participant's name. Section 4. Amount of Deferral. Fifty percent of the basic fee payable to a participant for membership on the Board (the "Mandatory Deferral") shall be deferred and credited to such participant's deferred compensation account as Share Units equal to the number of shares of the Company's common stock which could have been purchased with the amounts deferred, determined by dividing the dollar value of the amounts deferred by the fair market value of a share of the Company's common stock as reported in The Wall Street Journal on the effective date of such deferral until such time as the participant meets a guideline level of Share Unit or Company common stock ownership established by the Board. In addition, at each annual meeting of the stockholders of the Company ("Annual Meeting"), each participant will receive 500 deferred Share Units (the "Annual Deferred Share Units"). The value of each Annual Deferred Share Unit will be equal to a share of the Company's common stock as reported in the Wall Street Journal on the date of grant. For any calendar year, a participant may elect to defer receipt of compensation in excess of the participant's Mandatory Deferral (the "Elective Deferral") by filing the appropriate form pursuant to Section 9 and requesting deferral of: (1) all of the compensation in excess of the participant's Mandatory Deferral payable to the participant for serving on the Board and any committee thereof; or (2) any percentage specified by the participant of the compensation specified in clause (1) that is in excess of the participant's Mandatory Deferral. Section 5. Form and Computation of Deferred Amounts. Effective with respect to Elective Deferral amounts deferred after the Effective Date of the Plan and subject to Section 4, a participant, at the time he elects to participate in the Plan, shall elect to have the amounts deferred credited to such participant's deferred compensation account as Treasury Units or Dollar Units (each an "Investment Option") equal to the number of shares of the Company's common stock which could have been purchased with the amounts deferred determined by dividing the dollar value of the amounts deferred by the fair market value of a share of the Company's common share as reported in The Wall Street Journal on the effective date of such deferral. Such deferrals shall be allocated to Treasury Units, Dollar Units and/or Share Units in increments of 0%, 33 1/3%, 50%, 66 2/3% or 100%. The amount credited to a participant's deferred compensation account as Treasury Units shall be credited with interest at a rate to be set by the Board in January of each year after a review of the six-month United States Treasury bill discount rates for the preceding year. The amount credited to a participant's deferred compensation account as Dollar Units shall be credited with interest at a rate to be set by the Board in January of each year after a review of investment return on the invested cash of the Company. Upon payment by the Company of dividends on its common stock, the amount credited to a participant's deferred compensation account as Share Units shall be credited with an amount equal to the number of Share Units multiplied by a fraction the numerator of which is the amount of such dividend and the denominator of which is the fair market value of a Share of the Company's common stock as reported in The Wall Street Journal on the day such dividend is payable. The amount of Share Units in a participant's deferred compensation account shall be adjusted in the discretion of the Board to take into account a merger, consolidation, reorganization, recapitalization, stock split or other change in corporate structure of capitalization affecting the Company's common stock. At its discretion, the Board may discontinue, modify or offer additional Investment Options. Section 6. Period of Deferral. Subject to Section 4, a participant may elect to defer receipt of amounts attributable to Elective Deferrals (1) until a specified year in the future, (2) until the cessation of the participant's service as a Director or (3) until the end of the calendar year in which the cessation of the participant's service as a Director occurs. If alternative (1) is elected, payment will be made or will commence within sixty days after the beginning of the year specified; if alternative (2) is elected, payment will be made or will commence within sixty days after the cessation of the participant's service as a Director; and if alternative (3) is elected, payment will be made or will commence within sixty days after the end of the calendar year in which the cessation of the participant's service as a Director occurs. If a participant fails to make an election, payment will be made or will commence within sixty days after the cessation of the participant's service as a Director. Mandatory Deferrals and Annual Deferred Share Units will be paid within sixty days after the cessation of the participant's service as a Director. Section 7. Form of Payment. A participant may elect to receive Elective Deferrals under the Plan in either (1) a lump sum in cash or (2) a number of installments in cash, not more than ten, as specified by the participant. If installment payments are elected, the amount of each installment shall be equal to the balance in the participant's deferred compensation account divided by the number of installments remaining to be paid (including the installment in question). If a participant fails to make an election, payment will be made in a lump sum in cash. Mandatory Deferrals and Annual Deferred Share Units will be paid in shares of the Company's common stock. -2- Section 8. Death Prior to Receipt. A participant may elect that, in the event he or she dies prior to receipt of any or all of the amounts payable pursuant to this Plan, any amounts remaining in the participant's deferred compensation account attributable to Elective Deferrals shall be paid to the participant's estate in cash in either (1) a lump sum within sixty days following notification to the Company of the participant's death or (2) a number of annual installments, not more than ten, as specified by the participant. If alternative (2) is elected and payment to the participant pursuant to clause (2) of Section 7 has not commenced prior to death, the initial installment payment hereunder shall be made sixty days after notification to the Company of the participant's death, and the amount of each such installment shall be determined as provided in the last sentence of Section 7. If alternative (2) is elected and payment to the participant pursuant to clause (2) of Section 7 had commenced prior to death, the installment payments to the participant's estate shall be made at the same time and in the same amount as such payments would have been made to the participant had he or she survived. For purposes of this Section 8, any amounts deferred as Share Units shall be converted to Dollar Units by multiplying the number of Share Units credited to a participant's deferred compensation account on the date of his death by the fair market value of a share of the Company's common stock on such date as reported in The Wall Street Journal. Mandatory Deferrals and Annual Deferred Share Units will be paid within sixty days after the participant's death in shares of the Company's common stock. Section 9. Time of Election of Deferral. An election to defer compensation may be made by (i) a nominee for election as a Director prior to his/her election for the calendar year in which he/she is being elected (except that a person elected a Director by the Board may make an election to defer compensation within 30 days after his/her election as a Director, in which event such election to defer compensation shall be effective only with respect to compensation paid after the election to defer compensation is made) and (ii) a person then currently serving as a Director for the next succeeding calendar year no later than the preceding November 30th. This election will be deemed to be an election to defer compensation under this Plan for each succeeding calendar year, unless (1) the participant elects, in accordance with Section 11, to discontinue the deferral, (2) the Company discontinues the Plan, or (3) the election is stated, in writing, to apply only to the current calendar year. Section 10. Manner of Electing Deferral. A participant may elect to defer compensation by giving written notice to the Board on a form provided by the Company, which notice shall include the amount to be deferred, the form in which the amount deferred is to be credited, whether the deferral will be converted into options to purchase shares of the Company's common stock pursuant to Section 13, the period of deferral, the form of payment, including the number of installments, if any. -3- Section 11. Effect of Election. An election to defer compensation including the form of deferral shall be irrevocable by the participant once the calendar year to which it applies has commenced. An election may be discontinued or modified by the participant with respect to calendar years not yet begun by notifying the Board in writing no later than November 30th of the preceding year. Section 12. Further Election. Prior to the commencement of the year in which a participant has elected to commence receipt of payment of amounts deferred, the participant shall have the one-time right with regard to funds previously deferred to elect a further deferral of the payment of such funds by delivering to the Board a written statement in a form provided by the Company specifying the further period of deferral and the form of payment, including the number of installments, if any. In the event, however, there is a final determination by a court of appropriate jurisdiction that the further deferral was ineffective for the purpose of deferring tax obligations on the deferred amounts, then all amounts on which the further deferral was determined to be ineffective shall be paid to the participant within 15 days of such final determination being made, such payment to be made pursuant to the previously elected deferral. Section 13. Conversion into Options. For any calendar year, a participant may elect to convert all or any portion of the basic fee payable for services on the Board, except amounts that would otherwise be subject to Mandatory Deferral into options to purchase shares of the Company's common stock. The options will be issued pursuant to a stock option plan of the Company in which the participant is eligible to participate and will be granted as of the date of the next Annual Meeting following the election to convert, or at such other time as the Board may determine. The options will be issued at a conversion ratio of an option to purchase three shares of common stock for each Share Unit that the participant would be entitled to receive if the participant chose to defer all or any portion of the basic fee payable into Share Units. The options will have an exercise price equal to the market value of a share of the Company's common stock on the date of grant. The options will become fully exercisable on December 31st of the calendar year in which the options are granted if the participant continues as a non-employee director of the Company, or at such earlier time as provided in the stock option plan. A participant's election to convert all or any portion of the basic fee payable into stock options must be made in accordance with Sections 9 and 10. Section 14. Participant's Rights Unsecured. The right of any participant to receive future payments under the provisions of the Plan shall be an unsecured claim against the general assets of the Company. -4- Section 15. Statement of Account. A statement will be sent to each participant each year as to the value of his/her deferred compensation account as of the end of the preceding year. Section 16. Assignability. No right to receive payments hereunder shall be transferable or assignable by a participant, except by will or under the laws of descent and distribution. Section 17. Administration. This Plan will be administered by the Board, which shall have the authority to adopt rules and regulations to carry out the Plan and to interpret, construe and implement the provisions of the Plan. Section 18. Amendment. This Plan may at any time or from time to time be amended, modified or terminated by the Board. No amendment, modification or termination shall, without the consent of the participant, adversely affect such participant's accruals in his/her deferred compensation account of the date of amendment, modification or termination. Section 19. Governing Law. The validity, construction, interpretation and effect of the Plan and agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Indiana, without giving effect to the conflict of laws provisions thereof. -5- EX-99.1 10 ex99-1.txt PRESS RELEASE Exhibit 99.1 Contact: MEDIA INVESTORS Brad Bishop Sophia Twaddell Zimmer Fleishman-Hillard 219-372-4291 312-751-3738 bradley.bishop@zimmer.com twaddels@fleishman.com ZIMMER HOLDINGS, INC. ANNOUNCES INITIAL DIRECTORS OF COMPANY'S BOARD (WARSAW, IND) August 6, 2001 -- Zimmer Holdings, Inc. (NYSE:ZMH-WI) today announced the election of new members to its Board of Directors and the designation of Ray Elliott as Chairman of the Board of Directors and Chief Executive Officer. These actions complete the establishment of an initial five person board in connection with the distribution on August 6, 2001, of all of the outstanding shares of Zimmer Holdings to the holders of Bristol-Myers Squibb Company (NYSE:BMY) common stock. Joining Mr. Elliott on the board are: Larry C. Glasscock, President and Chief Executive Officer of Anthem Insurance Companies; Regina E. Herzlinger, Professor of Business Administration, Harvard Business School; John L. McGoldrick, Executive Vice President, Bristol-Myers Squibb Company; and Augustus A. White, III, M.D., Professor of Orthopaedic Surgery, Harvard Medical School. Mr. Elliott was elected a director on March 20, 2001. "In Larry, Regi, John and Gus we have four outstanding leaders who will contribute greatly based on the experiences and expertise they bring to the board," said Mr. Elliott, who has served as Zimmer Holdings' President and Chief Executive Officer since March 2001, and President of Zimmer, Inc. since 1997. "We are looking forward to working with them to grow Zimmer for the benefit of patients, surgeons, employees and shareholders." -more- Zimmer Announces Board--Page Two Larry C. Glasscock is President and Chief Executive Officer of Anthem Insurance Companies, Inc., the Blue Cross and Blue Shield licensee for Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Maine, Colorado and Nevada. Anthem provides health care benefits and services to more than seven million Americans. Glasscock joined Anthem in April, 1998, as Senior Executive Vice President and Chief Operating Officer. He was named President and Chief Operating Officer in April, 1999, and Chief Executive Officer in October 1999. He served for 20 years in various executive capacities, including Group Executive Vice President, Corporate Banking, with Ameritrust Corporation. From 1991 to 1993, he served as President, Chief Operating Office and Director, of First American Bank of Washington, D.C. He serves on the Anthem board and has served on several bank and corporation boards. Anthem has announced that it intends to convert from a mutual company to a publicly held company. Dr. Regina E. Herzlinger is the Nancy R. McPherson Professor of Business Administration Chair at the Harvard Business School. She was the first woman to be tenured and chaired at Harvard Business School and the first to serve on a number of corporate boards. She has written many articles and books in the fields of management control and health care. Her research has been profiled in industry journals and business publications such as BUSINESS WEEK, THE ECONOMIST, FORBES, and FORTUNE and has been recognized for excellence by the American College of Healthcare Executives three times. MANAGED HEALTHCARE has named her as one of health care's top ten thinkers. Dr. Herzlinger received her Bachelor's Degree from Massachusetts Institute of Technology and her Doctorate from the Harvard Business School. She has been a member of the board of several public firms. John L. McGoldrick is Executive Vice President of Bristol-Myers Squibb and is the President of its Medical Devices Group. He also serves as Vice Chair of Bristol-Myers Squibb's Operating Committee, and is General Counsel. -more- Zimmer Announces Board--Page Three He has for many years served as the senior director of the Board of the New Jersey Transit Corporation, and is a member of the board of AdvaMed, the medical device industry's trade association. He has served on several governmental reform commissions in New Jersey. He is an invited participant of The Aspen Institute on the World Economy and the World Economic Forum (Davos). Before joining Bristol-Myers Squibb, Mr. McGoldrick was a senior partner and executive committee member of the law firm of McCarter & English. He is a graduate of Harvard College and the Harvard Law School. Augustus A. White, III, MD, is Master of the Oliver Wendell Holmes Society, Harvard Medical School; Professor of Orthopaedic Surgery at the Harvard Medical School and the Harvard-MIT Division of Health Sciences and Technology; and Orthopaedic Surgeon-in-Chief, Emeritus, at the Beth Israel Deaconess Medical Center in Boston. He previously served as the Chief of Spine Surgery at Beth Israel and is Director of the Daniel E. Hogan Spine Fellowship Program. He is a graduate of the Stanford University Medical School, holds a PhD from the Karolinska Institute in Stockholm, and graduated from the Advanced Management Program at the Harvard Business School. Dr. White is a recipient of the Bronze Star, which he earned while stationed as a Captain in the U.S. Army Medical Corps in Vietnam. He is an internationally known and widely published authority on biomechanics of the spine, fracture healing and surgical and non-surgical care of the spine. He is nationally recognized for his work in medical education, diversity, and issues of health care disparities. Zimmer, based in Warsaw, Indiana, is a global leader in the design, development, manufacturing and marketing of orthopaedic reconstructive implants and fracture management products. Orthopaedic reconstructive implants restore joint function lost due to disease or trauma in joints such as knees, hips, shoulders and elbows. -more- Zimmer Announces Board--Page Four Fracture management products are devices used primarily to reattach or stabilize damaged bone and tissue to support the body's natural healing process. Zimmer also manufactures and markets other products related to orthopaedic and general surgery. Zimmer was founded in 1927 and has more than 3,200 employees worldwide. For the year 2000, Zimmer recorded worldwide revenues of more than $1 billion. For further information regarding Zimmer and its spin-off from Bristol-Myers Squibb Company, please see Zimmer's Form 10, which is filed with the Securities and Exchange Commission. THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS BASED ON CURRENT EXPECTATIONS, ESTIMATES, FORECASTS AND PROJECTIONS ABOUT THE ORTHOPAEDICS INDUSTRY, MANAGEMENT'S BELIEFS AND ASSUMPTIONS MADE BY MANAGEMENT. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT COULD CAUSE ACTUAL OUTCOMES AND RESULTS TO DIFFER MATERIALLY. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, PRICE AND PRODUCT COMPETITION, RAPID TECHNOLOGICAL DEVELOPMENT, DEMOGRAPHIC CHANGES, DEPENDENCE ON NEW PRODUCT DEVELOPMENT, THE MIX OF OUR PRODUCTS AND SERVICES, CUSTOMER DEMAND FOR OUR PRODUCTS AND SERVICES, OUR ABILITY TO SUCCESSFULLY INTEGRATE ACQUIRED COMPANIES, CONTROL OF COSTS AND EXPENSES, OUR ABILITY TO FORM AND IMPLEMENT ALLIANCES, INTERNATIONAL GROWTH, U.S. AND FOREIGN GOVERNMENT REGULATION, REIMBURSEMENT LEVELS FROM THIRD-PARTY PAYORS, GENERAL INDUSTRY AND MARKET CONDITIONS AND GROWTH RATES AND GENERAL DOMESTIC AND INTERNATIONAL ECONOMIC CONDITIONS INCLUDING INTEREST RATE AND CURRENCY EXCHANGE RATE FLUCTUATIONS. FOR A FURTHER LIST AND DESCRIPTION OF SUCH RISKS AND UNCERTAINTIES, SEE THE REPORTS FILED BY ZIMMER WITH THE SECURITIES AND EXCHANGE COMMISSION. ZIMMER DISCLAIMS ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. -----END PRIVACY-ENHANCED MESSAGE-----