exv10w5






Exhibit 10.5




ELI LILLY AND COMPANY




2007 CHANGE IN CONTROL SEVERANCE PAY PLAN

FOR SELECT EMPLOYEES

As Amended Effective October 20, 2010




     1. PURPOSE



This Eli Lilly and Company 2007 Change in Control Severance Pay Plan For Select Employees has been
established by the Company to provide for the payment of severance pay and benefits to Eligible
Employees whose employment with a Participating Employer terminates due to certain conditions
created by a Change in Control of the Company. The purpose of the Plan is to assure a continuity
in operations of the Company during a period of Change in Control by allowing employees to focus on
their responsibilities to the Company knowing that they have certain financial security in the
event of their termination of employment. The accomplishment of this purpose is in the best
interests of the Company and its shareholders. The Plan replaces the Change in Control Severance
Pay Plan for Select Employees that was originally adopted by the Board on March 1, 1995, and became
operative immediately upon the expiration of such plan with respect to a Change in Control
occurring on or after March 1, 2007. The Plan as amended by action of the Board of Directors of the
Company on October 20, 2008, shall become effective on October 20, 2010.




     2. DEFINITIONS



The terms defined in this Section 2 shall have the meanings given below:




     (a) “Base Salary” means an Eligible Employee’s gross annualized rate of base salary at the
time of any determination hereunder, before any deductions, exclusions or any deferrals or
contributions under any Participating Employer plan or program, but excluding bonuses, incentive
awards or compensation, employee benefits or any other non-salary form of compensation.



     (b) “Board” means the Board of Directors of the Company.



     (c) “Change in Control” has the meaning given in Section 3.



     (d) “Code” means the Internal Revenue Code of 1986, as amended.



     (e) “Committee” means the Compensation Committee of the Board, or such other committee
appointed by the Board to perform the functions of the Committee under the Plan, provided that at
all times the Committee shall be constituted solely of directors who are Continuing Directors (as
defined in Section 3) to the extent any such directors remain on the Board and are willing to serve
in such capacity.



     (f) “Company” means Eli Lilly and Company, an Indiana corporation.



     (g) “Covered Termination” has the meaning given in Section 6.



 









 





     (h) “Eligible Employee” has the meaning given in Section 5.



     (i) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.



     (j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     (k) “Participating Employer” has the meaning given in Section 4.



     (l) “Plan” means this Eli Lilly and Company 2007 Change in Control Severance Pay Plan for
Select Employees.



     (m) “Retirement Age” means the date the Eligible Employee reaches age 65, unless the Company’s
senior most officer responsible for the Human Resources department has approved a later date as the
Retirement Age for the Eligible Employee.



     (n) “Section 409A” shall mean Section 409A of the Code and the applicable rulings and
regulations promulgated thereunder.



     (o) “Separation from Service” shall mean a “separation from service” from a Participating
Employer within the meaning of Section 409A.



     (p) “Severance Period” means the two (2) year period immediately following a Covered
Termination.



     3. CHANGE IN CONTROL



For purposes of the Plan, a “Change in Control” of the Company shall be deemed to have occurred
upon:




          (a) the acquisition by any “person,” as that term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any employee
benefit plan or employee stock plan of the Company or a subsidiary of the Company or any trustee or
fiduciary with respect to any such plan when acting in that capacity, or (iv) Lilly Endowment,
Inc.) of “beneficial ownership,” as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 20% or more of the shares of the Company’s capital stock the holders of which have
general voting power under ordinary circumstances to elect at least a majority of the Board (or
which would have such voting power but for the application of the Indiana Control Shares Statute)
(“Voting Stock”); provided, however, that an acquisition of Voting Stock directly
from the Company shall not constitute a Change in Control under this Section 3(a);




          (b) the first day on which less than one-half of the total membership of the Board shall be
Continuing Directors (as that term is defined in Article 13(f) of the Company’s Articles of
Incorporation);




2









 








          (c) consummation of a merger, share exchange, or consolidation of the Company (a
“Transaction”), other than a Transaction which would result in the Voting Stock of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than 60% of the Voting
Stock of the Company or such surviving entity immediately after such Transaction;




          (d) a complete liquidation of the Company or a sale or disposition of all or substantially all
the assets of the Company, other than a sale or disposition of assets to any subsidiary of the
Company;




          (e) either (i) the Company shall have entered into a definitive agreement with any Person,
which, if consummated, would result in a Change in Control as specified in paragraphs (a) through
(d) of this Section 3 or (ii) any Person initiates a tender offer or exchange offer to acquire
shares of the Voting Stock which, if consummated, would result in a Change in Control as specified
in paragraphs (a) through (d) of this Section 3; provided, however, that if the
Board shall make a final determination that such agreement, tender offer or exchange offer will not
be consummated, the occurrence of any such event shall cease to constitute a Change in Control and
the termination of employment of an Eligible Employee after such determination shall not be treated
as a Covered Termination on the basis of such event; or




          (f) the Board adopts a resolution to the effect that any Person has taken actions which, if
consummated, would result in its having acquired effective control of the business and affairs of
the Company; provided, however, that if the Board shall make a final determination
that such actions will not be consummated, the occurrence of any such event shall cease to
constitute a Change in Control and the termination of employment of an Eligible Employee after such
determination shall not be treated as a Covered Termination on the basis of such event.



For purposes of this Section 3 only, the term “subsidiary” means a corporation or limited liability
company of which the Company owns directly or indirectly fifty (50) percent or more of the voting
power.




     4. PARTICIPATING EMPLOYERS



A. Designation of Participating Employers. The Company and each subsidiary corporation of which
the Company owns directly or indirectly one-hundred (100) percent of the voting power at the time
of the Change in Control shall be Participating Employers under the Plan. In addition, the
Committee may designate other affiliates of the Company as Participating Employers under the Plan,
from time to time and under such terms and conditions, as shall be specified by an action in
writing by the Committee. Such terms and conditions may impose limitations on the extent to which
any such affiliate participates in the Plan (including but not limited to the duration of any such
participation), but shall not provide rights or benefits to Eligible Employees that are broader
than those set forth in the Plan. Any entity that is a Participating Employer at the time of a
Change in Control shall continue to be a Participating Employer following a Change in Control, and
any person, firm or business that is a successor to the business or interests of a Participating
Employer following a Change in Control shall be treated as a Participating Employer under the Plan.




3









 







B. Limitations in Foreign Jurisdictions. Notwithstanding the foregoing or anything elsewhere in
the Plan to the contrary, the Committee shall have the discretionary authority, as specified below,
to exclude from participation or limit the participation of any Participating Employer with respect
to individuals employed outside of the United States. The Committee shall exercise this authority
only by an action in writing taken prior to a Change in Control on the basis of a good faith
determination that, as a result of the specific effect of applicable local law or practice with
respect to the Plan or severance benefits generally, it would be in the best interests of the
Company to so exclude or limit such participation. In addition, unless otherwise specified by the
Committee, the severance payments and benefits under this Plan shall offset the benefits otherwise
payable to any such Eligible Employee under severance arrangements that exist by reason of
applicable local law, practice or policy.




     5. ELIGIBLE EMPLOYEES



All employees of the Participating Employers, including executive officers (as defined in Rule 3b-7
under the Exchange Act), who are classified by the Company as R8 or M5-M8 global job level or other
groups or individuals as designated by the Committee (or any successor classifications) immediately
prior to the Change in Control shall be eligible to participate in the Plan and shall be considered
an Eligible Employee for all purposes hereunder. Any person who is an Eligible Employee in
accordance with the foregoing shall continue to be an Eligible Employee notwithstanding any change
in his/her position or classification following a Change in Control, subject to Section 6 hereof
relating to certain terminations of employment that are not treated as a Covered Termination. The
Committee shall notify each Eligible Employee of his/her participation in the Plan prior to the
Change in Control; provided that any failure to so notify shall not effect the Eligible Employee’s
participation in the Plan.




     6. COVERED TERMINATIONS



A. General. An Eligible Employee shall be treated as having suffered a “Covered Termination”
hereunder if he/she incurs a Separation from Service within a period of two (2) years immediately
following the date of a Change in Control, (i) by a Participating Employer other than for “Cause”,
or (ii) by the Eligible Employee for “Good Reason.”. For purposes of the foregoing, the two (2)
year time period specified above within which a Separation from Service may be treated as a Covered
Termination shall commence on the date the Change in Control becomes effective and, with respect to
a Change in Control under paragraphs (e) and (f) of Section 3, shall recommence (for the full
applicable period) on the date of consummation of the underlying actions. For purposes of the
Plan, a Separation from Service shall be effective as of the last date of the Eligible Employee’s
employment with the Participating Employer.



An Eligible Employee shall not be treated as having suffered a Covered Termination in the event of
(1) death, (2) total disability (within the meaning of the Company’s Extended Disability Plan), (3)
transfer of employment among Participating Employers (unless such transfer results in a Separation
from Service for “Good Reason”), (4) involuntary termination by the Participating Employer for
“Cause”, (5) voluntary termination by the Eligible Employee other than for Good Reason, (6) a
termination of employment for any reason by either the Participating Employer or the Eligible
Employee that does not occur during the two (2) year time period specified above or (7) a



4









 






termination of employment for any reason by either the Participating Employer or the Eligible
Employee after the Eligible Employee reaches Retirement Age.



B. Termination For Cause. For purposes hereof, an Eligible Employee’s Separation from Service by
the Participating Employer shall be deemed to be for “Cause” if as a result of:




          (i) the willful refusal of the Eligible Employee to perform, without legal cause, his/her
material duties to the Participating Employer, resulting in demonstrable economic harm to any
Participating Employer, which the Eligible Employee has failed to cure after thirty (30) calendar
days’ advance written notice from the Company;




          (ii) any act of fraud, dishonesty or gross misconduct of the Eligible Employee resulting in
significant economic harm to any Participating Employer or other significant harm to the business
reputation of any Participating Employer; or




          (iii) the conviction of the Eligible Employee by a court of competent jurisdiction of any
crime (or the entering of a plea of guilty or nolo contendere to a charge of any
crime) constituting a felony.



A termination for Cause shall be communicated to the Eligible Employee in writing by the
Participating Employer and shall specify the provisions of the Plan and factual matters relied upon
in making the Cause determination.



C. Termination for Good Reason. For purposes hereof, an Eligible Employee’s Separation from
Service by the Eligible Employee shall be deemed to be for “Good Reason” if as a result of:




          (i) a material diminution in the nature or status of the Eligible Employee’s position, title,
reporting relationship, duties, responsibilities or authority, or the assignment to him/her of
additional responsibilities that materially increase his/her workload;




          (ii) any reduction in the Eligible Employee’s then-current Base Salary;




          (iii) a material reduction in the Eligible Employee’s opportunities to earn incentive bonuses
below those in effect for the year most recently completed before the date of the Change in
Control, taking into account all material bonus factors such as targeted bonus amounts and
corporate performance measures;




          (iv) a material reduction in the Eligible Employee’s employee benefits and coverages
(including, without limitation, pension, profit sharing and all welfare, retiree welfare and fringe
benefits) that are provided to the Eligible Employee from the benefit levels in effect immediately
prior to the Change in Control;




          (v) the failure to grant to the Eligible Employee stock options, stock units, performance
shares or similar incentive rights during each twelve (12) month period following the Change in
Control on the basis of a number of shares or units and all other material terms (including vesting
requirements) at least as favorable to the Eligible Employee as those rights granted to



5









 






him/her on an annualized average basis for the three (3) year period immediately prior to the
Change in Control;




          (vi) relocation of the Eligible Employee by more than fifty (50) miles from his/her regularly
assigned workplace existing immediately prior to the date of the Change in Control; or




          (vii) any failure by a successor entity to the Company (including any entity that succeeds to
the business or assets of the Company) in connection with a Change in Control to assume by
operation of law or otherwise the obligations of the Company under the Plan, or any attempted
amendment, termination or repudiation of the Plan by such successor entity, other than pursuant to
the provisions of Section 15.



For purposes of the foregoing, but without limitation of the Eligible Employee’s right to otherwise
terminate employment for Good Reason, if the Eligible Employee is in charge of a principal business
unit, division or function of the Company immediately prior to a Change in Control, Good Reason
shall not be deemed to exist based solely on the fact that the Eligible Employee is not in charge
of such principal business unit, division or function of the combined entity following the Change
in Control, unless as a result thereof, the Eligible Employee suffers a material diminution in the
nature or status of the Eligible Employee’s position, title, reporting relationship, duties,
responsibilities or authority or suffers some other Good Reason event.



A termination for Good Reason shall be communicated to the Participating Employer in writing by the
Eligible Employee within thirty (30) days following his/her knowledge of the circumstances
constituting Good Reason, and shall specify the provisions of the Plan and the factual matters
relied upon in making the Good Reason determination. The Participating Employer shall have the
opportunity to cure the circumstances constituting Good Reason within 15 days following receipt of
such written notice from the Eligible Employee, and if such circumstances are fully cured, such
circumstances shall cease to constitute the basis for a Good Reason termination hereunder.




     7. SEVERANCE PAYMENT



A. Amount of Severance Payment. The amount of the severance payment to be paid by the Company to
an Eligible Employee who is treated as having suffered a Covered Termination hereunder shall equal
two (2) times the sum of:




          (i) the Eligible Employee’s Base Salary at the time of Covered Termination (calculated without
regard to any reduction in Base Salary that results in a Good Reason termination) or, if greater,
at the time of the Change in Control, plus




          (ii) the Eligible Employee’s target annual cash incentive bonus for the year of Covered
Termination or if there is no target-based annual cash incentive bonus, then the annual cash bonus
paid or payable, for the most recently completed calendar year prior to the Change in Control.



B. Payment of Severance. The severance payment to be made hereunder shall be paid to the Eligible
Employee in a single lump-sum cash payment, less any required tax withholding, on the date that is
thirty (30) calendar days following the date of the Eligible Employee’s Covered



6









 






Termination, conditioned upon the Eligible Employee having complied, prior to that date with the
requirements of Section 10 hereof regarding a release of claims. Notwithstanding the foregoing, if
the Eligible Employee is treated as a “specified employee” (within the meaning of Section 409A) as
of the date of any payment under this Plan upon such Separation from Service, then, to the extent
required by Section 409A, the commencement of any payment shall be delayed until the first business
day following the date that is six (6) months following the date of such Separation from Service.




     8. OTHER SEVERANCE BENEFITS



In addition to the severance payment provided under Section 7, an Eligible Employee shall be
entitled to the following benefits and other rights in the event of his/her Covered Termination:



A. Welfare Benefits. The Eligible Employee shall continue to participate, on the same basis as
active employees of the Participating Employer, for eighteen (18) months immediately following a
Covered Termination (“Continuation Period”) in the Participating Employer’s medical and dental
plans (but not to include flexible spending plans), group life insurance plans, company-provided
death benefit, supplemental life insurance and long-term disability plans for which he/she was
eligible at the time of Covered Termination (or, if it would provide benefits or other terms more
favorable to the Eligible Employee, at the time of the Change in Control), as though his/her
Separation from Service had not occurred (the “Welfare Continuation Coverages”). All Welfare
Continuation Coverages shall apply to the Eligible Employee and any of his/her dependents who would
have been eligible for coverage if the Eligible Employee remained employed for the Continuation
Period. The Company may provide the Eligible Employee with the Welfare Continuation Coverages
under arrangements other than its generally applicable welfare benefit plans, provided that the
benefit coverages so provided are at least as favorable to the Eligible Employee as coverage under
the otherwise applicable Welfare Continuation Coverages, on a coverage by coverage basis, and
taking into account all tax consequences to the Eligible Employee. At the expiration of the
Continuation Period, the Eligible Employee shall be treated as a then terminating employee with
respect to the right to elect continued medical and dental coverages in accordance with Section
4980B of the Code (or any successor provision thereto). Notwithstanding the foregoing, if the
Eligible Employee becomes eligible to participate in welfare benefit coverages from a subsequent
employer of the same type as provided under one or more of the Welfare Continuation Coverages, then
the applicable Welfare Continuation Coverages provided by this Section 8.A, on a coverage by
coverage basis, shall be terminated. If and to the extent that any benefit under this Section 8.A
or under Section 8.B. is not eligible for exemption from Section 409A pursuant to Treasury
Regulation § 1.409A-1(b)(9)(v) (or any successor regulation) or otherwise, the Company shall,
pursuant to Section 18 hereof, take such actions as it deems necessary to comply with the
requirements of Treasury Regulation § 1.409A-3(i)(1)(iv) (or any successor regulation), including,
without limitation, by providing that (i) the amount of the benefit under this Section 8.A or under
Section 8.B. in any calendar year shall not affect the amount of the benefit thereunder for any
other calendar year, (ii) any reimbursement of expenses under this Section 8.A or under Section
8.B. be made not later than the last day of the calendar year following the year in which the
Eligible Employee incurred such expenses, and (iii) in no event shall any right to reimbursement or
receipt of in-kind benefits under this Section 8.A. or under Section 8.B. be subject to liquidation
or exchange for another benefit.




7









 







B. Retiree Welfare Benefits. For purposes of determining eligibility, but not for the purpose of
determining the amount of any benefit, for the retiree medical and dental plans applicable to
Eligible Employee (the “Retiree Welfare Plans”), the Eligible Employee shall receive additional
credit for two years for purposes of both age and service requirements under the Retiree Welfare
Plans, but not beyond the Retirement Age of the Eligible Employee. If an Eligible Employee shall
be eligible for participation in the Retiree Welfare Plans at the time of Covered Termination
(including by reason of this Section 8.B.), then (i) for the Continuation Period, he/she shall be
entitled to continue to participate in the Welfare Continuation Coverage pursuant to Section 8.A.
hereof, and (ii) following the Continuation Period, he/she shall be entitled to continue to
participate in the retiree welfare benefit program on the same basis and subject to the same terms
and conditions as provided to retired employees of the Participating Employer generally, or if no
such program is provided, the program of the successor entity following the Change in Control, if
any.



C. Equity Incentives. Immediately upon a Covered Termination, (i) any stock options, or similar
equity-based incentive rights granted to the Eligible Employee under a stock incentive plan of a
Participating Employer that are not then fully vested and exercisable shall become fully vested and
immediately exercisable, (ii) the Eligible Employee shall be entitled to exercise any stock options
or similar equity-based incentive rights until the expiration of three years following the date of
the Covered Termination (or until such later date as may be applicable under the terms of the
option or other right upon termination of employment), subject to the maximum full term of the
option but without regard to any earlier termination otherwise applicable in the event of
termination of employment, and (iii) any performance shares, stock units or shares of restricted
stock granted to the Eligible Employee under a stock incentive plan of a Participating Employer
that remain subject to forfeiture, performance conditions or transfer restrictions at such time
shall become fully and immediately vested and all such conditions and restrictions shall
immediately lapse, with any payment to be made in accordance with the terms of the applicable award
agreements in accordance with the requirements for compliance with Section 409A. In addition, as to
any other types of equity-based incentive awards granted to the Eligible Employee under a stock
incentive plan of a Participating Employer prior to the date of Covered Termination, any
restrictions on exercise, payment or transfer shall immediately lapse, and the Eligible Employee
shall have all rights associated with such awards as of the date of Covered Termination, with any
payment to be made in accordance with the terms of the applicable award agreements in accordance
with the requirements for compliance with Section 409A. The provisions of this Section 8.C shall
apply equally to any awards or rights into which the equity incentive rights described herein are
converted or for which such rights are substituted in connection with a Change in Control.



D. Accrued Rights. The Eligible Employee shall be entitled to the following payments and benefits
in respect of accrued compensation rights at the time of a Covered Termination, in addition to all
other rights provided under the Plan: (i) immediate payment of any accrued but unpaid Base Salary
through the date of Covered Termination; (ii) payment within thirty (30) calendar days of Covered
Termination of any accrued but unpaid annual cash bonus for the most recently completed calendar
year prior to the Covered Termination; (iii) payment within thirty (30) calendar days of Covered
Termination of the accrued annual cash bonus for the year in effect on the date of the Covered
Termination, determined on the basis of the bonus earned under terms of the applicable bonus plan
through the date of termination or, if greater, the pro-rata amount of the target annual



8









 






cash bonus for the period of such year through the date of termination; and (iv) all benefits and
rights accrued under the employee benefit plans, fringe benefit programs and payroll practices of a
Participating Employer in accordance with their terms (including, without limitation, employee
pension, employee welfare, incentive bonus and stock incentive plans). 



E. Outplacement; Relocation. The Eligible Employee shall be provided, at the Company’s sole
expense, with professional outplacement services selected by the Eligible Employee consistent with
his/her duties or profession and of a type and level customary for persons in his/her position;
provided, however, that the Company shall not be required to pay fees in connection
with the foregoing in an amount greater than fifteen (15) percent of the Eligible Employee’s Base
Salary for purposes of clause (i) of Section 7. The Company shall honor any prior agreement or
understanding with an Eligible Employee who has suffered a Covered Termination to reimburse his/her
relocation expenses to the Indianapolis, Indiana metropolitan area or, if it does not result in a
greater cost to the Company, to such other location selected by the Eligible Employee. Payment for
any such outplacement service services or relocation expense shall be made on the business day that
is six (6) months following the date of the Covered Termination.



F. Indemnification. With respect to any Eligible Employee who is, immediately prior to a Change in
Control or a Covered Termination, indemnified by the Company for his/her service as a director,
officer or employee of a Participating Employer, the Company shall indemnify such Eligible Employee
to the fullest extent permitted by applicable law, and the Company shall maintain in full force and
effect, for the duration of all applicable statute of limitation periods, insurance policies at
least as favorable to the Eligible Employee as those maintained by the Company for the benefit of
its directors and officers at the time of Change in Control, provided that such insurance policies
are commercially available from carriers of recognized standing, with respect to all costs, charges
and expenses whatsoever (including payment of expenses in advance of final disposition of a
proceeding) incurred or sustained by the Eligible Employee in connection with any action, suit or
proceeding to which he/she may be made a party by reason of being or having been a director,
officer or employee of a Participating Employer or serving or having served any other enterprise as
a director, officer or employee at the request of a Participating Employer.




     9. EXCISE TAX REIMBURSEMENT




          (a) In the event it shall be determined that any payment, right or distribution by the Company
or any other person or entity to or for the benefit of an Eligible Employee pursuant to the terms
of this Plan or otherwise, in connection with, or arising out of, his/her employment with a
Participating Employer or a change in ownership or effective control of the Company or a
substantial portion of its assets (a “Payment”) is a “parachute payment” within the meaning of
Section 280G of the Code on account of the aggregate value of the Payments due to the Eligible
Employee being equal to or greater than three times the “base amount,” as defined in Section
280G(b)(3) of the Code, (the “Parachute Threshold”) so that the Eligible Employee would be subject
to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), concurrent with the
making of such Payment, then (i) in the event the aggregate value of the Payments exceeds the
Parachute Threshold by less than 5%, one or more Payments shall be reduced so that the aggregate
value of the Payments is $1.00 less than the Parachute Threshold Amount, reducing first any



9









 






Payments under Section 8.C hereof, then taxable Payments and thereafter any other non-taxable
Payments, or (ii) in the event that the aggregate value of the Payments exceeds the Parachute
Threshold by 5% or more, the Company shall pay to the Eligible Employee an additional payment (the
“Gross-Up Payment”) in an amount such that the net amount retained by the Eligible Employee, after
deduction of any Excise Tax on such Payments and any federal, state or local income tax and Excise
Tax on the Gross-Up Payment shall equal the amount of such Payments. In the event the Internal
Revenue Service subsequently may assess or seek to assess from the Eligible Employee an amount of
Excise Tax in excess of that determined in accordance with the foregoing, the Company shall pay to
the Eligible Employee an additional Gross-Up Payment, calculated as described above in respect of
such excess Excise Tax, including a Gross-Up Payment in respect of any interest or penalties
imposed by the Internal Revenue Service with respect to such excess Excise Tax. The rights of the
Eligible Employee to a Gross-Up Payment under this Section 9 shall apply without regard to whether
the Eligible Employee has incurred a Covered Termination and shall apply to all payments whether or
not in connection with a Covered Termination.




          (b) All determinations required to be made under this Section 9, including whether any Payment
is a “parachute payment” and whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized accounting firm designated by the Company which is not the auditor
of the Company or another party involved in the Change in Control (the “Accounting Firm”) and shall
be based upon “substantial authority” (within the meaning of Section 6662 of the Code). The
Accounting Firm shall provide detailed supporting calculations both to the Company and the Eligible
Employee within 15 business days of the receipt of notice from the Company or an Eligible Employee
that there has been a Payment, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the Company to the Eligible Employee within five
business days of the receipt of the Accounting Firm’s determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Eligible Employee.




     10. RELEASE OF CLAIMS



All payments and benefits that may be made to an Eligible Employee upon a Covered Termination under
the Plan shall be contingent upon the Eligible Employee entering into and not revoking a general
release of employment law claims against the Company and the Participating Employer in
substantially the form attached hereto as Exhibit A, subject to such modifications as may be
determined by the Committee in good faith to take into account changes in employment laws or
differences in employment laws in other jurisdictions. The Company will provide the general
release to the Eligible Employee within five business days of the Covered Termination.




     11. NO MITIGATION OR OFFSET



The Eligible Employee shall be under no obligation to minimize or mitigate damages by seeking other
employment, and the obtaining of any such other employment shall in no event effect any reduction
of the Company’s obligation to make the payments and provide the benefits required



10









 






under the Plan. Except as provided in Section 10, the Company’s obligation to make the payments
and provide the benefits required under the Plan shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or other rights which
a Participating Employer may have against the Eligible Employee.




     12. UNFUNDED STATUS



The Plan is intended to constitute an employee pension benefit plan under ERISA which is unfunded
and is maintained primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees, and shall be interpreted and administered
accordingly. The payments and benefits provided hereunder shall be paid from the general assets of
the Company. Nothing herein shall be construed to require the Company to maintain any fund or to
segregate any amount for the benefit of any employee, and no employee or other person shall have
any right against, right to, or security or other interest in any fund, account or asset of the
Company from which the payment pursuant to the Plan may be made. Consistent with the foregoing,
the Company may, in its sole discretion, deposit funds in a grantor trust or otherwise establish
arrangements to pay amounts that become due under the Plan, and, notwithstanding anything elsewhere
in the Plan to the contrary, the payments and benefits due under the Plan shall be reduced to
reflect the amount of any payment made in respect of any Eligible Employee from a grantor trust or
other arrangement established for this purpose.




     13. ADMINISTRATION



The Committee shall be the named fiduciary of the Plan and the plan administrator for purposes of
ERISA. The Committee shall be responsible for the overall operation of the Plan and shall have the
fiduciary responsibility for the general operation of the Plan. The Committee may allocate to any
one or more of the Company’s employees any responsibility the Committee may have under the Plan and
may designate any other person or persons to carry out any of the Committee’s responsibilities
under the Plan. As plan administrator, the Committee shall maintain records pursuant to the Plan’s
provisions and shall be responsible for the handling, processing and payment of any claims for
benefits under the Plan.




     14. CLAIMS AND DISPUTES



Within thirty (30) calendar days following a Covered Termination, the Company shall notify each
Eligible Employee whom the Company determines is entitled to payments and benefits under the Plan
of his/her entitlement to such payments and benefits. An Eligible Employee who is not so notified
may submit a claim for payments and benefits under the Plan in writing to the Company within ninety
(90) calendar days after becoming entitled to such benefits as described in Section 6. All such
claims shall be approved or denied in writing by the Company within thirty (30) calendar days after
submission.




11









 







Any denial of a claim by the Company shall be in writing and shall include: (i) the reason or
reasons for the denial; (ii) reference to the pertinent Plan provisions on which the denial is
based; (iii) a description of any additional material or information necessary for the Eligible
Employee to perfect the claim together with an explanation of why the material or information is
necessary; and (iv) an explanation of the Plan’s claim review procedure, described below.



An Eligible Employee shall have a reasonable opportunity to appeal a denied claim to the Company
for a full and fair review. The Eligible Employee or authorized representative shall have sixty
(60) calendar days after receipt of written notification of the denial of claim in which to request
a review and to review pertinent documents of the Plan. The Company shall notify the Eligible
Employee or his/her authorized representative of the time and place for the claim review. The
Company shall issue a decision on the reviewed claim promptly, but no later than fifteen (15)
calendar days after receipt of the request for review. The Company’s decision shall be in writing
and shall include: (i) the reasons for the decision, and (ii) references to the Plan provisions on
which the decision is based.



If the Eligible Employee shall dispute the Company’s final decision, the dispute shall be submitted
to an arbitration proceeding, conducted before a panel of three arbitrators, in accordance with the
rules of the Center for Public Resources (or such other organization selected by mutual agreement
of the Company and the Eligible Employee). Such arbitration shall take place in the location most
practicably proximate to the Eligible Employee’s principal workplace. Judgment may be entered on
the arbitrators’ award in any court having jurisdiction. Notwithstanding the foregoing, if an
Eligible Employee believes the claims procedure or dispute resolution mechanism provided under this
Section 14 would be futile or would cause such Eligible Employee irreparable harm, the Eligible
Employee may, in his/her sole discretion, elect to enforce his/her rights under the Plan pursuant
to Section 502 of ERISA.



The Company shall bear the expense of any enforcement proceeding brought by an Eligible Employee
under the Plan and shall reimburse the Eligible Employee for all of his/her reasonable costs and
expenses relating to such enforcement proceeding, including, without limitation, reasonable
attorneys’ fees and expenses, provided that the Eligible Employee is the prevailing party in such
proceeding. For purposes hereof, the trier of fact in such enforcement proceeding shall be
requested to make a determination as to the reimbursement of the Eligible Employee’s costs and
expenses as a prevailing party hereunder. In no event shall the Eligible Employee be required to
reimburse the Company for any of the costs or expenses relating to such enforcement proceeding.




     15. TERM AND AMENDMENT




The Plan became effective as on July 1, 2004, but only became operative with respect to a Change in
Control occurring on or after March 1, 2007, the date as of which the Plan as previously in effect
was terminated by action of the Board. The Plan as amended by action of the Board of Directors of
the Company on October 20, 2008 shall become effective with respect to a Change in Control
occurring on or after October 20, 2010. The Plan shall continue to be



12









 




effective until terminated in accordance with this Section 15. The Board shall have the right, by
resolution or other written action, to terminate or amend the Plan; provided,
however, that the Plan may only be terminated or amended prior to a Change in Control, and
then only (i) with respect to an amendment or termination that becomes effective upon the second
(2nd) anniversary of notice being given thereof to Eligible Employees generally, or (ii) to the
extent any such amendment is of a technical or clarifying nature, or increases the rights or
benefits of all affected Eligible Employees, and does not in any manner reduce the rights or
benefits of any Eligible Employee, unless the Company has obtained the express written consent, in
return for good and valuable consideration, of all affected Eligible Employees in respect of any
such amendment. Notwithstanding the foregoing, in the event of a Change in Control, the Plan shall
continue in effect, and no termination or amendment of the Plan shall occur, until the satisfaction
of all severance payments and benefits to which Eligible Employees are or may become entitled to
under the Plan. Upon the occurrence of a Change in Control during the term of the Plan, the Plan
shall not be operative with respect to any subsequent Change in Control.




     16. SUCCESSORS AND ASSIGNS



The Plan shall be binding upon any person, firm or business that is a successor to the business or
interests of the Company, whether as a result of a Change in Control of the Company or otherwise.
Any successor to the Company shall be required to assume the Plan in writing and honor the
obligations of the Company and the Participating Employers hereunder. All payments and benefits
that become due to an Eligible Employee under the Plan shall inure to the benefit of his/her heirs,
assigns, designees or legal representatives.




     17. ENFORCEABILITY



The Company intends the Plan to constitute a legally enforceable obligation between it and each
Eligible Employee, and that the Plan confer vested rights on each Eligible Employee in accordance
with the terms of the Plan, with each Eligible Employee being a third-party beneficiary thereof.
Nothing in the Plan, however, shall be construed to confer on any Eligible Employee any right to
continue in the employ of a Participating Employer or affect the right of a Participating Employer
to terminate the employment or change the terms and conditions of employment of an Eligible
Employee, with or without notice or cause, prior to a Change in Control, or to take any such action
following a Change in Control, subject to the consequences specified by the Plan.



The Plan shall be construed and enforced in accordance with ERISA and the laws of the State of
Indiana to the extent not preempted by ERISA, regardless of the law that might otherwise govern
under applicable principles or provisions of choice or conflict of law doctrines. To the extent
any provision of the Plan shall be invalid or unenforceable under any applicable law, it shall be
considered deleted herefrom and all other provisions of the Plan shall be unaffected and shall
continue in full force and effect.




13









 








     18. SECTION 409A COMPLIANCE



To the extent applicable, it is intended that the Plan and all payments hereunder comply with the
requirements of Section 409A, and the Plan shall be interpreted and applied by the Committee in a
manner consistent with this intent in order to avoid the imposition of any additional tax under
Section 409A. In the event that any provision of the Plan is determined by the Committee to not
comply with the applicable requirements of Section 409A, the Committee shall have the authority to
take such actions and to make such changes to the Plan as the Committee deems necessary to comply
with such requirements. In no event whatsoever shall the Company be liable for any tax, interest
or penalties that may be imposed on the Eligible Employee by or any damages for failing to comply
with Section 409A. Notwithstanding the foregoing or anything elsewhere in the Plan to the contrary,
if an Eligible Employee is treated as a “specified employee” as of the date of any payment under
this Plan, then, to the extent required, the commencement of any payment under this Plan shall be
delayed until the date that is six (6) months following the date of the Eligible Employee’s
Separation from Service.




14









 








EXHIBIT A




SEVERANCE AGREEMENT AND RELEASE OF CLAIMS



Definitions. I intend all words used in this Severance Agreement and Release of Claims
(“Agreement”) to have their plain meanings in ordinary English. Specific terms that I use in this
Agreement have the following meanings:





	 	A.	 	I, me, and my include both me and anyone who has or
obtains any legal rights or claims through me.
	 
	 	B.	 	Lilly means Eli Lilly and Company and any company related to Eli Lilly
and Company in the present or past, including without limitation, its or their
predecessors, successors, parents, subsidiaries, affiliates, joint venture partners,
and divisions.
	 
	 	C. 	 	Company means Lilly; the present and past officers, directors,
committees, agents, shareholders, and employees of Lilly; any employee benefit plan
sponsored or maintained by Lilly; any company providing insurance to Lilly in the
present or past; the present and past fiduciaries and administrators of any employee
benefit plan sponsored or maintained by Lilly (other than multi-employer plans); and
anyone who acted on behalf of Lilly or on instructions from Lilly.
	 
	 	D.	 	Actual Termination Date means ___________.
	 
	 	E.	 	Severance Benefit means the severance payment and severance benefits
described in Sections 7 and 8 of the Plan.
	 
	 	F.	 	Plan means The 2007 Change in Control Severance Pay Plan For Select
Employees, as in effect for a change in control on or after March 1, 2007, as amended
from time to time.
	 
	 	G.	 	My Claims mean, except as specifically excluded in the last paragraph
of this section following item G.8. below, all of my rights that I now have to any
personal relief of any kind from the Company, including without limitation:






	 	1.	 	all claims arising out of or relating to my employment with
Lilly, the terms and conditions of that employment, or the termination of that
employment, and the continuing effect, thereof;
	 
	 	2.	 	all claims arising out of or relating to actual or alleged
statements, actions, or omissions of the Company;
	 
	 	3.	 	all claims for any alleged unlawful discrimination, harassment,
retaliation or reprisal, or other alleged unlawful practices based on religion,
natural origin, ancestry, marital status, sex, sexual orientation, age, race,
color, disability or any other characteristic or category protected by law
arising under any federal, state, or local statute, ordinance, or regulation,
including without limitation claims under the Indiana Civil Rights Act, Title
VII of the Civil Righ0074s Act of 1964, the Age Discrimination in Employment
Act, 29 U.S.C. § 621 et seq., the Americans with Disabilities Act, 42 U.S.C.
§1981, the Employee Retirement




15









 












	 	 	 	Income Security Act, the Family and Medical Leave Act, the Worker Adjustment
and Retraining Notification Act, the Equal Pay Act, The California Fair
Employment and Housing Act, The California Family Rights Act, the California
Labor Code, the California Civil Code, the California Business & Professions
Code, the California Constitution and workers’ compensation non-interference
or non-retaliation statutes;
	 
	 	4.	 	all claims for alleged wrongful discharge; breach of contract;
breach of implied contract; failure to keep any promise; breach of a covenant
of good faith and fair dealing; breach of fiduciary duty; estoppel; my
activities, if any, as an actual or alleged “whistleblower”; defamation;
infliction of emotional distress; fraud; misrepresentation; negligence;
harassment; retaliation or reprisal; constructive discharge; assault; battery;
false imprisonment; invasion of privacy; interference with contractual or
business relationships; any other wrongful employment practices; and violation
of any other principle of common law;
	 
	 	5.	 	all claims for compensation or monetary damages of any kind,
including without limitation, salary, wages, bonuses, commissions, sales
incentive payments, equity-based compensation, vacation pay, and expense
reimbursements;
	 
	 	6.	 	all claims for reinstatement or other personal equitable
relief, back pay, front pay, compensatory damages, damages for alleged personal
injury, liquidated damages, and punitive damages;
	 
	 	7.	 	all claims under any employee benefit plan sponsored or
maintained by the Company (except as otherwise provided in this Agreement); and
	 
	 	8.	 	all claims for attorneys’ fees, costs, and interest.






	 	 	 	However, My Claims does not include any claims for vested benefits payable under the
terms of a plan qualified under Section 401(a) of the Internal Revenue Code of 1986,
any claims for continuation coverage under the federal law known as COBRA, any
claims that are or may be asserted in the case of Schaefer-Larose, et al. v. Eli
Lilly and Company, and any other claims that the law does not allow to be waived or
any claims that may arise after the date on which I sign this Agreement. My Claims
includes any claim to personal relief from any Equal Employment Opportunity
Commission (“EEOC”) or state or local administrative charge I have filed or may file
against the Company as described below under the heading “Representations and
Waiver of Personal Relief as to Administrative Charges.”




Agreement to Release My Claims. I will receive a Severance Benefit from Lilly as set forth
in the Plan if I sign and, if I am age 40 or older at the time I sign the Agreement, do not revoke
this Agreement as provided below. I understand and acknowledge that I will not be entitled to
receive the Severance Benefit if I do not sign this Agreement or, if I am age 40 or older at the
time I sign the Agreement and I timely revoke this Agreement. In exchange for the Severance
Benefit, I give up all of My Claims to the fullest extent permitted by law, and I agree to abide by
this Agreement in all respects. I will not bring any lawsuits against the Company or make any
demands against the Company for compensation or damages relating to My Claims. The Severance
Benefit that I am receiving under the Plan is a fair compromise for my undertakings in this
Agreement.



This release includes any claims that are being asserted or in the future are, or ever could be,
asserted or



16









 






considered within the scope of the case of Welch et al. vs. Eli Lilly and Company, Civil Action No.
1:06-CV-0641, United States District Court for the Southern District of Indiana (the “Welch
Action”). The Welch Action is a lawsuit that was filed by current and former African-American
Lilly employees alleging that they were discriminated against on the basis of their race. Lilly
denies these allegations. The plaintiffs in the Welch Action have expressed their intention to
seek class treatment. I understand that I may be a member of the putative class. By signing this
Agreement, I understand that I am giving up any right to receive any personal relief as a result of
the Welch Action.



Waiver of California Civil Code Section 1542. I have read and understand the following
language contained in Section 1542 of the California Civil Code:





“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”


I expressly waive all rights, if any, that I may have under this statute with respect to the
matters described in the “Agreement to Release My Claims” paragraph of this Agreement.



Indemnification Agreement. I agree to indemnify Lilly to the fullest extent permitted by
law from all claims, costs and expenses, including all attorneys’ fees, arising out of any
misrepresentation made by me in this Agreement. In the event I initiate, pursue or maintain any
lawsuit (other than a suit under the Age Discrimination in Employment Act) against Lilly based on
any claim, complaint, action, injury or right of action for which I have released and agreed not to
sue Lilly in this Agreement, I agree, to the fullest extent permitted by law, to pay all costs and
attorneys’ fees incurred by Lilly in defending such lawsuit. Nothing in this paragraph shall limit
my charge-filing rights as described below in the section titled “Representations and Waiver of
Personal Relief as to Administrative Charges,” and I shall have no obligation to pay Lilly for
costs or attorney’s fees incurred by Lilly in defending against any EEOC or state or local
administrative agency charge filed by me against Lilly as long as I waive and release any and all
entitlement to any form of personal relief arising from any such charge as described below.



Agreement to Cooperate in Investigations and Litigation. I agree that I will, at any
future time before or after my Actual Termination Date, be available upon reasonable notice from
Lilly, with or without subpoena, to be interviewed, review documents or things, give depositions,
testify, or engage in other reasonable activities, with respect to matters concerning which I have
or may have knowledge as a result of or in connection with my employment by Lilly. In performing
my obligations under this paragraph to testify or otherwise provide information, I will honestly,
truthfully, forthrightly, and completely provide the information requested. I will comply with
this Agreement upon notice from Lilly that Lilly or its attorneys believe that my compliance would
be helpful in the resolution of an investigation or the prosecution or defense of litigation.



Additional Agreements and Understandings. Even though Lilly will provide a Severance
Benefit to me under the Plan for me to settle and release My Claims and to otherwise abide by this
Agreement, the Company denies that it violated any law or committed any wrongful act.




Representations and Waiver of Personal Relief as to
Administrative Charges.



I understand and agree that although by signing this Agreement and accepting the Severance Benefit
I do not waive my right to file an Equal Employment Opportunity Commission (“EEOC”)



17









 






charge against
Lilly, or to file a charge with any comparable state or local administrative agency, or to cooperate in an EEOC or agency investigation of any such charge, I do waive and release, to the
fullest extent permitted by law, any and all entitlement to any form of personal relief arising
from any such charge I have filed or may file in the future against Lilly related to my employment
with Lilly. I understand that this waiver and release of personal relief would not affect the
EEOC’s or state or local administrative agency’s ability to investigate such a charge or to pursue
relief on behalf of other individuals. If I have filed such a charge prior to my signing of this
Agreement, I agree that I will, within two (2) business days of signing this Agreement, prepare,
sign, and deliver to the EEOC or state or local administrative agency with which the charge is
pending a letter that states as follows:



This letter is in regard to charge number _________ (“Charge”) which I have filed with
this agency. This is to advise you that I have entered into an agreement with my
employer, Eli Lilly and Company, under which, in exchange for sufficient consideration,
I have fully waived and released all claims to any personal relief, including any form
of monetary relief, arising out of any claims related to my employment with Lilly
through the date of my signing of the Agreement. This waiver and release includes any
and all claims for personal relief related to the above-referenced Charge. I have
also, again in exchange for sufficient consideration, fully waived and released all
right to file a lawsuit against Lilly in any court of law asserting claims arising out
of my employment with Lilly, up through and including the date of my signing of the
Agreement, other than a suit to enforce the Agreement or to challenge its validity or
enforceability. These waivers and releases are effective to the fullest extent
permitted by applicable law. I understand that this Agreement does not affect this
agency’s ability to investigate the above-referenced Charge or to pursue relief on
behalf of other individuals.



I entered into this Agreement with Lilly voluntarily and without coercion and with
sufficient opportunity to consult an attorney for advice. Thank you for your
assistance.



I further agree to provide to Lilly a copy of the letter as signed and delivered.



Return of Company Property. I agree to cooperate fully with Lilly in effecting a smooth
transfer of responsibilities and to return to Lilly by my Actual Termination Date all
identification and credit cards, keys, telephones, computers and other equipment, and other things
owned by Lilly, and all documents, materials, records or other things belonging to Lilly or
containing Lilly’s property that I have not yet returned.



Right to Consult with an Attorney. I understand and acknowledge that as required by law, I
am hereby being advised by the Company to consult with an attorney prior to signing this Agreement.



Period to Consider this Agreement. I acknowledge that a copy of this Agreement was
provided to me on ____________. I understand that I have the right to take up to forty-five days to
consider whether I wish to sign this Agreement. I understand that Lilly will accept this Agreement
and provide to me the Severance Benefit in accordance with the terms of the Plan if I (a) sign,
date and deliver to Lilly this Agreement at any time during the period beginning on the date I
received the Agreement and ending at the close of business on the forty-fifth day following my
receipt of the Agreement, and (b) do not revoke this Agreement as provided below. If I sign this
Agreement before the end of the period allotted to me for doing so, it will be my voluntary
decision to do so because I have decided that I do not need any




18









 







additional time to decide whether to sign this Agreement.



My Right to Revoke this Agreement. I understand that if I am age 40 or older at the time I
sign this Agreement, I may revoke this Agreement at any time within seven (7) calendar days after I
sign and date it, not counting the day on which I sign and date it. If I am age 40 or older at the
time I sign this Agreement, this Agreement will not become effective or enforceable unless and
until the seven (7)-day revocation period has expired without my revoking it. If I am under age 40
at the time I sign this Agreement, the Agreement will become effective at the time I sign, date and
deliver this Agreement to Lilly.



Procedure for Accepting or Revoking this Agreement. To accept the terms of this Agreement,
I must deliver the Agreement, after I have signed and dated it, to Lilly by hand or by certified
U.S. mail within the period of time described above in the paragraph on “Period to Consider this
Agreement.” If I am age 40 or older at the time I sign the Agreement and wish to revoke my
acceptance, I must deliver a written, signed statement that I revoke my acceptance to Lilly by hand
or by certified U.S. mail within the seven (7)-day revocation period. All deliveries must be made
to Lilly at the following address:



Team Leader, Compensation Administration

Eli Lilly and Company

Lilly Corporate Center

Indianapolis, IN 46285



If I choose to deliver my acceptance or, if applicable, the revocation of my acceptance by mail, it
must be:





	 	(1)	 	postmarked within the period stated above;
	 
	 	(2)	 	properly addressed to Lilly at the address stated above; and
	 
	 	(3)	 	sent by certified mail, first-class postage prepaid.




Interpretation of this Agreement. This Agreement should be interpreted as broadly as
possible to achieve my intention to resolve all of My Claims against the Company and to otherwise
fulfill my obligations under this Agreement. If this Agreement is held by a court to be inadequate
to release a particular claim encompassed within My Claims, this Agreement is still in full force
and effect and enforceable with respect to all the remainder of My Claims.



My Representations. I am legally able and entitled to receive the Severance Benefit being
provided to me under the Plan and this Agreement. No child support order, garnishment order, or
other order requiring that money owed to me by Lilly be paid to any other person is now in effect.



Governing Law. This Agreement shall be governed and administered and construed in
accordance with the laws of the State of Indiana.



I have read this Agreement carefully. I understand all of its terms. In signing and dating this
Agreement, I have not relied on any statements or explanations made by the Company except as
specifically set forth in this Agreement. I am voluntarily releasing My Claims against the Company
and undertaking my other obligations under this Agreement. I intend this Agreement to be legally
binding.




	 	 	 	 	 
	Dated:                     

	 	Name:                                         
	 	Printed:                                         






19