Attached files
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EX-32 - EX-32 - ELI LILLY & Co | c54269exv32.htm |
EX-11 - EX-11 - ELI LILLY & Co | c54269exv11.htm |
EX-12 - EX-12 - ELI LILLY & Co | c54269exv12.htm |
EX-31.2 - EX-31.2 - ELI LILLY & Co | c54269exv31w2.htm |
EX-31.1 - EX-31.1 - ELI LILLY & Co | c54269exv31w1.htm |
EXCEL - IDEA: XBRL DOCUMENT - ELI LILLY & Co | Financial_Report.xls |
10-Q - FORM 10-Q - ELI LILLY & Co | c54269e10vq.htm |
EXHIBIT 10. | THE LILLY DIRECTORS DEFERRAL PLAN AS AMENDED THROUGH OCTOBER 19, 2009 |
ELI LILLY AND COMPANY
THE LILLY DIRECTORS DEFERRAL PLAN
(as Amended and Restated on October 19, 2009)
(as Amended and Restated on October 19, 2009)
Preamble
The Lilly Directors Deferral Plan has been established by the Company for the purpose of
providing an opportunity for Directors of the Company who are not salaried employees of the Company
to voluntarily defer receipt of some or all of their meeting fees and retainer and to share in the
long-term growth of the Company by acquiring, on a deferred basis, an ownership interest in the
Company. Subject to adjustment as provided in Section 5(f), the aggregate number of shares of Eli
Lilly and Company common stock that may be issued or transferred under this Plan after April 28,
2003, is 750,000. The shares may be authorized and unissued shares or treasury shares.
The Plan constitutes a plan of unfunded deferred compensation and is intended to comply with
the requirements of Section 409A. Notwithstanding any other provision of this Plan, this Plan
shall be interpreted, operated and administered in a manner consistent with these intentions.
For the rules that apply to the distribution of amounts that were earned and vested (within
the meaning of Section 409A) under the Plan prior to 2005 (and earnings thereon) and are exempt
from the requirements of Section 409A, see Appendix A.
Section 1. Definition of Terms
The following terms used in the Plan shall have the meanings set forth below:
(a) Account means one or more deferred compensation accounts maintained for each
Participant under the Plan. A Participants Account shall consist of a Deferred Compensation
Account and the Deferred Stock Account as described in Section 5 hereof.
(b) Annual Allocation Date means the last Business Day in November of each calendar
year, or such other annual date, not earlier than the third Monday in February, established by the
Plan Administrator as the date as of which Shares are allocated to each Deferred Stock Account in
accordance with Section 5.
(c) Beneficiary means the person or persons who are designated by the Participant or
are otherwise entitled to receive benefits under the Plan in the event of the Participants death,
as provided in Section 6(d) hereof.
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(d) Board means the Board of Directors of the Company.
(e) Business Day means a day on which the Companys corporate headquarters are open
for regular business.
(f) Code means the Internal Revenue Code of 1986, as amended.
(g) Company means Eli Lilly and Company, an Indiana corporation.
(h) Deferral Amount means the amount of a Participants Monthly Compensation that is
elected by a Participant for deferral under the Plan.
(i) Deferred Stock Participant means a Director who is not, and for the preceding 12
months has not been, a salaried employee of the Company.
(j) Director means a member of the Board of Directors of the Company.
(k) Dividend Payment Date means the date as of which the Company pays a cash
dividend on Shares.
(l) Dividend Record Date means the date established by the Board of Directors as the
record date for determining shareholders entitled to the dividend with respect to any Dividend
Payment Date.
(m) Election Form means the written or electronic form or forms approved by the Plan
Administrator and completed by the Participant specifying the Participants election to defer
Monthly Compensation pursuant to Section 4 and setting forth the Participants Beneficiary
designation and the terms of distribution of the Participants Deferred Compensation Account and/or
Deferred Stock Account pursuant to Section 6.
(n) Monthly Compensation means the monthly retainer and the aggregate of all meeting
fees, committee fees and committee chairperson fees to which a Director is entitled for services
rendered to the Company as a Director during the month, as established from time to time by
resolution of the Board of Directors. For avoidance of doubt, Monthly Compensation does not
include stock options granted to Directors or the Shares allocated pursuant to Section 5 of this
Plan.
(o) Monthly Deferral Participant means a Director who is not, and for the preceding
12 months has not been, a salaried employee of the Company and who elects to defer all or part of
his or her Monthly Compensation pursuant to the Plan in accordance with Section 4 hereof.
(p) Participant means any current or former Director with an outstanding Account
balance the Plan.
(q) Plan means The Lilly Directors Deferral Plan, as amended and restated herein.
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(r) Plan Administrator means the Directors and Corporate Governance Committee of the
Board of Directors, or any successor committee of the Board of Directors that is charged with
matters relating to the compensation of non-employee directors. Except with respect to Section 5(f)
of this Plan, the Plan Administrator may at its discretion delegate any of its responsibilities to
one or more individuals provided that such delegation is in accordance with applicable laws.
(s) Plan Year means the calendar year from January 1 through December 31 with
respect to which compensation eligible for deferral under the Plan is earned.
(t) Section 409A means section 409A of the Code and the Treasury regulations and
other official guidance promulgated thereunder.
(u) Separation from Service means a separation from service within the meaning of
Section 409A.
(v) Share means a share of common stock of the Company.
(w) Unforeseeable Emergency means a severe financial hardship of a Participant
resulting from an illness or accident of such Participant or Beneficiary, such Participants spouse
or a dependent (as defined in section 152(a) of the Code) of such Participant, loss of such
Participants property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of such Participant, each as
determined in the manner consistent with Section 409A, and any other event or circumstance within
the meaning of the term unforeseeable emergency under Section 409A.
(x) Valuation Date means for any month, the third Monday of the month, or if Shares
are not traded on the New York Stock Exchange on such third Monday, the next day on which Shares
are traded on the New York Stock Exchange.
Section 2. Plan Administrator
(a) Authority. The Plan Administrator shall have full authority to administer the
Plan in accordance with its terms and to exercise all responsibilities and authorities as provided
herein, including the discretionary authorities to determine the terms and conditions of deferrals
of compensation under the Plan, to determine the terms and conditions of crediting to and
distributing from Accounts under the terms of the Plan, and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. The Plan Administrator has the
discretionary authority to interpret and construe all provisions of the Plan, to remedy possible
ambiguities, inconsistencies, or omissions under the Plan, and to resolve all questions of fact
arising under the Plan. The decisions of the Plan Administrator shall be final, binding and
conclusive on all parties. No member of the Board, the Plan Administrator nor any officers of the
Company shall have any liability for any action or determination taken under the Plan.
(b) Delegation; Expenses. The appropriate officer(s) of the Company as designated by
the Plan Administrator are authorized to act on behalf of the Plan Administrator
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for the day-to-day administration of the Plan, subject to the authority of the Plan
Administrator. Expenses of the administration of the Plan may be borne by the Company or may be
deducted from Participants Accounts at the sole discretion of the Plan Administrator.
Section 3. Participation
The Plan Administrator may require a Participant to comply with such terms and conditions as the
Plan Administrator may specify in order for the Participant to participate in the Plan.
Section 4. Elections to Participate
(a) Deferral Elections. A Monthly Deferral Participant in the Plan may file an
Election Form with the Plan Administrator on or before the date specified in accordance with
Section 4(c) hereof. The Election Form shall permit the Monthly Deferral Participant to specify
the Deferral Amount subject to a minimum Deferral Amount of five thousand dollars ($5,000) for the
deferral of Monthly Compensation, or such amounts as may be specified by the Plan Administrator in
its sole discretion, and whether such Deferral Amount shall be credited in cash to his or her
Deferred Compensation Account or in Shares to his or her Deferred Stock Account, pursuant to
Section 5(a) hereof. The Election Form shall also set forth the terms of distribution of the
Participants Account in accordance with Section 6 hereof and the Participants Beneficiary
designation. All elections to defer compensation under the Plan are irrevocable, and no changes to
any Election Form delivered to the Plan Administrator shall be permitted, except as specifically
provided under the terms of the Plan.
(b) Maximum Deferrals. A Monthly Deferral Participant may elect a Deferral Amount of
up to 100% of the Participants Monthly Compensation for a Plan Year. One hundred percent (100%)
of any annual allocation of Shares earned pursuant to Section 5(c) will be automatically credited
to a Deferred Stock Participants Deferred Stock Account.
(c) Timing and Effect of Elections. Unless otherwise specified by the Plan
Administrator in accordance with the requirements of Section 409A, deferral elections on an
Election Form shall be made:
(i) In the case of Monthly Compensation or an annual Share allocation not
qualifying as performance-based compensation within the meaning of Section 409A,
prior to the beginning of the Plan Year with respect to which the compensation is
earned; and
(ii) In the case of Monthly Compensation or an annual Share allocation which
the Plan Administrator has determined qualifies as performance-based compensation
within the meaning of Section 409A, no later than June 30th of the applicable Plan
Year with respect to which the compensation is earned.
Deferral elections shall apply to Monthly Compensation and annual Share allocations with respect to
the Plan Year for which the elections are made. Participants will be required to make deferral
elections for future Plan Years at such times to be specified by the Plan Administrator in
accordance with the foregoing. If a Participant does not file an Election Form with the Plan
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Administrator on or before the deadline established by the Plan Administrator for deferral
elections for a Plan Year, a Participant will be deemed not to have elected to defer Monthly
Compensation for such Plan Year, as applicable. Notwithstanding the foregoing, in the first year
in which an individual who is newly elected or appointed to serve as a Director becomes eligible to
participate in the Plan, such individual may, not later than thirty (30) days after the date he or
she becomes eligible to participate in the Plan, elect in accordance with the preceding provisions
of this Section 4, to defer the receipt of Monthly Compensation and set forth the terms of
distribution of the individuals Account with respect to services to be performed after the filing
of the election with the Company.
Section 5. Accounts and Interest Credits
(a) Participant Accounts. Accounts shall be maintained for each Participant under the
Plan:
(i) Deferred Compensation Account The Company shall maintain a
Deferred Compensation Account in the name of each Monthly Deferral Participant who
elects to have a Deferral Amount credited in cash pursuant to Section 4 hereof for a
given Plan Year. The Deferred Compensation Account shall be denominated in U.S.
dollars, rounded to the nearest whole cent. For each month, Deferral Amounts
allocated to a Deferred Compensation Account shall be credited to the Deferred
Compensation Account as of the last Business Day of the month.
(ii) Deferred Stock Account The Company shall maintain a
Deferred Stock Account for each Deferred Stock Participant and for each Monthly
Deferral Participant who elects to have a Deferral Amount credited in Shares. The
Deferred Stock Account shall be denominated in Shares and maintained in fractions
rounded to three (3) decimal places. Deferral Amounts allocated to a Deferred Stock
Account shall be credited to the Deferred Stock Account as of the last Business Day
of the month. Shares and, if necessary, fractional Shares, shall be credited based
upon the closing price of Shares on the New York Stock Exchange on the Valuation
Date for that month. Shares allocated to each Share Account shall be hypothetical
and not issued or transferred by the Company until payment is made pursuant to
Section 6 hereof.
A Participants Account shall consist of book entries only and shall not constitute a separate cash
or Share fund or other asset held in trust or as security for the Companys obligation to pay the
amount of the Account to the Participant. The balance of a Participants Account shall be adjusted
pursuant to this Section 5 and reduced by the amount of applicable tax withholding,
distributions and expenses. A Participants Account may include sub-accounts as the Company
considers necessary or advisable for purposes of maintaining a proper accounting of amounts
credited or debited for a Participant under the Plan. A Participant shall receive or have on-line
access to a statement of such Participants Account no less frequently than once a year following
the end of each Plan Year.
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(b) Crediting of Deferral Amount. A Participant who has filed an Election Form with
the Plan Administrator for the deferral of Monthly Compensation with respect to a Plan Year shall
have the Deferral Amount deducted from the applicable compensation and credited to the
Participants appropriate Account under the Plan. The Deferral Amount so credited shall be reduced
by applicable tax withholding, distributions and expenses.
(c) Annual Share Allocation. As of the Annual Allocation Date of each Plan Year,
there shall be allocated to the Deferred Stock Account of each person who (i) is a Deferred Stock
Participant on that date or (ii) was a Deferred Stock Participant at any time subsequent to the
last Annual Allocation Date, as part of his or her compensation for service on the Board of
Directors, up to 7,500 Shares, as may be specified from time to time by resolution of the Board of
Directors.
(d) Interest Credits. The Deferred Compensation Accounts of Participants shall be
credited with interest computed each Plan Year or portion thereof at a rate equal to 120% of the
long-term applicable federal rate, with monthly compounding (as prescribed under section 1274(d) of
the Code), as in effect for the month of December for the immediately preceding Plan Year. Such
interest shall accrue on all Deferral Amounts and prior earnings thereon of Deferred Compensation
Accounts and be credited daily to such accounts.
(e) Cash Dividends. Cash dividends paid on Shares shall be deemed to have been paid
on the Shares allocated to each Participants Deferred Stock Account as if the allocated Shares
were actual Shares issued and outstanding on the Dividend Record Date. An amount equal to the
amount of such dividends shall be credited in Shares to each Deferred Stock Account as of the last
Business Day of each month in which a Dividend Payment Date occurs, based upon the closing price
for Shares on the New York Stock Exchange on the Valuation Date for that month.
(f) Capital Adjustments. The number of Shares referred to in the Preamble and Section
5 hereof and the number of Shares allocated to each Deferred Stock Account shall be adjusted by the
Plan Administrator, in the event of any subdivision or combination of Shares or any stock dividend,
stock split, reorganization, recapitalization, or consolidation or merger with the Company as the
surviving corporation, or if additional shares or new or different shares or other securities of
the Company or any other issuer are distributed with respect to Shares through a spin-off or other
extraordinary distribution.
(g) Vesting of Accounts. A Participant is fully vested in his or her entire Account
balance.
Section 6. Distribution of Accounts
(a) Distribution upon Separation from Service. A Participant shall specify on an
Election Form the manner in which the amounts deferred in the Deferred Compensation Account and the
Deferred Stock Account, as applicable, for a Plan Year (and earnings thereon) shall be distributed
from the Participants Account upon the Participants Separation from Service. All elections are
irrevocable, and no changes shall be permitted to any Election Form delivered to the Plan
Administrator, except as specifically provided under the terms of the Plan.
6
A Participant may elect, to the extent permitted by the Plan Administrator and set forth on
the Election Form, that such portion of the Account be distributed upon a Participants Separation
from Service either in:
(i) Lump Sum payment in January of the second Plan Year following the
Plan Year in which the Participants Separation from Service occurs; or
(ii) Annual Installment payments over a period of two (2) to ten (10)
years commencing in January of the second Plan Year following the Plan Year in which
the Participants Separation from Service occurs, with subsequent installment
payments to be made in each January within the applicable period.
If a Participant fails to make a timely payment election on the Election Form for a Plan Year, the
amounts deferred in the Deferred Compensation Account and the Deferred Stock Account, as
applicable, for such Plan Year (and earnings thereon) shall be distributed in a lump sum in
accordance with Section 6(a)(i) hereof.
(b) Form of Distributions. All distributions of a Participants Deferred Compensation
Account under the Plan shall be made in cash. Except as provided in Section 6(f), all
distributions of a Participants Deferred Stock Account shall be paid in Shares, at which time the
Shares shall be issued or transferred from the books of the Company to the Participant. All Shares
to be issued or transferred hereunder may be newly issued or treasury shares. Fractional Shares
shall not be issued or transferred to a Participant, provided that in the case of a final payment
under the Plan with respect to a Participant, any fraction remaining in the Participants Deferred
Stock Account shall be rounded up to the next whole Share and that number of whole Shares shall be
issued or transferred. The value of the Deferred Stock Account is calculated with reference to the
closing price of Shares on the last trading day of the prior Plan Year.
(c) Distribution of Account. The Company shall distribute amounts from the
Participants Deferred Compensation Account and the Deferred Stock Account in the manner and on the
date(s) applicable under this Section 6. If the payment option described in Section 6(a)(i) hereof
is applicable, the amount of the lump sum shall be calculated using the valuation of the applicable
portion of the Participants Account as of the December 31 preceding the date of the payment. If
the payment option described in Section 6(a)(ii) hereof is applicable, the amount of each
installment shall be calculated using the valuation of the applicable portion of the Participants
Account as of the December 31 preceding the date of the installment payment divided by the number
of installment payments that have not yet been made.
(d) Distribution upon Death. Notwithstanding any election made by a Participant or
any other provision of this Section 6 to the contrary, if a Participant dies before full
distribution of his or her Account balance, any remaining balance shall be distributed to the
Participants Beneficiary in a lump sum within 90 days following the date of the Participants
death. The amount of such lump sum distribution shall be calculated using the valuation of the
Participants Account as of the date preceding the date of distribution. Any payment required to
be made to a Participant under the Plan that cannot be made due to the Participants death shall be
made to the Participants Beneficiary, subject to applicable law. Each Participant shall have the
right to designate one or more Beneficiaries, and to change a Beneficiary designation, from
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time to time by filing a written notice with the Plan Administrator. In the event that a
Beneficiary does not survive the Participant and no successor Beneficiary is selected, or in the
event no valid Beneficiary designation has been made, the Participants Beneficiary shall be the
Participants estate.
(e) Unforeseeable Emergency. Upon the written request of a Participant, the Plan
Administrator may permit the Participant to withdraw some or all of the Participants Account for
the purpose of enabling the Participant to meet the immediate needs created by an Unforeseeable
Emergency. The circumstances that will constitute an Unforeseeable Emergency will depend upon the
facts of each case, but in any case, the amounts distributed with respect to an Unforeseeable
Emergency shall not exceed the amounts necessary to satisfy such Unforeseeable Emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking
into account the extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the Participants assets, to the extent
that the liquidation of such assets would not itself cause severe financial hardship, or by
cessation of deferrals under the Plan.
(f) Payment of Cash in Lieu of Shares. If at any time the Plan Administrator
determines that payment of Shares to a Participant (or a Participants Beneficiary) or the
ownership or subsequent disposition of such Shares by such Participant or Beneficiary may violate
or conflict with any applicable law or regulation, the Plan Administrator shall pay all or a
portion of the Participants Deferred Stock Account in cash.
(g) Withholding Taxes. All distributions of a Participants Account under the Plan
shall be subject to income tax and other withholdings that the Plan Administrator deems necessary
or appropriate, and the Plan Administrator may reduce the amount credited to any Participants
Account to the extent it deems necessary to satisfy tax withholding requirements. Participants or
Beneficiaries receiving distributions under the Plan shall bear all taxes on amounts paid under the
Plan to the extent that taxes are not withheld thereon, irrespective of whether withholding is
required.
Section 7. Administrative Matters
(a) Claims Procedure. Any person making a claim for benefits hereunder shall submit
the claim in writing to the Plan Administrator. If the Plan Administrator denies the claim in
whole or in part, it shall issue to the claimant a written notice explaining the reason for the
denial and identifying any additional information or documentation that might enable the claimant
to perfect the claim. The claimant may, within sixty (60) days of receiving a written notice of
denial, submit a written request for reconsideration to the Plan Administrator, together with a
written explanation of the basis of the request. The Plan Administrator shall consider any such
request and shall provide the claimant with a written decision together with a written explanation
thereof. No legal action may be commenced or maintained against the Plan more than one year after
the Plan Administrator wholly or partially denies, or is deemed to have wholly or patially denied,
a claim for Plan benefits. All interpretations, determinations, and decisions of the Plan
Administrator in respect of any claim shall be final, binding and conclusive.
8
(b) Incapacity. If the Plan Administrator determines that any person entitled to
benefits under the Plan is unable to care for his or her affairs because of illness, accident or
other physical and mental incapacity, any payment due (unless a duly qualified guardian or other
legal representative has been appointed) may be paid consistent with the terms described herein for
the benefit of such person to such persons spouse, parent, brother, sister, adult child or other
party deemed by the Plan Administrator in its sole discretion to ensure proper care for such
person.
(c) Inability to Locate. If the Plan Administrator is unable to locate a person to
whom a payment is due under the Plan for a period of twelve (12) months, commencing with the first
day of the month as of which the payment becomes payable, the total amount payable to such person
shall be forfeited.
(d) Liability. Any decision made or action taken by the Board of Directors, the Plan
Administrator, or any employee of the Company or any of its subsidiaries, arising out of or in
connection with the construction, administration, interpretation, or effect of the Plan, shall be
absolutely discretionary, and shall be conclusive and binding on all parties. Neither the Plan
Administrator nor a member of the Board of Directors and no employee of the Company or any of its
subsidiaries shall be liable for any act or action hereunder, whether of omission or commission, by
any other member or employee or by any agent to whom duties in connection with the administration
of the Plan have been delegated or, except in circumstances involving bad faith, for anything done
or omitted to be done.
Section 8. Unfunded Status
All Accounts and all rights of Participants to benefits under the Plan are unfunded
obligations of the Company. Plan benefits shall be paid from the general assets of the Company,
and Participants shall have the status of an unsecured general creditor of the Company with respect
to all interests under the Plan. The Plan is a plan of unfunded deferred compensation.
Notwithstanding the foregoing, the Company may, but shall not be required to, establish a trust or
other funding vehicle under the Plan that does not affect the Plans status as a Plan of unfunded
deferred compensation.
Section 9. Nontransferability; Successors
No interest of any person in, or right to receive a distribution under, the Plan shall be
subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be
taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other
obligations or claims against, such person.
The obligations of the Company under the Plan will be binding upon the Companys successors,
transferees and assigns.
Section 10. Limitation of Rights
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Nothing in the Plan shall confer upon any Participant the right to continue to serve as a
Director of the Company or to serve in the capacity in which the Participant is employed by the
Company. Nothing in the Plan shall be interpreted as creating a right of a Participant to receive
any compensation or benefit from the Company. A Participant shall have no rights as a shareholder
of the Company with respect to any Shares until the Shares are issued or transferred to the
Participant on the books of the Company.
Section 11. Enforceability
To the extent not preempted by federal law, the Plan shall be construed, administered and
enforced in accordance with the laws of the State of Indiana, regardless of the law that might
otherwise govern under applicable principles or provisions of choice or conflict of law doctrines.
To the extent that any provision of the Plan or portion thereof shall be invalid or unenforceable,
it shall be considered deleted herefrom and the remainder of such provision and the Plan shall be
unaffected and shall continue in full force and effect.
Section 12. Effective Date; Amendment and Termination
The Plan, as amended and restated, shall become effective for the 2009 Plan Year (except as to
the share limit specified in Section 5(c), which shall become effective October 20, 2008) and for
future Plan Years until terminated by the Board. The Board may amend or terminate the Plan at any
time and in any manner; provided that no amendment or termination shall reduce the amount credited
to a Participants Account at the time of any such amendment or termination, and no amendment shall
be effective that shall cause the Plan to fail to meet the requirements of Section 409A. Upon
termination of the Plan in accordance with the requirements of Section 409A, (i) all future
deferrals of compensation will cease, (ii) all Plan Accounts will continue to receive interest
credits (or be invested) as permitted under the Plan, and (iii) all Plan Accounts will be
distributed in accordance with the Participants elections under the provisions of the Plan, unless
the Company determines in its sole discretion that all such amounts shall be distributed upon
termination in accordance with the requirements of Section 409A.
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APPENDIX A
GRANDFATHERED AMOUNTS
Distribution of amounts that were earned and vested (within the meaning of Section 409A) under
the Plan prior to 2005 (and earnings thereon) and are exempt from the requirements of Section 409A
shall be made in accordance with the Plan terms as in effect on January 1, 2004, as attached below.
THE LILLY DIRECTORS DEFERRAL PLAN
(As amended and restated through January 1, 2004)
(As amended and restated through January 1, 2004)
Section 1. Establishment of the Plan and Shares Available.
1.1. Establishment of Plan. This Plan was established effective January 1, 1996, to
permit Directors of the Company who are not salaried employees of the Company to voluntarily defer
receipt of some or all of their meeting fees and retainer and to share in the long-term growth of
the Company by acquiring, on a deferred basis, an ownership interest in the Company. This amended
and restated Plan is effective January 1, 2004.
1.2. Shares Available. Subject to adjustment as provided in Section 7.5, the
aggregate number of shares of Eli Lilly and Company common stock that may be issued or transferred
under this Plan after April 28, 2003, is 750,000. The shares may be authorized and unissued shares
or treasury shares.
Section 2. Definitions.
The following terms shall have the definitions set forth in this Section 2:
2.1. Annual Allocation Date. The last Business Day in November of each calendar
year, or such other annual date, not earlier than the third Monday in February, established by the
Committee as the date as of which Shares are allocated to each Share Account in accordance with
Section 6.
2.2. Beneficiary. The beneficiary or beneficiaries (including any contingent
beneficiary or beneficiaries) designated pursuant to subsection 8.3 hereof.
2.3 Business Day. A day on which the Companys corporate headquarters are open for
regular business.
2.4. Board of Directors. The Board of Directors of the Company.
2.5. Committee. The Directors and Corporate Governance Committee of the Board of
Directors, or any successor committee of the Board of Directors that is charged with matters
relating to the compensation of non-employee directors.
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2.6. Company. Eli Lilly and Company.
2.7. Company Credit. For any calendar year or part thereof, an amount computed, and
credited annually to a Participants Deferred Compensation Account at an annual rate that is equal
to one hundred twenty percent (120%) of the applicable federal long-term rate, with compounding (as
prescribed under Section 1274(d) of the Internal Revenue Code) that was in effect for the month of
December immediately preceding the calendar year.
2.8. Deferred Amount. The amount of a Monthly Deferral Participants Monthly
Compensation that the Participant elects to defer in accordance with Section 4 hereof.
2.9. Deferred Stock Participant. A Director who is not, and for the preceding 12
months has not been, a salaried employee of the Company and who becomes a Participant in the Plan
in accordance with Section 3 hereof.
2.10. Director. A member of the Board of Directors.
2.11. Dividend Payment Date. The date as of which the Company pays a cash dividend
on Shares.
2.12. Dividend Record Date. With respect to any Dividend Payment Date, the date
established by the Board of Directors as the record date for determining shareholders entitled to
the dividend.
2.13. Individual Accounts or Accounts. The separate accounts (the Deferred
Compensation Account and the Share Account) described in Section 7 hereof. When used in the
singular, the term shall refer to one of these two accounts, as the context requires.
2.14. Monthly Compensation. For any month, the monthly retainer and the aggregate of
all meeting fees, committee fees and committee chairperson fees to which a Director is entitled for
services rendered to the Company as a Director during the month, as established from time to time
by resolution of the Board of Directors. For avoidance of doubt, Monthly Compensation does not
include stock options granted to Directors or the Shares allocated pursuant to Section 6 of this
Plan.
2.15. Monthly Deferral Participant. A Director who is not a salaried employee of the
Company and who has elected to defer all or part of his or her Compensation pursuant to the Plan in
accordance with Section 4 hereof.
2.16. Participant. A Director who is a Deferred Stock Participant, a Monthly
Deferral Participant, or both.
2.17. Plan. The Lilly Directors Deferral Plan, as set forth herein and as it may be
amended from time to time.
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2.18. Share. A share of common stock of the Company.
2.19. Valuation Date. For any month, the third Monday of the month, or if Shares are
not traded on the New York Stock Exchange on such third Monday, the next day on which Shares are
traded on the New York Stock Exchange.
Section 3. Deferred Stock Participants.
Each Director who participated in The Lilly Non-Employee Directors Deferred Stock Plan immediately
before the effective date of this Plan shall continue as a Deferred Stock Participant on such
effective date, and all elections in effect under The Lilly Non-Employee Directors Deferred Stock
Plan shall remain in effect under this Plan, unless and until amended in accordance with this Plan.
Thereafter, each person who becomes a Director, and who is not, and for the preceding 12 months
has not been, a salaried employee of the Company, shall become a Deferred Stock Participant.
Section 4. Monthly Deferral Participants.
Each Director who participated in The Lilly Directors Deferred Compensation Plan immediately
before the effective date of the Plan shall continue as a Monthly Deferral Participant on such
effective date, and all elections in effect under The Lilly Directors Deferred Compensation Plan
shall remain in effect under this Plan, unless and until amended in accordance with this Plan.
Prior to the beginning of each calendar year, any Director who is not a salaried employee of the
Company may defer the receipt of Monthly Compensation to be earned by the Director during such year
by filing with the Company a written election that:
(i) defers payment of a designated amount (of one Thousand Dollars ($1,000) or more) or
percentage of his or her Monthly Compensation for services attributable to the following calendar
year or portion thereof (the Deferred Amount);
(ii) specifies the payment option selected by the Participant pursuant to subsection 8.2
hereof for such Deferred Amount; and
(iii) specifies the option selected by the Participant pursuant to Section 5 hereof for such
Deferred Amount.
The amount deferred may not exceed the Directors aggregate Monthly Compensation for the calendar
year. Notwithstanding the foregoing, any individual who is newly elected or appointed to serve as
a Director may, not later than thirty (30) days after his election or appointment becomes
effective, elect in accordance with the preceding provisions of this Section 4, to defer the
receipt of Monthly Compensation earned during the portion of the current calendar year that follows
the filing of the election with the Company. Except as provided in subsections 8.2 and 8.4 hereof,
any elections made pursuant to this Section 4 with respect to a calendar year shall be irrevocable
when made. If a Participant fails to make an election under section 5 with respect to his or her
Deferred Amount for a future calendar year, the Participants previous election shall
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remain in effect, provided that the Participant may amend his or her election with regard to a
future calendar year at any time.
Section 5. Form of Deferred Compensation Credits.
5.1. Deferred Compensation Account. Except with respect to Deferred Amounts which a
Monthly Deferral Participant elects to have credited in Shares in accordance with subsection 5.2
hereof, the Deferred Amount shall be denominated in U.S. dollars and credited to the Participants
Deferred Compensation Account pursuant to subsection 7.1 hereof.
5.2. Shares. Prior to the beginning of each calendar year, a Monthly Deferral
Participant may elect to have all or a percentage of the Deferred Amount for the following calendar
year credited in Shares and allocated to the Participants Share Account pursuant to subsection 7.2
hereof.
Section 6. Annual Allocations to Share Accounts.
6.1. Annual Allocation of Shares. As of the Annual Allocation Date of each calendar
year, there shall be allocated to the Share Account (as described in Section 7.2 below) of each
Deferred Stock Participant who is a Director on that date, as part of his or her compensation for
service on the Board of Directors, seven hundred (700) Shares or such other number of Shares, not
to exceed 3,000 shares, as may be specified from time to time by resolution of the Board of
Directors.
Section 7. Individual Accounts.
The Company shall maintain Individual Accounts for Participants as follows:
7.1. Deferred Compensation Account. The Company shall maintain a Deferred
Compensation Account in the name of each Monthly Deferral Participant who elects to defer the
receipt of Monthly Compensation pursuant to Section 4 hereof for a calendar year and does not elect
to have the Deferred Amount for such calendar year credited in Shares pursuant to subsection 5.2
hereof. The Deferred Compensation Account shall be denominated in U.S. dollars, rounded to the
nearest whole cent. For each month, Deferred Amounts allocated to a Deferred Compensation Account
pursuant to subsection 5.1 hereof shall be credited to the Deferred Compensation Account as of the
last Business Day of the month.
7.2. Share Account. The Company shall maintain a Share Account for each Deferred
Stock Participant and for each Monthly Deferral Participant who elects to have a Deferred Amount
credited in Shares pursuant to subsection 5.2 hereof. The Share Account shall be denominated in
Shares and maintained in fractions rounded to three (3) decimal places. Shares allocated to each
Share Account shall be hypothetical and not issued or transferred by the Company until payment is
made pursuant to Section 8 hereof.
For each month, Deferred Amounts allocated to a Share Account pursuant to subsection 5.2
hereof shall be credited to the Share Account as of the last Business Day of the month.
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Shares and, if necessary, fractional Shares, shall be credited based upon the average of the
high and low price of Shares on the New York Stock Exchange on the Valuation Date for that month.
7.3. Accrual of Company Credit. The Treasurer of the Company shall determine the
annual rate of Company Credit on or before December 31 of each calendar year. This rate shall be
effective for the following calendar year. The Company Credit shall accrue monthly, at one-twelfth
of the applicable annual rate, on all amounts credited to a Participants Deferred Compensation
Account, including the Company Credits for prior years. The Company Credit shall not accrue on any
amount distributed to a Participant (or to the Participants Beneficiary) during the month for
which the accrual is determined, except where an amount is distributed to a Beneficiary in the
month of the Participants death. The Company Credit for each year shall be credited to each
Deferred Compensation Account as of December 31 of that year and shall be compounded monthly.
7.4. Cash Dividends. Cash dividends paid on Shares shall be deemed to have been paid
on the Shares allocated to each Participants Share Account as if the allocated Shares were actual
Shares issued and outstanding on the Dividend Record Date. An amount equal to the amount of such
dividends shall be credited in Shares to each Share Account as of the last Business Day of each
month in which a Dividend Payment Date occurs, based upon the average of the high and low prices
for Shares on the New York Stock Exchange on the Valuation Date for that month.
7.5. Capital Adjustments. The number of Shares referred to in Sections 1.2 and 6
hereof and the number of Shares allocated to each Share Account shall be adjusted by the Committee,
as it deems appropriate in its discretion, in the event of any subdivision or combination of Shares
or any stock dividend, stock split, reorganization, recapitalization, or consolidation or merger
with Eli Lilly and Company as the surviving corporation, or if additional shares or new or
different shares or other securities of the Company or any other issuer are distributed with
respect to Shares through a spin-off or other extraordinary distribution.
7.6. Account Statements. Within a reasonable time following the end of each calendar
year, the Company shall render an annual statement to each Participant. The annual statement shall
report the number of Shares credited to the Participants Share Account as of December 31 of that
year and the dollar amount, if any, credited to the Participants Deferred Compensation Account as
of December 31 of that year.
Section 8. Payment Provisions.
8.1. Method of Payment. All payments to a Participant (or to a Participants
Beneficiary) with respect to the Participants Deferred Compensation Account shall be paid in cash.
Except as provided in Section 8.5, all payments to a Participant (or to a Participants
Beneficiary) with respect to the Participants Share Account shall be paid in Shares, at which time
the Shares shall be issued or transferred on the books of the Company. All Shares to be issued or
transferred hereunder may be newly issued or treasury shares. Fractional Shares shall not be
issued or transferred to a Participant, provided that in the case of a final payment under the Plan
with respect to a Participant, any fraction remaining in the Participants Share Account shall be
rounded up to the next whole Share and that number of whole Shares shall be issued or
15
transferred. If Shares are not traded on the New York Stock Exchange on any day on which a
payment of Shares is to be made under the Plan, then that payment shall be made on the next day on
which Shares are traded on the New York Stock Exchange.
8.2. Payment Options. Prior to each calendar year, or within 30 days after becoming
a Participant, the Participant shall select a payment election with respect to the payment of one
or both of the Participants Individual Accounts from the following payment elections:
(i) a lump sum in January of the calendar year immediately following the calendar year in
which the Participant ceases to be a Director;
(ii) a lump sum in January of the second calendar year following the calendar year in which
the Participant ceases to be a Director;
(iii) annual (or, in the case of the Deferred Compensation Account only, monthly)
installments over a period of two to ten years commencing in January of the calendar year following
the calendar year during which the Participant ceases to be a Director; or
(iv) annual (or in the case of the Deferred Compensation Account only, monthly) installments
over a period of two to ten years commencing in January of the second calendar year following the
calendar year in which the Participant ceases to be a director.
If a payment option described in paragraphs (i) or (ii), above, has been elected, the amount of the
lump sum with respect to the Participants Deferred Compensation Account shall be equal to the
amount credited to the Participants Deferred Compensation Account as of the December 31
immediately preceding the date of the payment, and the amount of the lump sum with respect to the
Participants Share Account shall be equal to the number of Shares credited to the Share Account as
of the December 31 immediately preceding the date of payment. If a payment option described in
paragraphs (iii) or (iv), above, has been elected, the amount of each installment with respect to
the Participants Deferred Compensation Account shall be equal to the amount credited to the
Participants Deferred Compensation Account as of the last day of the month immediately preceding
the date of a monthly installment payment, or the December 31 immediately preceding the date of an
annual installment payment, divided by the number of installment payments that have not yet been
made. The amount of each installment with respect to the Participants Share Account shall be
equal to the number of Shares credited to the Participants Share Account as of the December 31
immediately preceding the date of an annual installment payment, divided by the number of
installment payments that have not yet been made.
A Participant may elect that his or her final payment election may control over all prior
payment elections. If the Participant fails to elect a payment option, the amount credited to the
Participants Individual Account shall be distributed in a lump sum in accordance with the payment
option described in paragraph (i) above. At the time of any scheduled payment, if the amount
credited to a Participants Deferred Compensation Account or the value of Shares credited to a
Participants Share Account is less than $25,000, the Committee, in its sole discretion, may pay
out the Account in a lump sum.
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8.3. Payment Upon Death. Within a reasonable period of time following the death of a
Participant, the amount credited to the Participants Deferred Compensation Account and the Shares
credited to the Participants Share Account shall be paid by the Company in a lump sum to the
Participants Beneficiary. For purposes of this subsection 8.3, the amount credited to the
Participants Deferred Compensation Account and the number of Shares credited to the Participants
Share Account shall be determined as of the later of the date of death or the last Business Day of
the month prior to the month in which the payment occurs.
A Participant may designate the Beneficiary, in writing, in a form acceptable to the Committee
before the Participants death. A Participant may revoke a prior designation of Beneficiary and
may also designate a new Beneficiary without the consent of the previously designated Beneficiary,
provided that such revocation and new designation (if any) are in writing, in a form acceptable to
the Committee, and filed with the Committee before the Participants death. If the Participant
does not designate a Beneficiary, or if no designated Beneficiary survives the Participant, any
amount not distributed to the Participant during the Participants life shall be paid to the
Participants estate in a lump sum in accordance with this subsection 8.3.
8.4. Payment on Unforeseeable Emergency. The Committee may, in its sole discretion,
direct payment to a Participant of all or of any portion of the Participants Individual Account
balance, notwithstanding an election under subsection 8.2 above, at any time that it determines
that such Participant has an unforeseeable emergency, and then only to the extent reasonably
necessary to meet the emergency. For purposes of this section, unforeseeable emergency means
severe financial hardship to the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent of the Participant, loss of the Participants
property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant. The circumstances that will constitute
an unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may
not be made to the extent that such hardship is, or may be, relieved
(i) through reimbursement or compensation by insurance or otherwise;
(ii) by liquidation of the Participants assets, to the extent the liquidation of such assets
would not itself cause severe financial hardship; or
(iii) by cessation of deferrals under the Plan.
Examples of what are not considered to be unforeseeable emergencies include the need to send a
Participants child to college or the desire to purchase a home.
8.5. Payment of Cash in Lieu of Shares. If at any time the Committee shall determine
that payment of Shares to a Participant (or a Participants Beneficiary) or the ownership or
subsequent disposition of such Shares by such Participant or Beneficiary may violate or conflict
with any applicable law or regulation, the Committee may, in its discretion, pay all or a portion
of the Participants Share Account in cash. In this case, the amount of cash shall be determined
with reference to the average of the high and low trading price for Shares on the December 31
17
next preceding the date of payment, or if Shares are not traded on that day, the next
preceding trading day.
Section 9. Ownership of Shares.
A Participant shall have no rights as a shareholder of the Company with respect to any Shares until
the Shares are issued or transferred to the Participant on the books of the Company.
Section 10. Prohibition Against Transfer.
The right of a Participant to receive payments of Shares and cash under the Plan may not be
transferred except by will or applicable laws of descent and distribution. A Participant may not
assign, sell, pledge, or otherwise transfer Shares or cash to which he is entitled hereunder prior
to transfer or payment thereof to the Participant, and any such attempted assignment, sale, pledge
or transfer shall be void.
Section 11. General Provisions.
11.1. Directors Rights Unsecured. The Plan is unfunded. The right of any
Participant to receive payments of cash or Shares under the provisions of the Plan shall be an
unsecured claim against the general assets of the Company.
11.2. Administration. Except as otherwise provided in the Plan, the Plan shall be
administered by the Committee, which shall have the final authority to adopt rules and regulations
for carrying out the Plan, and to interpret, construe, and implement the provisions of the Plan.
11.3. Legal Opinions. The Committee may consult with legal counsel, who may be
counsel for the Company or other counsel, with respect to its obligations and duties under the
Plan, or with respect to any action, proceeding, or any questions of law, and shall not be liable
with respect to any action taken, or omitted, by it in good faith pursuant to the advice of such
counsel.
11.4. Liability. Any decision made or action taken by the Board of Directors, the
Committee, or any employee of the Company or any of its subsidiaries, arising out of or in
connection with the construction, administration, interpretation, or effect of the Plan, shall be
absolutely discretionary, and shall be conclusive and binding on all parties. Neither the
Committee nor a member of the Board of Directors and no employee of the Company or any of its
subsidiaries shall be liable for any act or action hereunder, whether of omission or commission, by
any other member or employee or by any agent to whom duties in connection with the administration
of the Plan have been delegated or, except in circumstances involving bad faith, for anything done
or omitted to be done.
11.5. Withholding. The Company shall have the right to deduct from all payments
hereunder any taxes required by law to be withheld from such payments. The recipients of such
18
payments shall bear all taxes on amounts paid under the Plan to the extent that no taxes are
withheld thereon, irrespective of whether withholding is required.
11.6. Legal Holidays. If any day on which action under the Plan must be taken falls
on a Saturday, Sunday, or legal holiday, such action may be taken on the next succeeding day that
is not a Saturday, Sunday, or legal holiday; provided, that this subsection 11.8 shall not permit
any action that must be taken in one calendar year to be taken in any subsequent calendar year.
11.7. Participant Who Becomes Employee. If a Participant becomes an employee of the
Company but remains a Director, he or she will no longer be entitled to new deferrals under the
Plan as a Deferred Stock Participant or Monthly Deferral Participant. However, the individuals
Account balances will continue to be administered under the Plan (including eligibility for the
Company Credit and Cash Dividends under Sections 7.3 and 7.4) until they are paid out in accordance
with Section 8.
Section 12. Term, Amendment, Suspension, and Termination.
The Plan shall remain in effect until terminated by the Board of Directors. The Board of Directors
shall have the right at any time, and from time to time, to amend, suspend, or terminate the Plan,
subject to the following:
(i) no amendment or termination shall reduce the number of Shares or the cash balance in an
Individual Account;
(ii) the number of Shares allocated annually pursuant to Section 6 hereof may not be changed
more frequently than every calendar year; and
(iii) to the extent required by New York Stock Exchange listing rules or applicable law,
material amendments shall be submitted to the Companys shareholders for approval.
Section 13. Applicable Law.
The Plan shall be governed by, and construed in accordance with, the laws of the State of Indiana,
except to the extent that such laws are preempted by Federal law.
Section 14. Effective Date.
The effective date of this Plan is January 1, 1996. Nothing herein shall invalidate or adversely
affect any previous election, designation, deferral, or accrual in accordance with the terms of The
Lilly Directors Deferred Compensation Plan or The Lilly Non-Employee Directors Deferred Stock
Plan that were in effect prior to the effective date of this Plan.
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